10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2009

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number: 001-31775

(Exact name of registrant as specified in its charter)

Maryland	86-1062192
(State or other jurisdiction of incorporation or organization)	(IRS employer identification number)
14185 Dallas Parkway, Suite 1100
Dallas, Texas	75254
(Address of principal executive offices)	(Zip code)

(972) 490-9600
(Registrant’s telephone number, including area code)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o Yes o No

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o  Accelerated filer þ  Non-accelerated filer   o
(Do not check if a smaller reporting company) Smaller reporting company o 

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes þ No

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $0.01 par value per share	61,771,139
(Class)	Outstanding at November 6, 2009

ASHFORD HOSPITALITY TRUST, INC
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2009

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS (Unaudited)	3
	Consolidated Balance Sheets as of September 30, 2009 and December 31, 2008	3
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2009 and 2008	4
	Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months Ended September 30, 2009 and 2008	5
	Consolidated Statement of Changes in Equity for the Nine Months Ended September 30, 2009	6
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2009 and 2008	7
	Notes to Consolidated Financial Statements	8
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	30
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	43
ITEM 4.	CONTROLS AND PROCEDURES	43
PART II. OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	44
ITEM 1A.	RISK FACTORS	44
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	45
ITEM 6.	EXHIBITS	46
SIGNATURES		47
EX-10.5.2
EX-10.5.4
EX-10.5.6
EX-10.5.9
EX-10.5.10
EX-10.5.11
EX-10.5.12
EX-10.14.1
EX-10.25.4.3
EX-10.25.4.3A
EX-10.25.4.4
EX-10.25.4.4A
EX-10.25.4.6
EX-10.25.4.6A
EX-10.26.1
EX-10.26.2
EX-10.30.4
EX-10.30.5
EX-31.1
EX-31.2
EX-32.1
EX-32.2

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)

	September 30,			December 31,
	2009			2008
	(Unaudited)
Assets
Investments in hotel properties, net	$	3,489,746		$	3,568,215
Cash and cash equivalents		197,920			241,597
Restricted cash		65,270			69,806
Accounts receivable, net of allowance of $541 and $598, respectively		39,471			41,110
Inventories		3,132			3,341
Notes receivable		66,652			212,815
Investment in unconsolidated joint venture		20,319			19,122
Deferred costs, net		19,458			24,211
Prepaid expenses		18,250			12,903
Interest rate derivatives		105,516			88,603
Other assets		4,520			6,766
Intangible assets, net		3,011			3,077
Due from third-party hotel managers		52,428			48,116
Total assets	$	4,085,693		$	4,339,682
Liabilities and Equity
Liabilities:
Indebtedness	$	2,801,824		$	2,790,364
Capital leases payable		105			207
Accounts payable and accrued expenses		115,335			93,476
Dividends payable		5,527			6,285
Unfavorable management contract liabilities		19,257			20,950
Due to related parties		1,403			2,378
Due to third-party hotel managers		2,024			3,855
Other liabilities		7,908			8,124
Total liabilities		2,953,383			2,925,639
Commitments and contingencies (Note 14)
Series B-1 cumulative convertible redeemable preferred stock, $0.01 par value, 7,447,865 shares issued and outstanding		75,000			75,000
Redeemable noncontrolling interests in operating partnership		84,947			107,469
Equity:
Stockholders’ equity of the Company:
Preferred stock, $0.01 par value, 50,000,000 shares authorized —
Series A Cumulative Preferred Stock, 1,487,900 shares and 2,185,500 shares issued and outstanding at September 30, 2009 and December 31, 2008		15			22
Series D Cumulative Preferred Stock, 5,666,797 shares and 6,394,347 shares issued and outstanding at September 30, 2009 and December 31, 2008		57			64
Common stock, $0.01 par value, 200,000,000 shares authorized, 122,748,859 shares issued; 63,890,831 shares and 86,555,149 shares outstanding at September 30, 2009 and December 31, 2008		1,227			1,227
Additional paid-in capital		1,434,161			1,450,146
Accumulated other comprehensive loss		(732	)		(860	)
Accumulated deficit		(321,853	)		(124,782	)
Treasury stock, at cost, 58,858,028 and 36,193,710 shares at September 30, 2009 and December 31, 2008		(158,430	)		(113,598	)
Total stockholders’ equity of the Company		954,445			1,212,219
Noncontrolling interests in consolidated joint ventures		17,918			19,355
Total equity		972,363			1,231,574
Total liabilities and equity	$	4,085,693		$	4,339,682

See Notes to Consolidated Financial Statements.

3

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2009			2008			2009			2008
	(Unaudited)
Revenue
Rooms	$	167,494		$	208,856		$	516,653		$	642,264
Food and beverage		38,630			53,143			133,864			175,153
Rental income from operating leases		1,236			1,367			3,830			4,239
Other		11,298			12,604			34,940			38,924
Total hotel revenue		218,658			275,970			689,287			860,580
Interest income from notes receivable		1,761			8,801			10,397			15,273
Asset management fees and other		173			510			552			1,953
Total revenue		220,592			285,281			700,236			877,806
Expenses
Hotel operating expenses:
Rooms		40,680			47,258			120,427			140,530
Food and beverage		30,284			39,468			97,819			124,237
Other expenses		73,357			86,836			224,237			259,623
Management fees		8,649			10,690			27,233			33,726
Total hotel operating expenses		152,970			184,252			469,716			558,116
Property taxes, insurance and other		16,023			14,918			46,602			45,776
Depreciation and amortization		38,935			44,406			118,927			126,405
Impairment charges		19,816			—			160,143			—
Corporate general and administrative		9,257			8,834			23,014			24,903
Total expenses		237,001			252,410			818,402			755,200
Operating (loss) income		(16,409	)		32,871			(118,166	)		122,606
Equity in earnings of unconsolidated joint venture		642			491			1,863			2,304
Interest income		56			697			253			1,594
Other income		13,228			3,379			35,140			6,244
Interest expense and amortization of loan costs		(36,545	)		(39,870	)		(109,663	)		(116,771	)
Write-off of loan costs, premiums and exit fees, net		—			(1,226	)		930			(1,226	)
Unrealized gain (loss) on derivatives		5,525			12,528			(14,166	)		(38,861	)
(Loss) income from continuing operations before income taxes		(33,503	)		8,870			(203,809	)		(24,110	)
Income tax expense		(193	)		(421	)		(585	)		(1,150	)
(Loss) income from continuing operations		(33,696	)		8,449			(204,394	)		(25,260	)
Income from discontinued operations		—			1,329			—			15,909
Net (loss) income		(33,696	)		9,778			(204,394	)		(9,351	)
Loss (income) from consolidated joint ventures attributable to noncontrolling interests		476			(123	)		629			(2,907	)
Net loss (income) attributable to redeemable noncontrolling interests in operating partnership		4,424			(856	)		25,567			738
Net (loss) income attributable to the Company		(28,796	)		8,799			(178,198	)		(11,520	)
Preferred dividends		(4,831	)		(7,018	)		(14,492	)		(21,054	)
Net (loss) income attributable to common stockholders	$	(33,627	)	$	1,781		$	(192,690	)	$	(32,574	)
Income (loss) per share — basic and diluted:
(Loss) income from continuing operations attributable to common stockholders	$	(0.52	)	$	—		$	(2.67	)	$	(0.40	)
Income from discontinued operations attributable to common stockholders		—			0.01			—			0.12
Net (loss) income attributable to common stockholders	$	(0.52	)	$	0.01		$	(2.67	)	$	(0.28	)
Weighted average common shares outstanding — basic		65,266			115,819			72,167			117,828
Weighted average common shares outstanding — diluted		65,266			115,819			72,167			117,828
Dividends declared per common share	$	—			0.21		$	—			0.63
Amounts attributable to common stockholders:
(Loss) income from continuing operations, net of tax	$	(28,796	)	$	7,579		$	(178,198	)	$	(26,180	)
Income from discontinued operations, net of tax		—			1,220			—			14,660
Preferred dividends		(4,831	)		(7,018	)		(14,492	)		(21,054	)
Net (loss) income attributable to common stockholders	$	(33,627	)	$	1,781		$	(192,690	)	$	(32,574	)

See Notes to Consolidated Financial Statements.

4

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2009			2008			2009			2008
				(Unaudited)
Net (loss) income	$	(33,696	)	$	9,778		$	(204,394	)	$	(9,351	)
Other comprehensive income (loss), net of tax:
Change in unrealized loss on derivatives		(6	)		(71	)		55			(57	)
Reclassification to interest expense		55			17			123			38
Foreign currency translation adjustments		—			—			—			(126	)
Total other comprehensive income (loss)		49			(54	)		178			(145	)
Comprehensive (loss) income		(33,647	)		9,724			(204,216	)		(9,496	)
Less: Comprehensive loss (income) attributable to noncontrolling interests in consolidated joint ventures		472			(123	)		599			(2,907	)
Less: Comprehensive loss (income) attributable to redeemable noncontrolling interests in operating partnership		4,418			(856	)		25,547			738
Comprehensive (loss) income attributable to the Company	$	(28,757	)	$	8,745		$	(178,070	)	$	(11,665	)

See Notes to Consolidated Financial Statements.

5

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 2009
(in thousands)

																																						Redeemable
																							Accumulated									Noncontrolling						Noncontrolling
	Preferred Stock																Additional						Other									Interests in						Interests in
	Series A						Series D						Common Stock				Paid-in			Accumulated			Comprehensive			Treasury Stock						Consolidated						Operating
	Shares			Amounts			Shares			Amounts			Shares		Amounts		Capital			Deficit			Income (Loss)			Shares			Amounts			Joint Ventures			Total			Partnership
Balance at January 1, 2009		2,185		$	22			6,394		$	64			122,749	$	1,227	$	1,450,146		$	(124,782	)	$	(860	)		(36,194	)	$	(113,598	)	$	19,355		$	1,231,574		$	107,469
Repurchases of preferred stock		(697	)		(7	)		(727	)		(7	)		—		—		(10,642	)		—			—			—			—			—			(10,656	)		—
Repurchases of treasury shares		—			—			—			—			—		—		—			—			—			(23,764	)		(53,335	)		—			(53,335	)		—
Issuance of restricted shares under stock-based compensation plan		—			—			—			—			—		—		(8,426	)		—			—			1,100			8,503			—			77			—
Stock/unit-based compensation expense		—			—			—			—			—		—		3,083			—			—			—			—			—			3,083			735
Net loss		—			—			—			—			—		—		—			(178,198	)		—			—			—			(629	)		(178,827	)		(25,567	)
Dividends declared — Preferred A shares		—			—			—			—			—		—		—			(2,385	)		—			—			—			—			(2,385	)		—
Dividends declared — Preferred B-1 shares		—			—			—			—			—		—		—			(3,128	)		—			—			—			—			(3,128	)		—
Dividends declared — Preferred D shares		—			—			—			—			—		—		—			(8,979	)		—			—			—			—			(8,979	)		—
Change in unrealized losses on derivatives		—			—			—			—			—		—		—			—			25			—			—			25			50			5
Reclassification to interest expense		—			—			—			—			—		—		—			—			103			—			—			5			108			15
Contributions from noncontrolling interests		—			—			—			—			—		—		—			—			—			—			—			281			281			—
Distributions to noncontrolling interests		—			—			—			—			—		—		—			—			—			—			—			(1,119	)		(1,119	)		(2,091	)
Adjustment to reflect redemption value		—			—			—			—			—		—		—			(4,381	)		—			—			—			—			(4,381	)		4,381
Balance at September 30, 2009		1,488		$	15			5,667		$	57			122,749	$	1,227	$	1,434,161		$	(321,853	)	$	(732	)		(58,858	)	$	(158,430	)	$	17,918		$	972,363		$	84,947

See Notes to Consolidated Financial Statements.

6

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

	Nine Months Ended
	September 30,
	2009			2008
	(Unaudited)
Cash Flows from Operating Activities
Net loss	$	(204,394	)	$	(9,351	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		118,927			133,040
Impairment charges		160,143			—
Equity in earnings of unconsolidated joint venture		(1,863	)		(2,304	)
Distributions of earnings from unconsolidated joint venture		667			1,415
Income from derivatives		(33,203	)		(6,244	)
Gain on sales of properties		—			(8,315	)
Amortization of discounts, deferred loan costs and deferred income on notes receivable		(3,128	)		(4,705	)
Amortization of loan costs		5,883			4,990
Write-off of loan costs, premiums and exit fees, net		(930	)		115
Unrealized loss on derivatives		14,166			38,861
Stock-based compensation		3,896			5,188
Changes in operating assets and liabilities —
Restricted cash		4,536			(11,940	)
Accounts receivable and inventories		2,128			3,655
Prepaid expenses and other assets		(3,322	)		3,306
Accounts payable and accrued expenses		22,731			(15,833	)
Due to/from related parties		(975	)		(1,660	)
Due to/from third-party hotel managers		(6,143	)		(3,779	)
Other liabilities		(2,240	)		(2,395	)
Net cash provided by operating activities		76,879			124,044
Cash Flows from Investing Activities
Acquisitions/originations of notes receivable		—			(138,040	)
Proceeds from payments of notes receivable		6			20,165
Investment in unconsolidated joint venture		—			(17,859	)
Improvements and additions to hotel properties		(51,734	)		(102,679	)
Proceeds from sales of assets/properties		858			317,426
Net cash (used in) provided by investing activities		(50,870	)		79,013
Cash Flows from Financing Activities
Borrowings on indebtedness and capital leases		67,800			704,570
Repayments of indebtedness and capital leases		(55,063	)		(613,921	)
Payments of deferred loan costs		(1,822	)		(6,300	)
Payments of dividends		(17,341	)		(105,206	)
Payments for derivatives		(31,022	)		(6,427	)
Cash income from derivatives		32,871			5,673
Repurchases of treasury stock		(53,334	)		(45,954	)
Repurchases of preferred stock		(10,656	)		—
Other		(1,119	)		53
Net cash used in financing activities		(69,686	)		(67,512	)
Net (decrease) increase in cash and cash equivalents		(43,677	)		135,545
Cash and cash equivalents at beginning of year		241,597			92,271
Cash and cash equivalents at end of period	$	197,920		$	227,816
Supplemental Cash Flow Information
Interest paid	$	99,983		$	118,552
Income taxes paid	$	380		$	736
Supplemental Disclosure of Non-Cash Investing Activity
Note receivable contributed to unconsolidated joint venture	$	—		$	5,230

See Notes to Consolidated Financial Statements.

7

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Description of Business

     Ashford Hospitality Trust, Inc. (“Ashford”) is a self-advised real estate investment trust (“REIT”) which commenced operations on August 29, 2003 when it completed its initial public offering (“IPO”) and concurrently consummated certain other formation transactions, including the acquisition of six hotels (“Initial Properties”). We began investing in mezzanine loans in November 2003 and originated our first mortgage loan secured by a hotel property in 2004. Ashford owns its lodging investments and conducts its business through Ashford Hospitality Limited Partnership, the operating partnership. Ashford OP General Partner LLC, a wholly-owned subsidiary of the REIT, serves as the sole general partner of our operating partnership. In this report, the terms “Ashford”, “the Company,” “we,” “us” or “our” mean Ashford Hospitality Trust, Inc. and all entities included in its consolidated financial statements.

     As of September 30, 2009, we owned 97 hotel properties directly and six hotel properties through majority-owned investments in joint ventures, which represents 23,255 total rooms, or 22,913 net rooms excluding those attributable to joint venture partners. All of these hotel properties are located in the United States. As of September 30, 2009, we also wholly-owned $66.7 million of mezzanine or first-mortgage loans receivable. In addition, at September 30, 2009, we had a 25% ownership in a $79.4 million mezzanine loan held in a joint venture. See Note 6.

     For federal income tax purposes, we elected to be treated as a REIT, which imposes limitations related to operating hotels. As of September 30, 2009, 102 of our hotel properties were leased or owned by our wholly-owned subsidiaries that are treated as taxable REIT subsidiaries for federal income tax purposes (collectively, these subsidiaries are referred to as “Ashford TRS”). Ashford TRS then engages third-party or affiliated hotel management companies to operate the hotels under management contracts. Hotel operating results related to these properties are included in the consolidated statements of operations. As of September 30, 2009, one hotel property was leased on a triple-net lease basis to a third-party tenant who operates the hotel. Rental income from this operating lease is included in the consolidated results of operations.

     Remington Lodging & Hospitality, LLC (“Remington Lodging”), our primary property manager, is beneficially wholly owned by Mr. Archie Bennett, Jr., our Chairman, and Mr. Monty J. Bennett, our Chief Executive Officer. As of September 30, 2009, Remington Lodging managed 46 of our 103 hotel properties, while third-party management companies managed the remaining 57 hotel properties.

2. Significant Accounting Policies

     Basis of Presentation — The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) issued by the Financial Accounting Standards Board (“FASB”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. These consolidated financial statements include the accounts of Ashford, its majority-owned subsidiaries and its majority-owned joint ventures in which it has a controlling interest. All significant inter-company accounts and transactions between consolidated entities have been eliminated in these consolidated financial statements. These consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and notes thereto included in our Current Report on Form 8-K filed on September 11, 2009 (the Form 8-K). The Form 8-K reflects retrospective application of our accounting for noncontrolling interests and the computation of income/loss per share using the two-class method under new accounting guidance issued by the FASB which were adopted on January 1, 2009, as required.

     In the preparation of the accompanying unaudited consolidated financial statements, management has evaluated events that have occurred after September 30, 2009, through the time we issued our financial statements on November 6, 2009.

8

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     The following items affect our reporting comparability related to our consolidated financial statements:

• The operations of our hotels have historically been seasonal. This seasonality pattern causes fluctuations in the operating results. Consequently, operating results for the three and nine months ended September 30, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009.

• Marriott International, Inc. (“Marriott”) manages 41 of our properties. For these Marriott-managed hotels, the fiscal year reflects twelve weeks of operations in each of the first three quarters of the year and sixteen weeks for the fourth quarter of the year. Therefore, in any given quarterly period, period-over-period results will have different ending dates. For Marriott-managed hotels, the third quarters of 2009 and 2008 ended September 11 and September 5, respectively.

     Use of Estimates — The preparation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

     Investments in Hotel Properties — Hotel properties are generally stated at cost. However, the Initial Properties contributed upon Ashford’s formation are stated at the predecessor’s historical cost, net of impairment charges, if any, plus a noncontrolling interest partial step-up related to the acquisition of noncontrolling interests from third parties associated with four of the Initial Properties. For hotel properties owned through our majority-owned joint ventures, the carrying basis attributable to the joint venture partners’ minority ownership is recorded at the predecessor’s historical cost, net of any impairment charges, while the carrying basis attributable to our majority ownership is recorded based on the allocated purchase price of our ownership interests in the joint ventures. All improvements and additions which extend the useful life of the hotel properties are capitalized.

     Impairment of Investment in Hotel Properties — Hotel properties are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. We test impairment by using current or projected cash flows over the estimated useful life of the asset. In evaluating the impairment of hotel properties, we make many assumptions and estimates, including projected cash flows, expected holding period and expected useful life. We may also use fair values of comparable assets. If an asset is deemed to be impaired, we record an impairment charge for the amount that the property’s net book value exceeds its estimated fair value. During the nine months ended September 30, 2009, we recorded an impairment of $10.9 million on one hotel property. See the detailed discussion in Notes 4 and 11.

     Notes Receivable — We provide mezzanine and first-mortgage financing in the form of notes receivable. These loans are held for investment and are intended to be held to maturity and accordingly, are recorded at cost, net of unamortized loan origination costs and fees, loan purchase discounts and net of the allowance for losses when a loan is deemed to be impaired. Premiums, discounts, and net origination fees are amortized or accreted as an adjustment to interest income using the effective interest method over the life of the loan. We discontinue recording interest and amortizing discounts/premiums when the contractual payment of interest and/or principal is not received.

     Variable interest entities, as defined by authoritative accounting guidance, must be consolidated by their controlling interest beneficiaries if the variable interest entities do not effectively disperse risks among the parties involved. Our mezzanine and first-mortgage notes receivable are each secured by various hotel properties or partnership interests in hotel properties and are subordinate to the controlling interest in the secured hotel properties. All such notes receivable are considered to be variable interests in the entities that own the related hotels. However, we are not considered to be the primary beneficiary of these hotel properties as a result of holding these loans. Therefore, we do not consolidate the hotels for which we have provided financing. We will evaluate the interests in entities acquired or created in the future to determine whether such entities should be consolidated. In evaluating variable interest entities, our analysis involves considerable management judgment and assumptions.

     Impairment of Notes Receivable — We review notes receivables for impairment in each reporting period pursuant to the applicable authoritative accounting guidance. A loan is impaired when, based on current information and events, it is probable that we will be unable to collect all amounts recorded as assets on the balance sheet according to the

9

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

contractual terms of the loan agreement. We apply normal loan review and underwriting procedures (as may be implemented or modified from time to time) in making that judgment.

     When a loan is impaired, we measure impairment based on the present value of expected cash flows discounted at the loan’s effective interest rate against the value of the asset recorded on the balance sheet. We may also measure impairment based on a loan’s observable market price or the fair value of collateral if the loan is collateral dependent. If a loan is deemed to be impaired, we record a valuation allowance through a charge to earnings for any shortfall. Our assessment of impairment is based on considerable judgment and estimates. During the nine months ended September 30, 2009, we recorded a valuation allowance of $149.3 million for our mezzanine loan portfolio. See Notes 5 and 11.

     Revenue Recognition — Hotel revenues, including room, food, beverage, and ancillary revenues such as long-distance telephone service, laundry, and space rentals, are recognized when services have been rendered. Rental income, representing income from leasing hotel properties to third-party tenants on triple-net operating leases, is recognized on a straight-line basis over the lease terms. Interest income, representing interest on the mezzanine and first mortgage loan portfolio (including accretion of discounts on certain loans using the effective interest method), is recognized when earned. We discontinue recording interest and amortizing discounts/premiums when the contractual payment of interest and/or principal is not received. Asset management fees are recognized when services are rendered. Taxes collected from customers and submitted to taxing authorities are not recorded in revenue. For the hotel leased to a third party, we report deposits into our escrow accounts for capital expenditure reserves as income.

     Derivative Financial Instruments and Hedges — We primarily use interest rate derivatives in order to capitalize on the historical correlation between changes in LIBOR (London Interbank Offered Rate) and RevPAR (Revenue per Available Room). Interest rate swaps involve the exchange of fixed-rate payments for variable-rate payments over the life of the derivative agreements without exchange of the underlying principal amount. Interest rate caps designated as cash flow hedges provide us with interest rate protection above the strike rate on the cap and result in us receiving interest payments when actual rates exceed the cap strike. For interest rate floors, we pay our counterparty interest when the variable interest rate index is below the strike rate. The interest rate flooridor combines two interest rate floors, structured such that the purchaser simultaneously buys an interest rate floor at a strike rate X and sells an interest rate floor at a lower strike rate Y. The purchaser of the flooridor is paid when the underlying interest rate index (for example, LIBOR) resets below strike rate X during the term of the flooridor. Unlike a standard floor, the flooridor limits the benefit the purchaser can receive as the related interest rate index falls. Once the underlying index falls below strike Y, the sold floor offsets the purchased floor. There is no liability to us other than the purchase price associated with the flooridor.

     We account for the interest rate derivatives at fair value in accordance with the applicable authoritative accounting guidance. All derivatives are recorded on the balance sheets at fair value and reported as “Interest rate derivatives.” For derivatives designated as cash flow hedges, the effective portion of changes in the fair value is reported as a component of “Accumulated other comprehensive income (loss)” (OCI) in the equity section of the consolidated balance sheets. The amount recorded in OCI is reclassified to interest expense in the same period or periods during which the hedged transaction affects earnings, while the ineffective portion of changes in the fair value of the derivative is recognized directly in earnings as “Unrealized gain (loss) on derivatives” in the consolidated statements of operations. For derivatives that are not designated as cash flow hedges, the changes in the fair value are recognized in earnings as “Unrealized gain (loss) on derivatives” in the consolidated statements of operations. We assess the effectiveness of each hedging relationship by comparing the changes in fair value or cash flows of the derivative hedging instrument with the changes in fair value or cash flows of the designated hedged item or transaction.

     Recently Adopted Accounting Standards — We adopted authoritative accounting guidance issued in December 2007 that was effective as of January 1, 2009, which states that accounting and reporting for minority interests should be re-characterized as noncontrolling interests and classified as a component of equity. However, noncontrolling interests that are redeemable for cash or other assets are to be classified outside of equity if they are redeemable (i) at a fixed or determinable price on a fixed or a determinable date; (ii) at the option of the holder; or (iii) upon the occurrence of an event that is not solely within the control of the issuer. The guidance also requires net income and other comprehensive income to be attributed to controlling and noncontrolling interests. To comply with these accounting rules, we have reclassified the noncontrolling interests in our consolidated joint ventures from the mezzanine section of our balance sheets to equity. Redeemable noncontrolling interests in our operating partnership will continue

10

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

to be classified in the mezzanine section of the balance sheets as these redeemable operating units do not meet the requirements for equity classification because the redemption feature requires the delivery of cash or registered shares. The carrying value of the noncontrolling interests in the operating partnership is based on the greater of the accumulated historical cost or the redemption value. Income/loss from consolidated joint ventures attributable to noncontrolling interests in our consolidated joint ventures and net income/loss attributable to redeemable noncontrolling interests in the operating partnership are reported as deductions/additions from net income/loss. Comprehensive income/loss attributable to these noncontrolling interests is reported as deductions/additions from comprehensive income/loss. We reclassified prior period amounts to reflect these requirements. The adoption of this standard had no effect on our basic and diluted income/loss per share.

     In March 2008, the FASB issued authoritative accounting guidance to enhance the disclosures about derivative instruments and hedging activities. Under the new guidance, entities are required to provide enhanced disclosures about (i) how and why an entity uses derivative instruments; (ii) how derivative instruments and related hedged items are accounted for under the applicable authoritative guidance; and (iii) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. We adopted this statement beginning January 1, 2009. There was no financial impact from the adoption of this accounting guidance and disclosures about our derivative instruments are presented in accordance with the requirements of the accounting guidance. See Note 10.

     In June 2008, the FASB issued authoritative accounting guidance to require non-vested shares that contain non-forfeitable rights to dividends or dividend equivalents to be considered participating securities, and therefore be included in computing earnings per share using the two-class method. We adopted this guidance as of January 1, 2009. Income (loss) per share has been computed using the two-class method for all periods presented and there has been no material impact on the income (loss) per share amount from the adoption of this accounting guidance.

     In April 2009, the FASB issued authoritative accounting guidance effective for interim reporting periods ending after June 15, 2009, to require disclosures about fair values of financial instruments for interim reporting periods. Accordingly, the fair values of financial instruments have been disclosed in Note 15. The adoption of this accounting guidance did not have an impact on our financial position and results of operations.

     In May 2009, the FASB issued accounting guidance effective for interim or annual financial periods ending after June 15, 2009, to modify the definition and disclosures of subsequent events. The guidance sets forth: (i) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and (iii) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. Subsequent events for the reporting period ended September 30, 2009 were evaluated through the time we issued our financial statements on November 6, 2009.

     In June 2009, the FASB issued an accounting standards update effective for financial statements issued for interim and annual periods ending after September 15, 2009. At the effective date, the accounting standards codification issued by the FASB has become the source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and Exchange Commission (the “SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The adoption of these authoritative accounting rules for the quarter ended September 30, 2009 did not change our accounting practices.

     Recently Issued Accounting Standards — In June 2009, the FASB issued authoritative accounting guidance to modify existing accounting guidance on transfers of financial assets. The new guidance is effective at the beginning of the first annual reporting period beginning after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. The new authoritative guidance limits the circumstances in which a financial asset, or portion of a financial asset, should be derecognized when the transferor has not transferred the entire original financial asset to an entity that is not consolidated with the transferor in the financial statements being presented and/or when the transferor has continuing involvement with the transferred financial assets. In addition, the guidance defines the term participating interest to establish specific conditions for reporting a transfer of a portion of a financial asset as a sale and requires that a transferor recognize and initially measure at fair value all assets obtained (including a transferor’s beneficial interest) and liabilities incurred as a result of a transfer of financial

11

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

assets accounted for as a sale. The impact of adopting this new guidance when effective will depend upon the nature, term and size of the assets transferred, if any.

     In June 2009, the FASB issued authoritative accounting guidance to redefine the characteristics of the primary beneficiary to be identified when an enterprise performs an analysis to determine whether the enterprise’s variable interest gives it a controlling financial interest in a variable interest entity (VIE). This accounting guidance is effective at the beginning of the first annual reporting period beginning after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. The new guidance requires an enterprise to assess whether it has an implicit financial responsibility to ensure that a VIE operates as designed and ongoing reassessments of whether it is the primary beneficiary of a VIE. It also amends certain previous guidance for determining whether an entity is a VIE and eliminates the quantitative approach previously required for determining the primary beneficiary of a VIE. We are currently evaluating the effects the adoption of the new guidance will have on our financial condition and results of operations.

     In August 2009, the FASB issued an accounting standard update, effective for the first reporting period (including interim periods) beginning after the issuance date, to provide guidance on measuring liabilities at fair value when no observable data are available. The update clarifies that when measuring fair value of liabilities in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using either (i) the quoted price of an identical liability when traded as an asset or quoted prices for similar liabilities when traded as assets; or (ii) the present value technique or a market approach based on the amount at the measurement date the reporting entity would pay to transfer the identical liability or would receive to enter into the identical liability. We do not expect a material impact from the adoption of this accounting guidance.

     Reclassifications — Certain amounts in the consolidated financial statements as of December 31, 2008 and for the three and nine months ended September 30, 2008 have been reclassified to conform to the presentation format adopted in 2009 as a result of the adoption of the authoritative accounting guidance issued in December 2007 related to noncontrolling interests. In addition, certain amounts in the consolidated statements of cash flows have been reclassified to conform to the current year presentation. These reclassifications have no effect on the results of operations or financial position previously reported.

3. Summary of Significant Transactions and Development

     Material Impairments — In June 2009, Extended Stay Hotels, LLC (“ESH”), the issuer of our $164 million mezzanine loan receivable secured by 681 hotels with initial maturity in June 2009, filed for Chapter 11 bankruptcy protection from its creditors. We anticipate that ESH, through its bankruptcy filing, may attempt to impose a plan of reorganization which could extinguish our investment. Accordingly, we recorded a valuation allowance of $109.4 million in earnings for the full amount of the book value of the note. An additional valuation allowance totaling $39.9 million was recorded on four other mezzanine loans. See Notes 5 and 11.

     Beginning in June 2009, we ceased making payments on the note payable of $29.1 million secured by the Hyatt Regency Dearborn hotel property. Due to the effect of market conditions in the region, the operating cash flows from the hotel property are not anticipated to cover the principal and interest payments on the note and the related capital expenditures on the property. The lender issued a notice of default and an acceleration notice. We have not cured the notice of default and intend to fully settle the debt via a deed-in-lieu of foreclosure or foreclosure of the hotel property. As a result, we recorded an impairment charge of $10.9 million during the nine months ended September 30, 2009 to write down the carrying amount of the hotel property to its estimated fair value. See Notes 4 and 11.

     Interest Rate Derivative Transactions — In March 2009, in order to take advantage of the declining LIBOR rates, we entered into a one-year flooridor with a financial institution for the period commencing December 14, 2009 and ending December 13, 2010 for a notional amount of $3.6 billion. The $3.6 billion flooridor establishes a floor rate of 0.75%. Under the new flooridor, the counterparty will pay us interest on the notional amount when LIBOR rates are below the original floor of 1.25% up to a maximum of 50 basis points on the notional amount. The upfront cost of this flooridor was $8.5 million. On July 1, 2009, we purchased two one-year term flooridors, each with a notional amount of $1.8 billion, for an upfront cost of $22.3 million. Under the first flooridor, the counterparty will pay us interest on the notional amount for the period commencing December 14, 2009 and ending December 13, 2010 when LIBOR rates are

12

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

below 1.75% up to a maximum of 50 basis points on the notional amount. Under the second flooridor, the counterparty will pay us interest on the notional amount for the period commencing December 13, 2010 and ending December 13, 2011 when LIBOR rates are below 2.75% up to a maximum of 225 basis points on the notional amount. We have no further liability under these flooridors to the counterparties. For the nine months ended September 30, 2009, we recognized total income of $33.2 million on our interest rate derivatives.

     In addition, during the nine months ended September 30, 2009, we entered into seven interest rate caps with total notional amounts of $283.0 million to cap the interest rates on our mortgage loans with an aggregate principal amount of $283.0 million (aggregate principal balance at September 30, 2009 was $280.5 million) with strike rates between 4.81% and 6%. The total price for these hedges was $233,000. These interest rate caps were designated as cash flow hedges.

     Authorization of Repurchases of Common and Preferred Shares and Prepayment of Outstanding Debt Obligations — In January 2009, the Board of Directors approved an additional $200.0 million authorization (excluding fees, commissions and all other ancillary expenses) for: (i) the repurchase of shares of our common stock, Series A preferred stock, Series B-1 preferred stock and Series D preferred stock and/or (ii) the prepayment of our outstanding debt obligations, including debt secured by our hotel assets and debt senior to our mezzanine or loan investments. During the nine months ended September 30, 2009, we have purchased 23.8 million shares of our common stock, 697,600 shares of the Series A preferred stock and 727,550 shares of the Series D preferred stock for a total price of $64.0 million, including $564,000 of commissions.

     Debt Financing and Refinancing — In February 2009, we refinanced the $47.4 million mortgage loan (excluding a premium of $1.4 million) secured by a hotel property in Arlington, Virgina, with a $60.8 million mortgage loan at an interest rate of LIBOR plus 4% for three years with two one-year extension options. In conjunction with the refinancing, we purchased an interest rate cap with a notional amount of $60.8 million and a strike rate of 4.81% for $161,000. In addition, in March 2009, we obtained a $7.0 million mortgage loan on a hotel property in Jacksonville, Florida. The loan matures April 2034 and bears an interest rate at the greater of 6% or prime plus 1%.

4. Investments in Hotel Properties

     Investments in hotel properties consisted of the following at September 30, 2009 and December 31, 2008 (in thousands):

	September 30,			December 31,
	2009			2008
Land	$	530,302		$	531,336
Buildings and improvements		3,073,513			3,065,744
Furniture, fixtures and equipment		383,349			359,397
Construction in progress		18,381			11,121
Total cost		4,005,545			3,967,598
Accumulated depreciation		(515,799	)		(399,383	)
Investment in hotel properties, net	$	3,489,746		$	3,568,215

     Beginning in June 2009, we ceased making payments on the note payable of $29.1 million secured by the Hyatt Regency Dearborn hotel property, due to the fact that the operating cash flows from the hotel property are not anticipated to cover the principal and interest payments on the note and the related capital expenditures on the property. The lender issued a notice of default and an acceleration notice. We have not cured the notice of default and intend to fully settle the debt via a deed-in-lieu of foreclosure or foreclosure of the hotel property. As a result, we wrote down the hotel property to its estimated fair value and recorded an impairment charge of $10.9 million in the quarter ended June 30, 2009. In determining the fair value of the property, we obtained a market analysis based on eight recent hotel sales in the Midwest region provided by a third party. Those sales ranged from a low of $33,000 per key to a high of $125,000 per key. We evaluated the analysis and determined that the current note payable balance on the Hyatt Regency Dearborn hotel property of $29.1 million, or $38,000 per key, is within the range and approximates the fair value of the property.

13

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     Investments in hotel properties are reviewed for impairment at the end of each quarter, taking into account the latest operating cash flows and market conditions and their impact on future projections. Based on our analysis, the hotel properties’ estimated future undiscounted cash flows were in excess of the properties’ carrying values. As a result, no impairment other than the impairment related to Hyatt Regency Dearborn was recorded for the nine months ended September 30, 2009.

5. Notes Receivable

      Notes receivable consisted of the following at September 30, 2009 and December 31, 2008 (in thousands):

	September 30,			December 31,
	2009			2008
Mezzanine loan secured by various mortgage-backed securities sponsored by government agencies, matures September 2011, at an interest rate of 14% (12% pay rate with deferred interest through the first two years), with interest-only payments through maturity	$	11,000		$	11,000
First mortgage loan secured by one hotel property, matured October 2008, with two one-year extension options, at an interest rate of LIBOR plus 9%, with interest-only payments through maturity (the balance before valuation allowance was $18,200)		—			18,200
Mezzanine loan secured by 105 hotel properties, matures April 2010, with a one-year extension option at an interest rate of LIBOR plus 5%, with interest-only payments through maturity		25,688			25,694
Mezzanine loan secured by one hotel property, matured September 2009, with two one-year extension options, at an interest rate of LIBOR plus 6.5%, with interest-only payments through maturity (the balance before valuation allowance was $7,000)		—			7,000
Mezzanine loan secured by one hotel property, matured July 2009, with two one-year extension options, at an interest rate of LIBOR plus 5.75%, with interest-only payments through maturity (the balance before valuation allowance was $4,000)		—			4,000
Mezzanine loan secured by one hotel property, matures January 2011, with two one-year extension options, at an interest rate of LIBOR plus 9%, with interest-only payments through maturity		7,056			7,056
Mezzanine loan with principal balance of $38.0 million secured by one hotel property, matures June 2017, at an interest rate of 9.66%, with interest-only payments through maturity (the balance before valuation allowance was $33,684)		22,980			33,445
Mezzanine loan with principal balance of $164.0 million secured by 681 Extended-Stay Hotel properties, matured June 2009, with three one-year extension options, at an interest rate of LIBOR plus 2.5%, with interest-only payments through maturity (the balance before valuation allowance was $109,272)		—			106,376
		66,724			212,771
Deferred loan costs and deferred income, net		(72	)		44
Total notes receivable	$	66,652		$	212,815
Weighted average effective interest rate		4.3	%		16.5	%

     In general, our notes receivable have extension options, prohibit prepayment through a certain period, and require decreasing prepayment penalties through maturities.

     Notes receivable in our portfolio are evaluated for collectability individually and collectively for each reporting period. The process of evaluating the collectability involves significant judgment. Therefore, there is at least a

14

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

reasonable possibility that a change in our estimates regarding collectability will occur in the future. Valuation allowances recorded for loans impaired according to our analysis are included in the “impairment charges” in the consolidated statements of operations.

     Interest payments since March of 2009 have not been made on the $7.1 million junior participation note receivable maturing January 2011 secured by a hotel property in La Jolla, California. In accordance with our accounting policy, we have discontinued recording interest on this note beginning in March of 2009. We put the borrower in default for failure to make the payments and the failure to maintain liquidity and net worth covenants as required under the loan guaranty. The first mortgage holder also put the borrower in default. We are in discussions with the borrower and the first mortgage holder with regard to potential workout solutions. Because we obtained personal guaranties from the principals of the borrower and a new investor has agreed to a possible restructuring of the loan that does not reduce principal on our mezzanine loan position while bringing the loan current, no valuation allowance was recorded on this note.

     Principal and interest payments have not been made since October 2008 on the $18.2 million junior participation note receivable secured by a hotel property in Nevis, West Indies. The underlying hotel property suffered significant damage by Hurricane Omar in 2008. In accordance with our accounting policy, we discontinued recording interest on this note beginning in October 2008. During the quarter ended June 30, 2009, we were made aware that insurance recoveries for the damages from the hurricane were not adequate to fully fund the repairs of the property and further delays in the reopening of the property were likely. As a result, we recorded a valuation allowance of $9.1 million to reflect our concerns regarding the collectability of our investment. Since June 30, 2009, more information became available indicating that additional uninsured and deferred costs could potentially exceed our loan principal and further delay the foreclosure process and eventual reopening. As a result of these factors along with the fact that pursuant to a settlement with a more senior participant, we relinquished our controlling holder status under the participation agreement, we recorded an additional valuation allowance of $9.1 million in the quarter ended September 30, 2009, for the remaining carrying amount of the note.

     The borrower of the $4.0 million junior participation loan collateralized by the Sheraton hotel property in Dallas, Texas which was due in July 2009 has been in default since May 11, 2009. Based on a recent appraisal of the property from a third party, it is unlikely that we will be able to recover our full investment due to our junior status. As a result, we recorded a valuation allowance for the full amount of the note receivable in the second quarter ended June 30, 2009.

     The $164.0 million principal amount mezzanine loan secured by 681 Extended Stay Hotel properties was purchased at a significant discount which was amortized over the life of the loan through March 31, 2009. In June 2009, the issuer of this note filed for Chapter 11 bankruptcy protection from its creditors. We anticipate that the issuer, through its bankruptcy filing, may attempt to impose a plan of reorganization which could extinguish our investment. Accordingly, we recorded a valuation allowance of $109.4 million in the second quarter ended June 30, 2009, for the full amount of the book value of the note. Prior to the bankruptcy filing, all payments on this loan were current.

     The $7.0 million loan collateralized by the Le Meridien hotel property in Dallas, Texas is no longer in a position to service its debt payments in the absence of a cash infusion from the borrower. It is likely that we will be unable to recover the full value of our investment due to our junior status. As a result, we recorded a valuation allowance in the quarter ended June 30, 2009, for the full amount of the note receivable.

     Due to the fact that the Ritz-Carlton hotel property in Key Biscayne, Florida collateralizing the $38.0 million principal amount loan is not generating sufficient cash flow for debt service, we have entered into definitive agreements, subject to servicer consent, with the borrower and a third party investor. Under the agreements, the third party investor, subject to certain conditions, has committed to funding equity to execute either a discounted payoff or a direct purchase of our loan for consideration of $20.0 million in cash and a $4.0 million note. Based on the net present value of the future cash flows of the definitive agreements, we recorded a valuation allowance of $10.7 million in the quarter ended September 30, 2009. See Note 11.

15

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     The average recorded investment in the impaired loans and the related interest income recognized for the three and nine months ended September 30, 2009 were as follows (in thousands):

	Three		Nine
	Months		Months
	Ended		Ended
	September 30,		September 30,
	2009		2009
Average investment in impaired loans	$	37,786	$	117,840
Interest income recognized on impaired loans	$	1,017	$	8,003
Interest income recognized on impaired loans using cash-basis	$	—		—

6. Investment in Unconsolidated Joint Venture

     We have a 25% ownership interest in a joint venture which invests in mezzanine loans. At September 30, 2009 and December 31, 2008, our investment in the joint venture consisted of the following (in thousands):

	September 30,			December 31,
	2009			2008
25% of a mezzanine loan acquired at a discounted price (principal balance of $21,000), secured by 29 hotel properties, matures August 2010 with two one-year extension options, at an interest rate of LIBOR plus 2.75%, and with interest-only payments through maturity	$	19,847		$	18,813
25% of a mezzanine loan at par value secured by two hotel properties, matures January 2018, at an interest rate of 14%, with interest-only payments through maturity		5,461			5,461
Allowance for loan losses		(5,461	)		(5,461	)
Other, net		106			106
Distributions		(2,467	)		(1,800	)
Equity in earnings since inception before discount amortization and allowance for loan losses		2,833			2,003
Total	$	20,319		$	19,122

16

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. Assets Held for Sale and Discontinued Operations

     The following table summarizes the operating results of the discontinued operations for the three and nine months ended September 30, 2008 ($ in thousands):

	Three			Nine
	Months			Months
	Ended			Ended
	September 30,			September 30,
	2008			2008
Number of properties:
Properties classified as held for sale at end of period		1			1
Properties sold during the period		3			9
Total properties included in discontinued operations		4			10
Results of operations:
Hotel revenues	$	11,909		$	80,854
Total operating expenses		(10,022	)		(64,062	)
Operating income		1,887			16,792
Gain on sales of properties		1,411			8,315
Depreciation and amortization		(1,106	)		(6,635	)
Interest expense and amortization of loan costs		(627	)		(3,465	)
Write-off of loan costs, premiums and exit fees, net		(236	)		1,112
Income from discontinued operations before income taxes		1,329			16,119
Income taxes		—			(210	)
Income from discontinued operations		1,329			15,909
Income from discontinued operations attributable to redeemable noncontrolling interests in operating partnership		(109	)		(1,249	)
Income from discontinued operations attributable to the Company.	$	1,220		$	14,660

17

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. Indebtedness

     Indebtedness consisted of the following at September 30, 2009 and December 31, 2008 (in thousands):

				September 30,		December 31,
Indebtedness	Collateral	Maturity	Interest Rate	2009		2008
Mortgage loan	10 hotels	July 2015	5.22%	$	160,490	$	160,490
Mortgage loan	5 hotels	February 2016	5.53%		115,645		115,645
Mortgage loan	5 hotels	February 2016	5.53%		95,905		95,905
Mortgage loan	5 hotels	February 2016	5.53%		83,075		83,075
Mortgage loan	8 hotels	December 2014	5.75%		110,899		110,899
Mortgage loan	8 hotels	December 2015	5.70%		100,576		100,576
Senior credit facility	Notes receivable	April 2010(1)	LIBOR(2) + 2.75% to 3.5%(3)		250,000		250,000
Mortgage loan	1 hotel	December 2016	5.81%		101,000		101,000
Mortgage loan	5 hotels	December 2009(1)	LIBOR (2) + 1.72%		203,400		203,400
Mortgage loan	5 hotels	April 2017	5.95%		115,600		115,600
Mortgage loan	7 hotels	April 2017	5.95%		126,466		126,466
Mortgage loan	2 hotels	April 2017	5.95%		128,251		128,408
Mortgage loan	5 hotels	April 2017	5.95%		103,906		103,906
Mortgage loan	5 hotels	April 2017	5.95%		158,105		158,105
Mortgage loan	3 hotels	April 2017	5.95%		260,980		260,980
Mortgage loan	1 hotel	April 2017	5.91%		35,000		35,000
Mortgage loan	10 hotels	May 2010(1)	LIBOR(2) + 1.65%		167,202		167,202
Mortgage loan	1 hotel	December 2017(4)	7.39%		—		48,790
Mortgage loan	1 hotel	January 2011	8.32%		5,867		5,966
Mortgage loan	1 hotel	January 2023	7.78%		4,900		6,612
TIF loan	1 hotel	June 2018	12.85%		7,783		7,783
Mortgage loan	1 hotel	March 2010(5)	5.6%		29,135		29,396
Mortgage loan	3 hotels	April 2011	5.47%		65,248		66,420
Mortgage loan	4 hotels	March 2010	5.95%		75,000		75,000
Mortgage loan	1 hotel	June 2011	LIBOR (2) + 2%		19,740		19,740
Mortgage loan	2 hotels	August 2011(1)	LIBOR (2) + 2.75%		157,400		159,000
Mortgage loan	1 hotel	March 2011(1)	LIBOR (2) + 3.75%		52,500		55,000
Mortgage loan	1 hotel	March 2012(1)	LIBOR (2) + 4%		60,800		—
Mortgage loan	1 hotel	April 2034	Greater of 6% or Prime + 1%		6,951		—
Total indebtedness				$	2,801,824	$	2,790,364

(1)	Each of these loans has two one-year extension options remaining.
(2)	LIBOR rates were 0.25% and 0.44% at September 30, 2009 and December 31, 2008, respectively.
(3)	Based on the debt-to-assets ratio defined in the loan agreement, interest rate on this debt was LIBOR + 3% as of September 30, 2009.
(4)	This note was refinanced in February 2009, with the $60.8 million note due March 1, 2012 and the unamortized premium of $1.4 million was written off.
(5)	This note is in the process of deed-in-lieu of foreclosure or foreclosure of the property.

     In February 2009, we refinanced the $47.4 million loan (excluding a premium of $1.4 million) secured by a hotel property in Arlington, Virgina, with a $60.8 million loan at an interest rate of LIBOR plus 4% for three years with two one-year extension options. In conjunction with the refinancing, we purchased an interest rate cap with a notional amount of $60.8 million and a strike rate of 4.81% for $161,000. In addition, in March 2009, we obtained a $7.0 million mortgage loan on a hotel property in Jacksonville, Florida. The loan matures April 2034 and bears an interest rate at the greater of 6% or prime plus 1%.

     Beginning in June 2009, we ceased making payments on the note payable of $29.1 million secured by the Hyatt Regency Dearborn hotel property, due to the fact that the operating cash flows from the hotel property are not anticipated to cover the principal and interest payments on the note and the related capital expenditures on the property. The lender issued a notice of default and an acceleration notice. We have not cured the notice of default and intend to fully settle the debt via a deed-in-lieu of foreclosure or foreclosure of the hotel property. See Notes 4 and 11.

     The main covenants of our $250.0 million senior credit facility with 10 banks, which expires in April 2010 with two one-year extension options that takes it to April 2012, include (i) the minimum fixed charge coverage ratio, as defined, of 1.25x through March 31, 2011 (1.60x at September 30, 2009), and 1.35x thereafter until expiration; and (ii)

18

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

the maximum leverage ratio, as defined, of 65% (57.8% at September 30, 2009). The only requirement to extend the credit facility is that the facility be in a non-default status with regards to the covenants.

     The articles governing our Series B-l preferred stock require us to maintain certain covenants. The impairment charges recorded during the quarter ended June 30, 2009 could have prevented us from satisfying one financial ratio. However, the holder of the Series B-l preferred stock reviewed the specific impairment charges and agreed to exclude the impairment charges incurred in the second quarter as they impact the financial ratio calculations for the affected periods. At September 30, 2009, we are in compliance with all covenants required under the articles governing the Series B-l preferred stock.

9. Income (Loss) Per Share

     Basic income (loss) per common share is calculated by dividing net income (loss) attributable to common stockholders by the weighted average common shares outstanding during the period using the two-class method prescribed by applicable authoritative accounting guidance. Diluted income (loss) per common share reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted into common shares, whereby such exercise or conversion would result in lower income per share under the two-class method. The following table reconciles the amounts used in calculating basic and diluted income (loss) per share for the three and nine months ended September 30, 2009 and 2008 (in thousands, except per share amounts):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2009			2008			2009			2008
(Loss) income from continuing operations attributable to the Company	$	(28,796	)	$	7,579		$	(178,198	)	$	(26,180	)
Less: Dividends to preferred stocks		(4,831	)		(7,018	)		(14,492	)		(21,054	)
Less: Dividends to common stock		—			(22,513	)		—			(72,837	)
Less: Dividends to unvested shares		—			(582	)		—			(545	)
Undistributed loss from continuing operations attributable to the Company	$	(33,627	)	$	(22,534	)	$	(192,690	)	$	(120,616	)
Income from discontinued operations allocated to common shares	$	—		$	1,220		$	—		$	14,660
Income from discontinued operations allocated to unvested restricted shares		—			—			—			—
Total income from discontinued operations attributable to the Company	$	—		$	1,220		$	—		$	14,660
Weighted average common shares — Basic		65,266			115,819			72,167			117,828
Income from continuing operations distributed to common shares	$	—		$	22,513		$	—		$	72,837
Undistributed loss from continuing operations allocated to common shares		(33,627	)		(22,534	)		(192,690	)		(120,616	)
Total distributed and undistributed loss from continuing operations to common shares		(33,627	)		(21	)		(192,690	)		(47,779	)
Income from discontinued operations allocated to common shares		—			1,220			—			14,660
Total distributed and undistributed (loss) income to common shares	$	(33,627	)	$	1,199		$	(192,690	)	$	(33,119	)
Basic and diluted (loss) income per share:
Distributed (loss) income from continuing operations	$	—		$	0.19		$	—		$	0.62
Undistributed loss from continuing operations		(0.52	)		(0.19	)		(2.67	)		(1.02	)
Total loss from continuing operations		(0.52	)		—			(2.67	)		(0.40	)
Income from discontinued operations		—			0.01			—			0.12
Basic and diluted net (loss) income attributable to common shares	$	(0.52	)	$	0.01		$	(2.67	)	$	(0.28	)

19

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     Due to the anti-dilutive effect, the weighted average diluted shares do not reflect the adjustments for the following items (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2009		2008		2009		2008
Number of shares from assumed conversion of Preferred B-1 shares		7,448		7,448		7,448		7,448
Assumed conversion of weighted average outstanding operating partnership units		13,492		14,390		13,456		14,082
Total		20,940		21,838		20,904		21,530

10. Derivatives and Hedging Activities

     We are exposed to risks arising from our business operations, economic conditions and financial markets. To manage the risks, we primarily use interest rate derivatives to hedge our asset cash flows. We also use non-hedge derivatives to capitalize on the historical correlation between changes in LIBOR and RevPAR. We entered into these interest rate derivatives and believe that the counterparties’ nonperformance risk is limited. In March 2009, in order to take advantage of the declining LIBOR rates, we entered into a one-year “flooridor” with a financial institution for the period commencing December 14, 2009 and ending December 13, 2010 for a notional amount of $3.6 billion. The flooridor establishes a floor rate of 0.75%. Under this flooridor, the counterparty will pay us interest on the notional amount when LIBOR rates are below the original floor of 1.25% up to a maximum of 50 basis points on the notional amount. The upfront cost of this flooridor was $8.5 million. On July 1, 2009, we purchased two one-year term flooridors, each with a notional amount of $1.8 billion, for an upfront cost of $22.3 million. Under the first flooridor, the counterparty will pay us interest on the notional amount for the period commencing December 14, 2009 and ending December 13, 2010 when LIBOR rates are below 1.75% up to a maximum of 50 basis points on the notional amount. Under the second flooridor, the counterparty will pay us interest on the notional amount for the period commencing December 13, 2010 and ending December 13, 2011 when LIBOR rates are below 2.75% up to a maximum of 225 basis points on the notional amount. We have no further liability under these flooridors to the counterparties.

     In addition, during the nine months ended September 30, 2009, we entered into seven interest rate caps with total notional amounts of $283.0 million to cap the interest rates on mortgage loans with an aggregate principal amount of $283.0 million (aggregate principal balance at September 30, 2009 was $280.5 million) with strike rates between 4.81% and 6%. The total price for these hedges was $233,000. These interest rate caps were designated as cash flow hedges.

     All derivatives are recorded at their fair values and reported net as “Interest rate derivatives” in the consolidated balance sheets in accordance with authoritative accounting guidance. For derivatives that are not designated as hedges, the changes in the fair value are recognized in earnings as “Unrealized gain (loss) on derivatives” in the consolidated statements of operations. For derivatives designated as cash flow hedges, the effective portion of changes in the fair value is reported as a component of “Accumulated other comprehensive income (loss)” (OCI) in the equity section of the consolidated balance sheets. The amount recorded in OCI is reclassified to interest expense in the same period or periods during which the hedged transaction affects earnings, while the ineffective portion of changes in the fair value of the derivative is recognized directly in earnings as “Unrealized gain (loss) on derivatives” in the consolidated statements of operations. During the next twelve months, we expect $502,000 of accumulated comprehensive loss will be reclassified to interest expense.

     We have a derivative agreement that incorporates the loan covenant provisions of our senior credit facility requiring us to maintain certain minimum financial covenant ratios on our indebtedness. Failure to comply with the covenant provisions would result in us being in default on any derivative instrument obligations covered by the agreement. At September 30, 2009, we were in compliance with all the covenants under the senior credit facility. At September 30, 2009, the fair value of derivatives related to this agreement was an asset of $50.4 million.

20

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     The fair value of our non-hedge designated interest rate derivatives at September 30, 2009 and the effects of these derivatives on the consolidated statement of operations for the three and nine months ended September 30, 2009 are as follows ($ in thousands):

								Gain or (Loss)						Interest Savings or (Cost)
								Recognized in Income						Recognized in Income
								Three			Nine			Three			Nine
					Fair			Months			Months			Months			Months
					Value			Ended			Ended			Ended			Ended
Derivative	Notional		Strike		Asset/			September 30,			September 30,			September 30,			September 30,
Type	Amount		Rate	Maturity	(Liability)			2009			2009			2009			2009
Interest rate cap	$	1,000,000	3.75% Pays LIBOR	2011	$	707		$	(239	)	$	(52	)	$	—		$	—
Interest rate swap	$	1,800,000	plus 2.639%, receives 5.84%	2013		80,318			6,396			(18,888	)		13,432			38,100
Interest rate floor	$	1,800,000	1.25%	2013		(19,425	)		(7,904	)		(2,258	)		(4,453	)		(11,455	)
Interest rate flooridor	$	1,800,000	1.25% — 0.75%	2009		1,848			(2,182	)		(3,870	)		2,300			6,558
Interest rate flooridor	$	3,600,000	1.25% — 0.75%	2010		14,099			4,205			5,649			—			—
Interest rate flooridor	$	1,800,000	1.75% — 1.25%	2010		7,875			781			781			—			—
Interest rate flooridor	$	1,800,000	2.75% — 0.50%	2011		19,719			4,474			4,474			—			—
Total					$	105,141	(1)	$	5,531	(2)	$	(14,164	)(2)	$	11,279	(3)	$	33,203	(3)

(1)	Reported as “Interest rate derivatives” in the consolidated balance sheets.
(2)	Reported as “Unrealized gain (loss) on derivatives” in the consolidated statements of operations.
(3)	Reported as “Other income” in the consolidated statements of operations.

     The fair value of our hedge-designated interest rate derivatives at September 30, 2009 and the effects of these derivatives on the consolidated statement of operations for the three and nine months ended September 30, 2009 are as follows ($ in thousands):

																	Reclassified from				Gain (Loss) Recognized
											Income (Loss)						Accumulated OCI				in Income for
											Recognized in OCI						into Interest Expense				Ineffective Portion
											Three			Nine			Three		Nine		Three			Nine
											Months			Months			Months		Months		Months			Months
								Fair			Ended			Ended			Ended		Ended		Ended			Ended
	Notional		Strike					Value			September 30,			September 30,			September 30,		September 30,		September 30,			September 30,
Derivative Type	Amount		Rates			Maturity		Asset			2009			2009			2009		2009		2009			2009
Interest rate cap	$	212,000		6.25	%		2009	$	—		$	35		$	97		$	35	$	97	$	—		$	—
Interest rate cap	$	160,000		5.00	%		2010		3			14			18			17		22		—			—
Interest rate cap	$	160,000		5.00	%		2011		186			3			105			—		—		(1	)		3
Interest rate cap	$	55,000		5.00	%		2010		1			6			6			3		4		(4	)		(4	)
Interest rate cap	$	55,000		5.00	%		2011		20			2			(23	)		—		—		(1	)		(1	)
Interest rate cap	$	60,800		4.81	%		2012		165			(10	)		4			—		—		—			—
Interest rate cap	$	167,212		6.00	%		2010		—			—			(28	)		—		—		—			—
Total								$	375	(1)	$	50		$	179		$	55	$	123	$	(6	)(2)	$	(2	)(2)

(1)	Included in “Interest rate derivatives” in the consolidated balance sheets.
(2)	Included in “Unrealized loss on derivatives” in the consolidated statements of operations.

     The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts/payments and the discounted expected variable cash payments/receipts. The variable cash payments/receipts are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves. The fair values of interest rate caps, floors and flooridors are determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates fell below the strike rate of the floors or rise above the strike rate of the caps. The variable interest rates used in the calculation of projected receipts on the floor (cap) are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities (the “Level 2” inputs that are observable at commonly quoted intervals, other than quoted prices). We also incorporate credit valuation adjustments (the “Level 3” inputs that are unobservable typically based on our own assumptions, as there is little, if any, related market activity) to appropriately reflect both our own non-performance risk and the respective counterparty’s non-performance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of non-performance risk, we have considered the impact of netting any applicable credit enhancements such as collateral postings, thresholds, mutual puts, and guarantees.

21

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     We have determined that when a majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. However, when the valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by us and our counter-parties, which we consider significant (10% or more) to the overall valuation of our derivatives, the derivative valuations in their entirety are classified in Level 3 of the fair value hierarchy.

     The following table presents our assets and liabilities measured at fair value on a recurring basis as of September 30, 2009 and December 31, 2008, aggregated by the level in the fair value hierarchy within which measurements fall (in thousands):

	September 30, 2009								December 31, 2008
	Level 2		Level 3			Total			Level 2		Level 3			Total
Assets
Non-hedge derivatives:
Interest rate swap	$	80,318	$	—		$	80,318		$	99,206	$	—		$	99,206
Interest rate cap		707		—			707			759		—			759
Interest rate flooridor		43,541		—			43,541			5,718		—			5,718
Hedge derivatives:
Interest rate cap		375		—			375			—		—			—
Subtotal		124,941		—			124,941			105,683		—			105,683
Liabilities
Non-hedge derivatives:
Interest rate floor		—		(19,425	)		(19,425	)		—		(17,168	)		(17,168	)
Hedge derivatives:
Interest rate cap		—		—			—			—		88			88
Subtotal		—		(19,425	)		(19,425	)		—		(17,080	)		(17,080	)
Net	$	124,941	$	(19,425	)	$	105,516		$	105,683	$	(17,080	)	$	88,603

     The reconciliation of the beginning and ending balances of the derivatives that were measured using Level 3 inputs is as follows (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2009			2008			2009			2008
Balance at beginning of period	$	62,401		$	(57,893	)	$	(17,080	)	$	—
Purchases		—			—			—			4,192
Unrealized gain (loss) included in earnings		(7,904	)		18,131			(35,087	)		(43,954	)
Transferred (out) in Level 3		(73,922	)		—			32,742			—
Balance at end of period	$	(19,425	)	$	(39,762	)	$	(19,425	)	$	(39,762	)

11. Impairment Charges

     Investment in Hotel Properties — Beginning in June 2009, we ceased making payments on the note payable of $29.1 million secured by the Hyatt Regency Dearborn hotel property, due to the fact that the operating cash flows from the hotel property are not anticipated to cover the principal and interest payments on the note and the related capital expenditures on the property. The lender issued a notice of default and an acceleration notice. We have not cured the notice of default and intend to fully settle the debt via a deed-in-lieu of foreclosure or foreclosure of the hotel property. As a result, we wrote down the hotel property to its estimated fair value and recorded an impairment charge of $10.9 million in the quarter ended June 30, 2009. In determining the fair value of the property, we obtained a market analysis based on eight recent hotel sales in the Midwest region provided by a third party. Those sales ranged from a low of $33,000 per key to a high of $125,000 per key. We evaluated the analysis and determined that the current note payable balance on the Hyatt Regency Dearborn hotel property of $29.1 million, or $38,000 per key, is within the range (level 3 input) and approximates the fair value of the property.

22

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     Notes Receivable — Principal and interest payments have not been made since October 2008 on the $18.2 million junior participation note receivable secured by a hotel property in Nevis, West Indies. The underlying hotel property suffered significant damage by Hurricane Omar in 2008. In accordance with our accounting policy, we discontinued recording interest on this note beginning in October 2008. During the quarter ended June 30, 2009, we were made aware that insurance recoveries for the damages from the hurricane were not adequate to fully fund the repairs of the property and further delays in the reopening of the property were likely. As a result, we recorded a valuation allowance of $9.1 million to reflect our concerns regarding the collectability of our investment. Since June 30, 2009, more information became available indicating that additional uninsured and deferred costs could potentially exceed our loan principal and further delay the foreclosure process and eventual reopening. As a result of these factors along with the fact that pursuant to a settlement with a more senior participant, we relinquished our controlling holder status under the participation agreement, we recorded an additional valuation allowance of $9.1 million in the quarter ended September 30, 2009, for the remaining carrying amount of the note.

     The borrower of the $4.0 million junior participation loan collateralized by the Sheraton hotel property in Dallas, Texas which was due in July 2009 has been in default since May 11, 2009. Based on a recent appraisal of the property from a third party (Level 3 inputs), it is unlikely that we will be able to recover our full investment due to our junior status. As a result, we recorded a valuation allowance in the quarter ended June 30, 2009, for the full amount of the note receivable.

     The $164.0 million principal amount mezzanine loan secured by 681 Extended Stay Hotel properties was purchased at a significant discount which was amortized over the life of the loan through March 31, 2009. In June 2009, the issuer of this note filed for Chapter 11 bankruptcy protection from its creditors. We anticipate that the issuer, through its bankruptcy filing, may attempt to impose a plan of reorganization which could extinguish our investment. Accordingly, we recorded a valuation allowance of $109.4 million in the quarter ended June 30, 2009, for the full amount of the book value of the note. Prior to the bankruptcy filing, all payments on this loan were current.

     The $7.0 million loan collateralized by the Le Meridien hotel property in Dallas, Texas is no longer in a position to service its debt payments in the absence of a cash infusion from the borrower. It is likely that we will be unable to recover the full value of our investment due to our junior status. As a result, we recorded a valuation allowance in the quarter ended June 30, 2009, for the full amount of the note receivable.

     Due to the fact that the Ritz-Carlton hotel property in Key Biscayne, Florida collateralizing the $38.0 million principal amount loan is not generating sufficient cash flow for debt service, we have entered into definitive agreements, subject to servicer consent, with the borrower and a third party investor. Under the agreements, the third party investor, subject to certain conditions, has committed to funding equity to execute either a discounted payoff or a direct purchase of our loan for consideration of $20.0 million in cash and a $4.0 million note. In evaluating possible impairment on this loan, consideration was given to different scenarios including (i) the agreed-upon transaction is closed without material changes; (ii) the agreed-upon transaction fails to close, the borrower defaults and the remedies are unfavorable to us; and (iii) the agreed-upon transaction fails to close but borrower protects its investment and the loan would be paid-in-full at its maturity. We concluded that the transaction is most likely to close under the first scenario and recorded a valuation allowance of $10.7 million in the quarter ended September 30, 2009 based on the net present value of the future cash flows under the definitive agreements.

     The following table summarizes the changes in allowance for losses for the three and nine months ended September 30, 2009 (in thousands):

	Three		Nine
	Months		Months
	Ended		Ended
	September 30,		September 30,
	2009		2009
Balance at beginning of period	$	129,456	$	—
Valuation allowance for notes receivable		19,816		149,272
Balance at end of period	$	149,272	$	149,272

23

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. Redeemable Noncontrolling Interests

     Redeemable noncontrolling interests in the operating partnership represent the limited partners’ proportionate share of equity in earnings/losses of the operating partnership, which is an allocation of net income attributable to the common unit holders based on the weighted average ownership percentage of these limited partners’ common unit holdings throughout the period plus distributions paid to these limited partners’ Class B unit holdings. Redeemable noncontrolling interests in our operating partnership at September 30, 2009 and December 31, 2008 were $84.9 million and $107.5 million, which represented ownership of 18.4% and 14.3% in our operating partnership, respectively. The change in ownership percentage is the result of the decrease in outstanding common shares due to the shares repurchase program authorized by our Board of Directors. Net loss attributable to the redeemable noncontrolling interests was $4.4 million and $25.6 million for the three and nine months ended September 30, 2009, respectively. Net income attributable to the redeemable noncontrolling interests was $856,000, for the three months ended September 30, 2008, and net loss attributable to the redeemable noncontrolling interests was $738,000 for the nine months ended September 30, 2008. The carrying value at September 30, 2009 included a $4.4 million adjustment to reflect the excess of redemption value over the accumulated historical costs related to the operating partnership units granted at IPO in 2003. For all other operating partnership units, the carrying value was based on the accumulated historical cost as the accumulated historical cost was greater than the redemption value at September 30, 2009.

     During the three and nine months ended September 30, 2009, we made distributions to redeemable noncontrolling interests of $697,000 and $2.1 million, respectively. We made such distributions of $3.0 million and $8.9 million for the three and nine months ended September 30, 2008, respectively. During the three and nine months ended September 30, 2009, we recognized compensation expense related to the long-term incentive partnership units issued in 2008 of $248,000 and $735,000, respectively. For the three and nine months ended September 30, 2008, we recognized such expense of $248,000 and $734,000, respectively.

13. Equity and Stock-Based Compensation

      Stock Repurchases — In January 2009, the Board of Directors approved an additional $200.0 million authorization (excluding fees, commissions and all other ancillary expenses) for: (i) the repurchase of shares of our common stock, Series A preferred stock, Series B-1 preferred stock and Series D preferred stock and/or (ii) the prepayment of our outstanding debt obligations, including debt secured by our hotel assets and debt senior to our mezzanine or loan investments. During the nine months ended September 30, 2009, we have repurchased 23.8 million shares of our common stock, 697,600 shares of the Series A preferred stock and 727,550 shares of the Series D preferred stock for a total price of $64.0 million, including $564,000 of commissions.

      Stock-Based Compensation — During the three and nine months ended September 30, 2009, we recognized compensation expense of $891,000 and $3.2 million, respectively, related to our stock-based compensation plan. During the three and nine months ended September 30, 2008, we recognized such expense of $1.4 million and $4.5 million, respectively. As of September 30, 2009, the unamortized amount of the unvested shares of restricted stock was $5.6 million and will be amortized over a period of 2.9 years.

     Dividends — A summary of dividends declared for the three and nine months ended September 30, 2009 and 2008 is as follows (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2009		2008		2009		2008
Common stock	$	—	$	23,095	$	—	$	73,382
Preferred stock:
Series A preferred stock		796		1,229		2,385		3,687
Series B-1 preferred stock		1,043		1,564		3,128		4,692
Series D preferred stock		2,992		4,225		8,979		12,675
Total dividends declared	$	4,831	$	30,113	$	14,492	$	94,436

24

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     Effective with the fourth quarter ended December 31, 2008, in conjunction with the credit facility amendment, our Board of Directors suspended the common stock dividend. We expect to distribute the minimum dividend required to maintain our REIT status in 2009, which is likely to be determined, if necessary, in the fourth quarter of 2009. We may elect to pay dividends on our common stock in cash or a combination of cash and shares of common stock as permitted under federal income tax laws governing REIT distribution requirements.

     Noncontrolling Interests in Consolidated Joint Ventures — Noncontrolling interests in consolidated joint ventures at September 30, 2009 and December 31, 2008 were $17.9 million and $19.4 million, respectively, which represent ownership percentages ranging from 11% to 25% of six hotel properties held by three joint ventures, and are reported in equity in the consolidated balance sheets. Loss from consolidated joint ventures attributable to these noncontrolling interests was $476,000 and $629,000 for the three and nine months ended September 30, 2009, respectively, and income from consolidated joint ventures attributable to these noncontrolling interests was $123,000 and $2.9 million for the three and nine months ended September 30, 2008, respectively.

14. Commitments and Contingencies

      Restricted Cash — Under certain management and debt agreements existing at September 30, 2009, we escrow payments required for insurance, real estate taxes, and debt service. In addition, for certain properties based on the terms of the underlying debt agreement, we escrow 4% to 6% of gross revenue for capital improvements.

     Franchise Fees — Under franchise agreements existing at September 30, 2009, we pay franchisor royalty fees between 2.5% and 6% of gross room revenue, or in some cases, gross room and food and beverage revenues, as well as fees for marketing, reservations, and other related activities aggregating between 1% and 3.75% of gross room revenue, or in some cases, gross room and food and beverage revenues. These franchise agreements expire between 2011 and 2027. When a franchise term expires, the franchisor has no obligation to renew the franchise. A franchise termination could have a material adverse effect on the operations or the underlying value of the affected hotel due to loss of associated name recognition, marketing support, and centralized reservation systems provided by the franchisor. A franchise termination could also have a material adverse effect on cash available for distribution to stockholders. In addition, if we breach the franchise agreement and the franchisor terminates a franchise prior to its expiration date, we may be liable for up to three times the average annual fees incurred for that property.

     For the nine months ended September 30, 2009 and 2008, our continuing operations incurred franchise fees of $18.4 million and $21.8 million, respectively, which are included in indirect hotel operating expenses in the accompanying consolidated statements of operations.

     Management Fees — Under management agreements existing at September 30, 2009, we pay (i) monthly property management fees equal to the greater of $10,000 (CPI adjusted) or 3% of gross revenues, or in some cases 2% to 8.5% of gross revenues, as well as annual incentive management fees, if applicable, (ii) market service fees on approved capital improvements, including project management fees of up to 4% of project costs, for certain hotels, and (iii) other general fees at current rates as approved by our independent directors, if required. These management agreements expire between 2011 and 2029, with renewal options. If we terminate a management agreement prior to its expiration, we may be liable for estimated management fees through the remaining term, liquidated damages or, in certain circumstances, we may substitute a new management agreement.

     Litigation — We are currently subject to litigation arising in the normal course of our business. In the opinion of management, none of these lawsuits or claims against us, either individually or in the aggregate, is likely to have a material adverse effect on our business, results of operations, or financial condition. In addition, management believes we have adequate insurance in place to cover any such significant litigation.

25

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15. Fair Value of Financial Instruments

     Determining estimated fair values of our financial instruments requires considerable judgment to interpret market data. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. Accordingly, the estimates presented are not necessarily indicative of the amounts at which these instruments could be purchased, sold or settled. The carrying amounts and estimated fair values of financial instruments at September 30, 2009 and December 31, 2008 were as follows (in thousands):

	September 30, 2009				December 31, 2008
	Carrying		Estimated		Carrying		Estimated
	Value		Fair Value		Value		Fair Value
Financial assets:
Cash and cash equivalents	$	197,920	$	197,920	$	241,597	$	241,597
Restricted cash	$	65,270	$	65,270	$	69,806	$	69,806
Accounts receivable	$	39,471	$	39,471	$	41,110	$	41,110
Notes receivable	$	66,652	$	45,516 to $50,307	$	212,815	$	200,293
Interest rate derivatives — cash flow hedges	$	376	$	376	$	88	$	88
Interest rate derivatives — non-cash flow hedges	$	105,140	$	105,140	$	88,515	$	88,515
Due from third-party hotel managers	$	52,428	$	52,428	$	48,116	$	48,116
Financial liabilities:
Indebtedness	$	2,801,824	$	1,883,427 to $2,081,679	$	2,790,364	$	2,788,503
Accounts payable and accrued expenses	$	115,335	$	115,335	$	93,476	$	93,476
Due to related parties	$	1,403	$	1,403	$	2,378	$	2,378
Due to third-party hotel managers	$	2,024	$	2,024	$	3,855	$	3,855

     Cash, cash equivalents and restricted cash. These financial assets bear interest at market rates and have maturities of less than 90 days. The carrying value approximates fair value due to the short-term nature.

     Accounts receivable, due to/from related parties or third-party hotel managers, accounts payable and accrued expenses. The carrying values of these financial instruments approximate their fair values due to the short-term nature of these financial instruments.

     Notes receivable. Because there is very little to no trading activity, we had to rely on our internal analysis of what we believe a willing buyer would pay for these notes (level 3 inputs) at September 30, 2009. We estimated the fair value of the notes receivable to be approximately 25% to 32% lower than the carrying value of $66.7 million at September 30, 2009.

     Indebtedness. Fair value of the indebtedness is determined using future cash flows discounted at current replacement rates for these instruments. For variable rate instruments, cash flows are determined using a forward interest rate yield curve. The current replacement rates are determined by using the U.S. Treasury yield curve or the index to which these financial instruments are tied, and adjusted for the credit spreads. Credit spreads take into consideration general market conditions, maturity and collateral. For the September 30, 2009 indebtedness valuation, we used estimated future cash flows discounted at applicable index forward curves (level 2 inputs) adjusted for credit spreads (level 3 inputs). We estimated the fair value of the indebtedness to be approximately 26% to 33% lower than the carrying value of $2.8 billion at September 30, 2009.

     Interest rate derivatives. Fair value of the interest rate derivatives are determined using the net discounted cash flows of the expected cash flows of each derivative based on the market-based interest rate curve (level 2 inputs) and adjusted for credit spreads of Ashford and the counterparties (level 3 inputs). See Note 10 for a complete description of the methodology and assumptions utilized in determining the fair values.

16. Segment Reporting

     We operate in two business segments within the hotel lodging industry: direct hotel investments and hotel financing. Direct hotel investments refer to owning hotels through either acquisition or new development. We report operating results of direct hotel investments on an aggregate basis as substantially all of our hotel investments have

26

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

similar economic characteristics and exhibit similar long-term financial performance. Hotel financing refers to owning subordinate hotel-related debt through acquisition or origination. We do not allocate corporate-level accounts to our operating segments, including corporate general and administrative expenses, non-operating interest income, interest expense, income tax expense/benefit, and noncontrolling interests.

     For the three and nine months ended September 30, 2009 and 2008, financial information related to our reportable segments was as follows (in thousands):

	Direct Hotel		Hotel
	Investments		Financing			Corporate			Consolidated
Three Months Ended September 30, 2009:
Total revenue	$	218,831	$	1,761		$	—		$	220,592
Total hotel operating expenses		152,970		—			—			152,970
Property taxes, insurance and other		16,023		—			—			16,023
Depreciation and amortization		38,935		—			—			38,935
Impairment charges		—		19,816			—			19,816
Corporate general and administrative		—		—			9,257			9,257
Total expenses		207,928		19,816			9,257			237,001
Operating income (loss)		10,903		(18,055	)		(9,257	)		(16,409	)
Equity in earnings of unconsolidated joint venture		—		642			—			642
Interest income		—		—			56			56
Other income		—		—			13,228			13,228
Interest expense and amortization of loan costs		—		—			(36,545	)		(36,545	)
Unrealized gain on derivatives		—		—			5,525			5,525
Income (loss) from continuing operations before income taxes		10,903		(17,413	)		(26,993	)		(33,503	)
Income tax expense		—		—			(193	)		(193	)
Income (loss) from continuing operations		10,903		(17,413	)		(27,186	)		(33,696	)
Income from discontinued operations		—		—			—			—
Net income (loss)		10,903		(17,413	)		(27,186	)		(33,696	)
Loss from consolidated joint ventures attributable to noncontrolling interests		—		—			476			476
Net loss attributable to redeemable noncontrolling interests in operating partnership		—		—			4,424			4,424
Net income (loss) attributable to the Company	$	10,903	$	(17,413	)	$	(22,286	)	$	(28,796	)
As of September 30, 2009:
Total assets	$	3,696,535	$	90,008		$	299,150		$	4,085,693

27

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

	Direct Hotel		Hotel
	Investments		Financing			Corporate			Consolidated
Three Months Ended September 30, 2008:
Total revenue	$	276,480	$	8,801		$	—		$	285,281
Total hotel operating expenses		184,252		—			—			184,252
Property taxes, insurance and other		14,918		—			—			14,918
Depreciation and amortization		44,406		—			—			44,406
Corporate general and administrative		—		—			8,834			8,834
Total expenses		243,576		—			8,834			252,410
Operating income (loss)		32,904		8,801			(8,834	)		32,871
Equity in earnings of unconsolidated joint venture		—		491			—			491
Interest income		—		—			697			697
Other income		—		—			3,379			3,379
Interest expense and amortization of loan costs		—		—			(39,870	)		(39,870	)
Write-off of loan costs, premiums and exit fees, net		—		—			(1,226	)		(1,226	)
Unrealized gain on derivatives		—		—			12,528			12,528
Income (loss) from continuing operations before income taxes		32,904		9,292			(33,326	)		8,870
Income tax expense		—		—			(421	)		(421	)
Income (loss) from continuing operations		32,904		9,292			(33,747	)		8,449
Income from discontinued operations		1,329		—			—			1,329
Net income (loss)		34,233		9,292			(33,747	)		9,778
Income from consolidated joint ventures attributable to noncontrolling interests		—		—			(123	)		(123	)
Net income attributable to redeemable noncontrolling interests in operating partnership		—		—			(856	)		(856	)
Net income (loss) attributable to the Company	$	34,233	$	9,292		$	(34,726	)	$	8,799
As of September 30, 2008:
Total assets	$	3,909,187	$	247,945		$	177,235		$	4,334,367
Nine Months Ended September 30, 2009:
Total revenue	$	689,839	$	10,397		$	—		$	700,236
Total hotel operating expenses		469,716		—			—			469,716
Property taxes, insurance and other		46,602		—			—			46,602
Depreciation and amortization		118,927		—			—			118,927
Impairment charges		10,871		149,272			—			160,143
Corporate general and administrative		—		—			23,014			23,014
Total expenses		646,116		149,272			23,014			818,402
Operating income (loss)		43,723		(138,875	)		(23,014	)		(118,166	)
Equity in earnings of unconsolidated joint venture		—		1,863			—			1,863
Interest income		—		—			253			253
Other income		—		—			35,140			35,140
Interest expense and amortization of loan costs		—		—			(109,663	)		(109,663	)
Write-off of loan costs, premiums and exit fees, net		—		—			930			930
Unrealized loss on derivatives		—		—			(14,166	)		(14,166	)
Income (loss) from continuing operations before income taxes		43,723		(137,012	)		(110,520	)		(203,809	)
Income tax expense		—		—			(585	)		(585	)
Income (loss) from continuing operations		43,723		(137,012	)		(111,105	)		(204,394	)
Income from discontinued operations		—		—			—			—
Net income (loss)		43,723		(137,012	)		(111,105	)		(204,394	)
Loss from consolidated joint ventures attributable to noncontrolling interests		—		—			629			629
Net loss attributable to redeemable noncontrolling interests in operating partnership		—		—			25,567			25,567
Net income (loss) attributable to the Company	$	43,723	$	(137,012	)	$	(84,909	)	$	(178,198	)

28

ASHFORD HOSPITALITY TRUST, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

	Direct Hotel		Hotel
	Investments		Financing		Corporate			Consolidated
Nine Months Ended September 30, 2008:
Total revenue	$	862,533	$	15,273	$	—		$	877,806
Total hotel operating expenses		558,116		—		—			558,116
Property taxes, insurance and other		45,776		—		—			45,776
Depreciation and amortization		126,405		—		—			126,405
Corporate general and administrative		—		—		24,903			24,903
Total expenses		730,297		—		24,903			755,200
Operating income (loss)		132,236		15,273		(24,903	)		122,606
Equity in earnings of unconsolidated joint venture		—		2,304		—			2,304
Interest income		—		—		1,594			1,594
Other income		—		—		6,244			6,244
Interest expense and amortization of loan costs		—		—		(116,771	)		(116,771	)
Write-off of loan costs, premiums and exit fees, net		—		—		(1,226	)		(1,226	)
Unrealized loss on derivatives		—		—		(38,861	)		(38,861	)
Income (loss) from continuing operations before income taxes		132,236		17,577		(173,923	)		(24,110	)
Income tax expense		—		—		(1,150	)		(1,150	)
Income (loss) from continuing operations		132,236		17,577		(175,073	)		(25,260	)
Income from discontinued operations		15,909		—		—			15,909
Net income (loss)		148,145		17,577		(175,073	)		(9,351	)
Income from consolidated joint ventures attributable to noncontrolling interests		—		—		(2,907	)		(2,907	)
Net loss attributable to redeemable noncontrolling interests in operating partnership		—		—		738			738
Net income (loss) attributable to the Company	$	148,145	$	17,577	$	(177,242	)	$	(11,520	)

17. Subsequent Events

     On October 13, 2009, we entered into a three-month flooridor transaction with a financial institution for the period commencing October 1, 2009 and ending December 31, 2009 for a notional amount of $2.7 billion. Under the flooridor, the counterparty will pay us interest on the notional amount as long as LIBOR rates remain below the floor of 2%, up to a maximum of 100 basis points. The upfront cost of this flooridor was $6.9 million.

     Subsequent to September 30, 2009 and through the time we issued our financial statements on November 6, 2009, we have repurchased 2.1 million shares of our common stock for a total price of $8.2 million.

29

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD LOOKING STATEMENTS

     The following discussion should be read in conjunction with the unaudited financial statements and notes thereto appearing elsewhere herein. This report contains forward-looking statements within the meaning of the federal securities laws. Ashford Hospitality Trust, Inc. (the “Company” or “we” or “our” or “us”) cautions investors that any forward-looking statements presented herein, or which management may express orally or in writing from time to time, are based on management’s beliefs and assumptions at that time. Throughout this report, words such as “anticipate,” “believe,” “expect,” “intend,” “may,” “might,” “plan,” “estimate,” “project,” “should,” “will,” “result,” and other similar expressions, which do not relate solely to historical matters, are intended to identify forward-looking statements. Such statements are subject to risks, uncertainties, and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties, and factors beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, or projected. We caution investors that while forward-looking statements reflect our good-faith beliefs at the time such statements are made, said statements are not guarantees of future performance and are affected by actual events that occur after such statements are made. We expressly disclaim any responsibility to update forward-looking statements, whether as a result of new information, future events, or otherwise. Accordingly, investors should use caution in relying on past forward-looking statements, which were based on results and trends at the time those statements were made, to anticipate future results or trends.

     Some risks and uncertainties that may cause our actual results, performance, or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, those discussed in our Form 10-K and the Form S-3 as filed with the Securities and Exchange Commission on March 2, 2009 and October 30, 2009, respectively. These risks and uncertainties continue to be relevant to our performance and financial condition. Moreover, we operate in a very competitive and rapidly changing environment where new risk factors emerge from time to time. It is not possible for management to predict all such risk factors, nor can management assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as indicators of actual results.

EXECUTIVE OVERVIEW

General

     The U.S. economy has been in a recession since December 2007 caused by the global credit crisis and declining GDP, employment, business investment, corporate profits and consumer spending. As a result of the dramatic downturn in the economy, lodging demand in the U.S. has declined significantly throughout the first nine months of 2009. We have experienced significant declines in demand for hotel rooms associated with leisure, group, business and transient travel. Although we anticipate that lodging demand will improve when the current economy trends reverse, we do not believe such improvements will occur during 2009, and we expect lodging demand and forecasts for the remainder of 2009 will be considerably bearish.

     At September 30, 2009, we owned interests in 103 hotel properties, which included direct ownership in 97 hotel properties and between 75% to 89% interests in six hotel properties through majority-owned investments in joint ventures which represents 23,255 total rooms, or 22,913 net rooms excluding those attributable to noncontrolling joint venture partners. In addition, at September 30, 2009, we owned $66.7 million of mezzanine or first-mortgage loans receivable and a 25% interest in a joint venture with Prudential Real Estate Investors (“PREI”) formed in January 2008 (the “PREI JV”). The joint venture owned a $79.4 million mezzanine loan at September 30, 2009.

     Based on our primary business objectives and forecasted operating conditions, our current key priorities and financial strategies include, among other things:

• preserving capital, enhancing liquidity and implementing cost saving measures;

• implementing selective capital improvements designed to increase profitability;

30

• implementing asset management strategies to minimize operating costs and increase revenues;

• repurchasing capital stock subject to limitations and our Board of Directors’ authorization;

• financing or refinancing hotels on competitive terms;

• utilizing hedges and derivatives to mitigate risks; and

• making other investments that our Board of Directors deems appropriate.

2009 Developments

     When we implemented our mezzanine loan investment strategy, we performed the underwriting stress test based on worst case scenarios similar to what the hotel industry experienced post 9/11. However, the magnitude of the current economic downturn far exceeds our underwriting sensitivity. If the current economic downturn continues and the underlying hotel properties of our mezzanine loan portfolio are unable to generate enough cash flows for the scheduled payments, there is a chance that the remaining mezzanine loan portfolio could be written off in its entirety. The remaining balance of our mezzanine loan portfolio was $86.5 million at September 30, 2009, including our 25% ownership in a mezzanine loan held by the PREI JV. If this write-off were to occur, it would impact our operating income by up to $4.9 million annually.

     Principal and interest payments have not been made since October 2008, on the $18.2 million junior participation note receivable secured by a hotel property in Nevis, West Indies. The underlying hotel property suffered significant damage by Hurricane Omar in 2008. In accordance with our accounting policy, we discontinued recording interest on this note beginning in October 2008. During the quarter ended June 30, 2009, we were made aware that insurance recoveries for the damages from the hurricane were not adequate to fully fund the repairs of the property and further delays in the reopening of the property were likely. As a result, we recorded a valuation allowance of $9.1 million to reflect our concerns regarding the collectability of our investment. Since June 30, 2009, more information became available indicating that additional uninsured and deferred costs could potentially exceed our loan principal and further delay the foreclosure process and eventual reopening. As a result of these factors along with the fact that pursuant to a settlement with a more senior participant, we relinquished our controlling holder status under the participation agreement, we recorded an additional valuation allowance of $9.1 million in the quarter ended September 30, 2009, for the remaining carrying amount of the note.

     The borrower of the $4.0 million junior participation loan collateralized by the Sheraton hotel property in Dallas, Texas which was due in July 2009 has been in default since May 11, 2009. Based on a recent appraisal of the property from a third party, it is unlikely that we will be able to recover our full investment due to our junior status. As a result, we recorded a valuation allowance in the quarter ended June 30, 2009, for the full amount of the note receivable.

     The $164.0 million principal amount mezzanine loan secured by 681 Extended Stay Hotel properties was purchased at a significant discount which was amortized over the life of the loan through March 31, 2009. In June 2009, the issuer of this note filed for Chapter 11 bankruptcy protection from its creditors. We anticipate that the issuer, through its bankruptcy filing, may attempt to impose a plan of reorganization which could extinguish our investment. Accordingly, we recorded a valuation allowance of $109.4 million in the quarter ended June 30, 2009, for the full amount of the book value of the note. Prior to the bankruptcy filing, all payments on this loan were current.

     The $7.0 million loan collateralized by the Le Meridien hotel property in Dallas, Texas is no longer in a position to service its debt payments in the absence of a cash infusion from the borrower. It is likely that we will be unable to recover the full value of our investment due to our junior status. As a result, we recorded a valuation allowance in the quarter ended June 30, 2009, for the full amount of the note receivable.

     Due to the fact that the Ritz-Carlton hotel property in Key Biscayne, Florida collateralizing the $38.0 million principal amount loan is not generating sufficient cash flow for debt service, we have entered into definitive agreements, subject to servicer consent, with the borrower and a third party investor. Under the agreements, the third party investor, subject to certain conditions, has committed to funding equity to execute either a discounted payoff or a direct purchase of our loan for consideration of $20.0 million in cash and a $4.0 million note. In evaluating possible impairment on this loan, consideration was given to different scenarios including (i) the agreed-upon transaction is closed without material changes; (ii) the agreed-upon transaction fails to close, the borrower defaults and the remedies are unfavorable to us;

31

and (iii) the agreed-upon transaction fails to close but borrower protects its investment and the loan would be paid-in-full at its maturity. We concluded that the transaction is most likely to close under the first scenario and recorded a valuation allowance of $10.7 million in the quarter ended September 30, 2009 based on the net present value of the future cash flows under the definitive agreements.

     Beginning in June 2009, we ceased making payments on the note payable of $29.1 million secured by the Hyatt Regency Dearborn hotel property, due to the fact that the operating cash flows from the hotel property are not anticipated to cover the principal and interest payments on the note and the related capital expenditures on the property. The lender issued a notice of default and an acceleration notice. We have not cured the notice of default and intend to fully settle the debt via a deed-in-lieu of foreclosure or foreclosure of the hotel property. As a result, we wrote down the hotel property to its estimated fair value at June 30, 2009 and recorded an impairment charge of $10.9 million in the quarter ended June 30, 2009. In determining the fair value of the property, we obtained a market analysis based on eight recent hotel sales in the Midwest region provided by a third party, those sales ranged from a low of $33,000 per key to a high of $125,000 per key. We evaluated the analysis and determined that the current note payable balance on the Hyatt Regency Dearborn hotel property of $29.1 million, or $38,000 per key, is within the range and approximates the fair value of the property.

     While the depth and length of the economic downturn is difficult to predict, our current strategy is to preserve capital and enhance liquidity, balanced with taking advantage of buying back our capital stock. As a result, we suspended work on a few renovation and improvement projects. In that regard, we did not expense the total costs capitalized on certain incomplete projects of approximately $600,000 as we expect to continue those projects in the future once the economic environment improves. However, if we decide not to move forward with those projects in the future, we will expense these costs.

     In March 2009, in order to take advantage of the declining LIBOR rates, we entered into a one-year “flooridor” with a financial institution for the period commencing December 14, 2009 and ending December 13, 2010 for a notional amount of $3.6 billion. The flooridor establishes a floor rate of 0.75%. Under this new flooridor, the counterparty will pay us interest on the notional amount when LIBOR rates are below the original floor of 1.25% up to a maximum of 50 basis points on the notional amount. The upfront cost of this flooridor was $8.5 million. In addition, during the nine months ended September 30, 2009, we entered into seven interest rate caps with total notional amounts of $283.0 million to cap the interest rates on mortgage loans with an aggregate principal amount of $283.0 million (aggregate principal balance at September 30, 2009 was $280.5 million) with strike rates between 4.81% and 6%. The total price for these hedges was $233,000. These interest rate caps were designated as cash flow hedges.

     On July 1, 2009, we purchased two one-year term flooridors, each with a notional amount of $1.8 billion, for an upfront cost of $22.3 million. Under the first flooridor, the counterparty will pay us interest on the notional amount for the period commencing December 14, 2009 and ending December 13, 2010 when LIBOR rates are below 1.75% up to a maximum of 50 basis points on the notional amount. Under the second flooridor, the counterparty will pay us interest on the notional amount for the period commencing December 13, 2010 and ending December 13, 2011 when LIBOR rates are below 2.75% up to a maximum of 225 basis points on the notional amount. We have no further liability under these flooridors to the counterparties.

     In January 2009, the Board of Directors authorized an additional $200 million repurchase plan authorization (excluding fees, commissions and all other ancillary expenses) for: (i) the repurchase of shares of our common stock, Series A preferred stock, Series B-1 preferred stock and Series D preferred stock and/or (ii) the prepayment of our outstanding debt obligations, including debt secured by our hotel assets and debt senior to our mezzanine or loan investments. During the nine months ended September 30, 2009, we have repurchased 23.8 million shares of our common stock, 697,600 shares of the Series A preferred stock and 727,550 shares of the Series D preferred stock for a total price of $63.4 million (excluding commissions of $564,000).

     We would like to emphasize that just because certain items and comments are emphasized in a particular quarter with regard to our investments, interest rate derivatives and liquidity or any other matter, the reader should not assume that such items and comments are not equally important for the current quarter and going forward.

CRITICAL ACCOUNTING POLICIES

     We adopted authoritative accounting guidance issued in December 2007 that was effective as of January 1, 2009, which states that accounting and reporting for minority interests should be re-characterized as noncontrolling interests

32

and classified as a component of equity. However, noncontrolling interests that are redeemable for cash or other assets are to be classified outside of equity if they are redeemable (i) at a fixed or determinable price on a fixed or a determinable date; (ii) at the option of the holder; or (iii) upon the occurrence of an event that is not solely within the control of the issuer. The guidance also requires net income and other comprehensive income to be attributed to controlling and noncontrolling interests. To comply with these accounting rules, we have reclassified the noncontrolling interests in our consolidated joint ventures from the mezzanine section of our balance sheets to equity. Redeemable noncontrolling interests in our operating partnership will continue to be classified in the mezzanine section of the balance sheets as these redeemable operating units do not meet the requirements for equity classification because the redemption feature requires the delivery of cash or registered shares. The carrying value of the noncontrolling interests in the operating partnership is based on the greater of the accumulated historical cost or the redemption value. Income/loss from consolidated joint ventures attributable to noncontrolling interests in our consolidated joint ventures and net income/loss attributable to redeemable noncontrolling interests in the operating partnership are reported as deductions/additions from net income/loss. Comprehensive income/loss attributable to these noncontrolling interests is reported as deductions/additions from comprehensive income/loss. We reclassified prior period amounts to reflect these requirements. The adoption of this standard had no effect on our basic and diluted income/loss per share.

     In March 2008, the FASB issued authoritative accounting guidance to enhance the disclosures about derivative instruments and hedging activities. Under the new guidance, entities are required to provide enhanced disclosures about (i) how and why an entity uses derivative instruments; (ii) how derivative instruments and related hedged items are accounted for under the applicable authoritative guidance; and (iii) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. We adopted this statement beginning January 1, 2009. There was no financial impact from the adoption of this accounting guidance and disclosures about our derivative instruments are presented in accordance with the requirements of the accounting guidance. See Note 10 of Notes to Consolidated Financial Statements.

     In June 2008, the FASB issued authoritative accounting guidance to require non-vested shares that contain non-forfeitable rights to dividends or dividend equivalents to be considered participating securities, and therefore be included in computing earnings per share using the two-class method. We adopted this guidance as of January 1, 2009. Income (loss) per share has been computed using the two-class method for all periods presented and there has been no material impact on the income (loss) per share amount from the adoption of this accounting guidance.

     There have been no other significant new accounting policies employed during the nine months ended September 30, 2009. See our Annual Report on Form 10-K for the year ended December 31, 2008 for further discussion of critical accounting policies.

RECENTLY ISSUED ACCOUNTING STANDARDS

     In June 2009, the FASB issued authoritative accounting guidance to modify existing accounting guidance on transfers of financial assets. The new guidance is effective at the beginning of the first annual reporting period beginning after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. The new authoritative guidance limits the circumstances in which a financial asset, or portion of a financial asset, should be derecognized when the transferor has not transferred the entire original financial asset to an entity that is not consolidated with the transferor in the financial statements being presented and/or when the transferor has continuing involvement with the transferred financial assets. In addition, the guidance defines the term participating interest to establish specific conditions for reporting a transfer of a portion of a financial asset as a sale and requires that a transferor recognize and initially measure at fair value all assets obtained (including a transferor’s beneficial interest) and liabilities incurred as a result of a transfer of financial assets accounted for as a sale. The impact of adopting this new guidance when effective will depend upon the nature, term and size of the assets transferred, if any.

     In June 2009, the FASB issued authoritative accounting guidance to redefine the characteristics of the primary beneficiary to be identified when an enterprise performs an analysis to determine whether the enterprise’s variable interest gives it a controlling financial interest in a variable interest entity (VIE). This accounting guidance is effective at the beginning of the first annual reporting period beginning after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. The new guidance requires an enterprise to assess whether it has an implicit financial responsibility to ensure that a VIE operates as designed and ongoing reassessments of whether it is the primary beneficiary of a VIE. It also amends certain previous guidance for determining whether an entity is a VIE and eliminates the quantitative approach previously required for determining the

33

primary beneficiary of a VIE. We are currently evaluating the effects the adoption of the new guidance will have on our financial condition and results of operations.

     In August 2009, the FASB issued an accounting standard update, effective for the first reporting period (including interim periods) beginning after the issuance date, to provide guidance on measuring liabilities at fair value when no observable data are available. The update clarifies that when measuring fair value of liabilities in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using either (i) the quoted price of an identical liability when traded as an asset or quoted prices for similar liabilities when traded as assets; or (ii) the present value technique or a market approach based on the amount at the measurement date the reporting entity would pay to transfer the identical liability or would receive to enter into the identical liability. We do not expect a material impact from the adoption of this accounting guidance.

RESULTS OF OPERATIONS

     The following table summarizes the changes in key line items from our consolidated statements of operations for the three and nine months ended September 30, 2009 and 2008 (in thousands):

	Three Months Ended												Nine Months Ended
	September 30,						Favorable/(Unfavorable)						September 30,						Favorable/(Unfavorable)
	2009			2008			$ Change			%Change			2009			2008			$ Change			%Change
Total revenue	$	220,592		$	285,281		$	(64,689	)		(22.7	)%	$	700,236		$	877,806		$	(177,570	)		(20.2	)%
Total hotel expenses	$	(152,970	)	$	(184,252	)	$	31,282			17.0	%	$	(469,716	)	$	(558,116	)		88,400			15.8	%
Property taxes, insurance and other	$	(16,023	)	$	(14,918	)	$	(1,105	)		(7.4	)%	$	(46,602	)	$	(45,776	)		(826	)		(1.8	)%
Depreciation and amortization	$	(38,935	)	$	(44,406	)	$	5,471			12.3	%	$	(118,927	)	$	(126,405	)		7,478			5.9	%
Impairment charges	$	(19,816	)	$	—		$	(19,816	)		—	*	$	(160,143	)	$	—			(160,143	)		—	*
Corporate general and administrative	$	(9,257	)	$	(8,834	)	$	(423	)		(4.8	)%	$	(23,014	)	$	(24,903	)		1,889			7.6	%
Operating (loss) income	$	(16,409	)	$	32,871		$	(49,280	)		—	*	$	(118,166	)	$	122,606			(240,772	)		—	*
Equity in earnings of unconsolidated joint venture	$	642		$	491		$	151			30.8	%	$	1,863		$	2,304			(441	)		(19.1	)%
Interest income	$	56		$	697		$	(641	)		(92.0	)%	$	253		$	1,594			(1,341	)		(84.1	)%
Other income	$	13,228		$	3,379		$	9,849			291.5	%	$	35,140		$	6,244			28,896			462.8	%
Interest expense and amortization of loan costs	$	(36,545	)	$	(39,870	)	$	3,325			8.3	%	$	(109,663	)	$	(116,771	)		7,108			6.1	%
Write-off of loan costs and exit fees, net	$	—		$	(1,226	)	$	1,226			—	*	$	930		$	(1,226	)		2,156			—	*
Unrealized gain (loss) on derivatives	$	5,525		$	12,528		$	(7,003	)		(55.9	)%	$	(14,166	)	$	(38,861	)		24,695			63.5	%
Income tax expense	$	(193	)	$	(421	)	$	228			54.2	%	$	(585	)	$	(1,150	)		565			49.1	%
(Loss) income from continuing operations	$	(33,696	)	$	8,449		$	(42,145	)		(498.8	)%	$	(204,394	)	$	(25,260	)		(179,134	)		(709.2	)%
Income (loss) from discontinued operations	$	—		$	1,329		$	(1,329	)		—	*	$	—		$	15,909			(15,909	)		—	*
Net (loss) income	$	(33,696	)	$	9,778		$	(43,474	)		—	*	$	(204,394	)	$	(9,351	)		(195,043	)		—	*
Loss (Income) from consolidated joint ventures attributable to noncontrolling interests	$	476		$	(123	)	$	599			—	*	$	629		$	(2,907	)		3,536			—	*
Net loss (income) attributable to redeemable noncontrolling interests in operating partnership	$	4,424		$	(856	)	$	5,280			—	*	$	25,567		$	738			24,829			—	*
Net (loss) income attributable to the Company	$	(28,796	)	$	8,799		$	(37,595	)		(427.3	)%	$	(178,198	)	$	(11,520	)		(166,678	)		(1446.9	)%

* Not meaningful.

     Income from continuing operations includes the operating results of 103 hotel properties that we have owned throughout the entirety of both the three and nine months ended September 30, 2009 and 2008. The following table illustrates the key performance indicators of these hotels for the three and nine months ended September 30, 2009 and 2008:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2009			2008			2009			2008
Total hotel revenue (in thousands)	$	218,658		$	275,970		$	689,287		$	860,580
Room revenue (in thousands)	$	167,494		$	208,856		$	516,653		$	642,264
RevPAR (revenue per available room)	$	82.93		$	103.44		$	85.84		$	106.49
Occupancy		67.95	%		74.45	%		65.96	%		73.71	%
ADR (average daily rate)	$	122.05		$	138.94		$	130.15		$	144.48

34

Comparison of the Three Months Ended September 30, 2009 with Three Months Ended September 30, 2008

     Revenue. Room revenues decreased $41.4 million, or 19.8%, during the three months ended September 30, 2009, (the “2009 quarter”) compared to the three months ended September 30, 2008 (the “2008 quarter”). Occupancy declined by 650 basis points from 74.45% to 67.95%. ADR declined by $16.89 to $122.05. Decline in market demand placed tremendous pressure on rates to maintain occupancy levels. Food and beverage experienced a similar decline of $14.5 million due to lower volume on catering and banquet events. Other hotel revenue which consists of ancillary revenues such as telecommunication, parking, spa, golf fees, and phone charges also experienced a $1.3 million decline due to lower occupancy.

     Rental income from operating leases represents rental income recognized on a straight-line basis associated with a hotel property that is leased to a third-party tenant on a triple-net basis. Rental income experienced a small decline of $131,000 primarily due to the lower occupancy and ADR during the 2009 quarter.

     Interest income from notes receivable decreased $7.0 million for the 2009 quarter compared to the 2008 quarter. This decrease is principally due to the Extended Stay mezzanine loan that was fully impaired during the second quarter of 2009 as a result of the issuer’s bankruptcy filing. Prior to the bankruptcy filing in June 2009, all payments on this loan were current. We recorded income from this loan of $5.6 million for the 2008 quarter. The decrease is also attributable to (i) the two mezzanine loans that were repaid during and after the 2008 quarter; (ii) four other mezzanine loans that were impaired at September 30, 2009 and three of which were in non-accrual status for the entire 2009 quarter (income recognized on these impaired loans was $1.0 million and $1.8 million for the 2009 quarter and the 2008 quarter, respectively); and (iii) the decline in LIBOR rates during the 2009 quarter.

     Asset management fees and other was $173,000 for the 2009 quarter and $510,000 for the 2008 quarter. The decrease is primarily due to the expiration in 2008 of an asset management consulting agreement with a related party which accounted for $338,000 of the income in the 2008 quarter.

     Hotel Operating Expenses. Hotel operating expenses consist of direct expenses from departments associated with revenue streams and indirect expenses associated with support departments. We experienced a reduction of $15.9 million in direct expenses and a $15.4 million reduction in indirect expenses during the 2009 quarter. The reductions in direct expenses were due to the decline in occupancy. The direct expenses were 35.5% of total hotel revenue during the 2009 quarter as compared to 33.9% during the 2008 quarter. The declines in indirect expenses were partly due to the decrease in occupancy and partly due to the result of cost saving initiatives adopted by the hotel managers.

     Property Taxes, Insurance and Other. Property taxes, insurance, and other increased $1.1 million, or 7.4%, for the 2009 quarter compared to the 2008 quarter, primarily due to higher insurance premiums on policies renewed during the 2009 quarter and other taxes paid.

     Depreciation and Amortization. Depreciation and amortization decreased $5.5 million, or 12.3%, for the 2009 quarter compared to the 2008 quarter primarily due to certain assets that had been fully depreciated since September 30, 2008, which is partially offset by an increase in depreciation expense as a result of capital improvements made at several hotel properties.

     Impairment Charges. In evaluating possible loan impairment, we analyze our notes receivable individually and collectively for possible loan losses in accordance with applicable authoritative accounting guidance. Based on the analysis, if we conclude that no loans are individually impaired, we then further analyze the specific characteristics of the loans, based on other authoritative guidance to determine if there would be probable losses in a group of loans with similar characteristics.

     The loans in our portfolio are collateralized by hotel properties. Some loans are collateralized by single hotel properties and others by hotel portfolios. The hotel properties are in different geographic locations, have different ages and a few of the properties have recently completed significant renovations which have a significant impact on the value of the underlying collateral. The hotel properties include independent and nationally recognized brands in all segments and classes including luxury, economy, extended-stay, full service, and select service. In addition, our loan assets vary by position in the related borrower’s capital structure, ranging from junior mortgage participations to mezzanine loans. The terms of our notes or participations were structured based on the different features of the related collateral and the priority in the borrower’s capital structure.

35

     The authoritative accounting guidance requires that an individual loan not impaired individually be included in the assessment of the loss in a group of loans only if specific characteristics of the loan indicate that it is probable that there would be an incurred loss in a group of loans with similar characteristics. As loans in our portfolio have significantly different risk factors and characteristics, such as different maturity terms, different types and classes of collateral, different interest rate structures, and different priority status, we concluded that the characteristics of the loans within the portfolio were not sufficiently similar as to allow an evaluation of these loans as a group for possible impairment within the authoritative accounting guidance. For the 2009 quarter, we recorded an allowance for losses of $19.8 million based on the results of the individual evaluation under the authoritative accounting guidance.

     Investments in hotel properties are reviewed for impairment for each reporting period. We take into account the latest operating cash flows and market conditions and their impact on future projections. For the properties that showed indicators of impairment, we perform a recoverability analysis using the sum of each property’s estimated future undiscounted cash flows compared to the property’s carrying value. The estimates of future cash flows are based on assumptions about the future operating results including disposition of the property. In addition, the cash flow estimation periods used are based on the properties’ remaining useful lives to us (expected holding periods). For properties securing mortgage loans, the assumptions regarding holding periods considered our ability and intent to hold the property to or beyond the maturity of the related indebtedness.

     In analyzing projected hotel properties’ operating cash flows, we factored in declining revenue for periods through 2010 and moderate growth thereafter based on revenue per available room, or RevPAR, data from third party sources. In addition, the projected hotel properties’ operating cash flows factored in our ongoing implementation of asset management strategies to minimize operating costs and implement extensive cost cutting measures. After factoring in the declines in revenue expected by the third party sources and the impact of company-specific strategies implemented to minimize operating costs, the hotel properties’ estimated future undiscounted cash flows were in excess of the properties’ carrying values. The analyses performed at September 30, 2009, did not identify any properties with respect to which an impairment loss should be recognized for the 2009 quarter.

     For a full description of impairment charges, see Note 11 of Notes to Consolidated Financial Statements and the Executive Overview.

     Corporate General and Administrative. Corporate general and administrative expense increased slightly to $9.3 million for the 2009 quarter compared to $8.8 million for the 2008 quarter. These expenses increased in the 2009 quarter compared to the 2008 quarter, primarily due to increases in (i) accrued bonuses principally resulting from the increased target incentives for certain executives approved by the Board of Directors in September 2009; (ii) accrual of $600,000 for tax indemnities associated with the sale of two hotel properties in 2008; and (iii) accrued legal expense of $874,000 primarily associated with the lawsuit related to the ESH mezzanine loans. However, these increases were partially offset by decreases in (i) stock-based compensation of $580,000 as a result of certain restricted stock awards granted in earlier years at a higher cost per share that fully vested in the first quarter of 2009; (ii) accrued accounting and audit fees of $1.1 million; and (iii) other corporate expenses resulting from the continued cost containment plans implemented at the corporate level since December 2008 which include reductions in overhead from staff layoffs, base salary freezes, and reduced benefits and fees along with other cost saving measures.

     Equity in Earnings of Unconsolidated Joint Venture. Equity in earnings of unconsolidated joint venture was $642,000 and $491,000 for the 2009 quarter and 2008 quarter, respectively, which represents 25% of the earnings from the PREI JV. The increase in earnings of the joint venture is primarily due to a true-up in the 2009 quarter of the management fee. The increase was partially offset by the write-off of expenses incurred by the joint venture with regard to terminated transactions and the lost income on a loan that has been in non-accrual status and fully reserved since the fourth quarter of 2008.

     Interest Income. Interest income decreased $641,000 for the 2009 quarter compared to the 2008 quarter primarily due to the significant decline in short-term interest rates and the decrease in average cash balances.

     Other Income. Other income was $13.2 million and $3.4 million for the 2009 quarter and the 2008 quarter, respectively. Other income included income from non-hedge interest rate swaps, floors and flooridors of $11.3 million and $3.4 million for the 2009 quarter and the 2008 quarter, respectively. The increase is primarily due to significant decreases in LIBOR rates that the derivatives are tied to as a result of the economic downturn. Also included in the 2009 quarter were income of $1.5 million recognized for business interruption insurance proceeds and a final settlement

36

received related to hotel properties sold in 2008, and a gain of $434,000 from the sale of our interest in a laundry joint venture.

     Interest Expense and Amortization of Loan Costs. Interest expense and amortization of loan costs decreased $3.3 million to $36.6 million for the 2009 quarter from $39.9 million for the 2008 quarter. The decline is primarily attributable to the decrease in interest expense on our variable rate debt as a result of continued decline in LIBOR rates. LIBOR rates at September 30, 2009 and 2008 were 0.25% and 3.93%, respectively. The decrease was partially offset by the higher weighted average debt balance during the 2009 quarter.

     Write-off of Loan Cost, Premiums and Exit Fees, Net. Because of a one-time event during the 2008 quarter, we wrote off unamortized loan costs of $424,000 on the $127.2 million debt that was refinanced with a $160.0 million debt and incurred $802,000 of prepayment penalties on the payoff of another loan.

     Unrealized Gain (Loss) on Derivatives. Beginning in March 2008, we entered into interest rate swap, floor, flooridor and cap transactions with significant notional amounts that were not designated as hedges. As a result, the changes in the fair values of these derivatives are included in earnings. During the 2009 quarter and the 2008 quarter, we recorded an unrealized gain of $5.5 million and $12.5 million, respectively, on these derivatives. The decrease in the unrealized gain is primarily due to movements in the LIBOR forward curve and the credit spreads during the 2009 quarter compared to the 2008 quarter.

     Income Tax Expense. Income tax expense for continuing operations was $193,000 and $421,000 for the 2009 quarter and the 2008 quarter, respectively. Income tax expense for both the 2009 quarter and the 2008 quarter consisted primarily of the Texas margin tax, Michigan business tax, and state taxes assessed on partnership subsidiaries. The decrease in the 2009 quarter is due to the decline in hotel revenues that both the Texas and Michigan taxes are based on and a decrease in the District of Columbia income taxes on our joint venture that owns a hotel property there. As a result of Ashford TRS losses in 2008 and prior years, and the limitations imposed by the Internal Revenue Code on the utilization of net operating losses of acquired subsidiaries, we continue to believe that it is more likely than not our net deferred tax asset would not be realized, and therefore, have provided a valuation allowance to fully reserve against these amounts.

     (Loss) Income from Continuing Operations. Loss from continuing operations was $33.7 million for the 2009 quarter and income from continuing operations was $8.4 million for the 2008 quarter.

     Income from Discontinued Operations. For the 2008 quarter, income from discontinued operations consisted of the operating results through the date of sale for three hotel properties and the operating results for the entire 2008 quarter for one hotel property that was classified as held for sale at September 30, 2008. Included in income from discontinued operations were gains on sales of $1.4 million. Operating results of discontinued operations also reflected interest and related debt expense of $627,000. In addition, unamortized loan costs of $236,000 were written off when the related debt was repaid upon the sale of the hotel properties collateralizing that debt.

     Loss (Income) from Consolidated Joint Ventures Attributable to Noncontrolling Interests. The noncontrolling interest partners in consolidated joint ventures were allocated a loss of $476,000 for the 2009 quarter and income of $123,000 for the 2008 quarter. The noncontrolling interests in consolidated joints ventures represent ownership ranging from 11% to 25% of six hotel properties held by two joint ventures.

     Net Loss (Income) Attributable to Redeemable Noncontrolling Interests in Operating Partnership. Redeemable noncontrolling interests in the operating partnership represent the limited partners’ proportionate share of equity in earnings/losses of the operating partnership, which is an allocation of net income attributable to the common unit holders based on the weighted average ownership percentage of these limited partners’ common unit holdings throughout the period plus distributions paid to these limited partners’ Class B unit holdings. The weighted average ownership percentage of the common units for the 2009 quarter and the 2008 quarter was 13.2% and 8.2%, respectively. The increase was due to the decrease in average outstanding common shares as a result of the repurchases of our common shares. Redeemable noncontrolling interests in the operating partnership was allocated net loss of $4.4 million during the 2009 quarter and net income of $856,000 for the 2008 quarter.

37

Comparison of the Nine Months Ended September 30, 2009 with Nine Months Ended September 30, 2008

     Revenue. Room revenues decreased $125.6 million, or 19.6%, during the nine months ended September 30, 2009 (the “2009 period”) compared to the nine months ended September 30, 2008 (the “2008 period”). Occupancy declined by 775 basis points from 73.71% to 65.96%. ADR declined by $14.33 to $130.15. Decline in market demand has placed tremendous pressure on rates to maintain occupancy levels. We observed businesses adopting cost saving initiatives on their travel and meeting expenses. Food and beverage experienced a similar decline of $41.3 million due to lower volume on catering and banquet events. Other hotel revenue experienced a $4.0 million decline due to lower occupancy.

     Rental income from the triple-net operating lease decreased $409,000 primarily due to the lower occupancy and ADR during the 2009 period.

     Interest income from notes receivable decreased $4.9 million for the 2009 period compared to the 2008 period. This decrease is primarily due to the Extended Stay Hotels mezzanine loan that was written off during the 2009 period as a result of the borrower’s bankruptcy filing. Prior to the bankruptcy filing in June 2009, all payments on this loan were current. We recorded income from this loan of $4.7 million and $5.6 million for the 2009 period and 2008 period, respectively. The decrease is also attributable to (i) the two mezzanine loans that were repaid during and after the 2008 period; (ii) four other mezzanine loans that were impaired at September 30, 2009 and three of which were in non-accrual status for at least a portion of the 2009 period (income recognized on these impaired loans was $3.3 million and $5.2 million for the 2009 period and the 2008 period, respectively); and (iii) the decline in LIBOR rates during the 2009 period.

     Asset management fees and other was $552,000 for the 2009 period and $2.0 million for the 2008 period. The decrease is primarily due to the expiration in 2008 of an asset management consulting agreement with a related party which accounted for $901,000 and a sourcing fee income from PREI JV which accounted for $442,000 of the income in the 2008 period.

     Hotel Operating Expenses. Hotel operating expenses consist of direct expenses from departments associated with revenue streams and indirect expenses associated with support departments. We experienced a reduction of $48.6 million in direct expenses and a $39.8 million reduction in indirect expenses during the 2009 period. The reductions in direct expenses were due to decline in occupancy. The direct expenses were 34.4% of total hotel revenue during the 2009 period as compared to 33.2% during the 2008 period. The decline in indirect expenses was partly due to the decrease in occupancy and partly due to the results of cost saving initiatives adopted by the hotel managers.

     Property Taxes, Insurance and Other. Property taxes, insurance, and other increased $826,000 for the 2009 period compared to the 2008 period, primarily due to higher insurance premiums on policies renewed during the 2009 period and other taxes paid.

     Depreciation and Amortization. Depreciation and amortization decreased $7.5 million, or 5.9%, for the 2009 period compared to the 2008 period primarily due to certain assets that had been fully depreciated since September 30, 2008, which is partially offset by an increase in depreciation expense as a result of capital improvements made at several hotel properties.

     Impairment Charges. Impairment charges of $160.1 million for the 2009 period were related to the valuation allowance on the Extended Stay Hotels mezzanine loan, four other mezzanine notes, and the Hyatt Regency Dearborn hotel property. Of the total impairment charges, $109.4 million was related to the valuation allowance on the Extended Stay Hotels mezzanine loan, $39.8 million was for four other mezzanine notes, and $10.9 million was related to Hyatt Regency Dearborn.

     Corporate General and Administrative. Corporate general and administrative expense decreased to $23.0 million for the 2009 period compared to $24.9 million for the 2008 period. The decline is primarily due to decreases in (i) stock-based compensation of $1.3 million; (ii) accrued accounting and audit fees of $2.3 million; and (iii) other corporate expenses resulting from the continued cost containment plans implemented at the corporate level. These decreases were partially offset by increases in (i) accrued bonuses resulting from the increased target incentives for certain executives approved by the Board of Directors in September 2009; (ii) accrued legal expense of $1.6 million primarily associated with the lawsuit related to the ESH mezzanine loan; and (iii) accrual of $600,000 for tax indemnities associated with the sale of two hotel properties in 2008.

38

     Equity in Earnings of Unconsolidated Joint Venture. Equity in earnings of unconsolidated joint venture was $1.9 million and $2.3 million for the 2009 period and 2008 period, respectively. The decrease is primarily a result of the lost income on a loan that has been in non-accrual status and fully reserved since the fourth quarter of 2008 and the write-off expenses incurred by the joint venture with regard to terminated transactions.

     Interest Income. Interest income decreased $1.3 million for the 2009 period compared to the 2008 period primarily due to the significant decline in short-term interest rates and the decrease in average cash balances during the 2009 period.

     Other Income. Other income was $35.1 million and $6.2 million for the 2009 period and the 2008 period, respectively. Other income included income from non-hedge interest rate swaps, floors and flooridors of $33.2 million and $6.2 million for the 2009 period and the 2008 period, respectively. The increase is primarily due to significant decreases in LIBOR rates that the derivatives are tied to as a result of the economic downturn. Also included in the 2009 period were income of $1.5 million recognized for business interruption insurance proceeds and a final settlement received related to hotel properties sold in 2008, and a gain of $434,000 from the sale of our interest in a laundry joint venture.

     Interest Expense and Amortization of Loan Costs. Interest expense and amortization of loan costs decreased $7.1 million to $109.7 million for the 2009 period from $116.8 million for the 2008 period. The decline is primarily attributable to the decrease in interest expense on our variable rate debt as a result of continued decline in LIBOR rates. The decrease was partially offset by the higher weighted average debt balance during the 2009 period.

     Write-off of Loan Cost, Premiums and Exit Fees, net. During the 2009 period we refinanced the $47.4 million mortgage loan secured by a hotel property in Arlington, VA with a $60.8 million loan. The unamortized debt premium of $1.3 million and loan cost of $411,000 on the old loan were written off at refinance. During the 2008 period we wrote off unamortized loan costs of $424,000 on the $127.2 million debt that was refinanced with a $160.0 million debt and incurred $802,000 of prepayment penalties on the payoff of another loan.

     Unrealized Gain (Loss) on Derivatives. During the 2009 period and the 2008 period, we recorded an unrealized loss of $14.2 million and $38.9 million, respectively, on our interest rate derivatives. The decrease was primarily a result of the movements in the LIBOR forward curve used in determining the fair values during the 2009 period.

     Income Tax Expense. Income tax expense for continuing operations was $585,000 and $1.2 million for the 2009 period and the 2008 period, respectively. The decrease in the 2009 period is due to the decline in hotel revenues that the Texas margin tax and Michigan business tax are based on and a decrease in District of Columbia income taxes on our joint venture that owns a hotel property there. As a result of Ashford TRS losses in 2008 and prior years, and the limitations imposed by the Internal Revenue Code on the utilization of net operating losses of acquired subsidiaries, we continue to believe that it is more likely than not our net deferred tax asset would not be realized, and therefore, have provided a valuation allowance to fully reserve against these amounts.

     Loss from Continuing Operations. Loss from continuing operations was $204.4 million and $25.3 million for the 2009 period and the 2008 period, respectively.

     Income from Discontinued Operations. Income from discontinued operations was $15.9 million for the 2008 period. Included in income from discontinued operations were gains on sales of $8.3 million. Operating results of discontinued operations also reflected interest and related debt expense of $3.5 million. In addition, unamortized loan costs of $974,000 and a premium of $2.1 million were written off when the related debt was repaid upon the sale of the hotel properties collateralizing that debt.

     Loss (Income) from Consolidated Joint Ventures Attributable to Noncontrolling Interests. During the 2009 period and the 2008 period, the noncontrolling interest partners in consolidated joint ventures were allocated a loss of $629,000 and income of $2.9 million, respectively. Noncontrolling interests in consolidated joints ventures represent ownership ranging from 11% to 25% of six hotel properties held by two joint ventures.

     Net Loss (Income) Attributable to Redeemable Noncontrolling Interests in Operating Partnership. Net loss allocated to the noncontrolling interests and distributions paid to these limited partners were $25.6 million and $738,000 million for the 2009 period and the 2008 period, respectively.

39

NON-GAAP FINANCIAL MEASURES

     EBITDA is defined as net income (loss) attributable to the Company before interest expense, interest income other than interest income from mezzanine loans, income taxes, depreciation and amortization, and noncontrolling interests in the operating partnership. We present EBITDA because we believe it provides useful information to investors as it is an indicator of our ability to meet our future debt payment requirements, working capital requirements and it provides an overall evaluation of our financial condition. EBITDA, as calculated by us may not be comparable to EBITDA reported by other companies that do not define EBITDA exactly as we define the term. EBITDA does not represent cash generated from operating activities determined in accordance with generally accepted accounting principles (“GAAP”), and should not be considered as an alternative to operating income or net income determined in accordance with GAAP as an indicator of performance or as an alternative to cash flows from operating activities as determined by GAAP as a indicator of liquidity. The following table reconciles net loss to EBITDA (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2009			2008			2009			2008
Net (loss) income	$	(33,696	)	$	9,778		$	(204,394	)	$	(9,351	)
Loss (income) from consolidated joint ventures attributable to noncontrolling interests		476			(123	)		629			(2,907	)
Net loss (income) attributable to redeemable noncontrolling interests in operating partnership		4,424			(856	)		25,567			738
Net (loss) income attributable to the Company		(28,796	)		8,799			(178,198	)		(11,520	)
Depreciation and amortization		38,140			44,731			116,566			131,716
Interest expense and amortization of loan costs		36,064			39,756			108,226			118,389
Income tax expense		193			421			585			1,360
Net (loss) income attributable to redeemable noncontrolling interests in operating partnership		(4,424	)		856			(25,567	)		(738	)
Interest income		(54	)		(697	)		(245	)		(1,594	)
EBITDA	$	41,123		$	93,866		$	21,367		$	237,613

     The White Paper on Funds From Operations (“FFO”) approved by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”) in April 2002 defines FFO as net income (loss) computed in accordance with GAAP, excluding gains or losses on sales of properties and extraordinary items as defined by GAAP, plus depreciation and amortization of real estate assets, and net of adjustments for the portion of these items attributable to noncontrolling interests in operating partnership. NAREIT developed FFO as a relative measure of performance of an equity REIT to recognize that income-producing real estate historically has not depreciated on the basis determined by GAAP. We compute FFO in accordance with our interpretation of standards established by NAREIT, which may not be comparable to FFO reported by other REITs that either do not define the term in accordance with the current NAREIT definition or interpret the NAREIT definition differently than us. FFO does not represent cash generated from operating activities as determined by GAAP and should not be considered as an alternative to a) GAAP net income or loss as an indication of our financial performance or b) GAAP cash flows from operating activities as a measure of our liquidity, nor is it indicative of funds available to satisfy our cash needs, including our ability to make cash distributions. However, to facilitate a clear understanding of our historical operating results, we believe that FFO should be considered along with our net income or loss and cash flows reported in the consolidated financial statements.

40

     The following table reconciles net loss to FFO (in thousands):

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2009			2008			2009			2008
Net (loss) income	$	(33,696	)	$	9,778		$	(204,394	)	$	(9,351	)
Loss (income) from consolidated joint ventures attributable to noncontrolling interests		476			(123	)		629			(2,907	)
Net loss (income) attributable to redeemable noncontrolling interests in operating partnership		4,424			(856	)		25,567			738
Preferred dividends		(4,831	)		(7,018	)		(14,492	)		(21,054	)
Net (loss) income available to common stockholders		(33,627	)		1,781			(192,690	)		(32,574	)
Depreciation and amortization of real estate		38,071			44,609			116,350			131,351
Gain on sale of properties		—			(1,411	)		—			(8,315	)
Net (loss) income attributable to redeemable noncontrolling interests in operating partnership		(4,424	)		856			(25,567	)		(738	)
FFO available to common stockholders	$	20		$	45,835		$	(101,907	)	$	89,724

LIQUIDITY AND CAPITAL RESOURCES

     Our principal sources of funds to meet our cash requirements include: positive cash flow from operations, principal payments or sales of mezzanine loans, property refinancing proceeds, asset sales, property level preferred equity, and net cash derived from the interest rate derivatives. Our principal uses of funds are expected to include possible operating shortfalls, owner-funded capital expenditures, debt interest and principal payments, and repurchases of our securities. Items that impacted our cash flows and liquidity are summarized as follows:

     Net Cash Flows Provided by Operating Activities. Net cash flows provided by operating activities, pursuant to our consolidated statement of cash flows, which includes the changes in balance sheet items, were $76.9 million and $124.0 million for the nine months ended September 30, 2009 and 2008, respectively. The decline is principally due to the economic downturn that resulted in reduced travel and demand for hotel rooms. The decline is partially offset by interest payments on indebtedness decreasing by $18.6 million resulting from a sharp decline in LIBOR rates during the nine months ended September 30, 2009.

     Net Cash Flows (Used in) Provided by Investing Activities. For the nine months ended September 30, 2009, investing activities used cash of $51.7 million for improvements to various hotel properties and provided cash of $858,000 from the sale of an interest in a laundry joint venture and a piece of land adjacent to a hotel property. For the nine months ended September 30, 2008, investing activities provided net cash flows of $79.0 million, which consisted of net proceeds of $317.4 million before paying off the related debt from sales of eight hotel properties and one office building and a payment of $16.2 million for the 75% note receivable sold to the PREI JV and $4.0 million repayment of a note receivable. These cash inflows were partially offset by $138.0 million for acquisitions or originations of notes receivable, $17.9 million for the net payment for the acquisition of a 25% interest in a mezzanine loan acquired by PREI JV, and $102.7 million of improvements to various hotel properties.

     Net Cash Flows Used in Financing Activities. For the nine months ended September 30, 2009, net cash flow used in financing activities was $69.7 million. Cash outlays consisted of $55.1 million of payments on indebtedness and capital leases, $1.8 million of loan costs, $17.3 million of dividends paid, $31.0 million paid for entering into interest rate derivatives, $53.3 million of payments to acquire treasury shares, $10.7 million to purchase Series A and Series D preferred stocks, and cash distributions of $1.1 million to noncontrolling interests in consolidated joint ventures. These cash outlays were partially offset by $67.8 million from debt refinancing and $32.9 million cash payments from the counterparties of the interest rate derivatives. For the nine months ended September 30, 2008, net cash flow used in financing activities was $67.5 million consisting of $613.9 million of payments on indebtedness and capital leases, $6.3 million of loan costs, $105.2 million of dividend payments, $6.4 million paid for entering into interest rate swap, floor and cap transactions, and $46.0 million of payments to acquire treasury shares. These cash outlays were partially offset by $704.6 million cash inflows from draws on our senior credit facility of $350.0 million and refinance of mortgage loans of $354.6 million, $5.7 million cash payments from the counterparties of the interest rate derivatives, and $53,000 buy-ins of the operating partnership units issued to our executives under our long term incentive partnership units plan.

     We are required to maintain certain financial ratios under various debt agreements and a derivative agreement. If we violate covenants in any debt agreements or the derivative agreement, we could be required to repay all or a portion

41

of our indebtedness before maturity at a time when we might be unable to arrange financing for such repayment on attractive terms, if at all. Violations of certain debt covenants may result in us being unable to borrow unused amounts under a line of credit, even if repayment of some or all borrowings is not required. In any event, financial covenants under our current or future debt obligations could impair our planned business strategies by limiting our ability to borrow (i) beyond certain amounts or (ii) for certain purposes. Presently, our existing financial debt covenants primarily relate to maintaining minimum debt coverage ratios at certain properties, maintaining an overall minimum net worth, maintaining a maximum loan to value, and maintaining an overall minimum total assets. At September 30, 2009, we were in compliance with all covenants or other requirements set forth in our credit agreements as amended.

     The main covenants of our $250.0 million senior credit facility with 10 banks, which expires in April 2010 with two one-year extension options that takes it to April 2012, include (i) the minimum fixed charge coverage ratio, as defined, of 1.25x through March 31, 2011 (1.60x at September 30, 2009), and 1.35x thereafter until expiration; and (ii) the maximum leverage ratio, as defined, of 65% (57.8% at September 30, 2009). The only requirement to extend the credit facility is that the facility be in a non-default status with regards to the covenants.

     The articles governing our Series B-1 preferred stock require us to maintain certain covenants. The impairment charges recorded during the quarter ended June 30, 2009 could have prevented us from satisfying one financial ratio. However, the holder of the Series B-1 preferred stock reviewed the specific impairment charges and agreed to exclude the impairment charges incurred in the second quarter as they impact the financial ratio calculations for the affected periods. At September 30, 2009, we are in compliance with all covenants required under the articles governing the Series B-1 preferred stock.

     We continue to execute aggressive cost saving measures at the property level that include payroll freezes, vendor contract renegotiation and adjustments to service levels. In addition, corporate level cost containment plans have been implemented which included reduction in payroll hours, base salary freezes, and reduced benefits and fees along with other cost saving measures.

     We may incur indebtedness to meet distribution requirements imposed on REITs under the Internal Revenue Code to the extent that working capital and cash flow from our investments are insufficient to fund required distributions.

     Based upon the current level of operations, management believes that our cash flow from operations along with our significant cash balances will be adequate to meet upcoming anticipated requirements for interest, working capital, and capital expenditures for the next 12 months. With respect to upcoming maturities, no assurances can be given that we will obtain additional financings or, if we do, what the amount and terms will be. We are in the process of documenting a new loan for not only the $75 million that matures in March 2010, but also $65 million that matures in 2011. Our failure to obtain future financing under favorable terms could adversely impact our ability to execute our business strategy. In addition, we may selectively pursue mortgage financing on individual properties and our mortgage investments.

     We are committed to an investment strategy when we will opportunistically pursue hotel acquisitions and share repurchases as suitable situations arise. Funds for future hotel-related investments are expected to be derived, in whole or in part, from future borrowings under a credit facility or other loans, or from proceeds from additional issuances of common stock, preferred stock, or other securities, asset sales, joint ventures and loan investment payoffs. However, we have no formal commitment or understanding to invest in additional assets, and there can be no assurance that we will successfully make additional investments.

     Our existing hotels are located in developed areas that contain competing hotel properties. The future occupancy, ADR, and RevPAR of any individual hotel could be materially and adversely affected by the current economic downturn, or an increase in the number or quality of the competitive hotel properties in its market area. Competition could also affect the quality and quantity of future investment opportunities.

     Dividend Policy. Effective with the fourth quarter ended December 31, 2008, in conjunction with the credit facility amendment, the Board of Directors suspended the common stock dividend. We expect to distribute the minimum dividend required to maintain our REIT status in 2009, which is likely to be determined, if necessary, in the fourth quarter of 2009. We may elect to pay dividends on our common stock in cash or a combination of cash and shares of common stock as permitted under federal income tax laws governing REIT distribution requirements.

42

SEASONALITY

      Our properties’ operations historically have been seasonal as certain properties maintain higher occupancy rates during the summer months and some during the winter months. This seasonality pattern can cause fluctuations in our quarterly lease revenue under our percentage leases. We anticipate that our cash flows from the operations of our properties will be sufficient to enable us to make distributions to maintain our REIT status. To the extent that cash flows from operations are insufficient during any quarter due to temporary or seasonal fluctuations in lease revenue, we expect to utilize other cash on hand or borrowings to fund required distributions. However, we cannot make any assurances that we will make distributions in the future.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     Our primary market risk exposure consists of changes in interest rates on borrowings under our debt instruments and notes receivable that bear interest at variable rates that fluctuate with market interest rates. The analysis below presents the sensitivity of the market value of our financial instruments to selected changes in market interest rates.

     At September 30, 2009, our $2.8 billion debt portfolio included $918.0 million of variable-rate debt. The impact on the results of operations of a 25-basis point change in interest rate on the outstanding balance of variable-rate debt at September 30, 2009 would be approximately $574,000 per quarter.

     We primarily use interest rate derivatives to hedge our asset cash flows. We also use non-hedge derivatives to capitalize on the historical correlation between changes in LIBOR (London Interbank Offered Rate) and RevPAR (Revenue per Available Room). To accomplish these objectives, we enter into interest rate swaps, caps, floors and flooridors. We believe that the counterparties’ nonperformance risk is limited. Interest rate swaps involve the receipt of variable-rate amounts in exchange for fixed-rate payments over the life of the derivative agreements without exchange of the underlying principal amount. Interest rate caps provide us with interest rate protection above the strike rate on the cap and result in us receiving interest payments when interest rates exceed the cap strike. Interest rate floors provide the counterparties with rate protection below the strike rate. Since March 2008, we have entered into interest rate swap, cap, floor, and flooridors transactions that were not designated as hedges. The changes in the fair market values of these transactions are recorded in earnings. Based on LIBOR in effect on September 30, 2009, the interest rate derivatives we entered into in 2008 and 2009 that are in effect would result in a quarterly savings of approximately $11.0 million. With LIBOR at its current level, a 25-basis point change would not result in changes to the amount of the interest savings due to the interest rate cap and floor on these derivatives.

     At September 30, 2009, our $66.7 million notes receivable included $25.7 million of variable-rate notes that are in accrual status. The impact on the results of operations of a 25-basis change in interest rate on the outstanding balance of variable-rate notes in accrual status at September 30, 2009 would be $16,000 per quarter.

     The above amounts were determined based on the impact of hypothetical interest rates on our borrowings and lending portfolios, and assume no changes in our capital structure. As the information presented above includes only those exposures that existed at September 30, 2009, it does not consider exposures or positions that could arise after that date. Accordingly, the information presented herein has limited predictive value. As a result, the ultimate realized gain or loss with respect to interest rate fluctuations will depend on exposures that arise during the period, the hedging strategies at the time, and the related interest rates.

ITEM 4. CONTROLS AND PROCEDURES

     Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, the “Exchange Act”)) as of September 30, 2009 (“Evaluation Date”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective (i) to ensure that information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms; and (ii) to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

43

     There have been no changes in our internal controls over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     We are currently subject to litigation arising in the normal course of our business. In the opinion of management, none of these lawsuits or claims against us, either individually or in the aggregate, is likely to have a material adverse effect on our business, results of operations, or financial condition. In addition, we believe we have adequate insurance in place to cover such litigation.

ITEM 1A. RISK FACTORS

     The discussion of our business and operations should be read together with the risk factors contained in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2008, filed with the Securities and Exchange Commission, which describe various risks and uncertainties to which we are or may become subject. These risks and uncertainties have the potential to affect our business, financial condition, results of operations, cash flows, strategies or prospects in a material and adverse manner. In addition, the following risk factors describe additional important risks and uncertainties related to our company that have developed since December 31, 2008:

     If the current economic downturn continues and the underlying hotel properties supporting our mezzanine loan portfolio are unable to generate enough cash flows for the scheduled payments, there is a possibility that our remaining mezzanine loan portfolio could be written off in its entirety, which may adversely affect our operating results.

     When we implemented our mezzanine loan investment strategy, we performed the underwriting stress test based on worst case scenarios similar to what the hotel industry experienced post 9/11. However the magnitude of the current economic downturn far exceeds our underwriting sensitivity. As a result, we have recorded impairment charges with respect to our mezzanine loan portfolio of approximately $149.3 million in the nine months ended September 30, 2009, and if the current economic downturn continues, we may record additional impairment charges to this portfolio equal to as much as the remaining balance of our mezzanine loan portfolio. If such a write-off were to occur, it would impact our income by up to $4.9 million annually.

     Continued significant impairment charges could result in our failure to satisfy certain financial ratios, which could trigger additional rights for the holder of our Series B-1 Preferred Stock.

     Our Series B-1 preferred stockholder has certain contractual rights in the event we are unable to satisfy certain financial ratios, and such inability remains uncured for more than 120 days. The end of the 120 day cure period, without a cure or waiver, would severely restrict our ability to operate our company without triggering a covenant violation. Specifically, we would be restricted from issuing preferred securities, incurring additional debt or purchasing or leasing real property without triggering a covenant violation under the articles supplementary governing the Series B-1 preferred stock.

     The impairment charges incurred in the second quarter of 2009 resulted in an adjusted EBITDA calculation that could have prevented us from satisfying one financial ratio. As a result, without a cure or waiver, we may have been obligated to restrict operations beginning in the third quarter of 2009 or risk triggering a covenant violation. However, Security Capital Preferred Growth Incorporated, the sole holders of our Series B-1 preferred stock, reviewed the specific impairment charges and agreed to exclude the impairment charges incurred in the second quarter as they impact the financial ratio calculations for the affected periods. If we incur additional impairment charges, there is no assurance that Security Capital will grant a similar waiver in the future.

     If a covenant violation does occur, we will be obligated to pay an additional $0.05015 per share quarterly dividend on our Series B-1 preferred stock (approximately $374,000 aggregate increase per quarter), and the Series B-1 preferred stockholder will gain the right to appoint two board members.

44

     The assets associated with certain of our derivative transactions do not constitute qualified REIT assets and the related income will not constitute qualified REIT income. Significant fluctuations in the value of such assets or the related income could jeopardize our REIT status or result in additional tax liabilities.

     We have entered into certain derivative transactions to protect against interest rate risks not specifically associated with debt incurred to acquire qualified REIT assets. The REIT provisions of the Internal Revenue Code limit our income and assets in each year from such derivative transactions. Failure to comply with the asset or income limitation within the REIT provisions of the Internal Revenue could result in penalty taxes or loss of our REIT status. If we elect to contribute the non-qualifying derivatives into a taxable REIT subsidiary to preserve our REIT status, such an action would result in any income from such transactions being subject to federal income taxation.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

     (c) The following table provides the information with respect to repurchases we made of shares of our equity securities during the third quarter of 2009:

	Total					Total Number of		Maximum Dollar
	Number			Average		Shares Purchased		Value of Shares That
	Of Shares			Price Paid		As Part of Publicly		May Yet Be Purchased
Period	Purchased			Per Share		Announced Plan(1)		Under the Plan
Common stock:
July 1 to July 31		2,294,443		$	2.77		2,294,443	$	149,480,000
August 1 to August 31		1,964,089	(2)	$	2.89		1,963,715	$	143,806,000
September 1 to September 30		2,065,440		$	3.50		2,065,440	$	136,574,000
Total		6,323,972		$	3.05		6,323,598

(1)

In November 2007, our Board of Directors authorized management to purchase up to a total of $50 million of our common stock from time to time on the open market. On September 5, 2008, the Board of Directors authorized the repurchase of an additional $75 million of our common stock that may be purchased under the share repurchase program. The $75 million authorization was subsequently revised to include repurchases of both common and preferred stock. Repurchases under these authorizations were completed in September 2008 and December 2008, respectively. In January 2009, the Board of Directors authorized an additional $200 million repurchase plan authorization (excluding fees, commissions and all other ancillary expenses) for the repurchase of shares of our common stock, Series A preferred stock, Series B-1 preferred stock and Series D preferred stock and/or the prepayment of our outstanding debt obligations, including debt secured by our hotel assets and debt senior to our mezzanine or loan investments.

(2)

Includes 374 shares forfeited to the Company to satisfy employees’ federal income tax obligations in connection with vesting of equity grants issued under our stock-based compensation plan.

45

ITEM 6. EXHIBITS

Exhibit	Description
10.5.2*	Amendment No. 1 to Employment Agreement, dated as of January 23, 2009, between Ashford Hospitality Trust, Inc. and Montgomery J. Bennett
10.5.4*	Amendment No. 1 to Employment Agreement, dated as of January 23, 2009, between Ashford Hospitality Trust, Inc. and Douglas Kessler
10.5.6*	Amendment No. 1 to Employment Agreement, dated as of January 23, 2009, between Ashford Hospitality Trust, Inc. and David A. Brooks
10.5.9	Amendment to Employment Agreement, dated as of September 3, 2009 and effective January 1, 2009, between Ashford Hospitality Trust, Inc. and Montgomery J. Bennett
10.5.10	Amendment to Employment Agreement, dated as of September 3, 2009 and effective January 1, 2009, between Ashford Hospitality Trust, Inc. and Douglas Kessler
10.5.11	Amendment to Employment Agreement, dated as of September 3, 2009 and effective January 1, 2009, between Ashford Hospitality Trust, Inc. and David A. Brooks
10.5.12	Amendment to Employment Agreement, dated as of September 3, 2009 and effective January 1, 2009, between Ashford Hospitality Trust, Inc. and Mark L. Nunneley
10.14.1*	Registration Rights Agreement, dated December 30, 2004, between the Registrant and Security Capital Preferred Growth Incorporated
10.25.4.3*	Mortgage, Security Agreement, Assignment of Rents and Fixture Filing from Ashford Atlantic Beach LP, as Borrower to Wachovia Bank, National Association, as Lender, dated April 11, 2007, with respect to Sea Turtle Inn, Atlantic Beach, Florida
10.25.4.3a	Schedule of Agreements omitted pursuant to Instruction 2 to Item 601 of Regulation S-K
10.25.4.4*	Mortgage, Security Agreement, Assignment of Rents and Fixture Filing from Ashford Edison LP, as Borrower to Wachovia Bank, National Association, as Lender, dated April 11, 2007, with respect to Courtyard Edison, Edison, New Jersey
10.25.4.4a	Schedule of Agreements omitted pursuant to Instruction 2 to Item 601 of Regulation S-K
10.25.4.6*	Guaranty for Fixed Rate Pool 1, executed as of April 11, 2007 by the Registrant, for the benefit of Wachovia Bank, National Association
10.25.4.6a	Schedule of Agreements omitted pursuant to Instruction 2 to Item 601 of Regulation S-K
10.26.1*	Joint Venture Agreement to the Investor Program Agreement, dated February 6, 2008, between Registrant and Prudential Investment Management, Inc.
10.26.2*	Loan Servicing Agreement to the Investor Program Agreement, dated February 6, 2008, between Registrant and Prudential Investment Management, Inc.
10.30.4	Confirmation of Trade, dated July 1, 2009, related to the purchase of 1-year Flooridor by Ashford Hospitality Limited Partnership from The Bank of New York Mellon as effected on December 13, 2010
10.30.5	Confirmation of Trade, dated July 1, 2009, related to the purchase of 1-year Flooridor by Ashford Hospitality Limited Partnership from SMBC Capital Markets, Inc. as effected on December 14, 2009
31.1	Certifications of Chief Executive Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of Securities Exchange Act of 1934, as amended
31.2	Certifications of Chief Financial Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of Securities Exchange Act of 1934, as amended
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* Executed agreement filed herewith to replace the form of this agreement previously filed with, or incorporated by reference into, the Registrant’s Form 10-K filed on March 2, 2009.

46

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: November 6, 2009	By:	/s/ MONTY J. BENNETT
		Monty J. Bennett
		Chief Executive Officer
Date: November 6, 2009	By:	/s/ DAVID J. KIMICHIK
		David J. Kimichik
		Chief Financial Officer

47

EX-10.5.2

Exhibit 10.5.2

AMENDMENT TO EMPLOYMENT AGREEMENT

     THIS AMENDMENT TO EMPLOYMENT AGREEMENT, effective as of January 23, 2009 (the “Effective Date”), between ASHFORD HOSPITALITY TRUST, INC., a corporation organized under the laws of the State of Maryland and having its principal place of business at Dallas, Texas (hereinafter, the “REIT”), ASHFORD HOSPITALITY LIMITED PARTNERSHIP, a limited partnership organized under the laws of the State of Delaware and having its principal place of business at Dallas, Texas (the Operating Partnership”), and MONTY BENNETT, an individual residing in Dallas, Texas (the “Executive”‘):

RECITALS:

A.	The REIT and the Operating Partnership (collectively, the “Company”) and the Executive are parties to a certain Employment Agreement (as amended, the “Agreement”), dated as of March 21, 2008, effective as of January 1, 2008; and
B.	The Compensation Committee, with the approval granted by the Board of Directors of the Company on January 23, 2009, desire to modify the Employment Agreement as specifically set forth herein;
C.	The Executive has agreed to accept this Amendment pursuant to the terms and conditions set forth herein; and
D.	All terms with their initial letter capitalized as set forth in the Employment Agreement shall have the same meaning herein as given such terms in the Employment Agreement

     NOW, THEREFORE, the Company and the Executive, in consideration of the respective covenants set forth in the Employment Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, agree that the Employment Agreement is modified as set forth below:

     1. POSITION. Section l (a) of the Employment Agreement is hereby modified by providing that the Executive shall be employed by the Company as Chief Executive Officer. Except for this modification to the Executive’s position and title, no other modification is made to Section l(a) of the Employment Agreement.

     2. RESPONSIBILITIES. Section l (b) of the Employment Agreement is hereby modified by deleting the reference to “President and Chief Executive Officer” and inserting in lieu thereof the reference of “Chief Executive Officer.”

     3. OTHER REFERENCES. All additional references in the Employment Agreement referring to Executive’s title or position of “President and Chief Executive Officer” are hereby modified to “Chief Executive Officer.”

-1-

     4. LIMITED MODIFICATION. Except as expressly modified above, the terms and conditions of the Employment Agreement shall remain in full force and effect, and the Company and the Executive ratify and confirm to each other the enforceability thereof.

     5. MISCELLANEOUS.

     5.1 Severability. If any provision of this Amendment is or becomes invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired.

     5.2 Counterparts. This Amendment may be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. In making proof of this Amendment, it shall not be necessary to produce or account for more than one such counterpart.

     5.3 Entire Agreement. This Amendment (together with the Employment Agreement, as modified herein) contains the entire understanding of the parties, supersedes all prior agreements and understandings, whether written or oral, relating to the subject matter hereof and may not be amended except by a written instrument hereafter signed by the Executive and a duly authorized representative of the Board.

     5.4 Governing Law. This Amendment and the performance hereof shall be construed and governed in accordance with the laws of the State of Texas, without giving effect to principles of conflicts of law. Jurisdiction and venue shall be solely in the federal or state courts of Dallas County, Texas. This provision shall not be read as a waiver of any right to removal to federal court in Dallas County, Texas.

     5.5 Construction. The language used in this Amendment will be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction will be applied against any party. The headings of sections of this Amendment are for convenience of reference only and shall not affect its meaning or construction.

     5.6 Consultation with Counsel. The Executive acknowledges that he has had a full and complete opportunity to consult with counsel or other advisers of his own choosing concerning the terms, enforceability and implications of this Amendment, and that the Company has not made any representations or warranties to the Executive concerning the terms, enforceability and implications of this Amendment other than as are reflected in this Amendment.

-2-

     IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties hereto have caused this Agreement to be duly executed under seal as of the date first above written.

REIT: ASHFORD HOSPITALITY TRUST, INC.
By:	/s/ David Brooks
	Name:
	Title:
Dated: 1/23/09
OPERATING PARTNERSHIP: ASHFORD HOSPITALITY LIMITED PARTNERSHIP
By:	Ashford OP General Partner, LLC
By:	/s/ David Brooks
	Name:
	Title:
Dated: 1/23/09
EXECUTIVE:
/s/ Monty Bennett
Name:	MONTY BENNETT
Dated: 1/23/09

-3-

EX-10.5.4

Exhibit 10.5.4

AMENDMENT TO EMPLOYMENT AGREEMENT

     THIS AMENDMENT TO EMPLOYMENT AGREEMENT, effective as of January 23, 2009 (the “Effective Date”), between ASHFORD HOSPITALITY TRUST, INC., a corporation organized under the laws of the State of Maryland and having its principal place of business at Dallas, Texas (hereinafter, the “REIT”). ASHFORD HOSPITALITY LIMITED PARTNERSHIP, a limited partnership organized under the laws of the State of Delaware and having its principal place of business at Dallas, Texas (the Operating Partnership”), and DOUGLAS KESSLER, an individual residing in Dallas, Texas (the “Executive”):

RECITALS:

A.	The REIT and the Operating Partnership (collectively, the “Company”) and the Executive are parties to a certain Employment Agreement (as amended, the “Agreement”), dated as of March 21, 2008, effective as of January 1,2008; and
B.	The Compensation Committee, with the approval granted by the Board of Directors of the Company on January 23, 2009, desire to modify the Employment Agreement as specifically set forth herein;
C.	The Executive has agreed to accept this Amendment pursuant to the terms and conditions set forth herein; and
D.	All terms with their initial letter capitalized as set forth in the Employment Agreement shall have the same meaning herein as given such terms in the Employment Agreement

     NOW, THEREFORE, the Company and the Executive, in consideration of the respective covenants set forth in the Employment Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, agree that the Employment Agreement is modified as set forth below:

     1. POSITION. Section l(a) of the Employment Agreement is hereby modified by providing that the Executive shall be employed by the Company as President. Except for this modification to the Executive’s position and title, no other modification is made to Section l(a) of the Employment Agreement.

     2. RESPONSIBILITIES. Section l(b) of the Employment Agreement is hereby modified by deleting the reference to “Chief Operating Officer and Head of Acquisitions” and inserting in lieu thereof the reference of “President.”

     3. OTHER REFERENCES. All additional references in the Employment Agreement referring to Executive’s title or position of “Chief Operating Officer and Head of Acquisitions” are hereby modified to “President.”

-1-

     4. LIMITED MODIFICATION. Except as expressly modified above, the terms and conditions of the Employment Agreement shall remain in full force and effect, and the Company and the Executive ratify and confirm to each other the enforceability thereof.

     5. MISCELLANEOUS.

     5.1 Severability. If any provision of this Amendment is or becomes invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired.

     5.2 Counterparts. This Amendment may be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. In making proof of this Amendment, it shall not be necessary to produce or account for more than one such counterpart.

     5.3 Entire Agreement. This Amendment (together with the Employment Agreement, as modified herein) contains the entire understanding of the parties, supersedes all prior agreements and understandings, whether written or oral, relating to the subject matter hereof and may not be amended except by a written instrument hereafter signed by the Executive and a duly authorized representative of the Board.

     5.4 Governing Law. This Amendment and the performance hereof shall be construed and governed in accordance with the laws of the State of Texas, without giving effect to principles of conflicts of law. Jurisdiction and venue shall be solely in the federal or state courts of Dallas County, Texas. This provision shall not be read as a waiver of any right to removal to federal court in Dallas County, Texas.

     5.5 Construction. The language used in this Amendment will be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction will be applied against any party. The headings of sections of this Amendment are for convenience of reference only and shall not affect its meaning or construction.

     5.6 Consultation with Counsel. The Executive acknowledges that he has had a full and complete opportunity to consult with counsel or other advisers of his own choosing concerning the terms, enforceability and implications of this Amendment, and that the Company has not made any representations or warranties to the Executive concerning the terms, enforceability and implications of this Amendment other than as are reflected in this Amendment.

-2-

     IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties hereto have caused this Agreement to be duly executed under seal as of the date first above written.

REIT: ASHFORD HOSPITALITY TRUST, INC.
By:	/s/ Monty Bennett
	Name:
	Title:
Dated: 1/23/09
OPERATING PARTNERSHIP: ASHFORD HOSPITALITY LIMITED PARTNERSHIP By: Ashford OP General Partner, LLC
By:	/s/ Monty Bennett
	Name:
	Title:
Dated: 1/23/09
EXECUTIVE:
/s/ DOUGLAS KESSLER
Name: DOUGLAS KESSLER
Dated: 1/23/09

-3-

EX-10.5.6

Exhibit 10.5.6

AMENDMENT TO EMPLOYMENT AGREEMENT

     THIS AMENDMENT TO EMPLOYMENT AGREEMENT, effective as of January 23, 2009 (the “Effective Date”), between ASHFORD HOSPITALITY TRUST, INC., a corporation organized under the laws of the State of Maryland and having its principal place of business at Dallas, Texas (hereinafter, the “REIT”). ASHFORD HOSPITALITY LIMITED PARTNERSHIP, a limited partnership organized under the laws of the State of Delaware and having its principal place of business at Dallas, Texas (the Operating Partnership”), and DAVID BROOKS, an individual residing in Dallas, Texas (the “Executive”):

RECITALS:

A.	The REIT and the Operating Partnership (collectively, the “Company”) and the Executive are parties to a certain Employment Agreement (as amended, the “Agreement”), dated as of March 21, 2008, effective as of January 1,2008; and
B.	The Compensation Committee, with the approval granted by the Board of Directors of the Company on January 23, 2009, desire to modify the Employment Agreement as specifically set forth herein;
C.	The Executive has agreed to accept this Amendment pursuant to the terms and conditions set forth herein; and
D.	All terms with their initial letter capitalized as set forth in the Employment Agreement shall have the same meaning herein as given such terms in the Employment Agreement

     NOW, THEREFORE, the Company and the Executive, in consideration of the respective covenants set forth in the Employment Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, agree that the Employment Agreement is modified as set forth below:

     1. POSITION. Section l(a) of the Employment Agreement is hereby modified by providing that the Executive shall be employed by the Company as Chief Operating Officer, General Counsel and Secretary. Except for this modification to the Executive’s position and title, no other modification is made to Section l(a) of the Employment Agreement.

     2. RESPONSIBILITIES. Section l(b) of the Employment Agreement is hereby modified by deleting the reference to “Chief Legal Officer, Head of Transactions and Secretary” and inserting in lieu thereof the reference of “Chief Operating Officer, General Counsel and Secretary.”

-1-

     3. SALARY. Section 3 of the Employment Agreement is hereby modified to provide that the Executive’s base salary, commencing January 26, 2009, shall be FOUR HUNDRED TWENTY FIVE THOUSAND DOLLARS ($425,000.00) per year.

     4. INCENTIVE BONUS. Section 4(a) of the Employment Agreement is hereby modified by deleting the reference to “30% to 90%” for the targeted Incentive Bonus and inserting in lieu thereof the range of “40% to 95%” for the targeted Incentive Bonus.

     5. OTHER REFERENCES. All additional references in the Employment Agreement referring to Executive’s title or position of “Chief Legal Officer, Head of Transactions and Secretary” are hereby modified to “Chief Operating Officer, General Counsel and Secretary.”

     6. LIMITED MODIFICATION. Except as expressly modified above, the terms and conditions of the Employment Agreement shall remain in full force and effect, and the Company and the Executive ratify and confirm to each other the enforceability thereof.

     7. MISCELLANEOUS.

     7.1 Severability. If any provision of this Amendment is or becomes invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired.

     7.2 Counterparts. This Amendment may be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. In making proof of this Amendment, it shall not be necessary to produce or account for more than one such counterpart.

     7.3 Entire Agreement. This Amendment (together with the Employment Agreement, as modified herein) contains the entire understanding of the parties, supersedes all prior agreements and understandings, whether written or oral, relating to the subject matter hereof and may not be amended except by a written instrument hereafter signed by the Executive and a duly authorized representative of the Board.

     7.4 Governing Law. This Amendment and the performance hereof shall be construed and governed in accordance with the laws of the State of Texas, without giving effect to principles of conflicts of law. Jurisdiction and venue shall be solely in the federal or state courts of Dallas County, Texas. This provision shall not be read as a waiver of any right to removal to federal court in Dallas County, Texas.

     7.5 Construction. The language used in this Amendment will be deemed to be the language chosen by the parties to express their mutual intent,

-2-

and no rule of strict construction will be applied against any party. The headings of sections of this Amendment are for convenience of reference only and shall not affect its meaning or construction.

     7.6 Consultation with Counsel. The Executive acknowledges that he has had a full and complete opportunity to consult with counsel or other advisers of his own choosing concerning the terms, enforceability and implications of this Amendment, and that the Company has not made any representations or warranties to the Executive concerning the terms, enforceability and implications of this Amendment other than as are reflected in this Amendment.

     IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties hereto have caused this Agreement to be duly executed under seal as of the date first above written.

REIT: ASHFORD HOSPITALITY TRUST, INC.
By:	/s/ Monty Bennett
	Name:
	Title:
Dated: 1/23/09
OPERATING PARTNERSHIP: ASHFORD HOSPITALITY LIMITED PARTNERSHIP
By:	Ashford OP General Partner, LLC
By:	/s/ Monty Bennett
	Name:
	Title:
Dated: 1/23/09

-3-

EXECUTIVE:
/s/ DAVID BROOKS
Name:	DAVID BROOKS
Dated: 1/23/09

-4-

EX-10.5.9

Exhibit 10.5.9

AMENDMENT TO EMPLOYMENT AGREEMENT

     THIS AMENDMENT TO EMPLOYMENT AGREEMENT, effective as of January 1, 2009 (the “Effective Date”), between ASHFORD HOSPITALITY TRUST, INC., a corporation organized under the laws of the State of Maryland and having its principal place of business at Dallas, Texas (hereinafter, the “REIT”). ASHFORD HOSPITALITY LIMITED PARTNERSHIP, a limited partnership organized under the laws of the State of Delaware and having its principal place of business at Dallas, Texas (the “Operating Partnership”), and MONTY BENNETT, an individual residing in Dallas, Texas (the “Executive”):

RECITALS:

A.	The REIT and the Operating Partnership (collectively, the “Company”) and the Executive are parties to a certain Employment Agreement (as amended, the “Agreement”), dated as of March 21, 2008, effective as of January 1, 2008; and
B.	The Compensation Committee, with the approval granted by the Board of Directors of the Company on September 3, 2009, desire to modify the Employment Agreement as specifically set forth herein;
C.	The Executive has agreed to accept this Amendment pursuant to the terms and conditions set forth herein; and
D.	All terms with their initial letter capitalized as set forth in the Employment Agreement shall have the same meaning herein as given such terms in the Employment Agreement

     NOW, THEREFORE, the Company and the Executive, in consideration of the respective covenants set forth in the Employment Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, agree that the Employment Agreement is modified as set forth below:

     1. TARGETED INCENTIVE BONUS. Section 4(a) of the Employment Agreement is hereby modified by providing that the targeted Incentive Bonus for the Term shall be seventy-five percent (75%) to two hundred percent (200%) of Base Salary. No other modification is made to Section 4(a).

-1-

     2. LIMITED MODIFICATION. Except as expressly modified above, the terms and conditions of the Employment Agreement shall remain in full force and effect, and the Company and the Executive ratify and confirm to each other the enforceability thereof.

     3. MISCELLANEOUS.

     3.1 Severability. If any provision of this Amendment is or becomes invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired.

     3.2 Counterparts. This Amendment may be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. In making proof of this Amendment, it shall not be necessary to produce or account for more than one such counterpart.

     3.3 Entire Agreement. This Amendment (together with the Employment Agreement, as modified herein) contains the entire understanding of the parties, supercedes all prior agreements and understandings, whether written or oral, relating to the subject matter hereof and may not be amended except by a written instrument hereafter signed by the Executive and a duly authorized representative of the Board.

     3.4 Governing Law. This Amendment and the performance hereof shall be construed and governed in accordance with the laws of the State of Texas, without giving effect to principles of conflicts of law. Jurisdiction and venue shall be solely in the federal or state courts of Dallas County, Texas. This provision shall not be read as a waiver of any right to removal to federal court in Dallas County, Texas.

     3.5 Construction. The language used in this Amendment will be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction will be applied against any party. The headings of sections of this Amendment are for convenience of reference only and shall not affect its meaning or construction.

     3.6 Consultation with Counsel. The Executive acknowledges that he has had a full and complete opportunity to consult with counsel or other advisers of his own choosing concerning the terms, enforceability and implications of this Amendment, and that the Company has not made any representations or warranties to the Executive concerning the terms, enforceability and implications of this Amendment other than as are reflected in this Amendment.

-2-

     IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties hereto have caused this Agreement to be duly executed under seal as of the date first above written.

REIT:
ASHFORD HOSPITALITY TRUST, INC.
By:	/s/ David A. Brooks
Name:	DAVID A. BROOKS
Title:	COO
Dated:	9/5/09
OPERATING PARTNERSHIP:
ASHFORD HOSPITALITY LIMITED PARTNERSHIP
By: Ashford OP General Partner, LLC
By:	/s/ David A. Brooks
Name:	DAVID A. BROOKS
Title:	VICE PRESIDENT
Dated:	9/5/09
EXECUTIVE:
/s/ Monty Bennett
Name: Monty Bennett
Dated:	9/5/09

-3-

EX-10.5.10

Exhibit 10.5.10

AMENDMENT TO EMPLOYMENT AGREEMENT

     THIS AMENDMENT TO EMPLOYMENT AGREEMENT, effective as of January 1, 2009 (the “Effective Date”), between ASHFORD HOSPITALITY TRUST, INC., a corporation organized under the laws of the State of Maryland and having its principal place of business at Dallas, Texas (hereinafter, the “REIT”), ASHFORD HOSPITALITY LIMITED PARTNERSHIP, a limited partnership organized under the laws of the State of Delaware and having its principal place of business at Dallas, Texas (the “Operating Partnership”), and DOUGLAS KESSLER, an individual residing in Dallas, Texas (the “Executive”):

RECITALS:

A.	The REIT and the Operating Partnership (collectively, the “Company”) and the Executive are parties to a certain Employment Agreement (as amended, the “Agreement”), dated as of March 21, 2008, effective as of January 1, 2008; and
B.	The Compensation Committee, with the approval granted by the Board of Directors of the Company on September 3, 2009, desire to modify the Employment Agreement as specifically set forth herein;
C.	The Executive has agreed to accept this Amendment pursuant to the terms and conditions set forth herein; and
D.	All terms with their initial letter capitalized as set forth in the Employment Agreement shall have the same meaning herein as given such terms in the Employment Agreement

     NOW, THEREFORE, the Company and the Executive, in consideration of the respective covenants set forth in the Employment Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, agree that the Employment Agreement is modified as set forth below:

     1. TARGETED INCENTIVE BONUS. Section 4(a) of the Employment Agreement is hereby modified by providing that the targeted Incentive Bonus for the Term shall be fifty percent (50%) to one hundred fifty percent (150%) of Base Salary. No other modification is made to Section 4(a).

-1-

     2. LIMITED MODIFICATION. Except as expressly modified above, the terms and conditions of the Employment Agreement shall remain in full force and effect, and the Company and the Executive ratify and confirm to each other the enforceability thereof.

     3. MISCELLANEOUS.

     3.1 Severability. If any provision of this Amendment is or becomes invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired.

     3.2 Counterparts. This Amendment may be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. In making proof of this Amendment, it shall not be necessary to produce or account for more than one such counterpart.

     3.3 Entire Agreement. This Amendment (together with the Employment Agreement, as modified herein) contains the entire understanding of the parties, supercedes all prior agreements and understandings, whether written or oral, relating to the subject matter hereof and may not be amended except by a written instrument hereafter signed by the Executive and a duly authorized representative of the Board.

     3.4 Governing Law. This Amendment and the performance hereof shall be construed and governed in accordance with the laws of the State of Texas, without giving effect to principles of conflicts of law. Jurisdiction and venue shall be solely in the federal or state courts of Dallas County, Texas. This provision shall not be read as a waiver of any right to removal to federal court in Dallas County, Texas.

     3.5 Construction. The language used in this Amendment will be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction will be applied against any party. The headings of sections of this Amendment are for convenience of reference only and shall not affect its meaning or construction.

     3.6 Consultation with Counsel. The Executive acknowledges that he has had a full and complete opportunity to consult with counsel or other advisers of his own choosing concerning the terms, enforceability and implications of this Amendment, and that the Company has not made any representations or warranties to the Executive concerning the terms, enforceability and implications of this Amendment other than as are reflected in this Amendment.

-2-

     IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties hereto have caused this Agreement to be duly executed under seal as of the date first above written.

REIT:
ASHFORD HOSPITALITY TRUST, INC.
By:	/s/ David A. Brooks
Name:	DAVID A. BROOKS
Title:	COO
Dated:	9/5/09
OPERATING PARTNERSHIP:
ASHFORD HOSPITALITY LIMITED PARTNERSHIP
By: Ashford OP General Partner, LLC
By:	/s/ David A. Brooks
Name:	DAVID A. BROOKS
Title:	VICE PRESIDENT
Dated:	9/5/09
EXECUTIVE:
/s/ Douglas Kessler
Name:	Douglas Kessler
Dated:	9/5/09

-3-

EX-10.5.11

Exhibit 10.5.11

AMENDMENT TO EMPLOYMENT AGREEMENT

     THIS AMENDMENT TO EMPLOYMENT AGREEMENT, effective as of January 1, 2009 (the “Effective Date”), between ASHFORD HOSPITALITY TRUST, INC., a corporation organized under the laws of the State of Maryland and having its principal place of business at Dallas, Texas (hereinafter, the “REIT”), ASHFORD HOSPITALITY LIMITED PARTNERSHIP, a limited partnership organized under the laws of the State of Delaware and having its principal place of business at Dallas, Texas (the “Operating Partnership”), and DAVID BROOKS, an individual residing in Dallas, Texas (the “Executive”):

RECITALS:

A.	The REIT and the Operating Partnership (collectively, the “Company”) and the Executive are parties to a certain Employment Agreement (as amended, the “Agreement”), dated as of March 21, 2008, effective as of January 1, 2008; and
B.	The Compensation Committee, with the approval granted by the Board of Directors of the Company on September 3, 2009, desire to modify the Employment Agreement as specifically set forth herein;
C.	The Executive has agreed to accept this Amendment pursuant to the terms and conditions set forth herein; and
D.	All terms with their initial letter capitalized as set forth in the Employment Agreement shall have the same meaning herein as given such terms in the Employment Agreement

     NOW, THEREFORE, the Company and the Executive, in consideration of the respective covenants set forth in the Employment Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, agree that the Employment Agreement is modified as set forth below:

     1. TARGETED INCENTIVE BONUS. Section 4(a) of the Employment Agreement is hereby modified by providing that the targeted Incentive Bonus for the Term shall be forty percent (40%) to one hundred twenty-five percent (125%) of Base Salary. No other modification is made to Section 4(a).

-1-

     2. LIMITED MODIFICATION. Except as expressly modified above, the terms and conditions of the Employment Agreement shall remain in full force and effect, and the Company and the Executive ratify and confirm to each other the enforceability thereof.

     3. MISCELLANEOUS.

     3.1 Severability. If any provision of this Amendment is or becomes invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired.

     3.2 Counterparts. This Amendment may be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. In making proof of this Amendment, it shall not be necessary to produce or account for more than one such counterpart.

     3.3 Entire Agreement. This Amendment (together with the Employment Agreement, as modified herein) contains the entire understanding of the parties, supercedes all prior agreements and understandings, whether written or oral, relating to the subject matter hereof and may not be amended except by a written instrument hereafter signed by the Executive and a duly authorized representative of the Board.

     3.4 Governing Law. This Amendment and the performance hereof shall be construed and governed in accordance with the laws of the State of Texas, without giving effect to principles of conflicts of law. Jurisdiction and venue shall be solely in the federal or state courts of Dallas County, Texas. This provision shall not be read as a waiver of any right to removal to federal court in Dallas County, Texas.

     3.5 Construction. The language used in this Amendment will be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction will be applied against any party. The headings of sections of this Amendment are for convenience of reference only and shall not affect its meaning or construction.

     3.6 Consultation with Counsel. The Executive acknowledges that he has had a full and complete opportunity to consult with counsel or other advisers of his own choosing concerning the terms, enforceability and implications of this Amendment, and that the Company has not made any representations or warranties to the Executive concerning the terms, enforceability and implications of this Amendment other than as are reflected in this Amendment.

-2-

     IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties hereto have caused this Agreement to be duly executed under seal as of the date first above written.

REIT:
ASHFORD HOSPITALITY TRUST, INC.
By:	/s/ Monty Bennett
Name:	MONTY BENNETT
Title:	CEO
Dated:	9/5/09
OPERATING PARTNERSHIP:
ASHFORD HOSPITALITY LIMITED PARTNERSHIP
By: Ashford OP General Partner, LLC
By:	/s/ Monty Bennett
Name:	MONTY BENNETT
Title:	PRESIDENT
Dated:	9/5/09
EXECUTIVE:
/s/ David Brooks
Name:	David Brooks
Dated:	9/5/09

-3-

EX-10.5.12

Exhibit 10.5.12

AMENDMENT TO EMPLOYMENT AGREEMENT

     THIS AMENDMENT TO EMPLOYMENT AGREEMENT, effective as of January 1, 2009 (the “Effective Date”), between ASHFORD HOSPITALITY TRUST, INC., a corporation organized under the laws of the State of Maryland and having its principal place of business at Dallas, Texas (hereinafter, the “REIT”), ASHFORD HOSPITALITY LIMITED PARTNERSHIP, a limited partnership organized under the laws of the State of Delaware and having its principal place of business at Dallas, Texas (the “Operating Partnership”), and MARK NUNNELEY, an individual residing in Dallas, Texas (the “Executive”):

RECITALS:

A.	The REIT and the Operating Partnership (collectively, the “Company”) and the Executive are parties to a certain Employment Agreement (as amended, the “Agreement”), dated as of March 21, 2008, effective as of January 1, 2008; and
B.	The Compensation Committee, with the approval granted by the Board of Directors of the Company on September 3, 2009, desire to modify the Employment Agreement as specifically set forth herein;
C.	The Executive has agreed to accept this Amendment pursuant to the terms and conditions set forth herein; and
D.	All terms with their initial letter capitalized as set forth in the Employment Agreement shall have the same meaning herein as given such terms in the Employment Agreement

     NOW, THEREFORE, the Company and the Executive, in consideration of the respective covenants set forth in the Employment Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, agree that the Employment Agreement is modified as set forth below:

     1. TARGETED INCENTIVE BONUS. Section 4(a) of the Employment Agreement is hereby modified by providing that the targeted Incentive Bonus for the Term shall be twenty percent (20%) to seventy-five percent (75%) of Base Salary. No other modification is made to Section 4(a).

-1-

     2. LIMITED MODIFICATION. Except as expressly modified above, the terms and conditions of the Employment Agreement shall remain in full force and effect, and the Company and the Executive ratify and confirm to each other the enforceability thereof.

     3. MISCELLANEOUS.

     3.1 Severability. If any provision of this Amendment is or becomes invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired.

     3.2 Counterparts. This Amendment may be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. In making proof of this Amendment, it shall not be necessary to produce or account for more than one such counterpart.

     3.3 Entire Agreement. This Amendment (together with the Employment Agreement, as modified herein) contains the entire understanding of the parties, supercedes all prior agreements and understandings, whether written or oral, relating to the subject matter hereof and may not be amended except by a written instrument hereafter signed by the Executive and a duly authorized representative of the Board.

     3.4 Governing Law. This Amendment and the performance hereof shall be construed and governed in accordance with the laws of the State of Texas, without giving effect to principles of conflicts of law. Jurisdiction and venue shall be solely in the federal or state courts of Dallas County, Texas. This provision shall not be read as a waiver of any right to removal to federal court in Dallas County, Texas.

     3.5 Construction. The language used in this Amendment will be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction will be applied against any party. The headings of sections of this Amendment are for convenience of reference only and shall not affect its meaning or construction.

     3.6 Consultation with Counsel. The Executive acknowledges that he has had a full and complete opportunity to consult with counsel or other advisers of his own choosing concerning the terms, enforceability and implications of this Amendment, and that the Company has not made any representations or warranties to the Executive concerning the terms, enforceability and implications of this Amendment other than as are reflected in this Amendment.

-2-

     IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties hereto have caused this Agreement to be duly executed under seal as of the date first above written.

REIT:
ASHFORD HOSPITALITY TRUST, INC.
By:	/s/ David A. Brooks
Name:	DAVID A. BROOKS
Title:	COO
Dated:	9/5/09
OPERATING PARTNERSHIP:
ASHFORD HOSPITALITY LIMITED PARTNERSHIP
By: Ashford OP General Partner, LLC
By:	/s/ David A. Brooks
Name:	DAVID A. BROOKS
Title:	VP
Dated:	9/5/09
EXECUTIVE:
/s/ Mark Nunneley
Name:	Mark Nunneley
Dated:	9/5/09

-3-

EX-10.14.1

Exhibit 10.14.1

REGISTRATION RIGHTS AGREEMENT

          REGISTRATION RIGHTS AGREEMENT, dated as of December 30, 2004 (this “Agreement”), by and between Ashford Hospitality Trust, Inc., a Maryland corporation (the “Company”), and Security Capital Preferred Growth Incorporated, a Maryland corporation (the “Investor”).

          WHEREAS, pursuant to that certain Series B Cumulative Convertible Redeemable Preferred Stock Purchase Agreement, dated as of December 27, 2004 (the “Purchase Agreement”), by and among the Company, Ashford Hospitality Limited Partnership, a Delaware limited partnership, and the Investor, the Investor has agreed to acquire up to 7,447,865 shares of Series B-1 Cumulative Convertible Redeemable Preferred Stock, par value $.01 per share, of the Company (the “Series B-1 Preferred Stock”), all of which may be converted into the Company’s common stock, par value $0.01 per share (the “Common Stock”), pursuant to the terms of the Series B-1 Preferred Stock, and up to 2,285,865 shares of Series B-2 Cumulative Convertible Redeemable Preferred Stock, par value $.01 per share, of the Company (the “Series B-2 Preferred Stock”, and together with the Series B-1 Preferred Stock, the “Preferred Stock”); and

          WHEREAS, in connection with the Purchase Agreement, the Company has agreed to register for sale by the Investor and certain transferees, (i) the shares of Preferred Stock and (ii) shares of Common Stock received upon conversion of Series B-1 Preferred Stock (collectively, the “Registrable Shares”); and

          WHEREAS, the parties hereto desire to enter into this Agreement to evidence the foregoing agreement of the Company and the mutual covenants of the parties relating thereto.

          NOW, THEREFORE, in consideration of the foregoing and the covenants of the parties set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, subject to the terms and conditions set forth herein, the parties hereby agree as follows:

          Section 1. Certain Definitions. In this Agreement the following terms shall have the following respective meanings:

          “Accredited Investor” shall have the meaning set forth in Rule 501 of the General Rules and Regulations promulgated under the Securities Act.

          “Affiliate” shall mean, when used with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the Person specified.

          “Commission” shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.

          “Common Stock” shall have the meaning ascribed to it in the recitals to this Agreement.

          “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the relevant time.

          “Holders” shall mean (i) the Investor and (ii) each Person holding Registrable Shares (which term, for purposes of this definition shall include Common Stock that may be issued upon conversion of outstanding Preferred Stock) as a result of a transfer or assignment to that Person of Registrable Shares other than pursuant to an effective registration statement or Rule 144 under the Securities Act.

          “Indemnified Party” shall have the meaning ascribed to it in Section 6(c) of this Agreement.

          “Indemnifying Party” shall have the meaning ascribed to it in Section 6(c) of this Agreement.

          “Person” shall mean an individual, corporation, partnership, limited liability company, estate, trust, association, private foundation, joint stock company or other entity.

          “Piggyback Notice” shall have the meaning ascribed to it in Section 3(a) of this Agreement.

          “Piggyback Registration” shall have the meaning ascribed to it in Section 3(a) of this Agreement.

          “Preferred Stock” shall have the meaning ascribed to it in the recitals to this Agreement.

          The terms “Register,” “Registered” and “Registration” refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act providing for the sale by the Holders of Registrable Shares in accordance with the method or methods of distribution designated by the Holders, and the declaration or ordering of the effectiveness of such registration statement by the Commission.

          “Registrable Shares” shall have the meaning ascribed to it in the recitals to this Agreement, except that as to any particular Registrable Shares, once issued such securities shall cease to be Registrable Shares when (a) a registration statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (b) such securities shall have been sold in accordance with Rule 144 (or any successor provision) under the Securities Act, or (c) such securities have been otherwise transferred in a transaction that would constitute a sale thereof under the Securities Act, the Company has delivered a new certificate or other evidence of ownership for such securities not bearing a Securities Act restricted stock legend and such shares may be resold without restriction under the Securities Act.

          “Registration Expenses” shall mean all out-of-pocket expenses (excluding Selling Expenses) incurred by the Company in complying with Sections 2, 3 and 4 hereof, including, without limitation, the following: (a) all registration, filing and listing fees; (b) fees and expenses

2

of compliance with federal and state securities or real estate syndication laws (including, without limitation, reasonable fees and disbursements of counsel in connection with state securities and real estate syndication qualifications of the Registrable Shares under the laws of such jurisdictions as the Holders may reasonably designate); (c) printing (including, without limitation, expenses of printing or engraving certificates for the Registrable Shares in a form eligible for deposit with The Depository Trust Company and otherwise meeting the requirements of any securities exchange on which they are listed and of printing registration statements and prospectuses), messenger, telephone, shipping and delivery expenses; (d) fees and disbursements of counsel for the Company; (e) fees and disbursements of all independent public accountants of the Company (including without limitation the expenses of any annual or special audit and “cold comfort” letters required by the managing underwriter); (f) Securities Act liability insurance if the Company so desires; (g) fees and expenses of other Persons reasonably necessary in connection with the registration, including any experts, retained by the Company; (h) fees and expenses incurred in connection with the listing of the Registrable Shares on each securities exchange on which securities of the same class or series are then listed; and (i) fees and expenses associated with any filing with the National Association of Securities Dealers, Inc. required to be made in connection with the registration statement.

          “Registration Request” shall have the meaning ascribed to it in Section 2(a) of this Agreement.

          “Rule 144” shall mean Rule 144 promulgated by the Commission under the Securities Act.

          “Securities Act” shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the relevant time.

          “Selling Expenses” shall mean all underwriting discounts, selling commissions and stock transfer taxes applicable to any sale of Registrable Shares.

          “Series B-1 Preferred Stock” shall have the meaning ascribed to it in the recitals to this Agreement.

          “Series B-2 Preferred Stock” shall have the meaning ascribed to it in the recitals to this Agreement.

          “Suspension Right” shall have the meaning ascribed to it in Section 2(a) of this Agreement.

          Section 2. Demand Registration.

               Upon receipt of a written request (a “Registration Request”) from Holders holding at least 10% of the aggregate of the number of Registrable Shares then outstanding, which shall specify the number of Registrable Shares to be registered and the intended method of distribution, the Company shall (i) promptly give notice of the Registration Request to all non-requesting Holders and (ii) prepare and file with the Commission, within 30 days after its receipt of such Registration Request a registration statement for the purpose of effecting a Registration

3

of the sale of all Registrable Shares by the requesting Holders and any other Holder who requests to have his Registrable Shares included in such registration statement within 10 days after receipt of notice by such Holder of the Registration Request; provided however, that such Holders may make such a request only with respect to $20,000,000 or more of issued and outstanding Registrable Shares (or such lesser amount, if any, equal to the full amount of any unregistered Registrable Securities issued and outstanding which are in an aggregate amount of less than $20,000,000 following the last date on which a closing is possible under the Purchase Agreement). Each such request shall specify the number of Registrable Shares to be registered and the intended method of distribution thereof. The Company shall use its best efforts to cause the applicable registration statement to be declared effective as soon as practicable (including, without limitation, the execution of an undertaking to file post-effective amendments and appropriate qualifications under applicable state securities and real estate syndication laws); and shall keep such Registration continuously effective until the date on which all Registrable Shares covered by such registration statement are no longer Registrable Shares.

               Notwithstanding the foregoing, the Company shall have the right (the “Suspension Right”) to defer such filing (or suspend sales under any filed registration statement or defer the updating of any filed registration statement and suspend sales thereunder) until the reason for such deferral or suspension no longer exists, but in no event for a continuous period of more than 30 days or an aggregate of more than 90 days in any twelve-month period, if the Company shall furnish to the Holders a certificate signed by an executive officer or any director of the Company stating that, in the good faith judgment of the Company, it would materially interfere with any material financing, acquisition, corporation reorganization, merger, or other transaction involving the Company or any of its subsidiaries or would otherwise be detrimental to the Company and its shareholders to file such registration statement or amendment or supplement thereto at such time (or continue sales under a filed registration statement) and therefore the Company has elected to defer the filing of such registration statement (or suspend sales under a filed registration statement).

          Section 3. Piggyback Registrations.

               (a) Until the date on which all Registrable Shares are no longer Registrable Shares, if the Company proposes to register any of its securities under the Securities Act (other than pursuant to (i) a registration statement filed pursuant to Rule 415 under the Securities Act, (ii) a registration on Form S-4 or any successor form, (iii) an offering of securities in connection with an employee benefit, share dividend, share ownership or dividend reinvestment plan, (iv) any registration statement filed by the Company relating to the offering of Common Stock for its own account as a result of the exercise of the exchange rights set forth in Section 7.4 of the Partnership Agreement (as defined in the Purchase Agreement), or (v) any registration statement filed in connection with a demand registration other than pursuant to Section 2 of this Agreement; provided, however, that the exceptions in clauses (iv) and (v) shall not apply if underwritten offerings are proposed to be made under such registration statements) and the registration form to be used may be used for the registration of Registrable Shares, the Company will give prompt written notice to all Holders of Registrable Shares of its intention to effect such a registration (each a “Piggyback Notice”) and, subject to subparagraphs 3(b) and (c) below, the Company will include in such registration all Registrable Shares with respect to which the Company has received written requests for inclusion therein within ten business days

4

after the date of sending the Piggyback Notice (a “Piggyback Registration”), unless, if the Piggyback Registration is an underwritten offering, the managing underwriters advise the Company in writing that in their opinion, the inclusion of Registrable Shares would materially adversely interfere with such offering, materially adversely affect the Company’s securities in the public markets, or otherwise materially adversely affect the Company. Notwithstanding the foregoing, if the Registration pursuant to Section 2 is then in effect, the Company shall have no obligation to effect the registration of Registrable Shares under this Section 3 unless the securities proposed to be registered by the Company are to be disposed of in an underwritten public offering. Nothing herein shall affect the right of the Company to withdraw any such registration in its sole discretion.

               (b) If a Piggyback Registration is a primary registration on behalf of the Company and, if the Piggyback Registration is an underwritten offering, and the managing underwriters advise the Company in writing that in their opinion, the number of securities requested to be included in such registration exceeds the number which can be sold in an orderly manner within a price range acceptable to the Company, the Company will include in such registration (i) first, the securities the Company proposes to sell and (ii) second, the Registrable Shares requested to be included in such Registration and any other securities requested to be included in such registration, pro rata among the holders of Registrable Shares requesting such registration and the holders of such other securities on the basis of the number of Shares requested for inclusion in such registration by each such holder.

               (c) If a Piggyback Registration is a secondary registration on behalf of holders of the Company’s securities other than the Holders of Registrable Shares, and, if the Piggyback Registration is an underwritten offering, the managing underwriters advise the Company in writing that in their opinion, the number of securities requested to be included in such registration exceeds the number which can be sold in an orderly manner in such offering within a price range acceptable to the Holders initially requesting such registration, the Company will include in such registration the securities requested to be included therein by the holders requesting such registration and the Registrable Shares requested to be included in such registration, pro rata among the holders of securities requesting such registration on the basis of the number of Shares requested for inclusion in such registration by each such holder.

          Section 4. Registration Procedures.

               (a) The Company shall promptly notify the Holders and, if requested by the Holders, confirm in writing, the occurrence of the following events:

               (i) when any registration statement relating to the Registrable Shares or post-effective amendment or supplement thereto has been filed with the Commission and has become effective;

               (ii) the issuance by the Commission of any stop order suspending the effectiveness of any registration statement relating to the Registrable Shares;

5

               (iii) the suspension of an effective registration statement by the Company in accordance with the last paragraph of Section 2(a) hereof;

               (iv) the Company’s receipt of any notification of the suspension of the qualification of any Registrable Shares covered by a registration statement for sale in any jurisdiction; and

               (v) the existence of any event, fact or circumstance that results in a registration statement or prospectus relating to Registrable Shares or any document incorporated therein by reference containing an untrue statement of material fact or omitting to state a material fact required to be stated therein or necessary to make the statements therein not misleading.

          The Company agrees to use its best efforts to obtain the withdrawal of any order suspending the effectiveness of any such registration statement or any state qualification as promptly as possible. The Company also agrees to prepare and file with the Commission such amendments and supplements to such registration statement as may be necessary and to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Shares covered by such registration statement in accordance with the Holders’ intended method of disposition set forth in the registration statement for such period. The Investor agrees by acquisition of the Registrable Shares that upon receipt of any notice from the Company of the occurrence of any event of the type described in Section 4(a)(ii), (iii), (iv) or (v) to immediately discontinue its disposition of Registrable Shares pursuant to any registration statement relating to such securities until the Investor’s receipt of written notice from the Company that such disposition may be made and, in the case of clauses (iii) and (v) of Section 4(a), copies of the supplemented or amended prospectus. At the written request of the Company, each Holder will deliver to the Company (at the Company’s expense) all copies, other than permanent file copies, in such Holder’s possession of the prospectus covering such Registrable Securities at the time of receipt of such notice.

               (b) The Company shall provide to the Holders, prior to the filing thereof with the Commission, copies of the registration statement relating to the Registrable Securities and any amendments or supplements thereto, which documents shall be subject to the approval of the Holders only with respect to any statements which relate to the Holders or their intended method of disposition.

               (c) The Company shall provide to the Holders, at no cost to the Holders, a copy of the registration statement and any amendment thereto used to effect the Registration of the Registrable Shares, each prospectus contained in such registration statement or post-effective amendment and any amendment or supplement thereto and such other documents as the requesting Holders may reasonably request in order to facilitate the disposition of the Registrable Shares covered by such registration statement. The Company consents to the use of each such prospectus and any supplement thereto by the Holders in connection with the offering and sale of the Registrable Shares covered by such registration statement or any amendment thereto. The Company shall also file a sufficient number of copies of the prospectus and any post-effective amendment or supplement thereto with the New York Stock Exchange, Inc. (or, if the Common Stock is no longer listed thereon, with such other securities exchange or

6

market on which the Common Stock is then listed) so as to enable the Holders to have the benefits of the prospectus delivery provisions of Rule 153 under the Securities Act.

               (d) The Company agrees to use its best efforts to cause the Registrable Shares covered by a registration statement to be registered with or approved by such state securities authorities as may be necessary to enable the Holders to consummate the disposition of such shares pursuant to the plan of distribution set forth in the registration statement; provided, however, that the Company shall not be obligated to take any action to effect any such Registration, qualification or compliance pursuant to this Section 4 in any particular jurisdiction in which the Company would be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this clause (d), (ii) subject itself to taxation in any such jurisdiction or (iii) execute a general consent to service of process in effecting such Registration, qualification or compliance unless the Company is already subject to service in such jurisdiction.

               (e) Subject to the Company’s Suspension Right, if any event, fact or circumstance requiring an amendment to a registration statement relating to the Registrable Shares or supplement to a prospectus relating to the Registrable Shares shall exist, immediately upon becoming aware thereof the Company agrees to notify the Holders and prepare and furnish to the Holders a post-effective amendment to the registration statement or supplement to the prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Shares, the prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading.

               (f) The Company agrees to use its best efforts (including the payment of any listing fees) to obtain the listing of all Registrable Shares covered by the registration statement on each securities exchange on which securities of the same class or series are then listed and to provide a transfer agent and registrar for all Registrable Shares.

               (g) The Company agrees to use its best efforts to comply with the Securities Act and the Exchange Act, and, as soon as reasonably practicable following the end of any fiscal year during which a registration statement effecting a Registration of the Registrable Shares shall have been effective, to make available to its security holders an earnings statement satisfying the provisions of Section 11(a) of the Securities Act.

               (h) The Company agrees to cooperate with the selling Holders to facilitate the timely preparation and delivery of certificates representing Registrable Shares to be sold pursuant to a Registration and not bearing any Securities Act legend; and enable certificates for such Registrable Shares to be issued for such numbers of shares and registered in such names as the Holders may reasonably request at least two business days prior to any sale of Registrable Shares.

               (i) In the case of an underwritten Piggyback Registration, the Company will have the right to select the investment banker(s) and manager(s) to administer the offering, and no Person may participate in any such underwritten registration unless such Person (a) agrees to sell such Person’s securities on the basis provided in any underwriting agreements

7

approved by the Persons entitled to approve such arrangements (including, without limitation, agreeing not to effect any sale or distribution of the issue being registered or a similar security of the Company, or any security convertible into or exchangeable or exercisable for such securities, if and to the extent requested in writing by the managing underwriter or underwriters, as the case may be, provided that the terms of such request is no more onerous to such Person than to any other Person selling under such Registration) and (b) completes and executes all reasonable questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting agreements. If requested by the underwriters for any underwritten offerings by Holders, under a registration requested pursuant to Section 2(a), the Company will enter into a customary underwriting agreement with such underwriters for such offering, to contain such representations and warranties by the Company and such other terms as are customarily contained in agreements of that type. The Holders shall be a party to such underwriting agreement and may, at their option, require that any or all of the conditions precedent to the obligations of such underwriters under such underwriting agreement be conditions precedent to the obligations of Holders. The Holders shall not be required to make any representations or warranties to or agreement with the Company or the underwriters other than representations, warranties or agreements regarding the Holders and the Holders’ intended method of distribution and any other representation or warranties required by law.

               (j) In an underwritten public offering, the Company shall furnish on the date that Registrable Shares are delivered to the underwriters for sale pursuant to such registration: (a) an opinion in form satisfactory to the Holders and (b) a “cold comfort” letter of the type normally given in underwritten offerings.

               (k) The Company shall give the Holders of Registrable Shares on whose behalf such Registrable Shares are to be so registered and their underwriters, if any, and their respective counsel and accountants, such access to its books and records and such opportunities to discuss the business of the Company with its officers and the independent public accountants who have certified its financial statements as shall be necessary, in the opinion of such Holders and such underwriters or their respective counsel, to conduct a reasonable investigation within the meaning of the Securities Act. Records which the Company determines in good faith, to be confidential and which it notifies the Holders are confidential shall not be disclosed by the Holders unless (i) the disclosure of such records is necessary to avoid or correct a misstatement or omission in a registration statement or (ii) the release of such records is ordered pursuant to a subpeona or other order from a court of competent jurisdiction. Each Holder of such Registrable Securities agrees that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it as the basis for any market transactions in securities of the Company unless and until such is made generally available to the public. Each Holder of such Registrable Securities further agrees that it will, upon learning that disclosure of such records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company, at the Company’s expense, to undertake appropriate action to prevent disclosure of the records deemed confidential.

               (l) Each Holder acknowledges that by asserting or participating in its registration rights pursuant to this Agreement, such Person may become a Selling Holder and thereby will be deemed a party to this Agreement and will be bound by each of its terms.

8

          Section 5. Expenses of Registration. The Company shall pay all Registration Expenses incurred in connection with the registration, qualification or compliance pursuant to Sections 2, 3 and 4 hereof. All Selling Expenses incurred in connection with the sale of Registrable Shares by any of the Holders shall be borne by the Holder selling such Registrable Shares. Each Holder shall pay the expenses of its own counsel.

          Section 6. Indemnification.

               (a) The Company will indemnify each Holder, each Holder’s officers and directors, and each person controlling such Holder within the meaning of Section 15 of the Securities Act, against all expenses, claims, losses, damages and liabilities (including reasonable legal expenses), arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement or prospectus relating to the Registrable Shares, or any amendment or supplement thereto, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Company shall reimburse such Holder and each Holder’s officers and directors, and each person controlling such Holder within the meaning of Section 15 of the Securities Act for any legal or any other expenses reasonably incurred by them in connection with investigating or defending any such claim, loss, damage or liability, provided, however, that the Company will not be liable in any such case to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission or alleged untrue statement or omission, made in reliance upon and in conformity with information furnished in writing to the Company by such Holder or underwriter for inclusion therein; provided further, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability or expense arises out of or is based upon an untrue statement or alleged untrue statement of any material fact contained in any such registration statement, preliminary prospectus, final prospectus or summary prospectus contained therein or any omission to state therein a material fact required to be stated therein or necessary to make the statements therein in light of the circumstances in which they were made not misleading in a prospectus or prospectus supplement, if (i) such untrue statement or omission is completely corrected in an amendment or supplement to such prospectus or prospectus supplement, the seller of the Registrable Shares has an obligation under the Securities Act to deliver a prospectus or prospectus supplement in connection with such sale of Registrable Shares and the seller of Registrable Shares thereafter fails to deliver such prospectus or prospectus supplement as so amended or supplemented prior to or concurrently with the sale of Registrable Shares to the person asserting such loss, claim, damage or liability after the Company has furnished such seller with a sufficient number of copies of the same or (ii) if the seller received written notice from the Company of the existence of such an untrue statement or such an omission and the seller continued to dispose of Registrable Shares following receipt of such written notice but prior to the time of the receipt of either (a) an amended or supplemented prospectus or prospectus supplement that completely corrected the untrue statement or the omission or (b) a notice from the Company that the use of the existing prospectus or prospectus supplement may be resumed.

               (b) Each Holder will indemnify the Company, each of its directors and each of its officers who signs the registration statement, each underwriter, if any, of the Company’s securities covered by such registration statement, and each person who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act, against all

9

claims, losses, damages and liabilities (including reasonable legal fees and expenses) arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement or prospectus, or any amendment or supplement thereto, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement or prospectus, in reliance upon and in conformity with information furnished in writing to the Company by such Holder for inclusion therein.

               (c) Each party entitled to indemnification under this Section 6 (the “Indemnified Party”) shall give notice to the party required to provide indemnification (the “Indemnifying Party”) promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, but the omission to so notify the Indemnifying Party shall not relieve it from any liability which it may have to the Indemnified Party pursuant to the provisions of this Section 6 except to the extent of the actual damages suffered by such delay in notification. The Indemnifying Party shall assume the defense of such action, including the employment of counsel to be chosen by the Indemnifying Party (which counsel shall be reasonably satisfactory to the Indemnified Party), and payment of expenses. The Indemnified Party shall have the right to employ its own counsel in any such case, but the legal fees and expenses of such counsel shall be at the expense of the Indemnified Party, unless the employment of such counsel shall have been authorized in writing by the Indemnifying Party in connection with the defense of such action, or the Indemnifying Party shall not have employed counsel to take charge of the defense of such action or the Indemnified Party shall have reasonably concluded that there may be defenses available to it or them which are different from or additional to those available to the Indemnifying Party (in which case the Indemnifying Party shall not have the right to direct the defense of such action on behalf of the Indemnified Party), in any of which events such fees and expenses shall be borne by the Indemnifying Party. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation.

               (d) If the indemnification provided for in this Section 6 is unavailable to a party that would have been an Indemnified Party under this Section 6 in respect of any expenses, claims, losses, damages and liabilities referred to herein, then each party that would have been an Indemnifying Party hereunder shall, in lieu of indemnifying such Indemnified Party, contribute to the amount paid or payable by such Indemnified Party as a result of such expenses, claims, losses, damages and liabilities in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and such Indemnified Party on the other in connection with the statement or omission which resulted in such expenses, claims, losses, damages and liabilities, as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Indemnifying Party or such Indemnified Party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and each Holder agree that it would not be just and

10

equitable if contribution pursuant to this Section were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 6(d).

               (e) No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

               (f) In no event shall any Holder be liable for any expenses, claims, losses, damages or liabilities pursuant to this Section 6 in excess of the net proceeds to such Holder of any Registrable Shares sold by such Holder.

          Section 7. Information to be Furnished by Holders. Each Holder shall furnish to the Company such information as the Company may reasonably request and as shall be required in connection with the Registration and related proceedings referred to in Section 2 or Section 3 hereof. If any Holder fails to provide the Company with such information within 10 days of receipt of the Company’s written request, the Company’s obligations under Section 2 or Section 3 hereof, as applicable, with respect to such Holder or the Registrable Shares owned by such Holder shall be suspended until such Holder provides such information.

          Section 8. Undertaking to Participate in Underwriting. If the Holders of Registrable Shares shall propose to sell Registrable Shares in an underwritten public offering, the Company shall make available members of the management of the Company and its affiliates for reasonable assistance in selling efforts relating to such offering, to the extent customary for a public offering (including, without limitation, to the extent customary, senior management attendance at due diligence meetings with the underwriters and their counsel and road shows) and shall enter into underwriting agreements containing usual and customary terms and conditions reasonably acceptable to the Company for such types of offerings.

          Section 9. Rule 144 Sales.

               (a) The Company covenants that it will file the reports required to be filed by the Company under the Exchange Act, so as to enable any Holder to sell Registrable Shares pursuant to Rule 144 under the Securities Act or any similar rule or regulation hereafter adopted by the Commission.

               (b) In connection with any sale, transfer or other disposition by any Holder of any Registrable Shares pursuant to Rule 144 under the Securities Act, the Company shall cooperate with such Holder to facilitate the timely preparation and delivery of certificates representing Registrable Shares to be sold and not bearing any Securities Act legend, and enable certificates for such Registrable Shares to be for such number of shares and registered in such names as the selling Holder may reasonably request at least two business days prior to any sale of Registrable Shares.

          Section 10. Miscellaneous.

               (a) Governing Law. This Agreement shall be governed in all respects by the laws of the State of Maryland, without giving effect to the choice of law principles of such

11

State. Each party hereby irrevocably submits to the non-exclusive jurisdiction of the state and federal courts sitting in the city of Chicago for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

               (b) Entire Agreement. This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subject matter hereof.

               (c) Amendment; Waiver. No supplement, modification, waiver or termination of this Agreement shall be binding unless executed in writing by the party to be bound thereby. No course of action or dealing, renewal, release or extension of any provision of this Agreement or any related agreement, or single or partial exercise of any such provision, or delay, failure or omission on a Holder’s part in enforcing any such provision shall affect the obligations of the Company or operate as a waiver of such provision or preclude any other or further exercise of such provision. No waiver by a Holder of any one or more defaults by the Company in the performance of any of the provisions of this Agreement or any related agreement shall operate or be construed as a waiver of any future default, whether of a like or different nature, and each such waiver shall be limited solely to the express terms and provisions of such waiver.

               (d) Notices, etc. Each notice, demand, request, request for approval, consent, approval, disapproval, designation or other communication (each of the foregoing being referred to herein as a notice) required or desired to be given or made under this Agreement shall be given in writing and shall be deemed effectively given (a) upon personal delivery to the party to be notified, (b) on the third business day after deposit with the United States Post Office, by registered or certified mail, postage prepaid, (c) on the next business day after dispatch via the overnight services of a nationally recognized overnight courier or (d) upon confirmation of transmission by facsimile, all addressed to the party to be notified at the address indicated for such party below, or at such other address as such party may designate by ten (10) business days’ advance written notice to the other parties. Any notice or other communication required to be given hereunder to a Holder in connection with a registration may instead be given to the designated representative of such Holder. Notices should be provided in accordance with this Section at the following addresses:

12

If to the Investor, to:

Security Capital Preferred Growth Incorporated
1 Bank One Plaza
10 S. Dearborn St., Suite 1400
Chicago, Illinois 60603
Attn: David Rosenbaum
Facsimile: (312) 385-8333

And

Security Capital Preferred Growth Incorporated
1 Bank One Plaza
10 S. Dearborn St., Suite 1400
Chicago, Illinois 60603
Attn: Corporate Secretary
Facsimile: (312) 385-8333

with a copy to:

Mayer, Brown, Rowe & Maw LLP
190 South LaSalle Street
Chicago, Illinois 60603
Attn: Edward J. Schneidman, Esq.
Facsimile: (312) 701-7711

If to the Company, to:

Ashford Hospitality Trust, Inc.
14185 Dallas Parkway, Suite 1100
Dallas, TX 75254
Attention: David A. Brooks
Facsimile: (972) 490-9605

with a copy to:

David Barbour, Esq.
Andrews Kurth LLP
1717 Main Street, Suite 3700
Dallas, TX 75201
Facsimile: (214) 659-4401

If to any assignee or transferee of the Investor, at such address or fax number as such assignee or transferee shall have furnished to the Company in writing.

               (e) Counterparts. This Agreement may be executed in any number of counterparts, each of which may be executed by fewer than all of the parties hereto (provided that each party executes one or more counterparts), each of which shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument.

13

               (f) Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof, and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

               (g) Section Titles. Section titles are for descriptive purposes only and shall not control or alter the meaning of this Agreement as set forth in the text.

               (h) Successors and Assigns. This Agreement shall be binding upon the parties hereto and their respective successors and assigns.

               (i) Remedies. Except as expressly provided to the contrary in this Agreement, the rights, obligations and remedies created by this Agreement are cumulative and in addition to any other rights, obligations, or remedies otherwise available under applicable law or in equity, including without limitation, specific performance and injunctive relief. Except as expressly provided herein, nothing herein shall be considered an election of remedies.

               (j) Attorneys’ Fees. If the Company or any Holder brings an action to enforce its rights under this Agreement, the prevailing party in the action shall be entitled to recover its costs and expenses, including, without limitation, reasonable attorneys’ fees, incurred in connection with such action, including any appeal of such action.

               (k) Rules of Construction. The following rules shall apply to the construction and interpretation of this Agreement:

     (i) Singular words shall connote the plural number as well as the singular and vice versa, and the masculine shall include the feminine and the neuter.

     (ii) All references in this Agreement to particular articles, sections, subsections, clauses or exhibits are references to articles, sections, subsections, clauses or exhibits of this Agreement.

     (iii) The headings contained in this Agreement are solely for convenience of reference and shall not constitute a part of this Agreement nor shall they affect its meaning, construction or effect.

     (iv) Any reference to a party shall include a reference to such party’s successors and permitted assigns.

     (v) Each party hereto and its counsel have reviewed and revised (or requested revisions of) this Agreement and have participated in the preparation of this Agreement, and therefore any usual rules of construction requiring that ambiguities are to be resolved against a particular party shall not be applicable in the construction and interpretation of this Agreement or any exhibits to this Agreement.

     (vi) The word “will” means “shall,” and the word “shall” means “will.”

14

               (l) Signatory Exculpation. The signatories for the Company and the Investor are executing this Agreement in their capacity as representatives of the Company and the Investor, respectively, and not individually and, therefore, shall have no personal or individual liability of any kind in connection with this Agreement or the transactions contemplated hereby.

[signature page follows]

15

               IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

ASHFORD HOSPITALITY TRUST, INC.
By:	/s/ David A. Brooks
	David A. Brooks
	Chief Legal Officer
SECURITY CAPITAL PREFERRED GROWTH INCORPORATED
By:	/s/ David E. Rosenbaum
	David E. Rosenbaum
	Senior Vice President

16

EX-10.25.4.3

Exhibit 10.25.4.3

Ashford
(Floating Rate Pool)

ASHFORD ATLANTIC BEACH LP,

as Borrower

to

WACHOVIA BANK, NATIONAL ASSOCIATION,

as Lender

MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF RENTS
AND FIXTURE FILING

Dated: April 11, 2007

PREPARED BY AND UPON RECORDATION RETURN TO:

Proskauer Rose llp
1585 Broadway
New York, New York 10036

Attention: David J. Weinberger, Esq.

NOTICE TO RECORDER: This instrument is additional collateral for a promissory note executed and delivered outside the State of Florida which is secured by mortgaged property both inside and outside the State of Florida. Documentary stamp tax and nonrecurring intangible tax is paid on the Florida mortgagee of even date recorded contemporaneously herewith in the Public Records of Miami-Dade County, Florida which mortgage contains the required additional information regarding the amount of documentary stamp tax and nonrecurring intangible tax paid.

     THIS MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF RENTS AND FIXTURE FILING (the “Security Instrument”) is made as of the 11th day of April, 2007, by the party set forth as Borrower on the signature page hereof, having their chief executive office at 14185 Dallas Parkway, Suite 1100, Dallas, Texas 75254-4308 (hereinafter referred to as “Borrower”), to WACHOVIA BANK, NATIONAL ASSOCIATION, having an address at Wachovia Bank, National Association, Commercial Real Estate Services, 8739 Research Drive URP 4, NC 1075, Charlotte, North Carolina 28262 (hereinafter referred to as “Lender”).

W I T N E S S E T H:

     WHEREAS, Lender has authorized a loan (hereinafter referred to as the “Loan”) to the Cross-collateralized Borrowers in the maximum principal sum of THREE HUNDRED FIFTEEN MILLION and NO/100 DOLLARS ($315,000,000.00) (hereinafter referred to as the “Loan Amount”), which Loan is evidenced by that certain promissory note, dated the date hereof (together with any supplements, amendments, modifications or extensions thereof, hereinafter referred to as the “Note”) given by the Cross-collateralized Borrowers, as maker, to Lender, as payee;

     WHEREAS, in consideration of the Loan, the Cross-collateralized Borrowers have agreed to make payments in amounts sufficient to pay and redeem, and provide for the payment and redemption of the principal of, premium, if any, and interest on the Note when due;

     WHEREAS, Borrower desires by this Security Instrument to provide for, among other things, the issuance of the Note and for the deposit, deed and pledge by Borrower with, and the creation of a security interest in favor of, Lender, as security for the Cross-collateralized Borrowers’ obligations to Lender from time to time pursuant to the Note and the other Loan Documents;

     WHEREAS, Borrower and Lender intend these recitals to be a material part of this Security Instrument; and

     WHEREAS, all things necessary to make this Security Instrument the valid and legally binding obligation of Borrower in accordance with its terms, for the uses and purposes herein set forth, have been done and performed.

     NOW THEREFORE, to secure the payment of the principal of, prepayment premium (if any) and interest on the Note and all other obligations, liabilities or sums due or to become due under this Security Instrument, the Note or any other Loan Documents, including, without limitation, interest on said obligations, liabilities or sums (said principal, premium, interest and other sums being hereinafter referred to as the “Debt”), and the performance of all other covenants, obligations and liabilities of the Cross-collateralized Borrowers pursuant to the Loan Documents, Borrower has executed and delivered this Security Instrument; and Borrower has irrevocably granted, and by these presents and by the execution and delivery hereof does hereby irrevocably grant, bargain, sell, alien, demise, release, convey, assign, transfer, deed, hypothecate, pledge, set over, warrant, mortgage and confirm to Lender, forever with power of sale, all right, title and interest of Borrower in and to all of the following property, rights, interests and estates:

     (a) the plot(s), piece(s) or parcel(s) of real property described in Exhibit A attached hereto and made a part hereof (individually and collectively, hereinafter referred to as the “Premises”);

     (b) (i) all buildings, foundations, structures, fixtures, additions, enlargements, extensions, modifications, repairs, replacements and improvements of every kind or nature now or hereafter located on the Premises (hereinafter collectively referred to as the “Improvements”); and (ii) to the extent permitted by law and the Management Agreement, the Franchise Agreement, the name or names, if any, as may now or hereafter be used for any of the Improvements, and the goodwill associated therewith;

     (c) all easements, servitudes, rights-of-way, strips and gores of land, streets, ways, alleys, passages, sewer rights, water, water courses, water rights and powers, ditches, ditch rights, reservoirs and reservoir rights, air rights and development rights, lateral support, drainage, gas, oil and mineral rights, tenements, hereditaments and

appurtenances of any nature whatsoever, in any way belonging, relating or pertaining to the Premises or the Improvements and the reversion and reversions, remainder and remainders, whether existing or hereafter acquired, and all land lying in the bed of any street, road or avenue, opened or proposed, in front of or adjoining the Premises to the center line thereof and any and all sidewalks, drives, curbs, passageways, streets, spaces and alleys adjacent to or used in connection with the Premises and/or Improvements and all the estates, rights, titles, interests, property, possession, claim and demand whatsoever, both in law and in equity, of Borrower of, in and to the Premises and Improvements and every part and parcel thereof, with the appurtenances thereto;

     (d) all machinery, equipment, systems, fittings, apparatus, appliances, furniture, furnishings, tools, fixtures, Inventory (as hereinafter defined) and articles of personal property and accessions thereof and renewals, replacements thereof and substitutions therefor (including, but not limited to, all plumbing, lighting and elevator fixtures, office furniture, beds, bureaus, chiffonniers, chests, chairs, desks, lamps, mirrors, bookcases, tables, rugs, carpeting, drapes, draperies, curtains, shades, venetian blinds, wall coverings, screens, paintings, hangings, pictures, divans, couches, luggage carts, luggage racks, stools, sofas, chinaware, flatware, linens, pillows, blankets, glassware, foodcarts, cookware, dry cleaning facilities, dining room wagons, keys or other entry systems, bars, bar fixtures, liquor and other drink dispensers, icemakers, radios, television sets, intercom and paging equipment, electric and electronic equipment, dictating equipment, telephone systems, computerized accounting systems, engineering equipment, vehicles, medical equipment, potted plants, heating, lighting and plumbing fixtures, fire prevention and extinguishing apparatus, theft prevention equipment, cooling and air-conditioning systems, elevators, escalators, fittings, plants, apparatus, stoves, ranges, refrigerators, laundry machines, tools, machinery, engines, dynamos, motors, boilers, incinerators, switchboards, conduits, compressors, vacuum cleaning systems, floor cleaning, waxing and polishing equipment, call systems, brackets, signs, bulbs, bells, ash and fuel, conveyors, cabinets, lockers, shelving, spotlighting equipment, dishwashers, garbage disposals, washers and dryers), other customary hotel equipment, inventory and other property of every kind and nature whatsoever owned by Borrower, or in which Borrower has or shall have an interest, now or hereafter located upon, or in, or used in connection with the Premises or the Improvements, or appurtenant thereto, and all building equipment, materials and supplies of any nature whatsoever owned by Borrower, or in which Borrower has or shall have an interest, now or hereafter located upon, or in, or used in connection with the Premises or the Improvements or appurtenant thereto, (hereinafter, all of the foregoing items described in this paragraph (d) are collectively called the “Equipment”), all of which, and any replacements, modifications, alterations and additions thereto, to the extent permitted by applicable law, shall be deemed to constitute fixtures (the “Fixtures”), and are part of the real estate and security for the payment of the Debt and the performance of Borrower’s obligations. To the extent any portion of the Equipment is not real property or fixtures under applicable law, it shall be deemed to be personal property, and this Security Instrument shall constitute a security agreement creating a security interest therein in favor of Lender under the UCC;

     (e) all awards or payments, including interest thereon, which may hereafter be made with respect to the Premises, the Improvements, the Fixtures, or the Equipment, whether from the exercise of the right of eminent domain (including but not limited to any transfer made in lieu of or in anticipation of the exercise of said right), or for a change of grade, or for any other injury to or decrease in the value of the Premises, the Improvements or the Equipment or refunds with respect to the payment of property taxes and assessments, and all other proceeds of the conversion, voluntary or involuntary, of the Premises, Improvements, Equipment, Fixtures or any other Property or part thereof into cash or liquidated claims;

     (f) all leases, tenancies, franchises (to the extent not prohibited in the Franchise Agreement), licenses and permits, Property Agreements and other agreements affecting the use, enjoyment or occupancy of the Premises, the Improvements, the Fixtures, or the Equipment or any portion thereof now or hereafter entered into, whether before or after the filing by or against Borrower of any petition for relief under the Bankruptcy Code and all reciprocal easement agreements, license agreements and other agreements, including, without limitation the existing Operating Lease (hereinafter collectively referred to as the “Leases”), together with all receivables, revenues, rentals, credit card receipts, receipts and all payments received which relate to the rental, lease, franchise and use of space at the Premises and rental and use of guest rooms or meeting rooms or banquet rooms or recreational facilities or bars, beverage or food sales, vending machines, mini-bars, room service, telephone, video and television systems, electronic mail, internet connections, guest laundry, bars, the provision or sale of other goods and services, and all other payments received from guests or visitors of the Premises, and other items of revenue, receipts or income as

2

identified in the Uniform System of Accounts (as hereinafter defined), all cash or security deposits, lease termination payments, advance rentals and payments of similar nature and guarantees or other security held by, or issued in favor of, Borrower in connection therewith to the extent of Borrower’s right or interest therein and all remainders, reversions and other rights and estates appurtenant thereto, and all base, fixed, percentage or additional rents, and other rents, oil and gas or other mineral royalties, and bonuses, issues, profits and rebates and refunds or other payments made by any Governmental Authority from or relating to the Premises, the Improvements, the Fixtures or the Equipment plus all rents, common area charges and other payments now existing or hereafter arising, whether paid or accruing before or after the filing by or against Borrower of any petition for relief under the Bankruptcy Code (the “Rents”) and all proceeds from the sale or other disposition of the Leases and the right to receive and apply the Rents to the payment of the Debt;

     (g) all proceeds of and any unearned premiums on any insurance policies covering the Premises, the Improvements, the Fixtures, the Rents or the Equipment, including, without limitation, the right to receive and apply the proceeds of any insurance, judgments, or settlements made in lieu thereof, for damage to the Premises, the Improvements, the Fixtures or the Equipment and all refunds or rebates of Impositions, and interest paid or payable with respect thereto;

     (h) all deposit accounts, securities accounts, funds or other accounts maintained or deposited with Lender, or its assigns, in connection herewith, including, without limitation, the Escrow Accounts, the Central Account, the Collection Account, and the Sub-Accounts and all monies and investments deposited or to be deposited in such accounts;

     (i) all accounts receivable, contract rights, franchises (to the extent not prohibited in the Franchise Agreement), interests, estate or other claims, both at law and in equity, now existing or hereafter arising, and relating to the Premises, the Improvements, the Fixtures or the Equipment, not included in Rents;

     (j) all now existing or hereafter arising claims against any Person with respect to any damage to the Premises, the Improvements, the Fixtures or the Equipment, including, without limitation, damage arising from any defect in or with respect to the design or construction of the Improvements, the Fixtures or the Equipment and any damage resulting therefrom;

     (k) all deposits or other security or advance payments, including rental payments now or hereafter made by or on behalf of Borrower to others, with respect to (i) insurance policies, (ii) utility services, (iii) cleaning, maintenance, repair or similar services, (iv) refuse removal or sewer service, (v) parking or similar services or rights and (vi) rental of Equipment, if any, relating to or otherwise used in the operation of the Premises, the Improvements, the Fixtures or the Equipment;

     (l) all intangible property (to the extent assignable) now or hereafter relating to the Premises, the Improvements, the Fixtures or the Equipment or its operation, including, without limitation, software, letter of credit rights, trade names, trademarks (including, without limitation, any licenses of or agreements to license trade names or trademarks now or hereafter entered into by Borrower), logos, building names and goodwill;

     (m) all now existing or hereafter arising advertising material, guaranties, warranties, building permits, other permits, licenses, plans and specifications, shop and working drawings, soil tests, appraisals and other documents, materials and/or personal property of any kind now or hereafter existing in or relating to the Premises, the Improvements, the Fixtures, and the Equipment;

     (n) all now existing or hereafter arising drawings, designs, plans and specifications prepared by architects, engineers, interior designers, landscape designers and any other consultants or professionals for the design, development, construction, repair and/or improvement of the Property, as amended from time to time;

     (o) the right, in the name of and on behalf of Borrower, to appear in and defend any now existing or hereafter arising action or proceeding brought with respect to the Premises, the Improvements, the Fixtures or the

3

Equipment and to commence any action or proceeding to protect the interest of Lender in the Premises, the Improvements, the Fixtures or the Equipment;

     (p) in the event Borrower is a tenancy-in-common, all rights of TICs under the TIC Agreement including, without limitation, any rights of first refusal, options to purchase and similar rights and any rights of first refusal arising under Section 363(i) of the Bankruptcy Code; and

     (q) all proceeds, products, substitutions and accessions (including claims and demands therefor) of each of the foregoing.

     All of the foregoing items (a) through (q), together with all of the right, title and interest of Borrower therein, are collectively referred to as the “Property”.

     TO HAVE AND TO HOLD the above granted and described Property unto Lender, and the successors and assigns of Lender in fee simple, forever.

     PROVIDED, ALWAYS, and these presents are upon this express condition, if Borrower shall well and truly pay and discharge the Debt and perform and observe the terms, covenants and conditions set forth in the Loan Documents, then these presents and the estate hereby granted shall cease and be void.

     AND Borrower covenants with and warrants to Lender that:

ARTICLE I: DEFINITIONS

     Section 1.01. Certain Definitions.

     For all purposes of this Security Instrument, except as otherwise expressly provided or unless the context clearly indicates a contrary intent:

     (i) the capitalized terms defined in this Section have the meanings assigned to them in this Section, and include the plural as well as the singular;

     (ii) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP; and

     (iii) the words “herein”, “hereof”, and “hereunder” and other words of similar import refer to this Security Instrument as a whole and not to any particular Section or other subdivision.

     “Adjusted Net Cash Flow” shall mean Net Operating Income for the twelve (12)-month period prior to the date of calculation less, without duplication, (a) the Recurring Replacement Reserve Monthly Installment (assuming for purposes of this definition that the definition of Recurring Replacement Reserve Monthly Installment only includes the first sentence thereof) multiplied by twelve (12) and (b) extraordinary capital improvements projected by Lender, in its reasonable discretion, for the subsequent twelve (12) month period for which sums were not deposited into the Recurring Replacement Reserve Escrow Account. The Adjusted Net Cash Flow shall be calculated by Borrower and shall be subject to the reasonable review and approval of Lender.

     “Affiliate” of any specified Person shall mean any other Person directly or indirectly Controlling or Controlled by or under direct or indirect common Control with such specified Person.

     “Aggregate Debt Service Coverage” shall mean the quotient obtained by dividing the aggregate Adjusted Net Cash Flow for all of the Cross-collateralized Properties for a specified period by the sum of the (a) aggregate payments of interest, principal and all other sums due under the Note for such specified period (determined as of the date the calculation of Aggregate Debt Service Coverage is required or requested hereunder) and (b) aggregate payments of interest, principal and all other sums due for such specified period pursuant to the terms of subordinate

4

or mezzanine financing, if any, then affecting or related to the Cross-collateralized Properties or, if Aggregate Debt Service Coverage is being calculated in connection with a request for consent to any subordinate financing, then proposed. In determining Aggregate Debt Service Coverage, the applicable interest rate for the Loan and for any floating rate loan referred to in clause (b) above, if any, shall be the greater of (1) the LIBOR Margin, with respect to the Loan, and the applicable margin over the applicable index, with respect to any other loan referred to in clause (b) above, plus the then current LIBOR Rate, with respect to the Loan, or the then current applicable index rate, with respect to any other loan described in clause (b) above (but in no event more than the strike price set forth in the Rate Cap Agreement or any similar agreement applicable to any loan referred to in clause (b) above), and (2) 7.65%.

     “Allocated Loan Amount” shall mean the Initial Allocated Loan Amount of each Cross-collateralized Property as such amount may be adjusted from time to time as hereinafter set forth. Upon each adjustment of the Principal Amount (each a “Total Adjustment”), whether as a result of amortization or prepayment or as otherwise expressly provided herein or in any other Loan Document, each Allocated Loan Amount shall be increased or decreased, as the case may be, by an amount equal to the product of (a) the Total Adjustment, and (b) a fraction, the numerator of which is the applicable Allocated Loan Amount (prior to the adjustment in question) and the denominator of which is the Principal Amount prior to the adjustment to the Principal Amount which results in the recalculation of the Allocated Loan Amount. However, when the Principal Amount is reduced as a result of Lender’s receipt of (a) a Release Price or, in connection with a Release, funds sufficient to prepay a portion of the Principal Amount in the amount of the Release Price, the Allocated Loan Amount for the Cross-collateralized Property being released and discharged from the encumbrance of the applicable Cross-collateralized Mortgage and related Loan Documents shall be reduced to zero (the amount by which such Allocated Loan Amount is reduced being referred to as the “Released Allocated Amount”), and each other Allocated Loan Amount shall be decreased by an amount equal to the product of (i) the excess of (A) the Release Price over (B) the Released Allocated Amount and (ii) a fraction, the numerator of which is the applicable Allocated Loan Amount (prior to the adjustment in question) and the denominator of which is the aggregate of all of the Allocated Loan Amounts other than the Allocated Loan Amount applicable to the Cross-collateralized Property for which the Release Price was paid, or (b) Net Proceeds, the Allocated Loan Amount for the Cross-collateralized Property with respect to which the Net Proceeds were received shall be reduced to zero (the amount by which such Allocated Loan Amount is reduced being referred to as the “Foreclosed Allocated Amount”) and each other Allocated Loan Amount shall (A) if the Net Proceeds exceed the Foreclosed Allocated Amount (such excess being referred to as the “Surplus Net Proceeds”), be decreased by an amount equal to the product of (i) the Surplus Net Proceeds and (ii) a fraction, the numerator of which is the applicable Allocated Loan Amount (prior to the adjustment in question) and the denominator of which is the aggregate of all of the Allocated Loan Amounts (prior to the adjustment in question) other than the Allocated Loan Amount applicable to the Cross-collateralized Property with respect to which the Net Proceeds were received (such fraction being referred to as the “Net Proceeds Adjustment Fraction”), (B) if the Foreclosed Allocated Amount exceeds the Net Proceeds (such excess being referred to as the “Net Proceeds Deficiency”), be increased by an amount equal to the product of (i) the Net Proceeds Deficiency and (ii) the Net Proceeds Adjustment Fraction, or (C) if the Net Proceeds equal the Foreclosed Allocated Amount, remain unadjusted, or (c) Loss Proceeds or partial prepayments made in accordance with Section 15.01 hereof, the Allocated Loan Amount for the Cross-collateralized Property with respect to which the Loss Proceeds or partial prepayments were received shall be decreased by an amount equal to the sum of (i) with respect to Loss Proceeds, Loss Proceeds which are applied towards the reduction of the Principal Amount as set forth in Article III hereof, if any, and (ii) with respect to partial prepayments the amount of any such partial prepayment which is applied towards the reduction of the Principal Amount in accordance with the provisions of the Note, if any, but in no event shall the Allocated Loan Amount for the Cross-collateralized Property with respect to which the Loss Proceeds or partial prepayments were received be reduced to an amount less than zero (the amount by which such Allocated Loan Amount is reduced being referred to as the “Loss Proceeds or Prepayment Allocated Amount”) and each other Allocated Loan Amount shall be decreased by an amount equal to the product of (i) the excess of (A) the Loss Proceeds or such partial prepayments over (B) the Loss Proceeds or Prepayment Allocated Amount, and (ii) a fraction, the numerator of which is the applicable Allocated Loan Amount (prior to the adjustment in question) and the denominator of which is the aggregate of all of the Allocated Loan Amounts (prior to the adjustment in question) other than the Allocated Loan Amount applicable to the Cross-collateralized Property to which such Loss Proceeds or partial prepayments were applied.

     “Annual Budget” shall mean an annual budget submitted by Borrower to Lender in accordance with the terms of Section 2.09 hereof.

5

     “Appraisal” shall mean the appraisal of the Property and all supplemental reports or updates thereto previously delivered to Lender in connection with the Loan.

     “Appraiser” shall mean the Person who prepared the Appraisal.

     “Approved Annual Budget” shall mean each Annual Budget approved by Lender in accordance with the terms hereof.

     “Approved Franchisor” shall mean the Franchisors listed on Exhibit F attached hereto and made a part hereof and any flag operated thereby.

     “Approved Letter of Credit” shall mean an irrevocable, unconditional, transferable, clean sight draft letter of credit in favor of Lender and its successors and/or assigns, the obligation to reimburse draws made in connection with which are those of a Person other than Borrower, with a term of not less than one (1) year and which is drawable in whole or in part by sight draft in New York City, issued by a bank having a long-term unsecured debt rating of not less than “AA” (or its equivalent) and a short-term unsecured debt rating of not less than “A-1” (or its equivalent) by each Rating Agency and otherwise reasonably acceptable to Lender.

     “Approved Manager” shall mean (a) the Manager as of the Closing Date or (b) the property managers listed on Exhibit F attached hereto and made a part hereof (or an Affiliate 51% or more of the legal and beneficial interest of which is owned by the managers listed on Exhibit F attached hereto), provided that each such property manager continues to be Controlled by substantially the same persons Controlling such property manager as of the Closing Date (or if such manager is a publicly traded company, such manager continues to be traded on a national stock exchange or quoted on the NASDAQ Stock Market) and such additional management companies as are reasonably approved by Lender, which approval may, subsequent to a Securitization, be conditioned upon, among other things, confirmation from each Rating Agency that any rating issued by the Rating Agency in connection with a Securitization will not, as a result of the proposed change of Manager, be downgraded from the current ratings thereof, qualified or withdrawn.

     “Approved Manager Standard” shall mean the standard of business operations, practices and procedures customarily employed by entities having a senior executive with at least seven (7) years’ experience in the management of hotels of the same class and quality (as of the Closing Date) as the Improvements which manage not less than five (5) such hotel properties having an aggregate number of hotel rooms of not less than five thousand (5,000) hotel rooms.

     “Architect” shall have the meaning set forth in Section 3.04(b)(i) hereof.

     “Assignment” shall mean the Assignment of Leases and Rents and Security Deposits of even date herewith relating to the Property given by Borrower to Lender, as the same may be modified, amended or supplemented from time to time.

     “Bank” shall mean the bank, trust company, savings and loan association or savings bank designated by Lender, in its sole and absolute discretion, in which the Central Account shall be located.

     “Bankruptcy Code” shall mean 11 U.S.C. §101 et seq., as amended from time to time.

     “Basic Carrying Costs” shall mean the sum of the following costs associated with the Property: (a) Real Estate Taxes and (b) insurance premiums.

     “Basic Carrying Costs Escrow Account” shall mean the Escrow Account maintained pursuant to Section 5.06 hereof.

     “Basic Carrying Costs Monthly Installment” shall mean Lender’s estimate of one-twelfth (1/12th) of the annual amount for Basic Carrying Costs. “Basic Carrying Costs Monthly Installment” shall also include, if required by Lender, a sum of money which, together with such monthly installments, will be sufficient to make the payment

6

of each such Basic Carrying Cost at least thirty (30) days prior to the date initially due. Should such Basic Carrying Costs not be ascertainable at the time any monthly deposit is required to be made, the Basic Carrying Costs Monthly Installment shall be determined by Lender in its reasonable discretion on the basis of the aggregate Basic Carrying Costs for the prior Fiscal Year or month or the prior payment period for such cost. As soon as the Basic Carrying Costs are fixed for the then current Fiscal Year, month or period, the next ensuing Basic Carrying Costs Monthly Installment shall be adjusted to reflect any deficiency or surplus in prior monthly payments. If at any time during the term of the Loan Lender determines that there will be insufficient funds in the Basic Carrying Costs Escrow Account to make payments when they become due and payable, Lender shall have the right to adjust the Basic Carrying Costs Monthly Installment such that there will be sufficient funds to make such payments. Notwithstanding the foregoing, provided that no Event of Default exists, if Borrower is depositing a sum with Manager on a monthly basis pursuant to the Management Agreement to be used for the payment of Basic Carrying Costs, such sums are controlled by Manager, and Borrower shall have delivered, or caused to be delivered to Lender proof that the Basic Carrying Costs with respect to which Manager is receiving deposits are paid not less than five (5) Business Days prior to the date upon which any fine, penalty, interest or cost for nonpayment is imposed, the Basic Carrying Costs Monthly Installment shall be reduced by the amount of Basic Carrying Costs which are deposited with Manager.

     “Basic Carrying Costs Sub-Account” shall mean the Sub-Account of the Central Account established pursuant to Section 5.02 into which the Basic Carrying Costs Monthly Installments shall be deposited.

     “Borrower” shall mean Borrower named herein and any successor to the obligations of Borrower.

     “Business Day” shall mean any day other than (a) a Saturday or Sunday, or (b) a day on which banking and savings and loan institutions in the State of New York or the State of North Carolina are authorized or obligated by law or executive order to be closed, or at any time during which the Loan is an asset of a Securitization, the cities, states and/or commonwealths used in the comparable definition of “Business Day” in the Securitization documents.

     “Capital Expenditures” shall mean for any period, the amount expended for items capitalized under GAAP including expenditures for building improvements or major repairs, leasing commissions and tenant improvements.

     “Cash Expenses” shall mean for any period, the operating expenses (excluding Capital Expenditures) for the Property as set forth in an Approved Annual Budget to the extent that such expenses are actually incurred by Borrower minus payments into the Basic Carrying Costs Sub-Account, the Debt Service Payment Sub-Account and the Recurring Replacement Reserve Sub-Account (to the extent such sums are for the payment of sums set forth as operating expenses in the Approved Annual Budget).

     “Central Account” shall mean an Eligible Account, maintained at the Bank, in the name of Lender or its successors or assigns (as secured party) as may be designated by Lender.

     “Closing Date” shall mean the date of the Note.

     “Code” shall mean the Internal Revenue Code of 1986, as amended and as it may be further amended from time to time, any successor statutes thereto, and applicable U.S. Department of Treasury regulations issued pursuant thereto.

     “Collection Account” shall mean one or more Eligible Accounts maintained in a bank acceptable to Lender in the joint names of Borrower and Lender or such other name as Lender may designate in writing.

     “Condemnation Proceeds” shall mean all of the proceeds in respect of any Taking or purchase in lieu thereof.

     “Contractual Obligation” shall mean, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or undertaking to which such Person is a party or by which it or any of the property owned by it is bound.

7

     “Control” means, when used with respect to any specific Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person whether through ownership of voting securities, beneficial interests, by contract or otherwise. The definition is to be construed to apply equally to variations of the word “Control” including “Controlled,” “Controlling” or “Controlled by.”

     “CPI” shall mean “The Consumer Price Index (New Series) (Base Period 1982-84=100) (all items for all urban consumers)” issued by the Bureau of Labor Statistics of the United States Department of Labor (the “Bureau”). If the CPI ceases to use the 1982-84 average equaling 100 as the basis of calculation, or if a change is made in the term, components or number of items contained in said index, or if the index is altered, modified, converted or revised in any other way, then the index shall be adjusted to the figure that would have been arrived at had the change in the manner of computing the index in effect at the date of this Security Instrument not been made. If at any time during the term of this Security Instrument the CPI shall no longer be published by the Bureau, then any comparable index issued by the Bureau or similar agency of the United States issuing similar indices shall be used in lieu of the CPI.

     “Cross-collateralization Agreement” shall mean that certain Cross-collateralization Agreement of even date herewith between Borrower, the other Cross-collateralized Borrowers and Lender.

     “Cross-collateralized Borrowers” shall mean each Person which has executed the Note.

     “Cross-collateralized Mortgage” shall mean each mortgage, deed of trust, deed to secure debt, security agreement, assignment of rents and fixture filing as originally executed or as same may hereafter from time to time be supplemented, amended, modified or extended by one or more indentures supplemental thereto granted by a Cross-collateralized Borrower to Lender as security for the Note.

     “Cross-collateralized Property” shall mean each parcel or parcels of real property encumbered by a Cross-collateralized Mortgage as identified on Exhibit C attached hereto and made a part hereof; provided, however, at such time, if any, that a Cross-collateralized Mortgage is released by Lender, the property which was encumbered by such Cross-collateralized Property shall no longer constitute a Cross-collateralized Property.

     “Curtailment Reserve Escrow Account” shall mean the Escrow Account maintained pursuant to Section 5.11 hereof into which sums shall be deposited during an O&M Operative Period.

     “Curtailment Reserve Sub-Account” shall mean the Sub-Account of the Central Account established pursuant to Section 5.02 hereof into which excess cash flow shall be deposited pursuant to Section 5.05.

     “Debt” shall have the meaning set forth in the Recitals hereto.

     “Debt Service” shall mean the amount of interest and principal payments due and payable in accordance with the Note during an applicable period.

     “Debt Service Coverage” shall mean the quotient obtained by dividing Adjusted Net Cash Flow by the sum of the (a) aggregate payments of interest, principal and all other sums due for such specified period which are allocable to a principal portion of the Note equal to the Allocated Loan Amount (determined as of the date the calculation of Debt Service Coverage is required or requested hereunder) and (b) aggregate payments of interest, principal and all other sums due for such specified period pursuant to the terms of subordinate or mezzanine financing (to the extent allocable to the Property, as determined by Lender in its reasonable discretion or with respect to the Mez Loan, allocated based upon the allocated loan amount set forth in the documents evidencing the Mez Loan), if any, then affecting or related to the Property or, if Debt Service Coverage is being calculated in connection with a request for consent to any subordinate or mezzanine financing, then proposed. In determining Debt Service Coverage, the applicable interest rate for the Loan and for any floating rate loan referred to in clause (b) above, if any, shall be the greater of (1) the LIBOR Margin, with respect to the Loan, and the applicable margin over the applicable index, with respect to any other loan referred to in clause (b) above, plus the then current LIBOR Rate, with respect to the Loan, or the then current applicable index rate, with respect to any other loan described in

8

clause (b) above (but in no event more than the strike price set forth in the Rate Cap Agreement or any similar agreement applicable to any loan referred to in clause (b) above), and (2) 7.65%.

     “Debt Service Payment Sub-Account” shall mean the Sub-Account of the Central Account established pursuant to Section 5.02 hereof into which the Required Debt Service Payment shall be deposited.

     “Debt Yield” shall mean Adjusted Net Cash Flow for all of the Cross-collateralized Properties divided by the sum of (a) the unpaid Principal Amount and (b) the outstanding principal balance of any subordinate or mezzanine financing including, without limitation, the Mez Loan then affecting or related to the Property or any interest therein (determined as of the date of the calculation of Debt Yield).

     “Default” shall mean any Event of Default or event which would constitute an Event of Default if all requirements in connection therewith for the giving of notice, the lapse of time, and the happening of any further condition, event or act, had been satisfied.

     “Default Management Period” shall mean any period of time during the term hereof when the Property is not being managed by an Approved Manager pursuant to the terms hereof.

     “Default Rate” shall mean the lesser of (a) the highest rate allowable at law and (b) five percent (5%) above the interest rate set forth in the Note.

     “Default Rate Interest” shall mean, to the extent the Default Rate becomes applicable, interest in excess of the interest which would have accrued on (a) the Principal Amount and (b) any accrued but unpaid interest, if the Default Rate was not applicable.

     “Development Laws” shall mean all applicable subdivision, zoning, environmental protection, wetlands protection, or land use laws or ordinances, and any and all applicable rules and regulations of any Governmental Authority promulgated thereunder or related thereto.

     “Disclosure Document” shall mean a prospectus, prospectus supplement, private placement memorandum, or similar offering memorandum or offering circular, in each case in preliminary or final form, used to offer securities in connection with a Securitization.

     “Dollar” and the sign “$” shall mean lawful money of the United States of America.

     “Eligible Account” shall mean a segregated account which is either (a) an account or accounts maintained with a federal or state chartered depository institution or trust company the long term unsecured debt obligations of which are rated by each of the Rating Agencies (or, if not rated by Fitch, Inc. (“Fitch”), otherwise acceptable to Fitch, as confirmed in writing that such account would not, in and of itself, result in a downgrade, qualification or withdrawal of the then current ratings assigned to any certificates issued in connection with a Securitization) in its second highest rating category at all times (or, in the case of the Basic Carrying Costs Escrow Account, the long term unsecured debt obligations of which are rated at least “AA” (or its equivalent)) by each of the Rating Agencies (or, if not rated by Fitch, otherwise acceptable to Fitch, as confirmed in writing that such account would not, in and of itself, result in a downgrade, qualification or withdrawal of the then current ratings assigned to any certificates issued in connection with a Securitization) or, if the funds in such account are to be held in such account for less than thirty (30) days, the short term obligations of which are rated by each of the Rating Agencies (or, if not rated by Fitch, otherwise acceptable to Fitch, as confirmed in writing that such account would not, in and of itself, result in a downgrade, qualification or withdrawal of the then current ratings assigned to any certificates issued in connection with a Securitization) in its second highest rating category at all times or (b) a segregated trust account or accounts maintained with a federal or state chartered depository institution or trust company acting in its fiduciary capacity which, in the case of a state chartered depository institution is subject to regulations substantially similar to 12 C.F.R. § 9.10(b), having in either case a combined capital and surplus of at least $100,000,000 and subject to supervision or examination by federal and state authority, or otherwise acceptable (as evidenced by a written confirmation from each Rating Agency that such account would not, in and of itself, cause a downgrade, qualification or withdrawal of the then current ratings assigned to any certificates issued in connection with a

9

Securitization) to each Rating Agency, which may be an account maintained by Lender or its agents. Eligible Accounts may bear interest. The title of each Eligible Account shall indicate that the funds held therein are held in trust for the uses and purposes set forth herein.

     “Engineer” shall have the meaning set forth in Section 3.04(b)(i) hereof.

     “Engineering Escrow Account” shall mean an Escrow Account established and maintained pursuant to Section 5.12 hereof relating to payments for any Required Engineering Work.

     “Environmental Problem” shall mean any of the following:

     (a) the presence of any Hazardous Material on, in, under, or above all or any portion of the Property in violation of any Environmental Statute;

     (b) the release of any Hazardous Material from or onto the Property to the extent such release is required to be reported pursuant to Environmental Statutes;

     (c) the violation or threatened violation of any Environmental Statute with respect to the Property; or

     (d) the failure to obtain or to abide by the terms or conditions of any permit or approval required under any Environmental Statute with respect to the Property.

A condition described above shall be an Environmental Problem regardless of whether or not any Governmental Authority has taken any action in connection with the condition and regardless of whether that condition was in existence on or before the date hereof.

     “Environmental Report” shall mean the environmental audit report for the Property and any supplements or updates thereto, previously delivered to Lender in connection with the Loan.

     “Environmental Statute” shall mean any federal, state or local statute, ordinance, rule or regulation, any judicial or administrative order (whether or not on consent) or judgment applicable to Borrower or the Property including, without limitation, any judgment or settlement based on common law theories, and any provisions or conditions of any permit, license or other authorization binding on Borrower relating to (a) the protection of the environment, the safety and health of persons (including employees) or the public welfare from actual or potential exposure (or effects of exposure) to any actual or potential release, discharge, disposal or emission (whether past or present) of any Hazardous Materials or (b) the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of any Hazardous Materials, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”), as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §9601 et seq., the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976, as amended by the Solid and Hazardous Waste Amendments of 1984, 42 U.S.C. §6901 et seq., the Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C. §1251 et seq., the Toxic Substances Control Act of 1976, 15 U.S.C. §2601 et seq., the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. §1101 et seq., the Clean Air Act of 1966, as amended, 42 U.S.C. §7401 et seq., the National Environmental Policy Act of 1975, 42 U.S.C. §4321, the Rivers and Harbors Act of 1899, 33 U.S.C. §401 et seq., the Endangered Species Act of 1973, as amended, 16 U.S.C. §1531 et seq., the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. §651 et seq., and the Safe Drinking Water Act of 1974, as amended, 42 U.S.C. §300(f) et seq., and all rules, regulations and guidance documents promulgated or published thereunder.

     “Equipment” shall have the meaning set forth in granting clause (d) of this Security Instrument.

     “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated thereunder. Section references to ERISA are to ERISA, as in effect at the

10

date of this Security Instrument and, as of the relevant date, any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor.

     “ERISA Affiliate” shall mean any corporation or trade or business that is a member of any group of organizations (a) described in Section 414(b) or (c) of the Code of which Borrower or Guarantor is a member and (b) solely for purposes of potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of the Code and the lien created under Section 302(f) of ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of which Borrower or Guarantor is a member.

     “Escrow Account” shall mean each of the Engineering Escrow Account, the Basic Carrying Costs Escrow Account, the Recurring Replacement Reserve Escrow Account, the Mez Payment Escrow Account, the Operation and Maintenance Expense Escrow Account and the Curtailment Reserve Escrow Account, each of which shall be an Eligible Account or book entry sub-account of an Eligible Account.

     “Event of Default” shall have the meaning set forth in Section 13.01 hereof.

     “Extraordinary Expense” shall mean an extraordinary operating expense or capital expense not set forth in the Approved Annual Budget or allotted for in the Recurring Replacement Reserve Sub-Account.

     “Fiscal Year” shall mean the twelve (12) month period commencing on January 1 and ending on December 31 during each year of the term of this Security Instrument, or such other fiscal year of Borrower as Borrower may select from time to time with the prior written consent of Lender.

     “Fixtures” shall have the meaning set forth in granting clause (d) of this Security Instrument.

     “Force Majeure” shall mean acts of god, governmental restrictions, stays, judgments, orders, decrees, enemy actions, civil commotion, fire, casualty, strikes or work stoppages which are industry-wide and not aimed at Borrower nor its Affiliates, or other causes beyond the reasonable control of Borrower and/or its Affiliates, but Borrower’s lack of funds in and of itself shall not be deemed a cause beyond the control of Borrower.

     “Franchise Agreement” shall mean any franchise or license agreement relating to the branding or operation of the Premises or any other agreement pursuant to which a franchise system, reservation system or brand affiliation is made available to the hotel operator of the Premises, together with all renewals and replacements thereof.

     “GAAP” shall mean generally accepted accounting principles in the United States of America, as of the date of the applicable financial report, consistently applied.

     “General Partner” shall mean, if Borrower or Operating Tenant is a partnership, each general partner of Borrower or Operating Tenant, as applicable, and, if Borrower or Operating Tenant is a limited liability company, each managing member, if any, of Borrower or Operating Tenant, as applicable, and in each case, if applicable, each general partner or managing member of such general partner or managing member. In the event that Borrower or Operating Tenant or any General Partner is a single member limited liability company with a managing member, the term “General Partner” shall include such single member.

     “Governmental Authority” shall mean, with respect to any Person, any federal or State government or other political subdivision thereof and any entity, including any regulatory or administrative authority or court, exercising executive, legislative, judicial, regulatory or administrative or quasi-administrative functions of or pertaining to government, and any arbitration board or tribunal, in each case having jurisdiction over such applicable Person or such Person’s property and any stock exchange on which shares of capital stock of such Person are listed or admitted for trading.

     “Guarantor” shall mean any Person guaranteeing, in whole or in part, the obligations of Borrower under the Loan Documents.

11

     “Hazardous Material” shall mean any flammable, explosive or radioactive materials, hazardous materials or wastes, hazardous or toxic substances, pollutants or related materials, asbestos or any material containing asbestos, molds, spores and fungus which may pose a risk to human health or the environment or any other substance or material as defined in or regulated by any Environmental Statutes.

     “Impositions” shall mean all taxes (including, without limitation, all real estate, ad valorem, sales (including those imposed on lease rentals), use, single business, gross receipts, value added, intangible, transaction, privilege or license or similar taxes), assessments (including, without limitation, all assessments for public improvements or benefits, whether or not commenced or completed prior to the date hereof and whether or not commenced or completed within the term of this Security Instrument), ground rents, water, sewer or other rents and charges, excises, levies, fees (including, without limitation, license, permit, inspection, authorization and similar fees), and all other governmental charges, in each case whether general or special, ordinary or extraordinary, or foreseen or unforeseen, of every character in respect of the Property and/or any Rent (including all interest and penalties thereon), which at any time prior to, during or in respect of the term hereof may be assessed or imposed on or in respect of or be a lien upon (a) Borrower (including, without limitation, all franchise, single business or other taxes imposed on Borrower for the privilege of doing business in the jurisdiction in which the Property or any other collateral delivered or pledged to Lender in connection with the Loan is located) or Lender, (b) the Property or any part thereof or any Rents therefrom or any estate, right, title or interest therein, or (c) any occupancy, operation, use or possession of, or sales from, or activity conducted on, or in connection with the Property, or any part thereof, or the leasing or use of the Property, or any part thereof, or the acquisition or financing of the acquisition of the Property, or any part thereof, by Borrower. Impositions shall not include any taxes imposed on Lender’s income and franchise taxes imposed on Lender by the law or regulation of any Governmental Authority.

     “Improvements” shall have the meaning set forth in granting clause (b) of this Security Instrument.

     “Indemnified Parties” shall have the meaning set forth in Section 12.01 hereof.

     “Independent” shall mean, when used with respect to any Person, a Person who (a) is in fact independent, (b) does not have any direct financial interest or any material indirect financial interest in Borrower, or in any Affiliate of Borrower or any constituent partner, shareholder, member or beneficiary of Borrower, (c) is not connected with Borrower or any Affiliate of Borrower or any constituent partner, shareholder, member or beneficiary of Borrower as an officer, employee, promoter, underwriter, trustee, partner, director or person performing similar functions and (d) is not a member of the immediate family of a Person defined in (b) or (c) above. Whenever it is herein provided that any Independent Person’s opinion or certificate shall be provided, such opinion or certificate shall state that the Person executing the same has read this definition and is Independent within the meaning hereof.

     “Initial Allocated Loan Amount” shall mean the portion of the Loan Amount allocated to each Cross-collateralized Property as set forth on Exhibit C annexed hereto and made a part hereof.

     “Initial Engineering Deposit” shall equal the amount set forth on Exhibit B attached hereto and made a part hereof.

     “Institutional Lender” shall mean any of the following Persons: (a) any bank, savings and loan association, savings institution, trust company or national banking association, acting for its own account or in a fiduciary capacity, (b) any charitable foundation, (c) any insurance company or pension and/or annuity company, (d) any fraternal benefit society, (e) any pension, retirement or profit sharing trust or fund within the meaning of Title I of ERISA or for which any bank, trust company, national banking association or investment adviser registered under the Investment Advisers Act of 1940, as amended, is acting as trustee or agent, (f) any investment company or business development company, as defined in the Investment Company Act of 1940, as amended, (g) any small business investment company licensed under the Small Business Investment Act of 1958, as amended, (h) any broker or dealer registered under the Securities Exchange Act of 1934, as amended, or any investment adviser registered under the Investment Adviser Act of 1940, as amended, (i) any government, any public employees’ pension or retirement system, or any other government agency supervising the investment of public funds, or (j) any other entity all of the equity owners of which are Institutional Lenders; provided that each of said

12

Persons shall have net assets in excess of $1,000,000,000 and a net worth in excess of $500,000,000, be in the business of making commercial mortgage loans, secured by properties of like type, size and value as the Property and have a long term credit rating which is not less than “BBB-” (or its equivalent) from each Rating Agency.

     “Insurance Proceeds” shall mean all of the proceeds received under the insurance policies required to be maintained by Borrower pursuant to Article III hereof.

     “Insurance Requirements” shall mean all terms of any insurance policy required by this Security Instrument, all requirements of the issuer of any such policy, and all regulations and then current standards applicable to or affecting the Property or any use or condition thereof, which may, at any time, be recommended by the Board of Fire Underwriters, if any, having jurisdiction over the Property, or such other Person exercising similar functions.

     “Interest Accrual Period” shall have the meaning set forth in the Note.

     “Interest Rate” shall have the meaning set forth in the Note.

     “Interest Shortfall” shall mean any shortfall in the amount of interest required to be paid with respect to the Loan Amount on any Payment Date.

     “Inventory” shall have the meaning as such term is defined in the Uniform Commercial Code applicable in the State in which the Property is located, including, without limitation, provisions in storerooms, refrigerators, pantries and kitchens, beverages in wine cellars and bars, other merchandise for sale, fuel, mechanical supplies, stationery and other expenses, supplies and similar items, as defined in the Uniform System of Accounts.

     “Late Charge” shall have the meaning set forth in Section 13.09 hereof.

     “Leases” shall have the meaning set forth in granting clause (f) of this Security Instrument.

     “Legal Requirement” shall mean as to any Person, the certificate of incorporation, by-laws, certificate of limited partnership, agreement of limited partnership or other organization or governing documents of such Person, and any law, statute, order, ordinance, judgement, decree, injunction, treaty, rule or regulation (including, without limitation, Environmental Statutes, Development Laws and Use Requirements) or determination of an arbitrator or a court or other Governmental Authority and all covenants, agreements, restrictions and encumbrances contained in any instruments, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

     “Lender” shall mean the Lender named herein and its successors or assigns.

     “LIBOR Margin” shall have the meaning set forth in the Note.

     “LIBOR Rate” shall have the meaning set forth in the Note.

     “Loan” shall have the meaning set forth in the Recitals hereto.

     “Loan Amount” shall have the meaning set forth in the Recitals hereto.

     “Loan Documents” shall mean this Security Instrument, the Note, the Assignment, and any and all other agreements, instruments, certificates or documents executed and delivered by Borrower, any of the Cross-collateralized Borrowers or any Affiliate of Borrower in connection with the Loan, together with any supplements, amendments, modifications or extensions thereof.

     “Loan Year” shall mean each 365 day period (or 366 day period if the month of February in a leap year is included) commencing on the first day of the month following the Closing Date (provided, however, that the first

13

Loan Year shall also include the period from the Closing Date to the end of the month in which the Closing Date occurs).

     “Loss Proceeds” shall mean, collectively, all Insurance Proceeds and all Condemnation Proceeds.

     “Major Space Lease” shall mean any Space Lease of a tenant or Affiliate of such tenant where such tenant, together with such Affiliate, leases, in the aggregate, 10,000 square feet or more and each restaurant, bar and/or casino lease.

     “Management Agreement” shall have the meaning set forth in Section 7.02 hereof.

     “Manager” shall mean the Person, other than Borrower and/or Operating Tenant, which manages the Property on behalf of Borrower.

     “Material Adverse Effect” shall mean any event or condition that has a material adverse effect on (a) the Property, (b) the business, prospects, profits, management, operations or condition (financial or otherwise) of Borrower, (c) the enforceability, validity, perfection or priority of the lien of any Loan Document or (d) the ability of Borrower to perform any obligations under any Loan Document.

     “Maturity”, when used with respect to the Note, shall mean the Maturity Date set forth in the Note or such other date pursuant to the Note on which the final payment of principal, and premium, if any, on the Note becomes due and payable as therein or herein provided, whether at Stated Maturity or by declaration of acceleration, or otherwise.

     “Maturity Date” shall mean the Maturity Date set forth in the Note, as the same may be extended from time to time pursuant to the terms of the Note.

     “Mez Loan” shall mean one or more mezzanine loans from Wachovia Bank, National Association to Affiliates of Borrower which are evidenced by certain promissory notes of even date herewith and which are secured by a first priority pledge of the direct or indirect ownership interest of such Persons in Borrower.

     “Mez Payment Amount” shall mean, as of any Payment Date, the amount of principal and interest then due and payable pursuant to the terms of the Mez Loan.

     “Mez Payment Escrow Account” shall mean the Escrow Account maintained pursuant to Section 5.14 hereof.

     “Mez Payment Sub-Account” shall mean the Sub-Account of the Central Account established pursuant to Section 5.02 hereof into which the Mez Payment Amount shall be deposited.

     “Multiemployer Plan” shall mean a multiemployer plan defined as such in Section 3(37) of ERISA to which contributions have been, or were required to have been, made by Borrower, Guarantor or any ERISA Affiliate and which is covered by Title IV of ERISA.

     “Net Capital Expenditures” shall mean for any period the amount by which Capital Expenditures during such period exceed reimbursements for such items during such period from any fund established pursuant to the Loan Documents.

     “Net Operating Income” shall mean in each Fiscal Year or portion thereof during the term hereof, Operating Income less Operating Expenses.

     “Net Proceeds” shall mean the excess of (a)(i) the purchase price (at foreclosure or otherwise) actually received by Lender with respect to the Property as a result of the exercise by Lender of its rights, powers, privileges and other remedies after the occurrence of an Event of Default, or (ii) in the event that Lender (or Lender’s nominee) is the purchaser at foreclosure by credit bid, then the amount of such credit bid, in either case, over (b) all costs and

14

expenses, including, without limitation, all attorneys’ fees and disbursements and any brokerage fees, if applicable, incurred by Lender in connection with the exercise of such remedies, including the sale of such Property after a foreclosure against the Property.

     “Note” shall have the meaning set forth in the Recitals hereto.

     “O&M Operative Period” shall mean the period of time (a) commencing upon the earlier to occur of (i) an Event of Default and (ii) determination by Lender that the Aggregate Debt Service Coverage (tested quarterly except during the continuance of an O&M Operative Period, in which event the Aggregate Debt Service Coverage shall be tested monthly and shall be calculated based upon information contained in the reports furnished to Lender pursuant to Section 2.09 hereof) is less than 1.05:1 and (b) and terminating (i) if the O&M Operative Period commenced pursuant to clause (a)(i) above, upon the cure of all Events of Default, provided that Lender accepts the cure of all Events of Default, the Loan has not been accelerated and Lender has not moved for the appointment of a receiver with respect to one or more Cross-collateralized Properties nor commenced foreclosure proceedings with respect to any Cross-collateralized Properties, and (ii) if the O&M Operative Period commenced pursuant to clause (a)(ii) above, on the Payment Date next succeeding the date upon which Lender determines that the Aggregate Debt Service Coverage for three (3) consecutive months is 1.05:1 or greater.

     “OFAC List” shall mean the list of specially designated nationals and blocked persons subject to financial sanctions that is maintained by the U.S. Treasury Department, Office of Foreign Assets Control and accessible through the internet website www.treas.gov/ofac/t11sdn.pdf.

     “Officer’s Certificate” shall mean a certificate delivered to Lender by Borrower which is signed on behalf of Borrower by an authorized representative of Borrower which states that the items set forth in such certificate are true, accurate and complete in all respects.

     “Operating Expenses” shall mean, in each Fiscal Year or portion thereof during the term hereof, all expenses directly attributable to the operation, repair and/or maintenance of the Property including, without limitation, (a) Impositions, (b) insurance premiums, (c) management fees, whether or not actually paid, equal to the greater of the actual management fees and four percent (4%) of annual gross operating income and (d) costs attributable to the operation, repair and maintenance of the systems for heating, ventilating and air conditioning the Improvements and actually paid for by Borrower. Operating Expenses shall not include interest, principal and premium, if any, due under the Note or otherwise in connection with the Debt, income taxes, extraordinary capital improvement costs, any non-cash charge or expense such as depreciation or amortization or any item of expense otherwise includable in Operating Expenses which is paid directly by any tenant except real estate taxes paid directly to any taxing authority by any tenant.

     “Operating Income” shall mean, in each Fiscal Year or portion thereof during the term hereof, all revenue derived by Borrower or Operating Tenant (or by Manager for the Account of Borrower or Operating Tenant) arising from the Property including, without limitation, room revenues, vending machines revenues, beverage revenues, food revenues, and packaging revenues, rental revenues (whether denominated as basic rent, additional rent, escalation payments, electrical payments or otherwise) and other fees and charges payable pursuant to Leases or otherwise in connection with the Property, and business interruption, rent or other similar insurance proceeds. Operating Income shall not include (a) Insurance Proceeds (other than proceeds of rent, business interruption or other similar insurance allocable to the applicable period) and Condemnation Proceeds (other than Condemnation Proceeds arising from a temporary taking or the use and occupancy of all or part of the applicable Property allocable to the applicable period), or interest accrued on such Condemnation Proceeds, (b) proceeds of any financing, (c) proceeds of any sale, exchange or transfer of the Property or any part thereof or interest therein, (d) capital contributions or loans to Borrower or an Affiliate of Borrower, (e) any item of income otherwise includable in Operating Income but paid directly by any tenant to a Person other than Borrower except for real estate taxes paid directly to any taxing authority by any tenant, (f) any other extraordinary, non-recurring revenues, (g) Rent paid by or on behalf of any lessee under an Operating Lease or Space Lease which is the subject of any proceeding or action relating to its bankruptcy, reorganization or other arrangement pursuant to the Bankruptcy Code or any similar federal or state law or which has been adjudicated a bankrupt or insolvent unless such Operating Lease or Space Lease, as applicable, has been affirmed by the trustee in such proceeding or action, (h) Rent paid by or on behalf of

15

any lessee under a Lease the demised premises of which are not occupied either by such lessee or by a sublessee thereof for sixty (60) or more days unless the lessee has a long term unsecured debt rating of not less than “A” (or its equivalent) from each Rating Agency; (i) Rent paid by or on behalf of any lessee under a Lease in whole or partial consideration for the termination of any Lease, or (j) sales tax rebates from any Governmental Authority.

     “Operating Lease” shall mean any Lease of the entire Property pursuant to which a Person other than Borrower assumes responsibility for the operation and management of the Property, as the same may be amended from time to time.

     “Operating Tenant” shall mean the tenant under the Operating Lease.

     “Operation and Maintenance Expense Escrow Account” shall mean the Escrow Account maintained pursuant to Section 5.09 hereof relating to the payment of Operating Expenses (exclusive of Basic Carrying Costs).

     “Operation and Maintenance Expense Sub-Account” shall mean the Sub-Account of the Central Account established pursuant to Section 5.02 hereof into which sums allocated for the payment of Cash Expenses, Net Capital Expenditures and approved Extraordinary Expenses shall be deposited.

     “Payment Date” shall have the meaning set forth in the Note.

     “PBGC” shall mean the Pension Benefit Guaranty Corporation established under ERISA, or any successor thereto.

     “Permitted Encumbrances” shall have the meaning set forth in Section 2.05(a) hereof.

     “Permitted Liens” shall mean (a) the lien of any Equipment leases and Equipment financing permitted in accordance with the terms of this Security Instrument, (b) the liens created by the Loan Documents, (c) liens, if any, for Impositions not yet due or delinquent or being contested in accordance with the terms of this Security Instrument, (d) any and all governmental, public utility and private restrictions, covenants, reservations, easements, licenses or other similar agreements which may hereafter be granted by Borrower in the ordinary course of business and which may not reasonably be expected to have a Material Adverse Effect, (e) rights of existing and future tenants, licensees and concessionaries pursuant to Leases in effect as of the date hereof or entered into in accordance with the terms of the Loan Documents, and (f) the Operating Lease and any renewal or replacement thereof in accordance with the terms of this Security Agreement at the expiration thereof, and (g) any liens securing a Mez Loan.

     “Permitted Transfer” shall mean, (a) Permitted Liens; (b) all transfers of Equipment and other items of personal property as expressly permitted in the Loan Documents; (c) transfers of direct and indirect interests in Borrower (other than interests held by a General Partner) and/or in General Partner to one or more Affiliates of Borrower; (d) transfers, issuances, conversions, pledges and redemptions of capital stock and partnership interests convertible into capital stock in Ashford Hospitality Trust, Inc., a Maryland corporation or Ashford Hospitality Limited Partnership, a Delaware limited partnership (or their respective successors) in the ordinary course of business and not in connection with a tender offer, merger or sale of such Persons and (e) the merger or consolidation of Ashford Hospitality Trust, Inc., Ashford OP General Partner LLC, Ashford OP Limited Partner LLC or Ashford Hospitality Limited Partnership (or their respective successors) whereby such entity is the surviving entity in such merger or consolidation, provided that, subsequent to a Securitization, each Rating Agency shall have delivered written confirmation that any ratings issued by the Rating Agency in connection with a Securitization will not, as a result of the proposed merger or consolidation, be downgraded from the then current ratings thereof, qualified or withdrawn, provided in each of the foregoing events, (a) ultimate Control of Borrower remains with the same Persons which ultimately Controlled Borrower as of the Closing Date, (b) in the event that any Person which as of the Closing Date does not own 49% or more of the director or indirect interest in Borrower or Operating Tenant, if applicable, obtains a 49% or greater direct or indirect interest in Borrower or Operating Partnership, Borrower shall deliver a substantive non-consolidation opinion to Lender in form and substance and from counsel reasonably acceptable to Lender and (c) no Transfer may be to a Prohibited Person.

16

     “Person” shall mean any individual, corporation, limited liability company, partnership, joint venture, estate, trust, unincorporated association, any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing.

     “Plan” shall mean an employee benefit or other plan established or maintained by Borrower, Guarantor or any ERISA Affiliate during the five-year period ended prior to the date of this Security Instrument or to which Borrower, Guarantor or any ERISA Affiliate makes, is obligated to make or has, within the five year period ended prior to the date of this Security Instrument, been required to make contributions (whether or not covered by Title IV of ERISA or Section 302 of ERISA or Section 401(a) or 412 of the Code), other than a Multiemployer Plan.

     “Premises” shall have the meaning set forth in granting clause (a) of this Security Instrument.

     “Principal Amount” shall mean the Loan Amount as such amount may be reduced from time to time pursuant to the terms of this Security Instrument, the Note or the other Loan Documents.

     “Principal Payments” shall mean all payments of principal made pursuant to the terms of the Note.

     “Prohibited Person” shall mean any Person and/or any Affiliate thereof identified on the OFAC List or any other Person or foreign country or agency thereof with whom a U.S. Person may not conduct business or transactions by prohibition of Federal law or Executive Order of the President of the United States of America.

     “Property” shall have the meaning set forth in the granting clauses of this Security Instrument.

     “Property Agreements” shall mean all agreements, grants of easements and/or rights-of-way, reciprocal easement agreements, permits, declarations of covenants, conditions and restrictions, disposition and development agreements, planned unit development agreements, parking agreements, party wall agreements or other instruments affecting the Property, but not including any brokerage agreements, Management Agreements, Operating Leases, Franchise Agreements, service contracts, Space Leases or the Loan Documents.

     “Property Available Cash” shall mean all amounts payable to Borrower and/or Operating Tenant pursuant to the Management Agreement.

     “Rate Cap Agreement” shall mean that certain interest rate protection agreement (together with the confirmation and schedules relating thereto) with a notional amount which shall not at any time be less than the Principal Amount and a LIBOR Rate strike price equal to six percent (6.0%) entered into by Borrower in accordance with the terms hereof or of the other Loan Documents and any similar interest rate cap or collar agreements subsequently entered into in replacement or substitution therefor by Borrower with respect to the Loan.

     “Rating Agency” shall mean each of Standard & Poor’s Ratings Services, a division of The McGraw-Hill Company, Inc. (“Standard & Poor’s”), Fitch, Inc., and Moody’s Investors Service, Inc. (“Moody’s”) and any successor to any of them; provided, however, that at any time after a Securitization, “Rating Agency” shall mean those of the foregoing rating agencies that from time to time rate the securities issued in connection with such Securitization.

     “Real Estate Taxes” shall mean all real estate taxes, assessments (including, without limitation, all assessments for public improvements or benefits, whether or not commenced or completed prior to the date hereof and whether or not commenced or completed within the term of this Security Instrument), water, sewer or other rents and charges, and all other governmental charges, in each case whether general or special, ordinary or extraordinary, or foreseen or unforeseen, of every character in respect of the Property (including all interest and penalties thereon), which at any time prior to, during or in respect of the term hereof may be assessed or imposed on or in respect of or be a lien upon the Property or any part thereof or any estate, right, title or interest therein.

     “Realty” shall have the meaning set forth in Section 2.05(b) hereof.

17

     “Recurring Replacement Expenditures” shall mean expenditures related to capital repairs, replacements and improvements performed at the Property from time to time.

     “Recurring Replacement Reserve Escrow Account” shall mean the Escrow Account maintained pursuant to Section 5.08 hereof relating to the payment of Recurring Replacement Expenditures.

     “Recurring Replacement Reserve Monthly Installment” shall mean the amount per month set forth on Exhibit B attached hereto and made a part hereof (the “Initial Recurring Installments”) until the end of 2007 and an amount per month in each subsequent year or portion thereof occurring prior to the Maturity Date equal to four percent (4%) (or such lesser amount as is required to be reserved for replacements pursuant to the Management Agreement (but in no event less than three (3%) percent of the total revenues of the Property) of the total revenues of the Property for the prior calendar year divided by twelve (12). Notwithstanding the foregoing, if Borrower has delivered evidence reasonably satisfactory to Lender on or before the Payment Date occurring in March of each year that Borrower has deposited with Manager on account of the prior year pursuant to the Management Agreement a sum equal to the Recurring Replacement Reserve Monthly Installment described in the first sentence of this definition multiplied by twelve (12) (the “Minimum Replacement Expenditure”) to be used for Recurring Replacement Expenditures or that Borrower and/or Manager on behalf of Borrower has incurred and paid a sum which when added to the amounts on deposit with Manager are equal to or greater than the Minimum Replacement Expenditure during the prior calendar year, the Recurring Replacement Reserve Monthly Installment shall be zero and, if the sum of the amounts on deposit with manager to be used for Recurring Replacement Expenditures pursuant to the Management Agreement together with the sums that Borrower and/or Manager on behalf of Borrower has incurred and paid for Recurring Replacement Expenditures are less than the Minimum Replacement Expenditure, the Recurring Replacement Reserve Monthly Installment shall be the lesser of the amount described in the first sentence of this definition and the amount by which the amount described in the first sentence of this definition exceeds one-twelfth of the difference between the Minimum Replacement Expenditure and the sum of the amounts actually on deposit with manager to be used for Recurring Replacement Expenditures pursuant to the Management Agreement together with the sums that Borrower and/or Manager on behalf of Borrower has incurred and paid for Recurring Replacement Expenditures but in no event more than the sums on deposit in the Central Account on such Payment Date less sums allocated pursuant to clause (i) — (iv) of Section 5.05(a) hereof (the “Required RRE Shortfall”).

     “Recurring Replacement Reserve Sub-Account” shall mean the Sub-Account of the Central Account established pursuant to Section 5.02 hereof into which the Recurring Replacement Reserve Monthly Installment shall be deposited.

     “Regulation AB” shall mean Regulation AB under the Securities Act and the Securities Exchange Act of 1934 (as amended).

     “Release” shall have the meaning set forth in Section 15.02 hereof.

     “Release Price Percentage” shall mean 110%.

     “Rents” shall have the meaning set forth in granting clause (f) of this Security Instrument.

     “Rent Roll” shall have the meaning set forth in Section 2.05 (o) hereof.

     “Required Debt Service Coverage” shall mean a Debt Service Coverage of not less than 1.0:1.

     “Required Debt Service Payment” shall mean, as of any Payment Date, the amount of interest and principal then due and payable pursuant to the Note, together with any other sums due thereunder, including, without limitation, any prepayments required to be made or for which notice has been given (and not revoked in writing in accordance with Section 15.01 hereof) under this Security Instrument, Default Rate Interest and premium, if any, paid in accordance therewith.

18

     “Required Engineering Work” shall mean the immediate engineering and/or environmental remediation work set forth on Exhibit D attached hereto and made a part hereof.

     “Retention Amount” shall have the meaning set forth in Section 3.04(b)(vii) hereof.

     “RevPAR” shall mean the average revenues per available room per day.

     “RevPAR Yield Index” shall mean the percentage amount determined by dividing the RevPAR of the Property by the RevPAR of the Property’s Competitive Set as determined by Smith Travel Research (“STR”) or if STR is no longer publishing, a successor reasonably acceptable to Lender.

     “Securities Act” shall mean the Securities Act of 1933, as the same shall be amended from time to time.

     “Securitization” shall mean a public or private offering of securities by Lender or any of its Affiliates or their respective successors and assigns which are collateralized, in whole or in part, by this Security Instrument.

     “Security Instrument” shall mean this Security Instrument as originally executed or as it may hereafter from time to time be supplemented, amended, modified or extended by one or more indentures supplemental hereto.

     “Significant Obligor” shall have the meaning set forth in Item 1101(k) of Regulation AB.

     “Single Purpose Entity” shall mean a corporation, partnership, joint venture, limited liability company, trust or unincorporated association, which is formed or organized solely for the purpose of holding, directly, an ownership interest in the Property or, with respect to General Partner, holding an ownership interest in and managing a Person which holds an ownership interest in the Property, or, with respect to Operating Tenant, holding a interest in the Property, does not engage in any business unrelated to, with respect to Borrower, the Property and, with respect to General Partner, its interest in Borrower or, in the case of a General Partner of the Operating Tenant, its interest in the Operating Tenant, does not have any assets other than those related to, with respect to Borrower, its interest in the Property and, with respect to General Partner, its interest in Borrower, in the case of a General Partner of the Operating Tenant, its interest in the Operating Tenant, or any indebtedness other than as permitted by this Security Instrument or the other Loan Documents, has its own separate books and records and has its own accounts, in each case which are separate and apart from the books and records and accounts of any other Person, holds itself out as being a Person separate and apart from any other Person and which otherwise satisfies the criteria of the Rating Agency, as in effect on the Closing Date, for a special-purpose bankruptcy-remote entity.

     “Solvent” shall mean, as to any Person, that (a) the sum of the assets of such Person, at a fair valuation, exceeds its liabilities, including contingent liabilities, (b) such Person has sufficient capital with which to conduct its business as presently conducted and as proposed to be conducted and (c) such Person has not incurred debts, and does not intend to incur debts, beyond its ability to pay such debts as they mature. For purposes of this definition, “debt” means any liability on a claim, and “claim” means (a) a right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured, or (b) a right to an equitable remedy for breach of performance if such breach gives rise to a payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured. With respect to any such contingent liabilities, such liabilities shall be computed in accordance with GAAP at the amount which, in light of all the facts and circumstances existing at the time, represents the amount which can reasonably be expected to become an actual or matured liability.

     “Space Leases” shall mean any Lease or sublease thereunder (including, without limitation, any Major Space Lease) creating a leasehold right of possession for the use and occupancy of a portion of the Property as a tenant together with any supplements, renewals, amendments, modifications or extensions thereof excluding room reservations and other functions held at the Property, and excluding the Operating Lease.

     “State” shall mean any of the states which are members of the United States of America.

19

     “Stated Maturity” when used with respect to the Note or any installment of interest and/or principal payment thereunder, shall mean the date specified in the Note as the fixed date on which a payment of all or any portion of principal and/or interest is due and payable, as such date may be extended from time to time pursuant to the terms of the Note.

     “Sub-Accounts” shall have the meaning set forth in Section 5.02 hereof.

     “Substantial Casualty” shall have the meaning set forth in Section 3.04 hereof.

     “Taking” shall mean a condemnation or taking pursuant to the lawful exercise of the power of eminent domain.

     “TIC” shall have the meaning set forth in Section 2.12.

     “TIC Agreement” shall have the meaning set forth in Section 2.12.

     “Transfer” shall mean the conveyance, assignment, sale, mortgaging, encumbrance, pledging, hypothecation, granting of a security interest in, granting of options with respect to, or other disposition of (directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, and whether or not for consideration or of record) all or any portion of any legal or beneficial interest (a) in all or any portion of the Property; (b) if Borrower is a corporation or, if Borrower is a partnership and any General Partner is a corporation, in the stock of Borrower or any General Partner; (c) in Borrower (or any trust of which Borrower is a trustee); or (d) if Borrower is a limited or general partnership, joint venture, limited liability company, trust, nominee trust, tenancy in common or other unincorporated form of business association or form of ownership interest, in any Person having a legal or beneficial ownership in Borrower, excluding any legal or beneficial interest in any constituent limited partner, if Borrower is a limited partnership, or in any non-managing member, if Borrower is a limited liability company, unless such interest would, or together with all other direct or indirect interests in Borrower which were previously transferred, aggregate 49% or more of the partnership or membership, as applicable, interest in Borrower or would result in any Person who, as of the Closing Date, did not own, directly or indirectly, 49% or more of the partnership or membership, as applicable, interest in Borrower, owning, directly or indirectly, 49% or more of the partnership or membership, as applicable, interest in Borrower and excluding any legal or beneficial interest in any General Partner unless such interest would, or together with all other direct or indirect interest in the General Partner which were previously transferred, aggregate 49% or more of the partnership or membership, as applicable, interest in the General Partner (or result in a change in control of the management of the General Partner from the individuals exercising such control immediately prior to the conveyance or other disposition of such legal or beneficial interest) and shall also include, without limitation to the foregoing, the following: an installment sales agreement wherein Borrower agrees to sell the Property or any part thereof or any interest therein for a price to be paid in installments; an agreement by Borrower leasing all or substantially all of the Property to one or more Persons pursuant to a single or related transactions, or a sale, assignment or other transfer of, or the grant of a security interest in, Borrower’s right, title and interest in and to any Leases or any Rent; any instrument subjecting the Property to a condominium regime or transferring ownership to a cooperative corporation; and the dissolution or termination of Borrower or the merger or consolidation of Borrower with any other Person.

     “UCC” shall mean the Uniform Commercial Code as in effect on the date hereof in the State in which the Realty is located; provided, however, that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection or priority of the security interest in any item or portion of the collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State in which the Realty is located (“Other UCC State”), “UCC” means the Uniform Commercial Code as in effect in such Other UCC State for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection or priority.

     “Uniform System of Accounts” shall mean the Uniform System of Accounts for the Lodging Industry, 10th Revised Edition, Educational Institute of the American Hotel and Motel Association and Hotel Association of New York City (2006), as from time to time amended.

20

     “Unscheduled Payments” shall mean (a) all Loss Proceeds that Borrower has elected or is required to apply to the repayment of the Debt pursuant to this Security Instrument, the Note or any other Loan Documents, (b) any funds representing a voluntary or involuntary principal prepayment other than scheduled Principal Payments and (c) any Net Proceeds.

     “Use Requirements” shall mean any and all building codes, permits, certificates of occupancy or compliance, laws, regulations, or ordinances (including, without limitation, health, pollution, fire protection, medical and day-care facilities, waste product and sewage disposal regulations), restrictions of record, easements, reciprocal easements, declarations or other agreements affecting the use of the Property or any part thereof.

     “Welfare Plan” shall mean an employee welfare benefit plan as defined in Section 3(1) of ERISA established or maintained by Borrower, Guarantor or any ERISA Affiliate or that covers any current or former employee of Borrower, Guarantor or any ERISA Affiliate.

     “Work” shall have the meaning set forth in Section 3.04(a)(i) hereof.

ARTICLE II: REPRESENTATIONS, WARRANTIES
AND COVENANTS OF BORROWER

     Section 2.01. Payment of Debt. Borrower will pay the Debt at the time and in the manner provided in the Note and the other Loan Documents, all in lawful money of the United States of America in immediately available funds.

     Section 2.02. Representations, Warranties and Covenants of Borrower. Borrower represents and warrants to and covenants with Lender:

          (a) Organization and Authority. Borrower (i) is a limited liability company, general partnership, limited partnership or corporation, as the case may be, duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation, (ii) has all requisite power and authority and all necessary licenses and permits to own and operate the Property and to carry on its business as now conducted and as presently proposed to be conducted and (iii) is duly qualified, authorized to do business and in good standing in the jurisdiction where the Property is located and in each other jurisdiction where the conduct of its business or the nature of its activities makes such qualification necessary. If Borrower is a limited liability company, limited partnership or general partnership, each general partner or managing member, as applicable, of Borrower which is a corporation is duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation.

          (b) Power. Borrower and, if applicable, each General Partner has full power and authority to execute, deliver and perform, as applicable, the Loan Documents to which it is a party, to make the borrowings thereunder, to execute and deliver the Note and to grant to Lender a first, prior, perfected and continuing lien on and security interest in the Property, subject only to the Permitted Encumbrances.

          (c) Authorization of Borrowing. The execution, delivery and performance of the Loan Documents to which Borrower is a party, the making of the borrowings thereunder, the execution and delivery of the Note, the grant of the liens on the Property pursuant to the Loan Documents to which Borrower is a party and the consummation of the Loan are within the powers of Borrower and have been duly authorized by Borrower and, if applicable, the General Partners, by all requisite action (and Borrower hereby represents that no approval or action which has not already been obtained of any member, limited partner or shareholder, as applicable, of Borrower is required to authorize any of the Loan Documents to which Borrower is a party) and will constitute the legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with their terms, except as enforcement may be stayed or limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity (whether considered in proceedings at law or in equity) and will not (i) violate any provision of its partnership agreement or partnership certificate or certificate of incorporation or by-laws, or operating agreement, certificate of formation or articles of organization, as applicable,

21

or, to its knowledge, any law, judgment, order, rule or regulation of any court, arbitration panel or other Governmental Authority, domestic or foreign, or other Person affecting or binding upon Borrower or the Property, or (ii) violate any provision of any indenture, agreement, mortgage, deed of trust, contract or other instrument to which Borrower or, if applicable, any General Partner is a party or by which any of their respective property, assets or revenues are bound, or be in conflict with, result in an acceleration of any obligation or a breach of or constitute (with notice or lapse of time or both) a default or require any payment or prepayment under, any such indenture, agreement, mortgage, deed of trust, contract or other instrument, or (iii) result in the creation or imposition of any lien, except those in favor of Lender as provided in the Loan Documents to which it is a party.

          (d) Consent. Neither Borrower nor, if applicable, any General Partner, is required to obtain any consent, approval or authorization from, or to file any declaration or statement with, any Governmental Authority or other agency in connection with or as a condition to the execution, delivery or performance of this Security Instrument, the Note or the other Loan Documents which has not been so obtained or filed.

          (e) Interest Rate. The rate of interest paid under the Note and the method and manner of the calculation thereof do not violate any usury or other law or applicable Legal Requirement.

          (f) Other Agreements. Borrower is not a party to nor is otherwise bound by any agreements or instruments which, individually or in the aggregate, are reasonably likely to have a Material Adverse Effect. Neither Borrower nor, if applicable, any General Partner, is in violation of its organizational documents or other restriction or any agreement or instrument by which it is bound, or any judgment, decree, writ, injunction, order or award of any arbitrator, court or Governmental Authority, or any Legal Requirement, in each case, applicable to Borrower or the Property, except for such violations that would not have a Material Adverse Effect.

          (g) Maintenance of Existence. (i) Borrower is familiar with the criteria of the Rating Agency required to qualify as a special-purpose bankruptcy-remote entity and Borrower, Operating Tenant and, if applicable, each General Partner at all times since their formation have been duly formed and existing at all times and at all times have preserved and shall preserve and has kept and shall keep in full force and effect their existence as a Single Purpose Entity.

     (ii) Borrower, Operating Tenant and, if applicable, each General Partner, at all times since their organization have complied, and will continue to comply in all material respects, with the provisions of its certificate of limited partnership and agreement of limited partnership or certificate of incorporation and by-laws or articles of organization, certificate of formation and operating agreement, as applicable, and the laws of its jurisdiction of organization relating to partnerships, corporations or limited liability companies, as applicable.

     (iii) Borrower, Operating Tenant and, if applicable, each General Partner have done or caused to be done and will do all things reasonably necessary to observe organizational formalities and preserve their existence and Borrower, Operating Tenant and, if applicable, each General Partner will not hereafter amend, modify or otherwise change the certificate of limited partnership and agreement of limited partnership or certificate of incorporation and by-laws or articles of organization, certificate of formation and operating agreement, as applicable, or other organizational documents of Borrower, Operating Tenant and, if applicable, each General Partner, except for non-material amendments which do not modify the Single Purpose Entity provisions.

     (iv) Borrower, Operating Tenant and, if applicable, each General Partner, have at all times accurately maintained, and will continue to accurately maintain in all material respects, their respective financial statements, accounting records and other partnership, company or corporate documents separate from those of any other Person and Borrower, Operating Tenant and/or, if applicable, General Partner, have filed and will file its own tax returns or, if Borrower, Operating Tenant and/or, if applicable, General Partner is part of a consolidated group for purposes of filing tax returns, Borrower, Operating Tenant and, General Partner, as applicable, have been shown and will be shown as separate members of such group. Borrower, Operating Tenant and, if applicable, each General Partner have not at any time since their

22

formation commingled, and will not commingle, their respective assets with those of any other Person and each has maintained and will maintain their assets in such a manner such that it will not be costly or difficult to segregate, ascertain or identify their individual assets from those of any other Person. Borrower, Operating Tenant and, if applicable, each General Partner has not permitted and will not permit any Affiliate independent access to their bank accounts. Borrower, Operating Tenant and, if applicable, each General Partner have at all times since their formation accurately maintained and utilized, and will continue to accurately maintain and utilize, their own separate bank accounts, payroll and separate books of account, stationery, invoices and checks.

     (v) Borrower, Operating Tenant and, if applicable, each General Partner, have at all times paid, and will continue to pay, their own liabilities from their own separate assets and each has allocated and charged and shall each allocate and charge fairly and reasonably any overhead which Borrower, Operating Tenant and, if applicable, any General Partner,             shares with any other Person, including, without limitation, for office space and services performed by any employee of another Person.

     (vi) Borrower, Operating Tenant and, if applicable, each General Partner, have at all times identified themselves, and will continue to identify themselves, in all dealings with the public, under their own names and as separate and distinct entities and have corrected and shall correct any known misunderstanding regarding their status as separate and distinct entities. Borrower, Operating Tenant and, if applicable, each General Partner, have not at any time identified themselves, and will not identify themselves, as being a division of any other Person.

     (vii) Borrower, Operating Tenant and, if applicable, each General Partner, have been at all times, and will continue to be, adequately capitalized in light of the nature of their respective businesses.

     (viii) Borrower, Operating Tenant and, if applicable, each General Partner, (A) have not owned, do not own and will not own any assets or property other than, with respect to Borrower, the Property and any incidental personal property necessary for the ownership, management or operation of the Property or, with respect to Operating Tenant, its leasehold interest in the Property, and, with respect to General Partner, if applicable, its interest in Borrower or, with respect to a General Partner of Operating Tenant, its interest in Operating Tenant, (B) have not engaged and will not engage in any business other than, with respect to Borrower, the ownership, management and operation of the Property, or with respect to Operating Tenant, its interest in the Property, or, with respect to General Partner, if applicable, its interest in Borrower or, with respect to a General Partner of Operating Tenant, its interest in Operating Tenant, (C) have not incurred any outstanding debt as of the date hereof, and will not incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than, with respect to Borrower, (W) the Loan, (X) unsecured trade and operational debt which (1) is not evidenced by a note, (2) is incurred in the ordinary course of the operation of the Property, (3) does not, together with any equipment financing incurred pursuant to clause (Y) hereof exceed in the aggregate two percent (2%) of the Allocated Loan Amount for the Property and (4) is, unless being contested in accordance with the terms of this Security Instrument, paid prior to the earlier to occur of the sixtieth (60th) day after the date incurred and the date when due, (Y) equipment financing relating to equipment used in connection with the operation of the Property which (1) is incurred in the ordinary course of the operation of the Property and (2) does not, together with any unsecured trade and operational debt incurred pursuant to clause (X) hereof, exceed in the aggregate two percent (2%) of the Allocated Loan Amount and (Z) contingent obligations to repay customer, membership and security deposits held in the ordinary course of Borrower’s business, (D) have not pledged (other than pledges which have been released which were given in connection with obligations which have been paid in full) and will not pledge their assets for the benefit of any other Person, and (E) have not made and will not make any loans or advances to any Person (including any Affiliate).

     (ix) None of Borrower, Operating Tenant nor, if applicable, any General Partner will hereafter change its name or principal place of business.

23

     (x) None of Borrower, Operating Tenant nor, if applicable, any General Partner has, and neither of such Persons will have, any subsidiaries (other than, with respect to General Partner, Borrower or, with respect to General Partner of Operating Tenant, Operating Tenant).

     (xi) Borrower has preserved and maintained and will preserve and maintain its existence as a Delaware limited partnership or a Delaware limited liability company, as applicable, and all material rights, privileges, tradenames and franchises and Operating Tenant has preserved and maintained and will preserve and maintain its existence as a Delaware limited partnership and all material rights, privileges, tradenames and franchises. General Partner, if applicable, has preserved and maintained and will preserve and maintain its existence as a Delaware limited liability company and all material rights, privileges, tradenames and franchises.

     (xii) None of Borrower, Operating Tenant nor, if applicable, any General Partner, has merged or consolidated with, and none will merge or consolidate with, and none has sold all or substantially all of its respective assets to any Person, and none will sell all or substantially all of its respective assets to any Person, and none has liquidated, wound up or dissolved itself (or suffered any liquidation, winding up or dissolution) and none will liquidate, wind up or dissolve itself (or suffer any liquidation, winding up or dissolution). None of Borrower, Operating Tenant nor, if applicable, any General Partner has acquired nor will acquire any business or assets from, or capital stock or other ownership interest of, or be a party to any acquisition of, any Person (other than, with respect to General Partner, if applicable, its interest in Borrower and Operating Tenant).

     (xiii) Borrower, Operating Tenant and, if applicable, each General Partner, have not at any time since their formation assumed, guaranteed or held themselves out to be responsible for, and will not assume, guarantee or hold themselves out to be responsible for the liabilities or the decisions or actions respecting the daily business affairs of their partners, shareholders or members or any predecessor company, corporation or partnership, each as applicable, any Affiliates, or any other Persons other than the Loan and other loans which have been paid in full, and liens granted thereunder fully discharged, prior to the date hereof. None of Borrower, Operating Tenant nor, if applicable, each General Partner, have at any time since its formation acquired, and will not acquire, obligations or securities of its partners or shareholders, members or any predecessor company, corporation or partnership, each as applicable, or any Affiliates (other than, with respect to General Partner, its interest in Borrower or, with respect to General Partner of Operating Tenant, its interest in Operating Tenant). Borrower, Operating Tenant and, if applicable, each General Partner, have not at any time since their formation made, and will not make, loans to its partners, members or shareholders or any predecessor company, corporation or partnership, each as applicable, or any Affiliates of any of such Persons. Borrower, Operating Tenant and, if applicable, each General Partner, have no known material contingent liabilities nor do they have any material financial liabilities under any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which such Person is a party or by which it is otherwise bound other than under the Loan Documents.

     (xiv) Neither Borrower nor Operating Tenant nor, if applicable, General Partner, has at any time since its formation entered into and was not a party to, and, will not enter into or be a party to, any transaction with its Affiliates, members, partners or shareholders, as applicable, or any Affiliates thereof except in the ordinary course of business of such Person on terms which are no less favorable to such Person than would be obtained in a comparable arm’s length transaction with an unrelated third party.

     (xv) If Borrower or Operating Tenant is a limited partnership, the General Partner shall be a corporation or limited liability company whose sole asset is its interest in Borrower or Operating Tenant, as applicable, and the General Partner will at all times comply, and will cause Borrower or Operating Tenant, as applicable, to comply, with each of the representations, warranties, and covenants contained in this Section 2.02(g) as if such representation, warranty or covenant was made directly by such General Partner.

     (xvi) Borrower and Operating Tenant shall at all times cause there to be at least two duly appointed members of the board of directors or board of managers or other governing board or body, as

24

applicable (each, an “Independent Director”), of, if Borrower or Operating Tenant is a corporation, Borrower or Operating Tenant, as applicable, if Borrower or Operating Tenant is a limited partnership, of the General Partner, and if Borrower or Operating Tenant is a limited liability company, of the General Partner or of Borrower or Operating Tenant, as applicable, reasonably satisfactory to Lender who shall not have been at the time of such individual’s appointment, and may not be or have been at any time (A) a shareholder, officer, director, attorney, counsel, partner, member or employee of Borrower, Operating Tenant or any of the foregoing Persons or Affiliates thereof, (B) a customer or creditor of, or supplier or service provider to, Borrower or any of its shareholders, partners, members or their Affiliates, (C) a member of the immediate family of any Person referred to in (A) or (B) above or (D) a Person Controlling, Controlled by or under common Control with any Person referred to in (A) through (C) above. A natural person who otherwise satisfies the foregoing definition except for being the Independent Director of a Single Purpose Entity Affiliated with Borrower, Operating Tenant or General Partner shall not be disqualified from serving as an Independent Director if such individual is at the time of initial appointment, or at any time while serving as the Independent Director, an Independent Director of a Single Purpose Entity Affiliated with Borrower, Operating Tenant or General Partner if such individual is an independent director provided by a nationally-recognized company that provides professional independent directors.

     (xvii) Borrower, Operating Tenant and, if applicable, each General Partner, shall not cause or permit the board of directors or board of managers or other governing board or body, as applicable, of Borrower, Operating Tenant or, if applicable, each General Partner, to take any action which, under the terms of any certificate of incorporation, by-laws, limited liability company agreement, operating agreement, certificate of formation or articles of organization requires a vote of the board of directors or board of managers or other governing board or body of Borrower, Operating Tenant, or, if applicable, the General Partner and also requires the vote of the Independent Directors therewith, unless at the time of such action there shall be at least two members who are Independent Directors.

     (xviii) Borrower, Operating Tenant and, if applicable, each General Partner has paid and shall pay the salaries of their own employees and has maintained and shall maintain a sufficient number of employees in light of their contemplated business operations.

     (xix) Borrower and Operating Tenant shall, and shall cause its Affiliates to, and Borrower and Operating Tenant have and have caused their Affiliates to, conduct its business so that the assumptions made with respect to Borrower, Operating Tenant and, if applicable, each General Partner, in that certain opinion letter relating to substantive non-consolidation dated the date hereof (the “Insolvency Opinion”) delivered in connection with the Loan has been and shall be true and correct in all respects.

     Notwithstanding anything to the contrary contained in this Section 2.02(g), provided Borrower or Operating Tenant, as applicable, is a Delaware single member limited liability company which satisfies the single purpose bankruptcy remote entity requirements of each Rating Agency for a single member limited liability company, the foregoing provisions of this Section 2.02(g) shall not apply to the General Partner.

     (h) No Defaults. No Event of Default or, to Borrower’s knowledge, Default has occurred and is continuing or would occur as a result of the consummation of the transactions contemplated by the Loan Documents. Borrower is not in default in the payment or performance of any of its Contractual Obligations in any material respect.

     (i) Consents and Approvals. Borrower and, if applicable, each General Partner, have obtained or made all necessary (i) consents, approvals and authorizations, and registrations and filings of or with all Governmental Authorities and (ii) consents, approvals, waivers and notifications of partners, stockholders, members, creditors, lessors and other nongovernmental Persons, in each case, which are required to be obtained or made by Borrower or, if applicable, the General Partner, in connection with the execution and delivery of, and the performance by Borrower of its obligations under, the Loan Documents.

25

     (j) Investment Company Act Status, etc. Borrower is not (i) an “investment company,” or a company “controlled” by an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended, (ii) a “holding company” or a “subsidiary company” of a “holding company” or an “affiliate” of either a “holding company” or a “subsidiary company” within the meaning of the Public Utility Holding Company Act of 1935, as amended, or (iii) subject to any other federal or state law or regulation which purports to restrict or regulate its ability to borrow money.

     (k) Compliance with Law. To Borrower’s knowledge, Borrower is in compliance with all Legal Requirements to which it or the Property is subject, including, without limitation, all Environmental Statutes (except as previously disclosed in the Environmental Report), the Americans with Disabilities Act (except as previously disclosed in the engineering report relating to the Property delivered to Lender in connection with the origination of the Loan), the Occupational Safety and Health Act of 1970 and ERISA. No portion of the Property has been or will be purchased, improved, fixtured, equipped or furnished with proceeds of any illegal activity and, to the best of Borrower’s knowledge, no illegal activities are being conducted at or from the Property.

     (l) Financial Information. All financial data that has been delivered by Borrower to Lender (i) is true, complete and correct in all material respects, (ii) accurately represents the financial condition and results of operations in all material respects of the Persons covered thereby as of the date on which the same shall have been furnished, and (iii) in the case of audited financial statements, has been prepared in accordance with GAAP and the Uniform System of Accounts (or such other accounting basis as is reasonably acceptable to Lender) throughout the periods covered thereby. As of the date hereof, neither Borrower nor, if applicable, any General Partner, has any material contingent liability, material liability for taxes or other unusual or forward commitment not reflected in such financial statements delivered to Lender. Since the date of the last financial statements delivered by Borrower to Lender except as otherwise disclosed in such financial statements or notes thereto, there has been no change in the assets, liabilities or financial position of Borrower nor, if applicable, any General Partner, or in the results of operations of Borrower which would have a Material Adverse Effect. Neither Borrower nor, if applicable, any General Partner, has incurred any obligation or liability, contingent or otherwise not reflected in such financial statements which would have a Material Adverse Effect.

     (m) Transaction Brokerage Fees. Borrower has not dealt with any financial advisors, brokers, underwriters, placement agents, agents or finders in connection with the transactions contemplated by this Security Instrument. All brokerage fees, commissions and other expenses payable in connection with the transactions contemplated by the Loan Documents have been paid in full by Borrower contemporaneously with the execution of the Loan Documents and the funding of the Loan. Borrower hereby agrees to indemnify and hold Lender harmless for, from and against any and all claims, liabilities, costs and expenses of any kind in any way relating to or arising from (i) a claim by any Person that such Person acted on behalf of Borrower in connection with the transactions contemplated herein or (ii) any breach of the foregoing representation. The provisions of this subsection (m) shall survive the repayment of the Debt.

     (n) Federal Reserve Regulations. No part of the proceeds of the Loan will be used for the purpose of “purchasing” or “carrying” any “margin stock” within the meaning of Regulations T, U or X of the Board of Governors of the Federal Reserve System or for any other purpose which would be inconsistent with such Regulations T, U or X or any other Regulations of such Board of Governors, or for any purposes prohibited by Legal Requirements or by the terms and conditions of the Loan Documents.

     (o) Pending Litigation. There are no actions, suits or proceedings pending or, to the best knowledge of Borrower, threatened against or affecting Borrower or the Property in any court or before any Governmental Authority which if adversely determined either individually or collectively has or is reasonably likely to have a Material Adverse Effect.

     (p) Solvency; No Bankruptcy. Each of Borrower and, if applicable, the General Partner, (i) is and has at all times been Solvent and will remain Solvent immediately upon the consummation of the transactions contemplated by the Loan Documents and (ii) is free from bankruptcy, reorganization or arrangement proceedings or a general assignment for the benefit of creditors and is not contemplating the filing of a petition under any state or

26

federal bankruptcy or insolvency laws or the liquidation of all or a major portion of such Person’s assets or property and Borrower has no knowledge of any Person contemplating the filing of any such petition against it or, if applicable, the General Partner. None of the transactions contemplated hereby will be or have been made with an intent to hinder, delay or defraud any present or future creditors of Borrower and Borrower has received reasonably equivalent value in exchange for its obligations under the Loan Documents. Borrower’s assets do not, and immediately upon consummation of the transaction contemplated in the Loan Documents will not, constitute unreasonably small capital to carry out its business as presently conducted or as proposed to be conducted. Borrower does not intend to, nor believes that it will, incur debts and liabilities beyond its ability to pay such debts as they may mature.

     (q) Use of Proceeds. The proceeds of the Loan shall be applied by Borrower to, inter alia, (i) purchase the Property and, if applicable, satisfy certain mortgage loans presently encumbering all or a part of the Property and (ii) pay certain transaction costs incurred by Borrower in connection with the Loan. No portion of the proceeds of the Loan will be used for family, personal, agricultural or household use.

     (r) Tax Filings. Borrower and, if applicable, each General Partner, have filed all federal, state and local tax returns required to be filed and have paid or made adequate provision for the payment of all federal, state and local taxes, charges and assessments payable by Borrower and, if applicable, the General Partners. Borrower and, if applicable, the General Partners, believe that their respective tax returns properly reflect the income and taxes of Borrower and said General Partner, if any, for the periods covered thereby, subject only to reasonable adjustments required by the Internal Revenue Service or other applicable tax authority upon audit.

     (s) Not Foreign Person. Borrower is not a “foreign person” within the meaning of §1445(f)(3) of the Code.

     (t) ERISA. (i) Neither Borrower nor Guarantor is, or is acting on behalf of: (a) an “employee benefit plan” within the meaning of Section 3(3) of ERISA, that is subject to Part 4 of Title I of ERISA; (b) a “plan” within the meaning of section 4975(e)(1) of the Code that is subject to section 4975 of the Code or (c) any other entity that is deemed under applicable law to hold the assets of a plan described in (a) or (b) and this representation shall be deemed to be continuing in nature for all periods that this Security Instrument is in effect. Each Plan is in compliance with, and has been administered in all material respects in compliance with, its terms and the applicable provisions of ERISA, the Code and any other applicable Legal Requirement, except to the extent the foregoing could not have a Material Adverse Effect, and no event or condition has occurred and is continuing as to which Borrower would be under an obligation to furnish a report to Lender under clause (ii)(A) of this Section. With respect to each Plan maintained or contributed to by Borrower, Guarantor or any ERISA Affiliate thereof (a) there is no actual or contingent material liability of Borrower, Guarantor or any ERISA Affiliate under Title IV of ERISA or Section 412 of the Code to any person or entity, including the Pension Benefit Guaranty Corporation, IRS, any such Plan or participants (or their beneficiaries) in any such Plan (other than the obligation to pay routine benefit claims when due under the terms of such Plan), (b) the assets of Borrower or Guarantor have not been subject to a lien under ERISA or the Code and (c) there is no basis for such material liability or the assertion of any such lien with respect to the assets of Borrower or Guarantor as the result of or after the consummation of the transactions contemplated by this Security Instrument. Except to the extent the following could not have a Material Adverse Effect, no Welfare Plan provides or will provide benefits, including, without limitation, death or medical benefits (whether or not insured) with respect to any current or former employee of Borrower or Guarantor beyond his or her retirement or other termination of service other than (A) coverage mandated by applicable law, (B) death or disability benefits that have been fully provided for by fully paid up insurance or (C) severance benefits.

     (ii) Borrower will furnish to Lender as soon as possible, and in any event within ten (10) days after Borrower knows or has reason to believe that any of the events or conditions specified below with respect to any Plan, Welfare Plan or Multiemployer Plan has occurred or exists, an Officer’s Certificate setting forth details respecting such event or condition and the action, if any, that Borrower or its ERISA Affiliate proposes to take with respect thereto (and a copy of any report or notice required to be filed with or given to PBGC (or any other relevant Governmental Authority)) by Borrower or an ERISA

27

Affiliate with respect to such event or condition, if such report or notice is required to be filed with the PBGC or any other relevant Governmental Authority:

     (A) any reportable event, as defined in Section 4043 of ERISA and the regulations issued thereunder, with respect to a Plan, as to which PBGC has not by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within thirty (30) days of the occurrence of such event (provided that a failure to meet the minimum funding standard of Section 412 of the Code and of Section 302 of ERISA, including, without limitation, the failure to make on or before its due date a required installment under Section 412(m) of the Code and of Section 302(e) of ERISA, shall be a reportable event regardless of the issuance of any waivers in accordance with Section 412(d) of the Code), and any request for a waiver under Section 412(d) of the Code for any Plan;

     (B) the distribution under Section 4041 of ERISA of a notice of intent to terminate any Plan or any action taken by Borrower or an ERISA Affiliate to terminate any Plan;

     (C) the institution by PBGC of proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by Borrower or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by PBGC with respect to such Multiemployer Plan;

     (D) the complete or partial withdrawal from a Multiemployer Plan by Borrower or any ERISA Affiliate that results in material liability under Section 4201 or 4204 of ERISA (including the obligation to satisfy secondary liability as a result of a purchaser default) or the receipt by Borrower or any ERISA Affiliate of notice from a Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or that it intends to terminate or has terminated under Section 4041A of ERISA;

     (E) the institution of a proceeding by a fiduciary of any Multiemployer Plan against Borrower or any ERISA Affiliate to enforce Section 515 of ERISA, which proceeding is not dismissed within thirty (30) days;

     (F) the adoption of an amendment to any Plan that, pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA, would result in the loss of tax-exempt status of the trust of which such Plan is a part if Borrower or an ERISA Affiliate fails to timely provide security to the Plan in accordance with the provisions of said Sections;

     (G) the imposition of a lien or a security interest in connection with a Plan; or

     (H) Borrower or Guarantor permits any Welfare Plan to provide benefits, including without limitation, medical benefits (whether or not insured), with respect to any current or former employee of Borrower or Guarantor beyond his or her retirement or other termination of service other than (1) coverage mandated by applicable law, (2) death or disability benefits that have been fully provided for by paid up insurance or otherwise or (3) severance benefits.

     (iii) Borrower shall not knowingly engage in or permit any transaction in connection with which Borrower or Guarantor could be subject to either a material civil penalty or tax assessed pursuant to Section 502(i) or 502(l) of ERISA or Section 4975 of the Code, to the extent it could have a Material Adverse Effect, permit any Welfare Plan to provide benefits, including without limitation, medical benefits (whether or not insured), with respect to any current or former employee of Borrower or Guarantor beyond his or her retirement or other termination of service other than (A) coverage mandated by applicable law, (B) death or disability benefits that have been fully provided for by paid up insurance or otherwise or (C) severance benefits, permit the assets of Borrower or Guarantor to become “plan assets”, as defined under

28

ERISA Section 3(42) and regulations promulgated thereunder or, to the extent it could have a Material Adverse Effect, adopt, amend (except as may be required by applicable law) or increase the amount of any benefit or amount payable under, or permit any ERISA Affiliate to adopt, amend (except as may be required by applicable law) or increase the amount of any benefit or amount payable under, any employee benefit plan (including, without limitation, any employee welfare benefit plan) or other plan, policy or arrangement, except for normal increases in the ordinary course of business consistent with past practice that, in the aggregate, do not result in a material increase in benefits expense to Borrower, Guarantor or any ERISA Affiliate.

     (u) Labor Matters. No organized work stoppage or labor strike is pending or threatened by employees or other laborers at the Property and neither Borrower nor Manager (i) is involved in or threatened with any labor dispute, grievance or litigation relating to labor matters involving any employees and other laborers at the Property, including, without limitation, violation of any federal, state or local labor, safety or employment laws (domestic or foreign) and/or charges of unfair labor practices or discrimination complaints; (ii) has engaged in any unfair labor practices within the meaning of the National Labor Relations Act or the Railway Labor Act; or (iii) except to the extent previously disclosed to Lender in writing, is a party to, or bound by, any collective bargaining agreement or union contract with respect to employees and other laborers at the Property and no such agreement or contract is currently being negotiated by Borrower, Manager or any of their Affiliates.

     (v) Borrower’s Legal Status. Borrower’s exact legal name that is indicated on the signature page hereto, organizational identification number and place of business or, if more than one, its chief executive office, as well as Borrower’s mailing address, if different, which were identified by Borrower to Lender and contained in this Security Instrument, are true, accurate and complete. Borrower (i) will not change its name, its place of business or, if more than one place of business, its chief executive office, or its mailing address or organizational identification number if it has one without giving Lender at least thirty (30) days prior written notice of such change, (ii) if Borrower does not have an organizational identification number and later obtains one, Borrower shall promptly notify Lender of such organizational identification number and (iii) will not change its type of organization, jurisdiction of organization or other legal structure.

     (w) Compliance with Anti-Terrorism, Embargo and Anti-Money Laundering Laws. (i) None of Borrower, General Partner, any Guarantor, or any Person who owns any equity interest in or Controls Borrower, General Partner or any Guarantor currently is identified on the OFAC List or otherwise qualifies as a Prohibited Person, and Borrower has implemented procedures, approved by Borrower and, if applicable, General Partner, to ensure that no Person who now or hereafter owns an equity interest in Borrower or General Partner is a Prohibited Person or Controlled by a Prohibited Person, (ii) no proceeds of the Loan will be used to fund any operations in, finance any investments or activities in or make any payments to, Prohibited Persons, and (iii) none of Borrower, General Partner, or any Guarantor is in violation of any Legal Requirements relating to anti-money laundering or anti-terrorism, including, without limitation, Legal Requirements related to transacting business with Prohibited Persons or the requirements of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, U.S. Public Law 107-56, and the related regulations issued thereunder, including temporary regulations, all as amended from time to time. Notwithstanding the foregoing, with respect to the holders of shares in publicly traded corporations which hold an equity interest in Borrower, General Partner or Guarantor and which holders of shares in publicly traded corporations do not Control Borrower, General Partner or Guarantor, the representations contained in clauses (i) and (iii) of the preceding sentence are made to the knowledge of Borrower. No tenant at the Property currently is identified on the OFAC List or otherwise qualifies as a Prohibited Person, and, to the best of Borrower’s knowledge, no tenant at the Property is owned or Controlled by a Prohibited Person. Borrower has determined that Manager has implemented procedures, approved by Borrower, to ensure that no tenant at the Property is a Prohibited Person or owned or Controlled by a Prohibited Person.

     Section 2.03. Further Acts, etc. Borrower will, at the cost of Borrower, and without expense to Lender, do, execute, acknowledge and deliver all and every such further acts, deeds, conveyances, mortgages or deeds of trust, as applicable, assignments, notices of assignments, transfers and assurances as Lender shall, from time to time, reasonably require for the better assuring, conveying, assigning, transferring, and confirming unto Lender the property and rights hereby mortgaged, given, granted, bargained, sold, alienated, enfeoffed, conveyed, confirmed,

29

pledged, assigned and hypothecated, or which Borrower may be or may hereafter become bound to convey or assign to Lender, or for carrying out or facilitating the performance of the terms of this Security Instrument or for filing, registering or recording this Security Instrument and, on demand, will execute and deliver and hereby authorizes Lender to execute in the name of Borrower or without the signature of Borrower to the extent Lender may lawfully do so, one or more financing statements, chattel mortgages or comparable security instruments to evidence more effectively the lien hereof upon the Property. Borrower grants to Lender an irrevocable power of attorney coupled with an interest for the purpose of protecting, perfecting, preserving and realizing upon the interests granted pursuant to this Security Instrument and to effect the intent hereof, all as fully and effectually as Borrower might or could do; and Borrower hereby ratifies all that Lender shall lawfully do or cause to be done by virtue hereof; provided, however, that Lender shall not exercise such power of attorney unless and until Borrower fails to take the required action within the five (5) Business Day time period stated above unless the failure to so exercise, could, in Lender’s reasonable judgment, result in a Material Adverse Effect. Upon (a) receipt of an affidavit of an officer of Lender as to the loss, theft, destruction or mutilation of the Note or any other Loan Document which is not of public record, (b) receipt of an indemnity of Lender related to losses resulting solely from the issuance of a replacement note or other applicable Loan Document and (c) in the case of any such mutilation, upon surrender and cancellation of such Note or other applicable Loan Document, Borrower will issue, in lieu thereof, a replacement Note or other applicable Loan Document, dated the date of such lost, stolen, destroyed or mutilated Note or other Loan Document in the same principal amount thereof and otherwise of like tenor.

     Section 2.04. Recording of Security Instrument, etc. Borrower forthwith upon the execution and delivery of this Security Instrument and thereafter, from time to time, will cause this Security Instrument, and any security instrument creating a lien or security interest or evidencing the lien hereof upon the Property and each instrument of further assurance to be filed, registered or recorded in such manner and in such places as may be required by any present or future law in order to publish notice of and fully protect the lien or security interest hereof upon, and the interest of Lender in, the Property. Borrower will pay all filing, registration or recording fees, and all expenses incident to the preparation, execution and acknowledgment of this Security Instrument, any mortgage or deed of trust, as applicable, supplemental hereto, any security instrument with respect to the Property and any instrument of further assurance, and all federal, state, county and municipal, taxes, duties, imposts, assessments and charges arising out of or in connection with the execution and delivery of this Security Instrument, any mortgage or deed of trust, as applicable, supplemental hereto, any security instrument with respect to the Property or any instrument of further assurance, except where prohibited by law to do so, in which event Lender may declare the Debt to be immediately due and payable. Borrower shall hold harmless and indemnify Lender and its successors and assigns, against any liability incurred as a result of the imposition of any tax on the making and recording of this Security Instrument.

     Section 2.05. Representations, Warranties and Covenants Relating to the Property. Borrower represents and warrants to and covenants with Lender with respect to the Property as follows:

     (a) Lien Priority. This Security Instrument is a valid and enforceable first lien on the Property, free and clear of all encumbrances and liens having priority over the lien of this Security Instrument, except for the items set forth as exceptions to or subordinate matters in the title insurance policy insuring the lien of this Security Instrument, none of which, individually or in the aggregate, materially interfere with the benefits of the security intended to be provided by this Security Instrument, materially affect the value or marketability of the Property, impair the use or operation of the Property for the use currently being made thereof or impair Borrower’s ability to pay its obligations in a timely manner (such items being the “Permitted Encumbrances”).

     (b) Title. Borrower has, subject only to the Permitted Encumbrances, good, insurable and marketable fee simple title to the Premises, Improvements and Fixtures (collectively, the “Realty”) and to all easements and rights benefiting the Realty and has the right, power and authority to mortgage, encumber, give, grant, bargain, sell, alien, enfeoff, convey, confirm, pledge, assign, and hypothecate the Property. Borrower will preserve its interest in and title to the Property, subject to the Permitted Encumbrances and will forever warrant and defend the same to Lender against any and all other claims made by, through or under Borrower and will forever warrant and defend the validity and priority of the lien and security interest created herein against the claims of all Persons whomsoever claiming by, through or under Borrower. The foregoing warranty of title shall survive the foreclosure of this

30

Security Instrument and shall inure to the benefit of and be enforceable by Lender in the event Lender acquires title to the Property pursuant to any foreclosure. In addition, there are no outstanding options or rights of first refusal to purchase the Property or Borrower’s ownership thereof.

     (c) Taxes and Impositions. All taxes and other Impositions and governmental assessments due and owing in respect of, and affecting, the Property have been paid. Borrower has paid all Impositions which constitute special governmental assessments in full, except for those assessments which are permitted by applicable Legal Requirements to be paid in installments, in which case all installments which are due and payable have been paid in full. There are no pending, or to Borrower’s best knowledge, proposed special or other assessments for public improvements or otherwise affecting the Property, nor are there any contemplated improvements to the Property that may result in such special or other assessments.

     (d) Casualty; Flood Zone. The Realty is in good repair and free and clear of any damage, destruction or casualty (whether or not covered by insurance) that would materially affect the value of the Realty or the use for which the Realty was intended, there exists no structural or other material defects or damages in or to the Property and Borrower has not received any written notice from any insurance company or bonding company of any material defect or inadequacies in the Property, or any part thereof, which would materially and adversely affect the insurability of the same or cause the imposition of extraordinary premiums or charges thereon or of any termination or threatened termination of any policy of insurance or bond. Except as disclosed on the survey of the Premises delivered to Lender in connection with the origination of the Loan, no portion of the Premises is located in an “area of special flood hazard,” as that term is defined in the regulations of the Federal Insurance Administration, Department of Housing and Urban Development, under the National Flood Insurance Act of 1968, as amended (24 CFR § 1909.1) or Borrower has obtained the flood insurance required by Section 3.01(a)(vi) hereof. The Premises either does not lie in a 100 year flood plain that has been identified by the Secretary of Housing and Urban Development or any other Governmental Authority or, if it does, Borrower has obtained the flood insurance required by Section 3.01(a)(vi) hereof.

     (e) Completion; Encroachment. All Improvements necessary for the efficient use and operation of the Premises, including, without limitation, all Improvements which were included for purposes of determining the appraised value of the Property in the Appraisal, have been completed and, except as disclosed on the survey of the Premises delivered to Lender in connection with the origination of the Loan, none of said Improvements lie outside the boundaries and building restriction lines of the Premises. Except as disclosed on the survey of the Premises delivered to Lender in connection with the origination of the Loan and as set forth in the title insurance policy insuring the lien of this Security Instrument, no improvements on adjoining properties encroach upon the Premises.

     (f) Separate Lot. The Premises are taxed separately without regard to any other real estate and constitute a legally subdivided lot under all applicable Legal Requirements (or, if not subdivided, no subdivision or platting of the Premises is required under applicable Legal Requirements), and for all purposes may be mortgaged, encumbered, conveyed or otherwise dealt with as an independent parcel. The Property does not benefit from any tax abatement or exemption.

     (g) Use. Except as previously disclosed in the zoning report relating to the Premises delivered to Lender in connection with the origination of the Loan, the existence of all Improvements, the present use and operation thereof and the access of the Premises and the Improvements to all of the utilities and other items referred to in paragraph (k) below are in compliance in all material respects with all Leases affecting the Property. Borrower has not received any notice from any Governmental Authority alleging any uncured violation relating to the Property of any applicable Legal Requirements.

     (h) Licenses and Permits. Borrower currently holds and will continue to hold all certificates of occupancy, licenses, registrations, permits, consents, franchises and approvals of any Governmental Authority or any other Person which are material for the lawful occupancy and operation of the Realty or which are material to the ownership or operation of the Property or the conduct of Borrower’s business. All such certificates of occupancy, licenses, registrations, permits, consents, franchises and approvals are current and in full force and effect.

31

     (i) Environmental Matters. Borrower has received and reviewed the Environmental Report and has no reason to believe that the Environmental Report contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained therein or herein, in light of the circumstances under which such statements were made, not misleading.

     (j) Property Proceedings. There are no actions, suits or proceedings pending or, to Borrower’s best knowledge, threatened in any court or before any Governmental Authority or arbitration board or tribunal (i) relating to (A) the zoning of the Premises or any part thereof, (B) any certificates of occupancy, licenses, registrations, permits, consents or approvals issued with respect to the Property or any part thereof, (C) the condemnation of the Property or any part thereof, or (D) the condemnation or relocation of any roadways abutting the Premises required for access or the denial or limitation of access to the Premises or any part thereof from any point of access to the Premises, (ii) asserting that (A) any such zoning, certificates of occupancy, licenses, registrations, permits, consents and/or approvals do not permit the operation of any material portion of the Realty as presently being conducted, (B) any material improvements located on the Property or any part thereof cannot be located thereon or operated with their intended use or (C) the operation of the Property or any part thereof is in violation in any material respect of any Environmental Statutes, Development Laws or other Legal Requirements or Space Leases or Property Agreements or (iii) which might (A) affect the validity or priority of any Loan Document or (B) have a Material Adverse Effect. Borrower is not aware of any facts or circumstances which may give rise to any actions, suits or proceedings described in the preceding sentence.

     (k) Utilities. The Premises has all necessary legal access to water, gas and electrical supply, storm and sanitary sewerage facilities, other required public utilities (with respect to each of the aforementioned items, by means of either a direct connection to the source of such utilities or through connections available on publicly dedicated roadways directly abutting the Premises or through permanent insurable easements benefiting the Premises), fire and police protection, parking, and means of direct access between the Premises and public highways over recognized curb cuts (or such access to public highways is through private roadways which may be used for ingress and egress pursuant to permanent insurable easements).

     (l) Mechanics’ Liens. The Property is free and clear of any mechanics’ liens or liens in the nature thereof, and no rights are outstanding that under law could give rise to any such liens, any of which liens are or may be prior to, or equal with, the lien of this Security Instrument, except those which are insured against by the title insurance policy insuring the lien of this Security Instrument.

     (m) Title Insurance. Lender has received a lender’s title insurance policy insuring this Security Instrument as a first lien on the Realty subject only to Permitted Encumbrances.

     (n) Insurance. The Property is insured in accordance with the requirements set forth in Article III hereof.

     (o) Space Leases.

     (i) To Borrower’s best knowledge, Borrower has delivered a true, correct and complete schedule of all Space Leases as of the date hereof, which accurately and completely sets forth in all material respects, for each such Space Lease, the following (collectively, the “Rent Roll”): the name and address of the tenant; the lease expiration date, extension and renewal provisions; the base rent and percentage rent payable; and the security deposit held thereunder.

     (ii) Each Space Lease constitutes the legal, valid and binding obligation of Borrower or, the Operating Tenant, as applicable, and, to the knowledge of Borrower, is enforceable against the tenant thereof. No default exists, or with the passing of time or the giving of notice would exist, which would, in the aggregate, have a Material Adverse Effect.

32

     (iii) To Borrower’s best knowledge, no tenant under any Major Space Lease has, as of the date hereof, paid Rent more than thirty (30) days in advance, and the Rents under such Major Space Leases have not been waived, released, or otherwise discharged or compromised.

     (iv) To Borrower’s best knowledge, except as disclosed in writing to Lender, all work to be performed by Borrower under the Space Leases has been substantially performed, all contributions to be made by Borrower to the tenants thereunder have been made except for any held-back amounts, and all other conditions precedent to each such tenant’s obligations thereunder have been satisfied.

     (v) To Borrower’s best knowledge, except as previously disclosed to Lender in writing or contained in the Space Leases, there are no options to terminate any Space Lease.

     (vi) To Borrower’s best knowledge, each tenant under a Major Space Lease or such tenant’s authorized subtenant is currently occupying the space demised by such Major Space Lease.

     (vii) To Borrower’s best knowledge, Borrower has delivered to Lender true, correct and complete copies of all Space Leases described in the Rent Roll.

     (viii) No Space Lease has been assigned or, to Borrower’s best knowledge, modified, supplemented or amended in any way.

     (ix) To Borrower’s best knowledge, each tenant under each Space Lease is free from bankruptcy, reorganization or arrangement proceedings or a general assignment for the benefit of creditors.

     (x) To Borrower’s best knowledge, no Space Lease provides any party with the right to obtain a lien or encumbrance upon the Property superior to the lien of this Security Instrument.

     (p) Property Agreements.

     (i) Borrower has delivered to Lender true, correct and complete copies of all Property Agreements of record or which could bind any owner of the Property other than Borrower.

     (ii) No Property Agreement provides any party with the right to obtain a lien or encumbrance upon the Property superior to the lien of this Security Instrument.

     (iii) No default exists or with the passing of time or the giving of notice or both would exist under any Property Agreement which would, individually or in the aggregate, have a Material Adverse Effect.

     (iv) Borrower has not received or given any written communication which alleges that a default exists or, with the giving of notice or the lapse of time, or both, would exist under the provisions of any Property Agreement.

     (v) No condition currently exists whereby Borrower or any future owner of the Property may be required to purchase any other parcel of land which is subject to any Property Agreement or which gives any Person a right to purchase, or right of first refusal with respect to, the Property.

     (vi) To the best knowledge of Borrower, no offset or any right of offset exists respecting continued contributions to be made by any party to any Property Agreement except as expressly set forth therein. Except as previously disclosed to Lender in writing, no material exclusions or restrictions on the utilization, leasing or improvement of the Property (including non-compete agreements) exists in any Property Agreement.

33

     (vii) Except as previously disclosed in writing to Lender, all work, if any, required to be performed by Borrower prior to the date hereof under each of the Property Agreements has been substantially performed, all contributions to be made by Borrower to any party to such Property Agreements have been made, and all other conditions to such party’s obligations thereunder have been satisfied.

     (q) Personal Property. Except as previously disclosed in writing to Lender, Borrower represents that it or Operating Tenant has good and marketable title to all personal property used in connection with the operation of the Property, free and clear of any liens, except for liens created under the Loan Documents and liens which describe the equipment and other personal property owned by tenants and upon termination of any Operating Lease any personal property owned by Operating Tenant will be transferred free and clear of any liens to Borrower.

     (r) Leasing Brokerage and Management Fees. Except as previously disclosed to Lender in writing, there are no brokerage fees or commissions payable by Borrower with respect to the leasing of space at the Property.

     (s) Security Deposits. Borrower is in compliance with all Legal Requirements relating to such security deposits as to which failure to comply might, individually or in the aggregate, have a Material Adverse Effect.

     (t) Loan to Value Ratio. To the best knowledge of Borrower, based on the substantial real estate expertise of Borrower, Borrower’s familiarity with the Property, and the Appraisal (which Borrower believes to contain a reasonable assessment of the fair market value of the Property), the Initial Allocated Loan Amount does not exceed one hundred twenty-five percent (125%) of the fair market value of the Property. For the purposes of this clause (t), the term “fair market value” shall be reduced by (i) the amount of any indebtedness secured by a lien affecting the Property that is prior to, or on a parity with, the lien of this Security Instrument, and (ii) the value of any property that is not “real property” within the meaning of Treas. Reg. §§ 1.860G-2 and 1.856-3(d).

     (u) Representations Generally. The representations and warranties contained in this Security Instrument, and the review and inquiry made on behalf of Borrower therefor, have all been made by Persons having the requisite expertise and knowledge to provide such representations and warranties. No representation, warranty or statement of fact made by or on behalf of Borrower in this Security Instrument or in any certificate, document or schedule furnished to Lender pursuant hereto, contains any untrue statement of a material fact or omits to state any material fact necessary to make statements contained therein or herein not misleading (which may be to Borrower’s best knowledge where so provided herein). There are no facts presently known to Borrower which have not been disclosed to Lender which would, individually or in the aggregate, have a Material Adverse Effect nor as far as Borrower can foresee might, individually or in the aggregate, have a Material Adverse Effect.

     (v) Liquor License. All licenses, permits, approvals and consents which are required for the sale and service of alcoholic beverages on the Premises have been obtained from the applicable Governmental Authorities.

     Section 2.06. Removal of Lien. (a) Borrower shall, at its expense, maintain this Security Instrument as a first lien on the Property and shall keep the Property free and clear of all liens and encumbrances of any kind and nature other than the Permitted Encumbrances. Borrower shall, within thirty (30) days following receipt of knowledge of any lien, promptly discharge of record, by bond or otherwise, any such liens and, promptly upon request by Lender, shall deliver to Lender evidence reasonably satisfactory to Lender of the discharge thereof.

     (b) Without limitation to the provisions of Section 2.06(a) hereof, Borrower shall (i) pay, from time to time when the same shall become due, all claims and demands of mechanics, materialmen, laborers, and others which, if unpaid, might result in, or permit the creation of, a lien on the Property or any part thereof, (ii) cause to be removed of record (by payment or posting of bond or settlement or otherwise) any mechanics’, materialmens’, laborers’ or other lien on the Property, or any part thereof, or on the revenues, rents, issues, income or profit arising therefrom, and (iii) in general, do or cause to be done, without expense to Lender, everything reasonably necessary to preserve in full the lien of this Security Instrument. If Borrower fails to comply with the requirements of this

34

Section 2.06(b), then, upon five (5) Business Days’ prior notice to Borrower, Lender may, but shall not be obligated to, pay any such lien, and Borrower shall, within five (5) Business Days after Lender’s demand therefor, reimburse Lender for all sums so expended, together with interest thereon at the Default Rate from the date advanced, all of which shall be deemed part of the Debt. Nothing contained herein shall be deemed a consent or request of Lender, express or implied, by inference or otherwise, to the performance of any alteration, repair or other work by any contractor, subcontractor or laborer or the furnishing of any materials by any materialmen in connection therewith.

     (c) Notwithstanding the foregoing, Borrower may contest any lien (other than a lien relating to non-payment of Impositions, the contest of which shall be governed by Section 4.04 hereof) of the type set forth in subparagraph (b)(ii) of this Section 2.06 provided that, following prior notice to Lender (i) Borrower is contesting the validity of such lien with due diligence and in good faith and by appropriate proceedings, without cost or expense to Lender or any of its agents, employees, officers, or directors, (ii) Borrower shall preclude the collection of, or other realization upon, any contested amount from the Property or any revenues from or interest in the Property, (iii) neither the Property nor any part thereof nor interest therein, shall be in any danger of being sold, forfeited or lost by reason of such contest by Borrower, (iv) such contest by Borrower shall not affect the ownership, use or occupancy of the Property, (v) such contest by Borrower shall not subject Lender or Borrower to the risk of civil or criminal liability (other than the civil liability of Borrower for the amount of the lien in question), (vi) such lien is subordinate to the lien of this Security Instrument, (vii) Borrower has not consented to such lien, (viii) Borrower has given Lender prompt notice of the filing of such lien and the bonding thereof by Borrower and, upon request by Lender from time to time, notice of the status of such contest by Borrower and/or confirmation of the continuing satisfaction of the conditions set forth in this Section 2.06(c), (ix) Borrower shall promptly pay the obligation secured by such lien upon a final determination of Borrower’s liability therefor, and (x) Borrower shall deliver to Lender cash, a bond or other security acceptable to Lender equal to 125% of the contested amount pursuant to collateral arrangements reasonably satisfactory to Lender.

     Section 2.07. Cost of Defending and Upholding this Security Instrument Lien. If any action or proceeding is commenced to which Lender is made a party relating to the Loan Documents and/or the Property or Lender’s interest therein or in which it becomes necessary to defend or uphold the lien of this Security Instrument or any other Loan Document, Borrower shall, on demand, reimburse Lender for all expenses (including, without limitation, reasonable attorneys’ fees and disbursements) incurred by Lender in connection therewith, and such sum, together with interest thereon at the Default Rate from and after such demand until fully paid, shall constitute a part of the Debt.

     Section 2.08. Use of the Property. Borrower will use, or cause to be used, the Property for such use as is permitted pursuant to applicable Legal Requirements including, without limitation, under the certificate of occupancy applicable to the Property, and which is required by the Loan Documents. Borrower shall not suffer or permit the Property or any portion thereof to be used by the public, any tenant, or any Person not subject to a Lease, in a manner as is reasonably likely to impair Borrower’s title to the Property, or in such manner as may give rise to a claim or claims of adverse usage or adverse possession by the public, or of implied dedication of the Property or any part thereof.

     Section 2.09. Financial Reports. (a) Borrower will keep and maintain or will cause to be kept and maintained on a Fiscal Year basis, in accordance with GAAP and The Uniform System of Accounts (or such other accounting basis reasonably acceptable to Lender) consistently applied, proper and accurate books, tax returns, records and accounts reflecting (i) all of the financial affairs of Borrower and Guarantor and (ii) all items of income and expense in connection with the operation of the Property or in connection with any services, equipment or furnishings provided in connection with the operation thereof, whether such income or expense may be realized by Borrower or by any other Person whatsoever, excepting lessees unrelated to and unaffiliated with Borrower who have leased from Borrower portions of the Premises for the purpose of occupying the same. Lender shall have the right from time to time at all times during normal business hours upon reasonable notice to examine such books, tax returns, records and accounts at the office of Borrower or other Person maintaining such books, tax returns, records and accounts and to make such copies or extracts thereof as Lender shall desire. After the occurrence of an Event of Default, Borrower shall pay any costs and expenses incurred by Lender to examine Borrower’s and Guarantor’s

35

accounting records with respect to the Property, as Lender shall determine to be necessary or appropriate in the protection of Lender’s interest.

     (b) Borrower will furnish Lender (i) annually, within one hundred twenty (120) days following the end of each Fiscal Year of Borrower and (ii) on a quarterly basis, within forty-five (45) days following the end of each fiscal quarter of Borrower, with a complete copy of Borrower’s financial statement consistently applied covering (i) all of the financial affairs of Borrower and (ii) the operation of the Property for such Fiscal Year or fiscal quarters, as applicable, and containing a statement of revenues and expenses, a statement of assets and liabilities and a statement of Borrower’s equity. Each annual financial statement shall be accompanied by audited financial statements of Ashford Hospitality Trust Inc. which are audited by a nationally recognized Independent certified public accountant that is acceptable to Lender in accordance with GAAP and The Uniform System of Accounts (or such other accounting basis reasonably acceptable to Lender). Together with the financial statements required to be furnished pursuant to this Section 2.09(b), Borrower shall furnish to Lender (A) an Officer’s Certificate certifying as of the date thereof (1) that the financial statements accurately represent the results of operations and financial condition of Borrower and the Property all in accordance with GAAP and The Uniform System of Accounts (or such other accounting basis reasonably acceptable to Lender) consistently applied, and (2) whether there exists a Default under the Note or any other Loan Document executed and delivered by Borrower, and if such event or circumstance exists, the nature thereof, the period of time it has existed and the action then being taken to remedy such event or circumstance and (B) together with the financial statements delivered pursuant to Section 2.09(b)(ii) above, a statement showing (1) projected Net Operating Income for the subsequent twelve (12) month period adjusted to reflect the Adjusted Net Cash Flow (subject to verification by Lender in its reasonable discretion) and (2) the calculation of the Aggregate Debt Service Coverage.

     (c) During the continuance of an O&M Operative Period and when requested by Lender, Borrower will furnish Lender monthly, within twenty (20) days following the end of each month, with a true, complete and correct cash flow statement with respect to the Property in the form required to be delivered pursuant to the Management Agreement and made a part hereof or such other form acceptable to Lender, showing (i) all cash receipts of any kind whatsoever and all cash payments and disbursements, (ii) year-to-date summaries of such cash receipts, payments and disbursements, and (iii) during an O&M Operative Period, a calculation of the Aggregate Debt Service Coverage, together with a certification of Manager stating that such cash flow statement is true, complete and correct and a list of all litigation and proceedings affecting Borrower or the Property in which the amount involved is $250,000 or more, if not covered by insurance (or $1,000,000 or more whether or not covered by insurance).

     (d) Intentionally Omitted.

     (e) At any time during which (i) an O&M Operative Period exists or (ii) the Rent under Space Leases exceeds five percent (5%) of the annual Operating Income, Borrower will furnish Lender annually, within twenty (20) days following the end of each year and within twenty (20) days following receipt of such request therefor, with a true, complete and correct rent roll for the Property which includes the information contained on the Rent Roll, including a list of which tenants are in default under their respective Major Space Leases, dated as of the date of Lender’s request, identifying each tenant that has filed a bankruptcy, insolvency, or reorganization proceeding since delivery of the last such rent roll, and the arrearages for such tenant, if any, and, if requested by Lender, a summary of the material terms of the Major Space Leases, including, without limitation, the dates of occupancy, the dates of expiration, any Rent concessions, work obligations or other inducements granted to the tenants thereunder, and any renewal options, and such rent roll shall be accompanied by an Officer’s Certificate, dated as of the date of the delivery of such rent roll, certifying that such rent roll is true, correct and complete in all material respects as of its date.

     (f) Borrower shall furnish to Lender, within thirty (30) days after Lender’s request therefor, with such further detailed information with respect to the operation of the Property and the financial affairs of Borrower as may be reasonably requested by Lender.

36

     (g) Borrower shall cause Manager to furnish to Lender, within twenty (20) days following the end of each year, a schedule of tenant security deposits to the extent such security deposits aggregate $1,000,000 or more.

     (h) Borrower will furnish Lender annually, within ninety (90) days after the end of each Fiscal Year, with a report setting forth (i) the average occupancy rate of the Property during such Fiscal Year, and (ii) the capital repairs, replacements and improvements performed at the Property during such Fiscal Year and the aggregate Recurring Replacement Expenditures made in connection therewith.

     (i) Borrower will furnish Lender monthly, within thirty (30) days following the end of each month, an occupancy summary for the Property setting forth the occupancy rates, average daily room rates, advance booking information (excluding customer names), RevPAR Yield Index, RevPAR and room revenues for each month of the preceding calendar year, as well as annual averages of the same, and such other information as may customarily be reflected thereon or reasonably requested by Lender, together with all franchise inspection reports and STR Reports received by Borrower during the preceding month.

     (j) Borrower shall and shall cause Guarantor to furnish to Lender annually, within thirty (30) days of filing its respective tax return, a copy of such tax return.

     (k) Borrower shall submit to Lender for Lender’s written approval (provided that such approval shall only be required in the event that Borrower or any Affiliate of Borrower has the right to approve any such budget pursuant to the terms of the Management Agreement) not to be unreasonably withheld, an Annual Budget within ten (10) Business Days after receipt thereof from Manager, in form satisfactory to Lender setting forth in reasonable detail budgeted monthly operating income and monthly operating capital and other expenses for the Property. In the event Lender shall have the right to approve such Annual Budget and Lender objects to the proposed Annual Budget submitted by Borrower, Lender shall advise Borrower of such objections within fifteen (15) days after receipt thereof (and deliver to Borrower a reasonably detailed description of such objections) and Borrower shall, within three (3) days after receipt of notice of any such objections, revise such Annual Budget and resubmit the same to Lender. Lender shall advise Borrower of any objections to such revised Annual Budget within ten (10) days after receipt thereof (and deliver to Borrower a reasonably detailed description of such objections) and Borrower shall revise the same in accordance with the process described herein until Lender approves an Annual Budget, provided, however, that if Lender shall not advise Borrower of its objections to any proposed Annual Budget within the applicable time period set forth in this Section, then such proposed Annual Budget shall be deemed approved by Lender. If Lender has the right to approve the Annual Budget pursuant to the terms of the Management Agreement, until such time that Lender approves a proposed Annual Budget, the most recently Approved Annual Budget shall, except as otherwise provided in the Management Agreement, apply; provided that, such Approved Annual Budget shall be adjusted to reflect actual increases in Basic Carrying Costs and utilities expenses and to delete any non-recurring expenses. In the event that Borrower must incur an Extraordinary Expense, then Borrower shall promptly deliver to Lender a reasonably detailed explanation of such proposed Extraordinary Expense which, if Borrower has the right to approve such expenditures pursuant to the terms of the Management Agreement, shall be subject to Lender’s approval, which approval may be granted or denied in Lender’s reasonable discretion.

     (l) In the event that Borrower fails to deliver any of the financial statements, reports or other information required to be delivered to Lender pursuant to this Section 2.09 on or prior to their due dates, if any such failure shall continue for ten (10) days following notice thereof from Lender, Borrower shall pay to Lender on each Payment Date for each month or portion thereof that any such financial statement, report or other information remains undelivered, an administrative fee in the amount of Two Thousand Five Hundred Dollars ($2,500) in the aggregate for all failures occurring in any applicable month. Borrower agrees that such administrative fee (i) is a fair and reasonable fee necessary to compensate Lender for its additional administrative costs and increased costs relating to Borrower’s failure to deliver the aforementioned statements, reports or other items as and when required hereunder and (ii) is not a penalty.

     Section 2.10. Litigation. Borrower will give prompt written notice to Lender of any litigation or governmental proceedings pending or threatened (in writing) against Borrower which might have a Material Adverse Effect.

37

     Section 2.11. Updates of Representations. Borrower shall deliver to Lender within ten (10) Business Days of the request of Lender an Officer’s Certificate updating all of the representations and warranties contained in this Security Instrument and the other Loan Documents and certifying that all of the representations and warranties contained in this Security Instrument and the other Loan Documents, as updated pursuant to such Officer’s Certificate, are true, accurate and complete in all material respects as of the date of such Officer’s Certificate or shall set forth the exceptions to representations and/or warranties in reasonable detail, as applicable, and, upon Lender’s request for further information with respect to such exceptions, shall provide Lender such additional information as Lender may reasonably request

     Section 2.12. Tenancy-in-Common. In the event that title to the Property is held by tenants-in-common, Borrower has delivered a true and complete written tenancy-in-common agreement (the “TIC Agreement”) which has been duly executed by each tenant-in-common having an interest in the Property (each, a “TIC”). The TIC Agreement provides, or, if not otherwise provided for in the TIC Agreement, each TIC agrees, that (a) each TIC irrevocably waives any and all rights of partition available at law, in equity or by contract, (b) each TIC shall at all times be a Single Purpose Entity all of the legal and beneficial interest in which is owned by an “Accredited Investor” as defined in Regulation D, as promulgated under the Securities Act, (c) each TIC irrevocably waives any and all rights it may have at law or in equity to obtain a lien on any tenant-in-common interest in the Property, (d) each TIC agrees that (i) any liens, security interests, judgment liens, charges or other encumbrances upon the Property or any interest of another TIC in the Property and (ii) any options to purchase or rights of first refusal or similar rights with respect to another TIC’s interest in the Property shall be and remain inferior and subordinate to any liens, security interests, judgment liens, charges or other encumbrances upon Borrower’s assets securing payment of the Debt, regardless of whether such liens, security interests, judgment liens, charges or other encumbrances, rights or options presently exist or are hereafter created or attach and that no TIC shall (i) exercise or enforce any creditor’s right it may have against Borrower or any other TIC or (ii) foreclose, repossess, sequester or otherwise take steps or institute any action or proceedings (judicial or otherwise, including without limitation the commencement of, or joinder in, any liquidation, bankruptcy, rearrangement, debtor’s relief or insolvency proceeding) to enforce any liens, security interests, judgment liens, charges or other encumbrances on assets of Borrower or any other TIC, (e) at no time shall there be more than three (3) TICs with respect to the Property, (f) the minimum investment in the Property of each TIC shall be $500,000 and (g) Lender is a third-party beneficiary to the provisions relating to the items set forth in (a) through (f) above. Borrower shall not amend, modify or terminate the TIC Agreement.

ARTICLE III: INSURANCE AND CASUALTY RESTORATION

     Section 3.01. Insurance Coverage. Borrower shall, at its expense, maintain or cause to be maintained the following insurance coverages with respect to the Property during the term of this Security Instrument:

(a) (i) Insurance against loss or damage by fire, casualty and other hazards included in an “all-risk” coverage endorsement or its equivalent (which, in the case of insurance during the time of any construction work (“Construction”) shall be in “builder’s risk completed value non-reporting form” together with rents, earnings and extra expense insurance covering loss due to delay in completion of the Improvements), with such endorsements as Lender may from time to time reasonably require and which are customarily required by Institutional Lenders of similar properties similarly situated, including, without limitation, if the Property constitutes a legal non-conforming use, an ordinance of law coverage endorsement which contains “Demolition Cost”, “Loss Due to Operation of Law” and “Increased Cost of Construction” coverages, covering the Property in an amount not less than the greater of (A) 100% of the insurable replacement value of the Property (exclusive of the Premises and footings and foundations) and (B) such other amount as is necessary to prevent any reduction in such policy by reason of and to prevent Borrower, Lender or any other insured thereunder from being deemed to be a co-insurer. Not less frequently than once every three (3) years, Borrower, at its option, shall either (A) have the Appraisal updated or obtain a new appraisal of the Property, (B) have a valuation of the Property made by or for its insurance carrier conducted by an appraiser experienced in valuing properties of similar type to that of the Property which are in the geographical area in which the Property is located or (C) provide such other evidence as will, in Lender’s sole judgment, enable Lender to determine whether there shall have been an increase in the insurable value

38

of the Property and Borrower shall deliver such updated Appraisal, new appraisal, insurance valuation or other evidence acceptable to Lender, as the case may be, and, if such updated Appraisal, new appraisal, insurance valuation, or other evidence acceptable to Lender reflects an increase in the insurable value of the Property, the amount of insurance required hereunder shall be increased accordingly and Borrower shall deliver evidence satisfactory to Lender that such policy has been so increased.

     (ii) Commercial general liability insurance against claims for personal and bodily injury and/or death to one or more persons or property damage, occurring on, in or about the Property (including the adjoining streets, sidewalks and passageways therein) in such amounts as Lender may from time to time reasonably require (but in no event shall Lender’s requirements be increased more frequently than once during each twelve (12) month period) and which are customarily required by Institutional Lenders for similar properties similarly situated, but not less than $1,000,000 per occurrence and $2,000,000 general aggregate on a per location basis and, in addition thereto, not less than $50,000,000, or such lesser amount as is required by the term of the Management Agreement (but in no event less than $10,000,000) excess and/or umbrella liability insurance shall be maintained for any and all claims.

     (iii) Business interruption, rent loss or other similar insurance with an unlimited indemnity period (A) with loss payable to Lender, (B) covering all risks required to be covered by the insurance provided for in Section 3.01(a)(i) hereof and (C) in an amount not less than 100% of the projected total revenues derived from the Property for the succeeding twenty-four (24) month period based on an occupancy rate taking into account historical and projected occupancy. The amount of such insurance shall be determined upon the execution of this Security Instrument, and not more frequently than once each calendar year thereafter based on Borrower’s reasonable estimate of projected total revenues derived from the Property for the next succeeding twenty-four (24) months together with a six (6) month extended period of indemnity. In the event the Property shall be damaged or destroyed, Borrower shall and hereby does assign to Lender all payment of claims under the policies of such insurance, and all amounts payable thereunder, and all net amounts, shall be collected by Lender under such policies and shall be applied in accordance with this Security Instrument.

     (iv) Intentionally Omitted.

     (v) Insurance against loss or damages from (A) leakage of sprinkler systems and (B) explosion of steam boilers, air conditioning equipment, pressure vessels or similar apparatus now or hereafter installed at the Property, in such amounts as Lender may from time to time reasonably require and which are then customarily required by Institutional Lenders of similar properties similarly situated.

     (vi) Flood insurance in an amount equal to the full insurable value of the Property or the maximum amount available, whichever is less, if the Improvements are located in an area designated by the Secretary of Housing and Urban Development as being “an area of special flood hazard” under the National Flood Insurance Program (i.e., having a one percent or greater chance of flooding), and if flood insurance is available under the National Flood Insurance Act.

     (vii) Worker’s compensation insurance or other similar insurance which may be required by Governmental Authorities or Legal Requirements.

     (viii) Insurance against loss resulting from mold, spores or fungus on or about the Premises.

     (ix) Insurance against damage resulting from acts of terrorism, or an insurance policy without an exclusion for damages resulting from terrorism, on terms consistent with the commercial property insurance policy required under subsections (i), (ii) and (iii) above.

     (x) At all times during Construction, contractor’s liability insurance to a limit of not less than $25,000,000 on a per occurrence basis covering each contractor’s construction operation at the Premises.

39

     (xi) Such other insurance as may from time to time be required by Lender and which is then customarily required by Institutional Lenders for similar properties similarly situated, against other insurable hazards, including, but not limited to, malicious mischief, vandalism, sinkhole and mine subsidence, acts of terrorism, war risk, windstorm and/or earthquake, due regard to be given to the size and type of the Premises, Improvements, Fixtures and Equipment and their location, construction and use. Additionally, Borrower shall carry such insurance coverage as Lender may from time to time require if the failure to carry such insurance may result in a downgrade, qualification or withdrawal of any class of securities issued in connection with a Securitization or, if the Loan is not yet part of a Securitization, would result in an increase in the subordination levels of any class of securities anticipated to be issued in connection with a proposed Securitization.

     (xii) If Borrower, any of its Affiliates or Manager holds a liquor license for the Premises, liquor liability insurance in the amount of no less than $10,000,000.

     (xiii) Automobile liability insurance covering owned, hired and not owned vehicles in an amount of not less than $1,000,000 per accident.

     (b) Borrower shall cause any Manager of the Property to maintain fidelity insurance in an amount equal to or greater than the Operating Income of the Property for the six (6) month period immediately preceding the date on which the premium for such insurance is due and payable or such lesser amount as Lender shall approve.

     Section 3.02. Policy Terms. (a) All insurance required by this Article III shall be in the form (other than with respect to Sections 3.01(a)(vi) and (vii) above when insurance in those two sub-sections is placed with a governmental agency or instrumentality on such agency’s forms) and amount and with deductibles as, from time to time, shall be reasonably acceptable to Lender, under valid and enforceable policies issued by financially responsible insurers authorized to do business in the State where the Property is located, with a general policyholder’s service rating of not less than A and a financial rating of not less than XIII as rated in the most currently available Best’s Insurance Reports (or the equivalent, if such rating system shall hereafter be altered or replaced) and shall have a claims paying ability rating and/or financial strength rating, as applicable, of not less than “AA” (or its equivalent), or such lower claims paying ability rating and/or financial strength rating, as applicable, as Lender shall, in its sole and absolute discretion, consent to, from a Rating Agency (one of which after a Securitization in which Standard & Poor’s rates any securities issued in connection with such Securitization, shall be Standard & Poor’s). Upon request of Lender originals or certified copies of all insurance policies shall be delivered to and held by Lender. All such policies (except policies for worker’s compensation) shall name Lender, its successors and/or assigns as an additional insured or, with respect to the insurance required pursuant to Section 3.01(a)(iii) above, shall provide for loss payable to Lender, its successors and/or assigns and shall contain (or have attached): (i) standard “non-contributory mortgagee” endorsement or its equivalent relating, inter alia, to recovery by Lender notwithstanding the negligent or willful acts or omissions of Borrower; (ii) a waiver of subrogation endorsement as to Lender; (iii) an endorsement indicating that neither Lender nor Borrower shall be or be deemed to be a co-insurer with respect to any casualty risk insured by such policies and shall provide for a deductible per loss of an amount not more than $25,000, and (iv) a provision that such policies shall not be canceled, terminated, denied renewal or amended, including, without limitation, any amendment reducing the scope or limits of coverage, without at least thirty (30) days’ prior written notice to Lender in each instance. Not less than thirty (30) days prior to the expiration dates of the insurance policies obtained pursuant to this Security Instrument, certificates evidencing such renewals bearing notations evidencing the payment of premiums or accompanied by other reasonable evidence of such payment (which premiums shall not be paid by Borrower through or by any financing arrangement which would entitle an insurer to terminate a policy) shall be delivered by Borrower to Lender. Borrower shall not carry separate insurance, concurrent in kind or form or contributing in the event of loss, with any insurance required under this Article III.

     (b) If Borrower fails to maintain and deliver to Lender the original policies or certificates of insurance required by this Security Instrument, or if there are insufficient funds in the Basic Carrying Costs Escrow Account to pay the premiums for same, Lender may, at its option, procure such insurance, and Borrower shall pay, or as the case may be, reimburse Lender for, all premiums thereon promptly, upon demand by Lender, with interest thereon at

40

the Default Rate from the date paid by Lender to the date of repayment and such sum shall constitute a part of the Debt.

     (c) Borrower shall notify Lender of the renewal premium of each insurance policy and Lender shall be entitled to pay such amount on behalf of Borrower from the Basic Carrying Costs Escrow Account.

     (d) The insurance required by this Security Instrument may, at the option of Borrower, be effected by blanket and/or umbrella policies issued to Borrower or Manager covering the Property provided that, in each case, the policies otherwise comply with the provisions of this Security Instrument and allocate to the Property, from time to time (but in no event less than once a year), the coverage specified by this Security Instrument, without possibility of reduction or coinsurance by reason of, or damage to, any other property (real or personal) named therein. If the insurance required by this Security Instrument shall be effected by any such blanket or umbrella policies, Borrower shall furnish to Lender (i) an original certificate of insurance together with reasonable access to the original of such policy to review such policy’s coverage of the Property, with schedules attached thereto showing the amount of the insurance provided under such policies applicable to the Property and (ii) an Officer’s Certificate setting forth (A) the number of properties covered by such policy, (B) the location by city (if available, otherwise, county) and state of the properties, (C) the average square footage of the properties, (D) a brief description of the typical construction type included in the blanket policy and (E) such other information as Lender may reasonably request.

     Section 3.03. Assignment of Policies. (a) Borrower hereby assigns to Lender the proceeds of all insurance (other than worker’s compensation and liability insurance) obtained pursuant to this Security Instrument, all of which proceeds shall be payable to Lender as collateral and further security for the payment of the Debt and the performance of the Cross-collateralized Borrowers’ obligations hereunder and under the other Loan Documents, and Borrower hereby authorizes and directs the issuer of any such insurance to make payment of such proceeds directly to Lender. Except as otherwise expressly provided in Section 3.04 or elsewhere in this Article III, Lender shall have the option, in its discretion, and without regard to the adequacy of its security, to apply all or any part of the proceeds it may receive pursuant to this Article in such manner as Lender may elect to any one or more of the following: (i) the payment of the Debt, whether or not then due, in any proportion or priority as Lender, in its discretion, may elect, (ii) the repair or restoration of the Property, (iii) the cure of any Default or (iv) the reimbursement of the costs and expenses of Lender incurred pursuant to the terms hereof in connection with the recovery of the Insurance Proceeds. Nothing herein contained shall be deemed to excuse Borrower from repairing or maintaining the Property as provided in this Security Instrument or restoring all damage or destruction to the Property, regardless of the sufficiency of the Insurance Proceeds, and the application or release by Lender of any Insurance Proceeds shall not cure or waive any Default or notice of Default.

     (b) In the event of the foreclosure of this Security Instrument or any other transfer of title or assignment of all or any part of the Property in extinguishment, in whole or in part, of the Debt, all right, title and interest of Borrower in and to all policies of insurance required by this Security Instrument shall inure to the benefit of the successor in interest to Borrower or the purchaser of the Property. If, prior to the receipt by Lender of any proceeds, the Property or any portion thereof shall have been sold on foreclosure of this Security Instrument or by deed in lieu thereof or otherwise, or any claim under such insurance policy arising during the term of this Security Instrument is not paid until after the extinguishment of the Debt, and Lender shall not have received the entire amount of the Debt outstanding at the time of such extinguishment, whether or not a deficiency judgment on this Security Instrument shall have been sought or recovered or denied, then, the proceeds of any such insurance to the extent of the amount of the Debt not so received, shall be paid to and be the property of Lender, together with interest thereon at the Default Rate, and the reasonable attorney’s fees, costs and disbursements incurred by Lender in connection with the collection of the proceeds which shall be paid to Lender and Borrower hereby assigns, transfers and sets over to Lender all of Borrower’s right, title and interest in and to such proceeds. Notwithstanding any provisions of this Security Instrument to the contrary, Lender shall not be deemed to be a trustee or other fiduciary with respect to its receipt of any such proceeds, which may be commingled with any other monies of Lender; provided, however, that Lender shall use such proceeds for the purposes and in the manner permitted by this Security Instrument. Any proceeds deposited with Lender shall be held by Lender in an interest-bearing account, but Lender makes no representation or warranty as to the rate or amount of interest, if any, which may accrue on such deposit and shall have no liability in connection therewith. Interest accrued, if any, on the proceeds shall be

41

deemed to constitute a part of the proceeds for purposes of this Security Instrument. The provisions of this Section 3.03(b) shall survive the termination of this Security Instrument by foreclosure, deed in lieu thereof or otherwise as a consequence of the exercise of the rights and remedies of Lender hereunder after a Default.

     Section 3.04. Casualty Restoration. (a) (i) In the event of any damage to or destruction of the Property the cost to repair which could reasonably be expected to be in excess of $250,000 in the aggregate, Borrower shall give prompt written notice to Lender (which notice shall set forth Borrower’s good faith estimate of the cost of repairing or restoring such damage or destruction, or if Borrower cannot reasonably estimate the anticipated cost of restoration, Borrower shall nonetheless give Lender prompt notice of the occurrence of such damage or destruction, and will diligently proceed to obtain estimates to enable Borrower to quantify the anticipated cost and time required for such restoration, whereupon Borrower shall promptly notify Lender of such good faith estimate) and, provided that restoration does not violate any Legal Requirements, Borrower shall promptly commence and diligently prosecute to completion the repair, restoration or rebuilding of the Property so damaged or destroyed to a condition such that the Property shall be at least equal in value to that immediately prior to the damage to the extent practicable, in full compliance with all Legal Requirements and the provisions of all Leases, and in accordance with Section 3.04(b) below. Such repair, restoration or rebuilding of the Property are sometimes hereinafter collectively referred to as the “Work”.

     (ii) Borrower shall not adjust, compromise or settle any claim for Insurance Proceeds without the prior written consent of Lender, which shall not be unreasonably withheld or delayed and Lender shall have the right, at Borrower’s sole cost and expense, to participate in any settlement or adjustment of Insurance Proceeds; provided, however, that, except during the continuance of an Event of Default, Lender’s consent shall not be required with respect to the adjustment, compromising or settlement of any claim for Insurance Proceeds in an amount less than $1,000,000.

     (iii) Subject to Section 3.04(a)(iv), Lender shall apply any Insurance Proceeds which it may receive towards the Work in accordance with Section 3.04(b) and the other applicable sections of this Article III.

     (iv) If (A) an Event of Default shall have occurred, (B) Lender is not reasonably satisfied that the Debt Service Coverage, after substantial completion of the Work, will be at least equal to the Required Debt Service Coverage, (C) more than thirty percent (30%) of the reasonably estimated fair market value of the Property is damaged or destroyed, (D) Lender is not reasonably satisfied that the Work can be completed six (6) months prior to Maturity or (E) Lender is not reasonably satisfied that the Work can be completed within twelve (12) months of the damage to or destruction of the Property (each, a “Substantial Casualty”), Lender shall have the option, in its sole discretion to apply any Insurance Proceeds it may receive pursuant to this Security Instrument (less any cost to Lender of recovering and paying out such proceeds incurred pursuant to the terms hereof and not otherwise reimbursed to Lender, including, without limitation, reasonable attorneys’ fees and expenses) to the payment of the Debt, without any prepayment fee or charge of any kind, or to allow such proceeds to be used for the Work pursuant to the terms and subject to the conditions of Section 3.04(b) hereof and the other applicable sections of this Article III.

     (v) In the event that Lender elects or is obligated hereunder to allow Insurance Proceeds to be used for the Work, any excess proceeds remaining after completion of such Work shall be applied to the payment of the Debt without any prepayment fee or charge of any kind.

     (vi) If any Insurance Proceeds are applied to the payment of the Debt, provided that no Event of Default exists, Borrower may prepay the balance of the Release Price with respect to the Property in connection with obtaining a Release of the Property without any prepayment fee or charge of any kind.

     (b) If any Condemnation Proceeds in accordance with Section 6.01(a), or any Insurance Proceeds in accordance with Section 3.04(a), are to be applied to the repair, restoration or rebuilding of the Property, then such proceeds shall be deposited into a segregated interest-bearing bank account at the Bank, which shall be an Eligible Account, held by Lender and shall be paid out from time to time to Borrower as the Work progresses (less any cost

42

to Lender of recovering and paying out such proceeds, including, without limitation, reasonable attorneys’ fees and costs allocable to inspecting the Work and the plans and specifications therefor) subject to Section 5.13 hereof and to all of the following conditions:

     (i) An Independent architect or engineer selected by Borrower and reasonably acceptable to Lender (an “Architect” or “Engineer”) or a Person otherwise reasonably acceptable to Lender, shall have delivered to Lender a certificate estimating the cost of completing the Work, and, if the amount set forth therein is more than the sum of the amount of Insurance Proceeds then being held by Lender in connection with a casualty and amounts agreed or reasonably expected to be agreed to be paid as part of a final settlement under the insurance policy upon or before completion of the Work, Borrower shall have delivered to Lender (A) cash collateral in an amount equal to such excess, (B) an unconditional, irrevocable, clean sight draft letter of credit, in form, substance and issued by a bank reasonably acceptable to Lender, in the amount of such excess and draws on such letter of credit shall be made by Lender to make payments pursuant to this Article III following exhaustion of the Insurance Proceeds therefor or (C) a completion bond in form, substance and issued by a surety company reasonably acceptable to Lender.

     (ii) If the cost of the Work is reasonably estimated by an Architect or Engineer in a certification reasonably acceptable to Lender to be equal to or exceed five percent (5%) of the Allocated Loan Amount, such Work shall be performed under the supervision of an Architect or Engineer, it being understood that the plans and specifications with respect thereto shall provide for Work so that, upon completion thereof, the Property shall be at least equal in replacement value and general utility to the Property prior to the damage or destruction.

     (iii) Each request for payment shall be made on not less than ten (10) days’ prior notice to Lender and shall be accompanied by a certificate of an Architect or Engineer, or, if the Work is not required to be supervised by an Architect or Engineer, by an Officer’s Certificate stating (A) that payment is for Work completed substantially in compliance with the plans and specifications, if required under clause (ii) above, (B) that the sum requested is required to reimburse Borrower for payments by Borrower to date, or is due to the contractors, subcontractors, materialmen, laborers, engineers, architects or other Persons rendering services or materials for the Work (giving a brief description of such services and materials), and that when added to all sums previously paid out by Lender does not exceed the value of the Work done to the date of such certificate, (C) if the sum requested is to cover payment relating to repair and restoration of personal property required or relating to the Property, that title to the personal property items covered by the request for payment is vested in Borrower (unless Borrower is lessee of such personal property), and (D) that the Insurance Proceeds and other amounts deposited by Borrower held by Lender after such payment is more than the estimated remaining cost to complete such Work; provided, however, that if such certificate is given by an Architect or Engineer, such Architect or Engineer shall certify as to clause (A) above, and such Officer’s Certificate shall certify as to the remaining clauses above, and provided, further, that Lender shall not be obligated to disburse such funds if Lender determines, in Lender’s reasonable discretion, that Borrower shall not be in compliance with this Section 3.04(b). Additionally, each request for payment shall contain a statement signed by Borrower stating that the requested payment is for Work satisfactorily done to date.

     (iv) Each request for payment shall be accompanied by waivers of lien, in customary form and substance, covering that part of the Work for which payment has been made pursuant to any previous request for payment and, if required by Lender, a search prepared by a title company or licensed abstractor, or by other evidence reasonably satisfactory to Lender that there has not been filed with respect to the Property any mechanic’s or other lien or instrument for retention of title relating to any part of the Work not discharged of record. Additionally, as to any personal property covered by the request for payment, Lender shall be furnished with evidence of Borrower having incurred a payment obligation therefor and such further evidence reasonably satisfactory to assure Lender that UCC filings therefor provide a valid first lien on the personal property in favor of Lender.

43

     (v) Lender shall have the right to inspect the Work at all reasonable times upon reasonable prior notice and may condition any disbursement of Insurance Proceeds upon satisfactory compliance by Borrower with the provisions hereof. Neither the approval by Lender of any required plans and specifications for the Work nor the inspection by Lender of the Work shall make Lender responsible for the preparation of such plans and specifications, or the compliance of such plans and specifications of the Work, with any applicable law, regulation, ordinance, covenant or agreement.

     (vi) Insurance Proceeds shall not be disbursed more frequently than once every thirty (30) days.

     (vii) Until such time as the Work has been substantially completed, Lender shall not be obligated to disburse to Borrower an amount (the “Retention Amount”) up to (A) until fifty percent (50%) of the Work has been completed (as reasonably determined by Lender), ten percent (10%) of the cost of the Work and (B) after fifty percent (50%) of the Work has been completed (as reasonably determined by Lender), five percent (5%) of the cost of the Work. Upon substantial completion of the Work, Borrower shall send notice thereof to Lender and, subject to the conditions of Section 3.04(b)(i)-(iv), Lender shall disburse one-half of the Retention Amount to Borrower; provided, however, that the remaining one-half of the Retention Amount shall be disbursed to Borrower when Lender shall have received copies of any and all final certificates of occupancy or other certificates, licenses and permits required for the ownership, occupancy and operation of the Property in accordance with all Legal Requirements. Borrower hereby covenants to diligently seek to obtain any such certificates, licenses and permits.

     (viii) Upon failure on the part of Borrower promptly to commence the Work or to proceed diligently and continuously to completion of the Work, subject to Force Majeure, not to exceed sixty (60) days, which failure shall continue after notice for thirty (30) days, Lender may apply any Insurance Proceeds or Condemnation Proceeds it then or thereafter holds to the payment of the Debt in accordance with the provisions of the Note; provided, however, that Lender shall be entitled to apply at any time all or any portion of the Insurance Proceeds or Condemnation Proceeds it then holds to the extent necessary to cure any Event of Default.

     (c) If Borrower (i) within ninety (90) days (plus, if all approvals from Governmental Authorities have not been obtained within such period and Borrower has continuously and expeditiously attempted to obtain such approvals within such time period, such additional period of time required to obtain approvals from all Governmental Authorities up to one hundred eighty (180) days in total, provided Borrower deposits with Lender an amount, as reasonably determined by Lender, equal to the Required Debt Service Payment for each additional thirty (30) day period) after the occurrence of any damage to the Property or any portion thereof (or such shorter period as may be required under any Major Space Lease) shall fail to submit to Lender for approval plans and specifications for the Work (approved by the Architect and by all Governmental Authorities whose approval is required), (ii) after any such plans and specifications are approved by all Governmental Authorities, the Architect and Lender, shall fail to promptly commence such Work or (iii) shall fail to diligently prosecute such Work to completion, then, in addition to all other rights available hereunder, at law or in equity, Lender, or any receiver of the Property or any portion thereof, upon five (5) days’ prior notice to Borrower (except in the event of emergency in which case no notice shall be required), may (but shall have no obligation to) perform or cause to be performed such Work, and may take such other steps as it reasonably deems advisable. Borrower hereby waives, for Borrower, any claim, other than for gross negligence or willful misconduct, against Lender and any receiver arising out of any act or omission of Lender or such receiver pursuant hereto, and Lender may apply all or any portion of the Insurance Proceeds (without the need to fulfill any other requirements of this Section 3.04) to reimburse Lender and such receiver, for all costs not reimbursed to Lender or such receiver upon demand together with interest thereon at the Default Rate from the date such amounts are advanced until the same are paid to Lender or the receiver.

     (d) If the Insurance Proceeds are greater than $1,000,000 or an Event of Default exists Borrower hereby irrevocably appoints Lender as its attorney-in-fact, coupled with an interest, to collect and receive any Insurance Proceeds paid with respect to any portion of the Property or the insurance policies required to be

44

maintained hereunder, and to endorse any checks, drafts or other instruments representing any Insurance Proceeds whether payable by reason of loss thereunder or otherwise.

     (e) Notwithstanding the foregoing provisions of this Section 3.04, upon the occurrence of any damage to or destruction of the Property, provided that such damage or destruction is not a Substantial Casualty, if in Lender’s reasonable judgment the cost of repair of or restoration to the Property required as a result of any damage or destruction is less than $1,000,000 in the aggregate and the Work can be completed in less than one hundred twenty (120) days (but in no event beyond the date which is six (6) months prior to the Maturity Date), then Lender, upon request by Borrower, shall permit Borrower to apply for and receive the Insurance Proceeds directly from the insurer (and Lender shall advise the insurer to pay over such Insurance Proceeds directly to Borrower), to the extent required to pay for any such Work, with any excess thereof to be promptly paid by Borrower to Lender to be applied against the Debt.

     Section 3.05. Compliance with Insurance Requirements. Borrower promptly shall comply with, and shall cause the Property to comply with, all Insurance Requirements, even if such compliance requires structural changes or improvements or would result in interference with the use or enjoyment of the Property or any portion thereof provided Borrower shall have a right to contest in good faith and with diligence such Insurance Requirements provided (a) no Event of Default shall exist during such contest and such contest shall not subject the Property or any portion thereof to any lien or affect the priority of the lien of this Security Instrument, (b) failure to comply with such Insurance Requirements will not subject Lender or any of its agents, employees, officers or directors to any civil or criminal liability, (c) such contest will not cause any reduction in insurance coverage, (d) such contest shall not affect the ownership, use or occupancy of the Property, (e) the Property or any part thereof or any interest therein shall not be in any danger of being sold, forfeited or lost by reason of such contest by Borrower, (f) Borrower has given Lender prompt notice of such contest and, upon request by Lender from time to time, notice of the status of such contest by Borrower and/or information of the continuing satisfaction of the conditions set forth in clauses (a) through (e) of this Section 3.05, (g) upon a final determination of such contest, Borrower shall promptly comply with the requirements thereof, and (h) prior to and during such contest, Borrower shall furnish to Lender security satisfactory to Lender, in its reasonable discretion, against loss or injury by reason of such contest or the non-compliance with such Insurance Requirement (and if such security is cash, Lender shall deposit the same in an interest-bearing account and interest accrued thereon, if any, shall be deemed to constitute a part of such security for purposes of this Security Instrument, but Lender (i) makes no representation or warranty as to the rate or amount of interest, if any, which may accrue thereon and shall have no liability in connection therewith and (ii) shall not be deemed to be a trustee or fiduciary with respect to its receipt of any such security and any such security may be commingled with other monies of Lender). If Borrower shall use the Property or any portion thereof in any manner which could permit the insurer to cancel any insurance required to be provided hereunder, Borrower immediately shall obtain a substitute policy which shall satisfy the requirements of this Security Instrument and which shall be effective on or prior to the date on which any such other insurance policy shall be canceled. Borrower shall not by any action or omission invalidate any insurance policy required to be carried hereunder unless such policy is replaced as aforesaid, or materially increase the premiums on any such policy above the normal premium charged for such policy. Borrower shall cooperate with Lender in obtaining for Lender the benefits of any Insurance Proceeds lawfully or equitably payable to Lender in connection with the transaction contemplated hereby.

     Section 3.06. Event of Default During Restoration. Notwithstanding anything to the contrary contained in this Security Instrument including, without limitation, the provisions of this Article III, if, at the time of any casualty affecting the Property or any part thereof, or at any time during any Work, or at any time that Lender is holding or is entitled to receive any Insurance Proceeds pursuant to this Security Instrument, a Default exists and is continuing (whether or not it constitutes an Event of Default), Lender shall then have no obligation to make such proceeds available for Work and Lender shall have the right and option, to be exercised in its sole and absolute discretion and election, with respect to the Insurance Proceeds, either to retain and apply such proceeds in reimbursement for the actual costs, fees and expenses incurred by Lender in accordance with the terms hereof in connection with the adjustment of the loss and, after the occurrence of an Event of Default, any balance toward payment of the Debt in such priority and proportions as Lender, in its sole discretion, shall deem proper, or towards the Work, upon such terms and conditions as Lender shall determine, or to cure such Event of Default, or to any one or more of the foregoing as Lender, in its sole and absolute discretion, may determine. If Lender shall receive and retain such Insurance Proceeds, the lien of this Security Instrument shall be reduced only by the amount thereof

45

received, after reimbursement to Lender of expenses of collection, and actually applied by Lender in reduction of the principal sum payable under the Note in accordance with the Note.

     Section 3.07. Application of Proceeds to Debt Reduction. (a) No damage to the Property, or any part thereof, by fire or other casualty whatsoever, whether such damage be partial or total, shall relieve Borrower from its liability to pay in full the Debt and to perform its obligations under this Security Instrument and the other Loan Documents.

     (b) If any Insurance Proceeds are applied to reduce the Debt, Lender shall apply the same in accordance with the provisions of the Note.

ARTICLE IV: IMPOSITIONS

     Section 4.01. Payment of Impositions, Utilities and Taxes, etc. (a) Borrower shall pay or cause to be paid all Impositions at least five (5) days prior to the date upon which any fine, penalty, interest or cost for nonpayment is imposed, and furnish to Lender, upon request, receipted bills of the appropriate taxing authority or other documentation reasonably satisfactory to Lender evidencing the payment thereof. If Borrower shall fail to pay any Imposition in accordance with this Section and is not contesting or causing a contesting of such Imposition in accordance with Section 4.04 hereof, or if there are insufficient funds in the Basic Carrying Costs Escrow Account to pay any Imposition, Lender shall have the right, but shall not be obligated, to pay that Imposition, and Borrower shall repay to Lender, on demand, any amount paid by Lender, with interest thereon at the Default Rate from the date of the advance thereof to the date of repayment, and such amount shall constitute a portion of the Debt secured by this Security Instrument and the other Cross-collateralized Mortgages.

     (b) Borrower shall, prior to the date upon which any fine, penalty, interest or cost for the nonpayment is imposed, pay or cause to be paid all charges for electricity, power, gas, water and other services and utilities in connection with the Property. If Borrower shall fail to pay any amount required to be paid by Borrower pursuant to this Section 4.01 and is not contesting such charges in accordance with Section 4.04 hereof, Lender shall have the right, but shall not be obligated, to pay that amount, and Borrower will repay to Lender, on demand, any amount paid by Lender with interest thereon at the Default Rate from the date of the advance thereof to the date of repayment, and such amount shall constitute a portion of the Debt secured by this Security Instrument and the other Cross-collateralized Mortgages.

     (c) Borrower shall pay all taxes, charges, filing, registration and recording fees, excises and levies imposed upon Lender by reason of or in connection with its ownership of any Loan Document or any other instrument related thereto, or resulting from the execution, delivery and recording of, or the lien created by, or the obligation evidenced by, any of them, other than income, franchise and other similar taxes imposed on Lender and shall pay all corporate stamp taxes, if any, and other taxes, required to be paid on the Loan Documents. If Borrower shall fail to make any such payment within ten (10) days after written notice thereof from Lender, Lender shall have the right, but shall not be obligated, to pay the amount due, and Borrower shall reimburse Lender therefor, on demand, with interest thereon at the Default Rate from the date of the advance thereof to the date of repayment, and such amount shall constitute a portion of the Debt secured by this Security Instrument and the other Cross-collateralized Mortgages.

     Section 4.02. Deduction from Value. In the event of the passage after the date of this Security Instrument of any Legal Requirement deducting from the value of the Property for the purpose of taxation, any lien thereon or changing in any way the Legal Requirements now in force for the taxation of this Security Instrument, the other Cross-collateralized Mortgages and/or the Debt for federal, state or local purposes, or the manner of the operation of any such taxes so as to adversely affect the interest of Lender, or imposing any tax or other charge on any Loan Document, then Borrower will pay such tax, with interest and penalties thereon, if any, within the statutory period. In the event the payment of such tax or interest and penalties by Borrower would be unlawful, or taxable to Lender or unenforceable or provide the basis for a defense of usury, then in any such event, Lender shall have the option, by written notice of not less than thirty (30) days, to declare the Debt (or, if Lender determines in its

46

sole and absolute discretion, that no Material Adverse Effect may result therefrom, the Release Price with respect to the Property) immediately due and payable, with no prepayment fee or charge of any kind.

     Section 4.03. No Joint Assessment. Borrower shall not consent to or initiate the joint assessment of the Premises or the Improvements (a) with any other real property constituting a separate tax lot and Borrower represents and covenants that the Premises and the Improvements are and shall remain a separate tax lot or (b) with any portion of the Property which may be deemed to constitute personal property, or any other procedure whereby the lien of any taxes which may be levied against such personal property shall be assessed or levied or charged to the Property as a single lien.

     Section 4.04. Right to Contest. Borrower shall have the right, after prior notice to Lender, at its sole expense, to contest by appropriate legal proceedings diligently conducted in good faith, without cost or expense to Lender or any of its agents, employees, officers or directors, the validity, amount or application of any Imposition, provided that (a) no Event of Default shall exist during such proceedings and such contest shall not (unless Borrower shall comply with clause (d) of this Section 4.04) subject the Property or any portion thereof to any lien or affect the priority of the lien of this Security Instrument, (b) failure to pay such Imposition or charge will not subject Lender or any of its agents, employees, officers or directors to any civil or criminal liability, (c) the contest suspends enforcement of the Imposition or charge (unless Borrower first pays the Imposition or charge), (d) prior to and during such contest, Borrower shall furnish to Lender security satisfactory to Lender, in its reasonable discretion, against loss or injury by reason of such contest or the non-payment of such Imposition or charge (and if such security is cash, Lender may deposit the same in an interest-bearing account and interest accrued thereon, if any, shall be deemed to constitute a part of such security for purposes of this Security Instrument, but Lender (i) makes no representation or warranty as to the rate or amount of interest, if any, which may accrue thereon and shall have no liability in connection therewith and (ii) shall not be deemed to be a trustee or fiduciary with respect to its receipt of any such security and any such security may be commingled with other monies of Lender), (e) such contest shall not affect the ownership, use or occupancy of the Property, (f) the Property or any part thereof or any interest therein shall not be in any danger of being sold, forfeited or lost by reason of such contest by Borrower, (g) Borrower has given Lender notice of the commencement of such contest and upon request by Lender, from time to time, notice of the status of such contest by Borrower and/or confirmation of the continuing satisfaction of clauses (a) through (f) of this Section 4.04, and (h) upon a final determination of such contest, Borrower shall promptly comply with the requirements thereof. Upon completion of any contest, Borrower shall immediately pay the amount due, if any, and deliver to Lender proof of the completion of the contest and payment of the amount due, if any, following which Lender shall return the security, if any, deposited with Lender pursuant to clause (d) of this Section 4.04, provided that Lender shall, so long as no Event of Default exists, disburse to Borrower any sums held by Lender pursuant to clause (d) hereof to pay any contested Impositions. Borrower shall not pay any Imposition in installments unless permitted by applicable Legal Requirements, and shall, upon the request of Lender, deliver copies of all notices and bills relating to any Imposition or other charge covered by this Article IV to Lender.

     Section 4.05. No Credits on Account of the Debt. Borrower will not claim or demand or be entitled to any credit or credits on account of the Debt for any part of the Impositions assessed against the Property or any part thereof and no deduction shall otherwise be made or claimed from the taxable value of the Property, or any part thereof, by reason of this Security Instrument or the Debt. In the event such claim, credit or deduction shall be required by Legal Requirements, Lender shall have the option, by written notice of not less than thirty (30) days, to declare the Debt (or, if Lender determines in its sole and absolute discretion, that no Material Adverse Effect may result therefrom, the Release Price with respect to the Property) immediately due and payable, and Borrower hereby agrees to pay such amounts not later than thirty (30) days after such notice.

     Section 4.06. Documentary Stamps. If, at any time, the United States of America, any State or Commonwealth thereof or any subdivision of any such State shall require revenue or other stamps to be affixed to the Note, this Security Instrument or any other Loan Document, or impose any other tax or charges on the same, Borrower will pay the same, with interest and penalties thereon, if any.

47

ARTICLE V: CENTRAL CASH MANAGEMENT

     Section 5.01. Cash Flow. All proceeds of the Rate Cap Agreement shall be paid directly to the Central Account. All payments constituting Rent shall be delivered to Manager. Manager shall collect all Rent and shall deposit in the Collection Account, the name and address of the bank in which such account is located and the account number of which to be identified in writing by Borrower to Lender, all Property Available Cash. Pursuant to the Collection Account Agreement of even date herewith, the bank in which the Collection Account is located has been instructed that all collected funds deposited in the Collection Account shall be automatically transferred through automated clearing house funds (“ACH”) or by Federal wire to the Central Account prior to 3:00 p.m. (New York City time) on the Business Day immediately prior to each Payment Date or, if an O&M Operative Period has occurred and is continuing, on a daily basis. Within two (2) Business Days of the Closing Date, Borrower shall deliver to Lender a copy of the irrevocable notice which Borrower delivered to the bank in which the Rent Account is located pursuant to the provisions of this Section 5.01, the receipt of which is acknowledged in writing by such bank. Lender may elect to change the financial institution in which the Central Account shall be maintained; however, Lender shall give Borrower and the bank in which the Collection Account is located not fewer than five (5) Business Days’ prior notice of such change. Neither Borrower nor Manager shall change such bank or the Collection Account without the prior written consent of Lender. All fees and charges of the bank(s) in which the Collection Account and the Central Account are located shall be paid by Borrower.

     Section 5.02. Establishment of Accounts. Lender has established the Escrow Accounts and the Central Account in the name of Lender and the Collection Account in the joint name of Borrower and Lender, as secured party. The Escrow Accounts , the Collection Account and the Central Account shall be under the sole dominion and control of Lender and funds held therein shall not constitute trust funds. Borrower hereby irrevocably directs and authorizes Lender to withdraw funds from the Collection Account, and to deposit into and withdraw funds from the Central Account and the Escrow Accounts, all in accordance with the terms and conditions of this Security Instrument. Borrower shall have no right of withdrawal in respect of the Collection Account, the Central Account or the Escrow Accounts except as specifically provided herein. Each transfer of funds to be made hereunder shall be made only to the extent that funds are on deposit in the Collection Account, the Central Account or the affected Sub-Account or Escrow Account, and Lender shall have no responsibility to make additional funds available in the event that funds on deposit are insufficient. The Central Account shall contain the Basic Carrying Costs Sub-Account, the Debt Service Payment Sub-Account, the Recurring Replacement Reserve Sub-Account, the Operation and Maintenance Expense Sub-Account, the Mez Payment Sub-Acount and the Curtailment Reserve Sub-Account, each of which accounts shall be Eligible Accounts or book-entry sub-accounts of an Eligible Account (each a “Sub-Account” and collectively, the “Sub-Accounts”) to which certain funds shall be allocated and from which disbursements shall be made pursuant to the terms of this Security Instrument. Sums held in the Escrow Accounts may be commingled with other monies held by Lender.

     Section 5.03. Intentionally Omitted.

     Section 5.04. Servicer. At the option of Lender, the Loan may be serviced by a servicer (the “Servicer”) selected by Lender and Lender may delegate all or any portion of its responsibilities under this Security Instrument to the Servicer.

     Section 5.05. Monthly Funding of Sub-Accounts and Escrow Accounts. (a) On or before each Payment Date during the term of the Loan, commencing on the first (1st) Payment Date occurring after the month in which the Loan is initially funded, Borrower shall pay or cause to be paid to the Central Account all sums required to be deposited in the Sub-Accounts pursuant to this Section 5.05(a) and all funds transferred or deposited into the Central Account shall be allocated among the Sub-Accounts as follows and in the following priority:

     (i) first, to the Basic Carrying Costs Sub-Account, until an amount equal to the Basic Carrying Costs Monthly Installment for such Payment Date has been allocated to the Basic Carrying Costs Sub-Account;

48

     (ii) second, to the Debt Service Payment Sub-Account, until an amount equal to the Required Debt Service Payment for such Payment Date has been allocated to the Debt Service Payment Sub-Account;

     (iii) third, but only during any Default Management Period, to the Operation and Maintenance Expense Sub-Account in an amount equal to the Cash Expenses, other than management fees payable to Affiliates of Borrower, for the Interest Accrual Period ending immediately prior to such Payment Date pursuant to the related Approved Annual Budget;

     (iv) fourth, but only during any Default Management Period, to the Operation and Maintenance Expense Sub-Account in an amount equal to the amount, if any, of the Net Capital Expenditures for the Interest Accrual Period ending immediately prior to such Payment Date pursuant to the related Approved Annual Budget;

     (v) fifth, to the Recurring Replacement Reserve Sub-Account, but only until an amount equal to the Recurring Replacement Reserve Monthly Installment for such Payment Date has been allocated to the Recurring Replacement Reserve Sub-Account;

     (vi) sixth, but only during any Default Management Period, to the Operation and Maintenance Expense Sub-Account in an amount equal to the amount, if any, of the Extraordinary Expenses approved by Lender for the Interest Accrual Period ending immediately prior to such Payment Date;

     (vii) seventh, but only if an Event of Default is not then continuing, to the Mez Payment Sub-Account until an amount equal to the Mez Payment Amount has been allocated to the Mez Payment Sub-Account, provided, however, in the event there is not sufficient Rent to allocate all funds required to be allocated to the Mez Payment Sub-Account pursuant to this clause viii such failure shall not, in and of itself, constitute a Default; and

     (viii) eighth, but only during an O&M Operative Period, the balance, if any, to the Curtailment Reserve Sub-Account.

     Provided that no Event of Default has occurred and is continuing, Lender agrees that in each Interest Accrual Period any amounts deposited into or remaining in the Central Account after the Sub-Accounts have been funded as set forth in this Section 5.05(a) with respect to such Interest Accrual Period and any periods prior thereto, shall be disbursed by Lender to Borrower on each Payment Date and on the 15th day of each month (or if such date is not a Business Day, the first Business Day after such date) applicable to such Interest Accrual Period. The balance of the funds distributed to Borrower after payment of all Operating Expenses by or on behalf of Borrower may be retained by Borrower. After the occurrence, and during the continuance, of an Event of Default, no funds held in the Central Account shall be distributed to, or withdrawn by, Borrower, and Lender shall have the right to apply all or any portion of the funds held in the Central Account or any Sub-Account or any Escrow Account to the Debt in Lender’s sole discretion.

     (b) On each Payment Date, (i) sums held in the Basic Carrying Costs Sub-Account shall be transferred to the Basic Carrying Costs Escrow Account, (ii) sums held in the Debt Service Payment Sub-Account, together with any amounts deposited into the Central Account that are either (x) Loss Proceeds that Lender has elected to apply to reduce the Debt in accordance with the terms of Article III hereof or (y) excess Loss Proceeds remaining after the completion of any restoration required hereunder, shall be transferred to Lender to be applied towards the Required Debt Service Payment, (iii) sums held in the Recurring Replacement Reserve Sub-Account shall be transferred to the Recurring Replacement Reserve Escrow Account, (iv) sums held in the Mez Payment Sub-Account shall be transferred to the Mez Payment Escrow Account, (v) sums held in the Operation and Maintenance Expense Sub-Account shall be transferred to the Operation and Maintenance Expense Escrow Account and (vii) sums held in the Curtailment Reserve Sub-Account shall be transferred to the Curtailment Reserve Escrow Account.

49

     Section 5.06. Payment of Basic Carrying Costs. Borrower hereby agrees to pay all Basic Carrying Costs (without regard to the amount of money in the Basic Carrying Costs Sub-Account or the Basic Carrying Costs Escrow Account). At least ten (10) Business Days prior to the due date of any Basic Carrying Costs, and not more frequently than once each month, Borrower may notify Lender in writing and request that Lender pay such Basic Carrying Costs on behalf of Borrower on or prior to the due date thereof, and, provided that no Event of Default has occurred and is continuing and that there are sufficient funds available in the Basic Carrying Costs Escrow Account, Lender shall make such payments out of the Basic Carrying Costs Escrow Account before same shall be delinquent. Together with each such request, Borrower shall furnish Lender with bills and all other documents necessary, as reasonably determined by Lender, for the payment of the Basic Carrying Costs which are the subject of such request. Borrower’s obligation to pay (or cause Lender to pay) Basic Carrying Costs pursuant to this Security Instrument shall include, to the extent permitted by applicable law, Impositions resulting from future changes in law which impose upon Lender an obligation to pay any property taxes or other Impositions or which otherwise adversely affect Lender’s interests.

     Provided that no Event of Default shall have occurred and is continuing, all funds deposited into the Basic Carrying Costs Escrow Account shall be held by Lender pursuant to the provisions of this Security Instrument and shall be applied in payment of Basic Carrying Costs in accordance with the terms hereof. Should an Event of Default occur, the sums on deposit in the Basic Carrying Costs Sub-Account and the Basic Carrying Costs Escrow Account may be applied by Lender in payment of any Basic Carrying Costs or may be applied to the payment of the Debt or any other charges affecting all or any portion of the Cross-collateralized Properties as Lender in its sole discretion may determine; provided, however, that no such application shall be deemed to have been made by operation of law or otherwise until actually made by Lender as herein provided.

     Section 5.07. Intentionally Omitted.

     Section 5.08. Recurring Replacement Reserve Escrow Account. (a) Borrower hereby agrees to pay all Recurring Replacement Expenditures with respect to the Property (without regard to the amount of money then available in the Recurring Replacement Reserve Sub-Account or the Recurring Replacement Reserve Escrow Account). Provided that Lender has received written notice from Borrower at least five (5) Business Days prior to the due date of any payment relating to Recurring Replacement Expenditures and not more frequently than once each month, and further provided that no Event of Default has occurred and is continuing, that there are sufficient funds available in the Recurring Replacement Reserve Escrow Account and Borrower shall have theretofore furnished Lender with lien waivers (if the cost incurred in connection therewith is greater than $25,000), copies of bills, invoices and other reasonable documentation as may be required by Lender to establish that the Recurring Replacement Expenditures which are the subject of such request represent amounts due for completed or partially completed capital work and improvements performed at the Property, Lender shall make such payments out of the Recurring Replacement Reserve Escrow Account.

     (b) In lieu of making deposits into the Recurring Replacement Reserve Sub-Account, Borrower may deliver an Approved Letter of Credit to Lender in the amount of the Required RRE Shortfall (as the same may be amended, replaced, extended or drawn down upon pursuant to the provisions of this Section 5.08, the “Delivered Letter of Credit”). The Delivered Letter of Credit shall be held in accordance with this Section 5.08 and otherwise constitute security for the payment of the Debt. On or prior to the thirtieth (30^th) day prior to the expiration of any Delivered Letter of Credit, Borrower shall provide Lender with a replacement to such Delivered Letter of Credit which shall be an Approved Letter of Credit, and otherwise in the same form and amount as the Delivered Letter of Credit being replaced or such other form reasonably approved by Lender. In the event (i) Borrower shall fail to provide Lender with a replacement Delivered Letter of Credit on or prior to the thirtieth (30^th) day prior to the expiration of any previously existing Delivered Letter of Credit or (ii) the long-term unsecured debt rating or the short-term unsecured debt rating of the bank issuing the Delivered Letter of Credit shall be downgraded below “AA-” (or its equivalent) or “A-1” (or its equivalent), respectively, withdrawn or qualified by any Rating Agency and the letter of credit required to be delivered hereunder is not replaced within thirty (30) days of receipt of notice of such downgrading, withdrawal or qualification, Lender may draw on the Delivered Letter of Credit, deposit all sums received in connection with such draw into the Recurring Replacement Reserve Sub-Account, and disburse such sums in accordance with Section 5.08 above. Provided no Event of Default shall have occurred and is continuing,

50

upon Lender’s receipt of a written request from Borrower together with such other documentation as may be reasonably requested by Lender, Lender shall draw on all or a portion of the Delivered Letter of Credit, deposit any sums received in connection with such draw into the Recurring Replacement Reserve Sub-Account, and apply such sums towards the reimbursement of Borrower for the cost of any Recurring Replacement Expenditures in accordance with the provisions of Section 5.08 hereof. Upon the occurrence of an Event of Default, Lender may draw on the Delivered Letter of Credit and apply the sums received towards the payment of Recurring Replacement Expenditures or towards payment of the Debt or any other charges affecting all or any portion of the Property, as Lender in its sole discretion may determine; provided, however, that no such application shall be deemed to have been made by operation of law or otherwise until actually made by Lender as herein provided. Provided that no Event of Default shall have occurred and is continuing, Borrower may deliver to Lender Dollars in the amount of any Delivered Letter of Credit and, upon receipt of such Dollars, Lender will return to Borrower the Delivered Letter of Credit.

     (c) Provided that no Event of Default shall have occurred and is continuing, all funds deposited into the Recurring Replacement Reserve Escrow Account shall be held by Lender pursuant to the provisions of this Security Instrument and shall be applied in payment of Recurring Replacement Expenditures. Should an Event of Default occur, the sums on deposit in the Recurring Replacement Reserve Sub-Account and the Recurring Replacement Reserve Escrow Account may be applied by Lender in payment of any Recurring Replacement Expenditures or may be applied to the payment of the Debt or any other charges affecting all or any portion of the Cross-collateralized Properties, as Lender in its sole discretion may determine; provided, however, that no such application shall be deemed to have been made by operation of law or otherwise until actually made by Lender as herein provided.

     Section 5.09. Operation and Maintenance Expense Escrow Account. Borrower hereby agrees to pay or cause to be paid all Operating Expenses and extraordinary capital improvement costs with respect to the Property (without regard to the amount of money then available in the Operation and Maintenance Expense Sub-Account or the Operation and Maintenance Expense Escrow Account). All funds allocated to the Operation and Maintenance Expense Escrow Account shall be held by Lender pursuant to the provisions of this Security Instrument. Any sums held in the Operation and Maintenance Expense Escrow Account shall be disbursed to Borrower within five (5) Business Days of receipt by Lender from Borrower of (a) a written request for such disbursement which shall indicate the Operating Expenses (exclusive of Basic Carrying Costs and any management fees payable to Borrower, or to any Affiliate of Borrower) and/or extraordinary capital improvement costs approved in writing by Lender for which the requested disbursement is to pay and (b) an Officer’s Certificate stating that no Operating Expenses with respect to the Property are more than sixty (60) days past due; provided, however, in the event that Borrower legitimately disputes any invoice for an Operating Expense and/or extraordinary capital improvement costs approved in writing by Lender, and (i) no Event of Default has occurred and is continuing hereunder, (ii) Borrower shall have set aside adequate reserves for the payment of such disputed sums together with all interest and late fees thereon, (iii) Borrower has complied with all the requirements of this Security Instrument relating thereto, and (iv) the contesting of such sums shall not constitute a default under any other instrument, agreement, or document to which Borrower is a party, then Borrower may, after certifying to Lender as to items (i) through (iv) hereof, contest such invoice. Together with each such request, Borrower shall furnish Lender with bills and all other documents necessary for the payment of the Operating Expenses and/or extraordinary capital improvement costs approved in writing by Lender which are the subject of such request. Borrower may request a disbursement from the Operation and Maintenance Expense Escrow Account no more than one (1) time per calendar month. Should an Event of Default occur and be continuing, the sums on deposit in the Operation and Maintenance Expense Sub-Account or the Operation and Maintenance Expense Escrow Account may be applied by Lender in payment of any Operating Expenses and/or extraordinary capital improvement costs for the Cross-collateralized Properties or may be applied to the payment of the Debt or any other charges affecting all or any portion of the Property as Lender, in its sole discretion, may determine; provided, however, that no such application shall be deemed to have been made by operation of law or otherwise until actually made by Lender as herein provided.

     Section 5.10. Rate Cap Agreement. Borrower shall maintain the Rate Cap Agreement at all times during the term of the Loan and pay all fees, charges and expenses incurred in connection therewith. Borrower shall comply with all of its obligations under the terms of the Rate Cap Agreement. All amounts paid by the issuer of the Rate Cap Agreement (the “Counterparty”) to Borrower or Lender shall be deposited immediately into the Central

51

Account. Borrower shall take all actions reasonably requested by Lender to enforce Lender’s rights under the Rate Cap Agreement in the event of a default by the Counterparty. In the event that (a) the long-term unsecured debt obligations of the Counterparty are downgraded by the Rating Agency below “A+” or its equivalent or (b) the Counterparty shall default in any of its obligations under the Rate Cap Agreement, Borrower shall, at the request of Lender, promptly but in all events within five (5) Business Days, replace the Rate Cap Agreement with an agreement having identical payment terms and maturity as the Rate Cap Agreement and which is otherwise in form and substance substantially similar to the Rate Cap Agreement and otherwise acceptable to Lender with a cap provider, the long-term unsecured debt of which is rated at least “AA-” (or its equivalent) by each Rating Agency, or which will allow each Rating Agency to reaffirm their then current ratings of all rated certificates issued in connection with the Securitization. In the event that Borrower fails to maintain the Rate Cap Agreement as provided in this Section 5.10, Lender may purchase the Rate Cap Agreement and the cost incurred by Lender in connection therewith shall be paid by Borrower to Lender with interest thereon at the Default Rate from the date such cost is incurred until such cost is paid by Borrower to Lender.

     Section 5.11. Curtailment Reserve Escrow Account. Funds deposited into the Curtailment Reserve Escrow Account shall be held by Lender in the Curtailment Reserve Escrow Account as additional security for the Loan until the Loan has been paid in full. Provided that no Event of Default has occurred and is continuing, and no O&M Operative Period has existed for three (3) consecutive calendar months, Lender shall, upon written request from Borrower, release all sums contained in the Curtailment Reserve Escrow Account and the Operation and Maintenance Expense Escrow Account to Borrower. Should an Event of Default occur, the sums on deposit in the Curtailment Reserve Sub-Account and the Curtailment Reserve Escrow Account may be applied by Lender to the payment of the Debt or other charges affecting all or any portion of the Cross-collateralized Properties, as Lender, in its sole discretion, may determine; provided, however, that no such application shall be deemed to have been made by operation of law or otherwise until actually made by Lender as herein provided.

     Section 5.12. Performance of Engineering Work. (a) Borrower shall promptly commence and diligently thereafter pursue to completion (without regard to the amount of money then available in the Engineering Escrow Account) the Required Engineering Work prior to the six (6) month anniversary of the Closing Date. After Borrower completes an item of Required Engineering Work, Borrower may submit to Lender an invoice therefor with lien waivers and a statement from the Engineer, reasonably acceptable to Lender, indicating that the portion of the Required Engineering Work in question has been completed substantially in compliance with all Legal Requirements, and Lender shall, within twenty (20) days thereafter, although in no event more frequently than once each month, reimburse such amount to Borrower from the Engineering Escrow Account; provided, however, that Borrower shall not be reimbursed more than the amount set forth on Exhibit D hereto as the amount allocated to the portion of the Required Engineering Work for which reimbursement is sought.

     (b) From and after the date all of the Required Engineering Work is completed, Borrower may submit a written request, which request shall be delivered together with final lien waivers and a statement from the Engineer, as the case may be, reasonably acceptable to Lender, indicating that all of the Required Engineering Work has been completed substantially in compliance with all Legal Requirements, and Lender shall, within twenty (20) days thereafter, disburse any balance of the Engineering Escrow Account to Borrower. Should an Event of Default occur, the sums on deposit in the Engineering Escrow Account may be applied by Lender in payment of any Required Engineering Work or may be applied to the payment of the Debt or any other charges affecting all or any portion of the Cross-collateralized Properties, as Lender in its sole discretion may determine; provided, however, that no such application shall be deemed to have been made by operation of law or otherwise until actually made by Lender as herein provided.

     Section 5.13. Loss Proceeds. In the event of a casualty to the Property, unless Lender elects, or is required pursuant to Article III hereof to make all of the Insurance Proceeds available to Borrower for restoration, Lender and Borrower shall cause all such Insurance Proceeds to be paid by the insurer directly to the Central Account, whereupon Lender shall, after deducting Lender’s costs of recovering and paying out such Insurance Proceeds, including without limitation, reasonable attorneys’ fees, apply same to reduce the Debt in accordance with the terms of the Note; provided, however, that if Lender elects, or is deemed to have elected, to make the Insurance Proceeds available for restoration, all Insurance Proceeds in respect of rent loss, business interruption or similar

52

coverage shall be maintained in the Central Account, to be applied by Lender in the same manner as Rent received with respect to the operation of the Property; provided, further, however, that in the event that the Insurance Proceeds with respect to such rent loss, business interruption or similar insurance policy are paid in a lump sum in advance, Lender shall hold such Insurance Proceeds in a segregated interest-bearing escrow account, which shall be an Eligible Account, shall estimate, in Lender’s reasonable discretion, the number of months required for Borrower to restore the damage caused by the casualty, shall divide the aggregate rent loss, business interruption or similar Insurance Proceeds by such number of months, and shall disburse from such bank account into the Central Account each month during the performance of such restoration such monthly installment of said Insurance Proceeds minus, if the sum which otherwise would be required to be deposited into the Operation and Maintenance Expense Sub-Account if a Default Management Period existed, which sum shall be remitted by Lender to Manager to pay Operating Expenses. In the event that Insurance Proceeds are to be applied toward restoration, Lender shall hold such funds in a segregated bank account at the Bank, which shall be an Eligible Account, and shall disburse same in accordance with the provisions of Section 3.04 hereof. Unless Lender elects, or is required pursuant to Section 6.01 hereof to make all of the Condemnation Proceeds available to Borrower for restoration, Lender and Borrower shall cause all such Condemnation Proceeds to be paid to the Central Account, whereupon Lender shall, after deducting Lender’s costs of recovering and paying out such Condemnation Proceeds, including without limitation, reasonable attorneys’ fees, apply same to reduce the Debt in accordance with the terms of the Note; provided, however, that any Condemnation Proceeds received in connection with a temporary Taking shall be maintained in the Central Account, to be applied by Lender in the same manner as Rent received with respect to the operation of the Property; provided, further, however, that in the event that the Condemnation Proceeds of any such temporary Taking are paid in a lump sum in advance, Lender shall hold such Condemnation Proceeds in a segregated interest-bearing bank account, which shall be an Eligible Account, shall estimate, in Lender’s reasonable discretion, the number of months that the Property shall be affected by such temporary Taking, shall divide the aggregate Condemnation Proceeds in connection with such temporary Taking by such number of months, and shall disburse from such bank account into the Central Account each month during the pendency of such temporary Taking such monthly installment of said Condemnation Proceeds. In the event that Condemnation Proceeds are to be applied toward restoration, Lender shall hold such funds in a segregated bank account at the Bank, which shall be an Eligible Account, and shall disburse same in accordance with the provisions of Section 3.04 hereof. If any Loss Proceeds are received by Borrower, such Loss Proceeds shall be received in trust for Lender, shall be segregated from other funds of Borrower, and shall be forthwith paid into the Central Account, or paid to Lender to hold in a segregated bank account at the Bank, in each case to be applied or disbursed in accordance with the foregoing. Any Loss Proceeds made available to Borrower for restoration in accordance herewith, to the extent not used by Borrower in connection with, or to the extent they exceed the cost of, such restoration, shall be deposited into the Central Account, whereupon Lender shall apply the same to reduce the Debt in accordance with the terms of the Note.

     Section 5.14. Mez Payment Escrow Account. Provided that no Event of Default has occurred and is continuing, on each Payment Date during which the Mez Loan is outstanding, Lender shall transfer to the holder of the Mez Loan, as identified in writing by a joint direction executed by Borrower and the holder of the Mez Loan, an amount equal to the Mez Payment Amount. Should an Event of Default occur, sums on deposit in the Mez Payment Escrow Account may be applied by Lender to the payment of the Debt or any other charges affecting all or any portion of the Cross-collateralized Properties, as Lender in its sole discretion may determine; provided, however, that no such application shall be deemed to have been made by operation of law or otherwise until actually made by Lender as herein provided.

ARTICLE VI: CONDEMNATION

     Section 6.01. Condemnation. (a) Borrower shall notify Lender promptly of the commencement or threat of any Taking of the Property or any portion thereof. Lender is hereby irrevocably appointed as Borrower’s attorney-in-fact, coupled with an interest, with exclusive power to collect, receive and retain the proceeds of any such Taking and to make any compromise or settlement in connection with such proceedings (subject to Borrower’s reasonable approval, except after the occurrence of an Event of Default, in which event Borrower’s approval shall not be required), subject to the provisions of this Security Instrument; provided, however, that Borrower may participate in any such proceedings and shall be authorized and entitled to compromise or settle any such proceeding with respect to Condemnation Proceeds in an amount less than five percent (5%) of the Allocated Loan Amount. Borrower shall execute and deliver to Lender any and all instruments reasonably required in connection with any

53

such proceeding promptly after request therefor by Lender. Except as set forth above, Borrower shall not adjust, compromise, settle or enter into any agreement with respect to such proceedings without the prior consent of Lender. All Condemnation Proceeds are hereby assigned to and shall be paid to Lender. With respect to Condemnation Proceeds in an amount in excess of five percent (5%) of the Allocated Loan Amount, (subject to Borrower’s reasonable approval, except after the occurrence of an Event of Default, in which event Borrower’s approval shall not be required), Borrower hereby authorizes Lender to compromise, settle, collect and receive such Condemnation Proceeds, and to give proper receipts and acquittance therefor. Subject to the provisions of this Article VI, Lender may apply such Condemnation Proceeds (less any cost to Lender of recovering and paying out such proceeds, including, without limitation, reasonable attorneys’ fees and disbursements and costs allocable to inspecting any repair, restoration or rebuilding work and the plans and specifications therefor) toward the payment of the Debt or to allow such proceeds to be used for the Work.

          (b) “Substantial Taking” shall mean (i) a Taking of such portion of the Property that would, in Lender’s reasonable discretion, leave remaining a balance of the Property which would not under then current economic conditions, applicable Development Laws and other applicable Legal Requirements, permit the restoration of the Property so as to constitute a complete, rentable facility of the same sort as existed prior to the Taking, having adequate ingress and egress to the Property, capable of producing a projected Net Operating Income (as reasonably determined by Lender) yielding a projected Debt Service Coverage therefrom for the next two (2) years of not less than the Required Debt Service Coverage, (ii) a Taking which occurs less than two (2) years prior to the Maturity Date, (iii) a Taking which Lender is not reasonably satisfied could be restored within twelve (12) months and at least six (6) months prior to the Maturity Date or (iv) a Taking of more than fifteen percent (15%) of the reasonably estimated fair market value of the Property.

          (c) In the case of a Substantial Taking, Condemnation Proceeds shall be payable to Lender in reduction of the Debt but without any prepayment fee or charge of any kind and, provided that no Event of Default exists, if Borrower elects to apply any Condemnation Proceeds it may receive pursuant to this Security Instrument to the payment of the Debt, Borrower may prepay the balance of the Release Price with respect to the Property without any prepayment fee or charge of any kind.

          (d) In the event of a Taking which is less than a Substantial Taking, Borrower at its sole cost and expense (whether or not the award shall have been received or shall be sufficient for restoration) shall proceed diligently to restore, or cause the restoration of, the remaining Improvements not so taken, to maintain a complete, rentable, self-contained fully operational facility of the same sort as existed prior to the Taking in as good a condition as is reasonably possible. In the event of such a Taking, Lender shall receive the Condemnation Proceeds and shall pay over the same:

     (i) first, provided no Event of Default shall have occurred, to Borrower to the extent of any portion of the award as may be necessary to pay the reasonable cost of restoration of the Improvements remaining, and

     (ii) second, to Lender, in reduction of the Debt without any prepayment premium or charge of any kind.

   If one or more Takings in the aggregate create a Substantial Taking, then, in such event, the sections of this Article VI above applicable to Substantial Takings shall apply.

          (e) In the event Lender is obligated to or elects to make Condemnation Proceeds available for the restoration or rebuilding of the Property, such proceeds shall be disbursed in the manner and subject to the conditions set forth in Section 3.04(b) hereof. If, in accordance with this Article VI, any Condemnation Proceeds are used to reduce the Debt, they shall be applied in accordance with the provisions of the Note. Borrower shall promptly execute and deliver all instruments requested by Lender for the purpose of confirming the assignment of the Condemnation Proceeds to Lender. Application of all or any part of the Condemnation Proceeds to the Debt shall be made in accordance with the provisions of Sections 3.06 and 3.07 hereof. No application of the Condemnation Proceeds to the reduction of the Debt shall have the effect of releasing the lien of this Security

54

Instrument until the remainder of the Debt has been paid in full. In the case of any Taking, Lender, to the extent that Lender has not been reimbursed by Borrower, shall be entitled, as a first priority out of any Condemnation Proceeds, to reimbursement for all reasonable costs, fees and expenses reasonably incurred in the determination and collection of any Condemnation Proceeds. All Condemnation Proceeds deposited with Lender pursuant to this Section, until expended or applied as provided herein, shall be held in accordance with Section 3.04(b) hereof and shall constitute additional security for the payment of the Debt and the payment and performance of Borrower’s obligations, but Lender shall not be deemed a trustee or other fiduciary with respect to its receipt of such Condemnation Proceeds or any part thereof. All awards so deposited with Lender shall be held by Lender in an Eligible Account, but Lender makes no representation or warranty as to the rate or amount of interest, if any, which may accrue on any such deposit and shall have no liability in connection therewith. For purposes hereof, any reference to the award shall be deemed to include interest, if any, which has accrued thereon.

ARTICLE VII: LEASES AND RENTS

     Section 7.01. Assignment. (a) Borrower does hereby bargain, sell, assign and set over unto Lender, all of Borrower’s interest in the Leases and Rents. The assignment of Leases and Rents in this Section 7.01 is an absolute, unconditional and present assignment from Borrower to Lender and not an assignment for security and the existence or exercise of Borrower’s revocable license to collect Rent shall not operate to subordinate this assignment to any subsequent assignment. The exercise by Lender of any of its rights or remedies pursuant to this Section 7.01 shall not be deemed to make Lender a mortgagee-in-possession. In addition to the provisions of this Article VII, Borrower shall comply with all terms, provisions and conditions of the Assignment.

     (b) So long as there shall exist and be continuing no Event of Default, Borrower shall have a revocable license to take all actions with respect to all Leases and Rents, present and future, including the right to collect and use the Rents, subject to the terms of this Security Instrument and the Assignment.

     (c) In a separate instrument Borrower shall, as requested from time to time by Lender, assign to Lender or its nominee by specific or general assignment, any and all Leases, such assignments to be in form and content reasonably acceptable to Lender, but subject to the provisions of Section 7.01(a) and (b) hereof. Borrower agrees to deliver to Lender, within thirty (30) days after Lender’s request, a true and complete copy of every Lease.

     (d) The rights of Lender contained in this Article VII, the Assignment or any other assignment of any Lease shall not result in any obligation or liability of Lender to Borrower or any lessee under a Lease or any party claiming through any such lessee.

     (e) At any time during the continuance of an Event of Default, the license granted hereinabove may be revoked by Lender, and Lender or a receiver appointed in accordance with this Security Instrument may enter upon the Property, and collect, retain and apply the Rents toward payment of the Debt in such priority and proportions as Lender in its sole discretion shall deem proper.

     (f) In addition to the rights which Lender may have herein, during the continuance of any Event of Default, Lender, at its option, may require Borrower to pay monthly in advance to Lender, or any receiver appointed to collect the Rents, the fair and reasonable rental value for the use and occupation of such part of the Property as may be used and occupied by Borrower and may require Borrower to vacate and surrender possession of the Property to Lender or to such receiver and, in default thereof, Borrower may be evicted by summary proceedings or otherwise.

     Section 7.02. Management of Property. (a) Borrower shall manage the Property or cause the Property to be managed in a manner which is consistent with the Approved Manager Standard. All Space Leases shall provide for rental rates comparable to then existing local market rates and terms and conditions which constitute good and prudent business practice and are consistent with prevailing market terms and conditions, and shall be arms-length transactions. All Space Leases entered into after the date hereof shall provide that they are subordinate to this Security Instrument and that the lessees thereunder attorn to Lender. Borrower shall deliver copies of all Leases, amendments, modifications and renewals thereof to Lender. All proposed Leases for the Property shall be

55

subject to the prior written approval of Lender, not to be unreasonably withheld, conditioned or delayed, provided, however that Borrower may enter into new leases with unrelated third parties without obtaining the prior consent of Lender provided that: (i) the proposed leases conform with the requirements of this Section 7.02; (ii) the proposed Space Lease is not a Major Space Lease and the space to be leased pursuant to such proposed lease together with any space leased or to be leased to an Affiliate of the tenant thereunder does not exceed 10,000 square feet; and (iii) the term of the proposed lease inclusive of all extensions and renewals, does not exceed ten (10) years.

     (b) Borrower (i) shall or shall cause Operating Tenant to observe and perform all of its material obligations under the Leases pursuant to applicable Legal Requirements and shall not do or permit to be done anything to impair the value of the Major Space Leases as security for the Debt; (ii) shall promptly send copies to Lender of all notices of default which Borrower shall receive under the Major Space Leases; (iii) shall, consistent with the Approved Manager Standard, enforce all of the terms, covenants and conditions contained in the Leases to be observed or performed; (iv) shall not collect any of the Rents under the Major Space Leases more than one (1) month in advance (except that Borrower may collect in advance such security deposits as are permitted pursuant to applicable Legal Requirements and are commercially reasonable in the prevailing market); (v) shall not execute any other assignment of lessor’s interest in the Leases or the Rents except as otherwise expressly permitted pursuant to this Security Instrument; (vi) shall not cancel or terminate any of the Leases or accept a surrender thereof in any manner inconsistent with the Approved Manager Standard; (vii) shall not convey, transfer or suffer or permit a conveyance or transfer of all or any part of the Premises or the Improvements or of any interest therein so as to effect a merger of the estates and rights of, or a termination or diminution of the obligations of, lessees thereunder; (viii) shall not alter, modify or change the terms of any guaranty of any Major Space Lease or cancel or terminate any such guaranty in a manner inconsistent with the Approved Manager Standard; (ix) shall, in accordance with the Approved Manager Standard, make all reasonable efforts to seek lessees for space as it becomes vacant and enter into Leases in accordance with the terms hereof; (x) shall not cancel or terminate or materially modify, alter or amend any Major Space Lease or Property Agreement without Lender’s consent, which consent will not be unreasonably withheld or delayed; and (xi) shall, without limitation to any other provision hereof, execute and deliver at the request of Lender all such further assurances, confirmations and assignments in connection with the Property as are required herein and as Lender shall from time to time reasonably require.

     (c) All security deposits shall be held in accordance with all Legal Requirements. Following the occurrence and during the continuance of any Event of Default, Borrower shall, upon Lender’s request, if permitted by applicable Legal Requirements, turn over the security deposits (and any interest thereon) to Lender to be held by Lender in accordance with the terms of the Leases and all Legal Requirements.

     (d) If requested by Lender, Borrower shall furnish, or shall cause the applicable lessee to furnish, to Lender financial data and/or financial statements in accordance with Regulation AB for any lessee of the Property if, in connection with a Securitization, Lender expects there to be, with respect to such lessee or any group of affiliated lessees, a concentration within all of the mortgage loans included or expected to be included, as applicable, in such Securitization such that such lessee or group of affiliated lessees would constitute a Significant Obligor; provided, however, that in the event the related Space Lease does not require the related lessee to provide the foregoing information, Borrower shall use commercially reasonable efforts to cause the applicable lessee to furnish such information.

     (e) Borrower covenants and agrees with Lender that (i) the Property will be managed at all times by an Approved Manager pursuant to the management agreement approved by Lender (the “Management Agreement”), such approval not to be unreasonably withheld or delayed, (ii) after Borrower has knowledge of a fifty percent (50%) or more change in control of the ownership of Manager, Borrower will promptly give Lender notice thereof (a “Manager Control Notice”) and (iii) the Management Agreement may be terminated by Lender at any time (A) for cause to the extent provided in the Management Agreement (including, but not limited to, Manager’s gross negligence, misappropriation of funds, willful misconduct or fraud) following the occurrence of an Event of Default of the type set forth in Section 13.01(a) through (c), or (B) to the extent provided in the Management Agreement, following the receipt of a Manager Control Notice and a substitute Approved Manager shall be appointed by Borrower. Notwithstanding the foregoing, transfers of publicly traded stock of Manager on a national stock exchange or on the NASDAQ Stock Market in the normal course of business and not in connection with a tender

56

offer or sale of Manager or substantially all of the assets of Manager shall not require the giving of a Manager Control Notice. Borrower may from time to time appoint a successor manager to manage the Property, provided that any such successor manager shall be an Approved Manager. Borrower further covenants and agrees that Borrower shall require Manager (or any successor managers) to maintain at all times during the term of the Loan worker’s compensation insurance as required by Governmental Authorities.

     (f) Borrower shall not enter into any new or replacement Franchise Agreement without obtaining the prior written consent of Lender, such consent not to be unreasonably withheld, conditioned or delayed (provided that any Franchise Agreement which is on a form in all material respects (including, without limitation, all fees due thereunder) the same as the form of any Franchise Agreement which is contained in the uniform franchise offering circular for any Approved Franchisor shall be deemed an acceptable form), and shall (i) pay or shall cause to be paid all sums required to be paid by Borrower under any Franchise Agreement and Operating Lease, (ii) diligently perform and observe all of the material terms, covenants and conditions of any Franchise Agreement on the part of Borrower to be performed and observed to the end that all things shall be done which are necessary to keep unimpaired the rights of Borrower under any Franchise Agreement and Operating Lease, (iii) promptly notify Lender of the giving of any notice to Borrower of any material default by Borrower in the performance or observance of any of the terms, covenants or conditions of and Franchise Agreement or Operating Lease on the part of Borrower to be performed and observed and deliver to Lender a true copy of each such notice, and (iv) promptly deliver to Lender a copy of each financial statement, business plan, capital expenditures plan, report and estimate received by it under the Franchise Agreement or the Management Agreement or the Operating Lease. Borrower shall not, without the prior consent of the Lender, such consent not to be unreasonably withheld, conditioned or delayed, surrender any Franchise Agreement or Operating Lease or terminate or cancel any Franchise Agreement or modify, change, supplement, alter or amend any Franchise Agreement or Operating Lease, in any material respect, either orally or in writing, and Borrower hereby assigns to Lender as further security for the payment of the Debt and for the performance and observance of the terms, covenants and conditions of this Security Instrument, all the rights, privileges and prerogatives of Borrower to surrender any Franchise Agreement or Operating Lease or to terminate, cancel, modify, change, supplement, alter or amend any Franchise Agreement or Operating Lease in any respect, and any such surrender of any Franchise Agreement or termination, cancellation, modification, change, supplement, alteration or amendment of any Franchise Agreement or Operating Lease without the prior consent of Lender shall be void and of no force and effect, provided, however, Borrower may terminate any Franchise Agreement if Borrower enters into a new Franchise Agreement with an Approved Franchisor pursuant to a Franchise Agreement which is reasonably acceptable to Lender. If Borrower shall default in the performance or observance of any material term, covenant or condition of any Franchise Agreement or Operating Lease on the part of Borrower to be performed or observed, then, without limiting the generality of the other provisions of this Security Instrument, and without waiving or releasing Borrower from any of its obligations hereunder, Lender shall have the right, but shall be under no obligation, to pay any sums and to perform any act or take any action as may be appropriate to cause all the terms, covenants and conditions of any Franchise Agreement or Operating Lease on the part of Borrower to be performed or observed to be promptly performed or observed on behalf of Borrower, to the end that the rights of Borrower in, to and under any Franchise Agreement and Operating Lease shall be kept unimpaired and free from default. Lender and any Person designated by Lender shall have, and are hereby granted, the right to enter upon the Property at any time and from time to time for the purpose of taking any such action. If the franchisor under any Franchise Agreement or lessee under an Operating Lease shall deliver to Lender a copy of any notice sent to Borrower of default under any Franchise Agreement or Operating Lease, as applicable, such notice shall constitute full protection to Lender for any action to be taken by Lender in good faith, in reliance thereon. Borrower shall, from time to time, use its best efforts to obtain from the franchisor or lessee under any Franchise Agreement such certificates of estoppel with respect to compliance by Borrower with the terms of any Franchise Agreement as may be requested by Lender. Borrower shall exercise each individual option, if any, to extend or renew the term of any Franchise Agreement within four (4) months of the last day upon which any such option may be exercised, unless Lender consents to the non-renewal of such Franchise Agreement in writing, and Borrower hereby expressly authorizes and appoints Lender its attorney-in-fact to exercise any such option in the name of and upon behalf of Borrower, which power of attorney shall be irrevocable and shall be deemed to be coupled with an interest, provided, however, that Lender shall not exercise such power of attorney unless and until Borrower fails to take the actions required herein.

57

     (g) Intentionally Omitted.

     (h) Borrower shall fund and operate, or shall cause Manager to fund and operate, the Property in a manner consistent with a hotel of the same type and category as the Property and in compliance in all material respects with any Franchise Agreement and Operating Lease.

     (i) Borrower shall maintain or cause Operating Tenant to cause Manager to maintain Inventory in kind and amount sufficient to meet hotel industry standards for hotels comparable to the hotel located at the Premises and at levels sufficient for the operation of the hotel located at the Premises at historic occupancy levels.

     (j) Borrower shall deliver to Lender all notices of default or termination received by Borrower, Operating Tenant or Manager with respect to any licenses and permits, contracts, Property Agreements or insurance policies within three (3) Business Days of receipt of the same.

     (k) Borrower shall not permit any Equipment or other personal property to be removed from the Property unless the removed item is consumed or sold in the ordinary course of business, removed temporarily for maintenance and repair, or, if removed permanently, replaced by an article of equivalent suitability and not materially less value, owned by Borrower free and clear of any lien.

ARTICLE VIII: MAINTENANCE AND REPAIR

     Section 8.01. Maintenance and Repair of the Property; Alterations; Replacement of Equipment. Borrower hereby covenants and agrees:

     (a) Borrower shall not (i) desert or abandon the Property, (ii) change the use of the Property or cause or permit the use or occupancy of any part of the Property to be discontinued if such discontinuance or use change would violate any zoning or other law, ordinance or regulation; (iii) consent to or seek any lowering of the zoning classification, or greater zoning restriction affecting the Property; or (iv) take any steps whatsoever to convert the Property, or any portion thereof, to a condominium or cooperative form of ownership.

     (b) Borrower shall, or shall cause Operating Tenant to, at its expense, (i) take good care of the Property including grounds generally, and utility systems and sidewalks, roads, alleys, and curbs therein, and shall keep the same in good, safe and insurable condition and in compliance with all applicable Legal Requirements, (ii) promptly make all necessary repairs to the Property, above grade and below grade, interior and exterior, structural and nonstructural, ordinary and extraordinary, unforeseen and foreseen, and maintain the Property in a manner appropriate for the facility and (iii) not commit or suffer to be committed any waste of the Property or do or suffer to be done anything which will impair the value of the Property or increase in any respect the risk of fire or other hazard to the Property. Borrower shall keep the sidewalks, vaults, gutters and curbs comprising, or adjacent to, the Property, clean and free from dirt, snow, ice, rubbish and obstructions. All repairs made by Borrower shall be made with first-class materials, in a good and workmanlike manner, shall be equal or better in quality and class to the original work and shall comply with all applicable Legal Requirements and Insurance Requirements. To the extent any of the above obligations are obligations of tenants under Space Leases or other Persons under Property Agreements, Borrower may fulfill its obligations hereunder by causing such tenants or other Persons, as the case may be, to perform their obligations thereunder. As used herein, the terms “repair” and “repairs” shall be deemed to include all necessary replacements.

     (c) Borrower shall not demolish, remove, construct, or, except as otherwise expressly provided herein, restore, or alter the Property or any portion thereof, nor consent to or permit any such demolition, removal, construction, restoration, addition or alteration, which would diminish the value of the Property without Lender’s prior written consent in each instance, which consent shall not be unreasonably withheld or delayed.

     (d) Borrower represents and warrants to Lender that together with Equipment owned by Operating Tenant and Manager (i) there are no fixtures, machinery, apparatus, tools, equipment or articles of personal property attached or appurtenant to, or located on, or used in connection with the management, operation or maintenance of the Property, except for the Equipment and equipment leased by Borrower and/or Operating Tenant and/or Manager

58

for the management, operation or maintenance of the Property in accordance with the Loan Documents; (ii) the Equipment and the leased equipment constitute all of the fixtures, machinery, apparatus, tools, equipment and articles of personal property necessary to the proper operation and maintenance of the Property; and (iii) all of the Equipment is free and clear of all liens, except for the lien of this Security Instrument and the Permitted Encumbrances. All right, title and interest of Borrower in and to all extensions, improvements, betterments, renewals and appurtenances to the Property hereafter acquired by, or released to, Borrower or constructed, assembled or placed by Borrower in the Property, and all changes and substitutions of the security constituted thereby, shall be and, in each such case, without any further mortgage, encumbrance, conveyance, assignment or other act by Lender or Borrower, shall become subject to the lien and security interest of this Security Instrument as fully and completely, and with the same effect, as though now owned by Borrower and specifically described in this Security Instrument, but at any and all times Borrower shall execute and deliver to Lender any documents Lender may reasonably deem necessary or appropriate for the purpose of specifically subjecting the same to the lien and security interest of this Security Instrument.

     (e) Notwithstanding the provisions of this Security Instrument to the contrary, Borrower shall have the right, at any time and from time to time, to remove and dispose of Equipment which may have become obsolete or unfit for use or which is no longer useful in the management, operation or maintenance of the Property. Borrower shall promptly replace any such Equipment so disposed of or removed with other Equipment of equal value and utility, free of any security interest or superior title, liens or claims; except that, if by reason of technological or other developments, replacement of the Equipment so removed or disposed of is not necessary or desirable for the proper management, operation or maintenance of the Property, Borrower shall not be required to replace the same. All such replacements or additional equipment shall be deemed to constitute “Equipment” and shall be covered by the security interest herein granted.

ARTICLE IX: TRANSFER OR ENCUMBRANCE OF THE PROPERTY

     Section 9.01. Other Encumbrances. Borrower shall not further encumber or permit the further encumbrance in any manner (whether by grant of a pledge, security interest or otherwise) of the Property or any part thereof or interest therein, including, without limitation, of the Rents therefrom. In addition, except for a Permitted Encumbrance, Borrower shall not further encumber and shall not permit the further encumbrance in any manner (whether by grant of a pledge, security interest or otherwise) of Borrower or any direct or indirect interest in Borrower except as expressly permitted pursuant to this Security Instrument.

     Section 9.02. No Transfer. Borrower acknowledges that Lender has examined and relied on the expertise of Borrower and, if applicable, each General Partner, in owning and operating properties such as the Property in agreeing to make the Loan and will continue to rely on Borrower’s ownership of the Property as a means of maintaining the value of the Property as security for repayment of the Debt and Borrower acknowledges that Lender has a valid interest in maintaining the value of the Property. Borrower shall not Transfer, other than Permitted Transfers, nor permit any Transfer, other than Permitted Transfers, without the prior written consent of Lender, which consent Lender may withhold in its sole and absolute discretion. Lender shall not be required to demonstrate any actual impairment of its security or any increased risk of default hereunder in order to declare the Debt immediately due and payable upon a Transfer without Lender’s consent. This provision shall apply to every Transfer regardless of whether voluntary or not, or whether or not Lender has consented to any previous Transfer.

     Section 9.03. Due on Sale. Lender may declare the Debt immediately due and payable upon any Transfer, other than Permitted Transfers, or further encumbrance without Lender’s consent without regard to whether any impairment of its security or any increased risk of default hereunder can be demonstrated. This provision shall apply to every Transfer or further encumbrance of the Property or any part thereof or interest in the Property or in Borrower regardless of whether voluntary or not, or whether or not Lender has consented to any previous Transfer or further encumbrance of the Property or interest in Borrower.

59

ARTICLE X: CERTIFICATES

     Section 10.01. Estoppel Certificates. (a) After request by Lender, Borrower, within fifteen (15) days and at its expense, will furnish Lender with a statement, duly acknowledged and certified, setting forth (i) the amount of the original principal amount of the Note, and the unpaid principal amount of the Note, (ii) the rate of interest of the Note, (iii) the date payments of interest and/or principal were last paid, (iv) any offsets or defenses to the payment of the Debt that Borrower shall have knowledge of, and if any are alleged, the nature thereof, (v) that the Note, this Security Instrument and the other Loan Documents have not been modified or if modified, giving particulars of such modification and (vi) that to Borrower’s best knowledge, there has occurred and is then continuing no Default or if such Default exists, the nature thereof, the period of time it has existed, and the action being taken to remedy such Default.

     (b) Within fifteen (15) days after written request by Borrower, Lender shall furnish to Borrower a written statement confirming the amount of the Debt, the maturity date of the Note and the date to which interest has been paid.

     (c) At Lender’s request Borrower shall use all reasonable efforts to obtain estoppel certificates from tenants in form and substance reasonably acceptable to Lender.

ARTICLE XI: NOTICES

     Section 11.01. Notices. Any notice, demand, statement, request or consent made hereunder shall be in writing and delivered personally or sent to the party to whom the notice, demand or request is being made by Federal Express or other nationally recognized overnight delivery service, as follows and shall be deemed given (a) when delivered personally, (b) on the date of sending by telefax if sent during normal business hours on a Business Day (otherwise on the next Business Day) provided that any notice given by telefax is also given by at least one other method provided herein, or (c) one (1) Business Day after being deposited with Federal Express or such other nationally recognized delivery service:

If to Lender:	Wachovia Bank, National Association
	Commercial Real Estate Services
	8739 Research Drive URP 4
	NC 1075
	Charlotte, North Carolina 28262
	Loan Number: 502859548
	Attention: Portfolio Management
	Fax No.: (704) 715-0036
with a copy to:	Proskauer Rose llp
	1585 Broadway
	New York, New York 10036
	Attn: David J. Weinberger, Esq.
	Fax No.: (212) 969-2900
If to Borrower:	c/o Ashford Hospitality Trust, Inc.
	14185 Dallas Parkway, Suite 1100
	Dallas, Texas 75254-4308
	Attn: David Brooks
	Facsimile: (972) 778-9270
	E-mail: dbrooks@ahreit.com

60

with a copy to:	Akin Gump Strauss Hauer & Feld LLP
	590 Madison Avenue
	New York, New York 10022-2524
	Attn: Peter Miller, Esq.
	Facsimile: (212) 872-1002
	E-mail: pamiller@akingump.com,

or such other address as either Borrower or Lender shall hereafter specify by not less than ten (10) days prior written notice as provided herein; provided, however, that notwithstanding any provision of this Article to the contrary, such notice of change of address shall be deemed given only upon actual receipt thereof. Rejection or other refusal to accept or the inability to deliver because of changed addresses of which no notice was given as herein required shall be deemed to be receipt of the notice, demand, statement, request or consent.

ARTICLE XII: INDEMNIFICATION

     Section 12.01. Indemnification Covering Property. In addition, and without limitation, to any other provision of this Security Instrument or any other Loan Document, Borrower shall protect, indemnify and save harmless Lender and its successors and assigns, and each of their agents, employees, officers, directors, stockholders, partners and members (collectively, “Indemnified Parties”) for, from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature, known or unknown, contingent or otherwise, whether incurred or imposed within or outside the judicial process, including, without limitation, reasonable attorneys’ fees and disbursements imposed upon or incurred by or asserted against any of the Indemnified Parties by reason of (a) ownership of this Security Instrument, the Assignment, the Property or any part thereof or any interest therein or receipt of any Rents; (b) any accident, injury to or death of any person or loss of or damage to property occurring in, on or about the Property or any part thereof or on the adjoining sidewalks, curbs, parking areas, streets or ways; (c) any use, nonuse or condition in, on or about, or possession, alteration, repair, operation, maintenance or management of, the Property or any part thereof or on the adjoining sidewalks, curbs, parking areas, streets or ways; (d) any failure on the part of Borrower to perform or comply with any of the terms of this Security Instrument or the Assignment; (e) performance of any labor or services or the furnishing of any materials or other property in respect of the Property or any part thereof; (f) any claim by brokers, finders or similar Persons claiming to be entitled to a commission in connection with any Lease or other transaction involving the Property or any part thereof; (g) any Imposition including, without limitation, any Imposition attributable to the execution, delivery, filing, or recording of any Loan Document, Lease or memorandum thereof; (h) any lien or claim arising on or against the Property or any part thereof under any Legal Requirement or any liability asserted against any of the Indemnified Parties with respect thereto; (i) any claim arising out of or in any way relating to any tax or other imposition on the making and/or recording of this Security Instrument, the Note or any of the other Loan Documents; (j) a Default under Sections 2.02(f), 2.02(g), 2.02(k), 2.02(t) or 2.02(w) hereof, (k) the failure of any Person to file timely with the Internal Revenue Service an accurate Form 1099-B, Statement for Recipients of Proceeds from Real Estate, Broker and Barter Exchange Transactions, which may be required in connection with the Loan, or to supply a copy thereof in a timely fashion to the recipient of the proceeds of the Loan; (l) the claims of any lessee or any Person acting through or under any lessee or otherwise arising under or as a consequence of any Lease or (m) the failure to pay any insurance premiums. Notwithstanding the foregoing provisions of this Section 12.01 to the contrary, Borrower shall have no obligation to indemnify the Indemnified Parties pursuant to this Section 12.01 for liabilities, obligations, claims, damages, penalties, causes of action, costs and expenses relative to the foregoing which result from Lender’s, and its successors’ or assigns’, willful misconduct or gross negligence or with respect to matters which first occur after Lender has taken title to the Property through a foreclosure or delivery of a deed in lieu thereof. Any amounts payable to Lender by reason of the application of this Section 12.01 shall constitute a part of the Debt secured by this Security Instrument and the other Loan Documents and shall become immediately due and payable and shall bear interest at the Default Rate from the date the liability, obligation, claim, cost or expense is sustained by Lender, as applicable, until paid. The provisions of this Section 12.01 shall survive the termination of this Security Instrument whether by repayment of the Debt, foreclosure or delivery of a deed in lieu thereof, assignment or otherwise. In case any action, suit or proceeding is brought against any of the Indemnified Parties by reason of any occurrence of the type set forth in (a) through (m) above, Borrower shall, at Borrower’s expense, resist and defend such action, suit or proceeding or will cause the same to be resisted and defended by counsel at Borrower’s expense for the insurer of the liability or by counsel designated by Borrower (unless reasonably disapproved by Lender promptly after Lender has been notified of such counsel); provided,

61

however, that nothing herein shall compromise the right of Lender (or any other Indemnified Party) to appoint its own counsel at Borrower’s expense for its defense with respect to any action which, in the reasonable opinion of Lender or such other Indemnified Party, as applicable, presents a conflict or potential conflict between Lender or such other Indemnified Party that would make such separate representation advisable. Any Indemnified Party will give Borrower prompt notice after such Indemnified Party obtains actual knowledge of any potential claim by such Indemnified Party for indemnification hereunder. The Indemnified Parties shall not settle or compromise any action, proceeding or claim as to which it is indemnified hereunder without notice to Borrower. Notwithstanding the foregoing, so long as no Default has occurred and is continuing and Borrower is resisting and defending such action, suit or proceeding as provided above in a prudent and commercially reasonable manner, in order to obtain the benefit of this Section 12.01 with respect to such action, suit or proceeding, Lender and the Indemnified Parties agree that they shall not settle such action, suit or proceeding without obtaining Borrower’s consent which Borrower agrees not to unreasonably withhold, condition or delay; provided, however, (x) if Borrower is not diligently defending such action, suit or proceeding in a prudent and commercially reasonable manner as provided above and Lender has provided Borrower with thirty (30) days’ prior written notice, or shorter period if mandated by the requirements of the applicable law, and Borrower has failed to correct such failure, or (y) failure to settle could, in Lender’s reasonable judgment, expose Lender to criminal liability, Lender may settle such action, suit or proceeding without the consent of Borrower and be entitled to the benefits of this Section 12.01 with respect to the settlement of such action, suit or proceeding.

ARTICLE XIII: DEFAULTS

     Section 13.01. Events of Default. The Debt shall become immediately due at the option of Lender upon any one or more of the following events (“Event of Default”):

     (a) if the final payment or prepayment premium, if any, due under the Note shall not be paid on Maturity;

     (b) if any monthly payment of interest and/or principal due under the Note (other than the sums described in (a) above) shall not be fully paid on the date upon which the same is due and payable thereunder; provided, that the failure of any such amount to be paid when due shall not be an Event of Default if adequate funds were on deposit in the relevant Sub-Account (or would have been on deposit therein if Lender had timely allocated such funds thereto from the Central Account and/or the Collection Account in accordance with the provisions of Article V hereof);

     (c) if payment of any sum (other than the sums described in (a) above or (b) above) required to be paid pursuant to the Note, this Security Instrument or any other Loan Document shall not be paid within five (5) Business Days after Lender delivers written notice to Borrower that same is due and payable thereunder or hereunder;

     (d) if Borrower, Operating Tenant, Guarantor or, if Borrower, Operating Tenant or Guarantor is a partnership, any general partner of Borrower, Operating Tenant or Guarantor, or, if Borrower, Operating Tenant or Guarantor is a limited liability company, any managing member of Borrower, Operating Tenant or Guarantor, shall institute or cause to be instituted any proceeding for the termination or dissolution of Borrower, Operating Tenant, Guarantor or any such general partner or member;

     (e) if (i) Borrower fails to deliver to Lender the original insurance policies or certificates as herein provided (provided, however, that if the insurance policies required by this Security Instrument are maintained in full force and effect, then Borrower shall have five (5) Business Days after notice from Lender of Borrower’s failure to deliver the original policies or certificates (whichever has not been delivered as required) to deliver same to Lender before such failure becomes an Event of Default) or (ii) if the insurance policies required hereunder are not kept in full force and effect as herein provided (no notice or cure period applies to this item (ii));

62

     (f) if Borrower or Guarantor attempts to assign its rights under this Security Instrument or any other Loan Document or any interest herein or therein, or if any Transfer occurs other than in accordance with the provisions hereof;

     (g) if any representation or warranty of Borrower or Guarantor made herein or in any other Loan Document or in any certificate, report, financial statement or other instrument or agreement furnished to Lender shall prove false or misleading in any material respect as of the date made; provided, however, that if such representation or warranty which was false or misleading in any material respect is, by its nature, curable and is not reasonably likely to have a Material Adverse Effect, and such representation or warranty was not, to the best of Borrower’s knowledge, false or misleading in any material respect when made, then the same shall not constitute an Event of Default unless Borrower has not cured the same within five (5) Business Days after receipt by Borrower of notice from Lender in writing of such breach;

     (h) if Borrower, Operating Tenant, Guarantor or any general partner of Borrower, Operating Tenant or Guarantor shall make an assignment for the benefit of creditors or shall admit in writing its inability to pay its debts generally as they become due;

     (i) if a receiver, liquidator or trustee of Borrower, Operating Tenant, Guarantor or any general partner of Borrower, Operating Tenant or Guarantor shall be appointed or if Borrower, Operating Tenant, Guarantor or their respective general partners shall be adjudicated a bankrupt or insolvent, or if any petition for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any similar federal or state law, shall be filed by or against, consented to, or acquiesced in, by Borrower, Operating Tenant, Guarantor or their respective general partners or if any proceeding for the dissolution or liquidation of Borrower, Operating Tenant, Guarantor or their respective general partners shall be instituted; however, if such appointment, adjudication, petition or proceeding was involuntary and not consented to by Borrower, Operating Tenant, Guarantor or their respective general partners, as applicable, upon the same not being discharged, stayed or dismissed within ninety (90) days or if Borrower, Operating Tenant, Guarantor or their respective general partners shall generally not be paying its debts as they become due;

     (j) if Borrower shall be in default beyond any notice or grace period, if any, under any other mortgage or deed of trust or security agreement covering any part of the Property without regard to its priority relative to this Security Instrument; provided, however, this provision shall not be deemed a waiver of the provisions of Article IX prohibiting further encumbrances affecting the Property or any other provision of this Security Instrument;

     (k) if the Property becomes subject (i) to any lien which is superior to the lien of this Security Instrument, other than a lien for real estate taxes and assessments not due and payable, or (ii) to any mechanic’s, materialman’s or other lien which is or is asserted to be superior to the lien of this Security Instrument, and such lien shall remain undischarged (by payment, bonding, or otherwise) for fifteen (15) days unless contested in accordance with the terms hereof;

     (l) if Borrower discontinues the operation of the Property or any material part thereof for reasons other than repair or restoration arising from a casualty or condemnation or any renovation project for ten (10) days or more;

     (m) except as permitted in this Security Instrument, any material alteration, demolition or removal of any of the Improvements without the prior consent of Lender;

     (n) if Borrower consummates a transaction which would cause this Security Instrument or Lender’s rights under this Security Instrument, the Note or any other Loan Document to constitute a non-exempt prohibited transaction under ERISA or result in a violation of a state statute regulating government plans subjecting Lender to liability for a violation of ERISA or a state statute;

63

     (o) if a default by Borrower beyond applicable notice and grace periods, if any, occurs under the Franchise Agreement or Operating Lease, or if the Franchise Agreement or Operating Lease is terminated, or if, without Lender’s prior written consent, there is a material change to the Franchise Agreement or Operating Lease unless, with respect to any default under or termination of the Franchise Agreement, Borrower enters into a replacement Franchise Agreement within thirty (30) days of the termination or receipt of notice of any such default, as applicable, in accordance with the terms hereof;

     (p) if an Event of Default shall occur and be continuing under any of the other Cross-collateralized Mortgages;

     (q) if Borrower is a tenancy-in-common, if any TIC brings a partition action without first offering its interest to the other TICs or if, upon the making of such offer, one or more of the TICs does not purchase the tenant-in-common interest of the TIC which desires to bring a partition action;

     (r) if Borrower is a tenancy-in-common, if the TIC Agreement is modified without the prior written consent of Lender or if the Person appointed in the TIC Agreement as manager is replaced or removed without obtaining the prior written consent of Lender; or

     (s) if a default shall occur under any of the other terms, covenants or conditions of the Note, this Security Instrument or any other Loan Document, other than as set forth in (a) through (r) above, for ten (10) days after notice from Lender in the case of any default which can be cured by the payment of a sum of money, or for thirty (30) days after notice from Lender in the case of any other default or an additional ninety (90) days if Borrower is diligently and continuously effectuating a cure of a curable non-monetary default, other than as set forth in (a) through (r) above.

     Section 13.02. Remedies. (a) Upon the occurrence and during the continuance of any Event of Default, Lender may, in addition to any other rights or remedies available to it hereunder or under any other Loan Document, at law or in equity, take such action, without notice or demand, as it reasonably deems advisable to protect and enforce its rights against Borrower or any one or more of the Cross-collateralized Borrowers and in and to the Property or any one or more of the Cross-collateralized Properties including, but not limited to, the following actions, each of which may be pursued singly, concurrently or otherwise, at such time and in such order as Lender may determine, in its sole discretion, without impairing or otherwise affecting any other rights and remedies of Lender hereunder, at law or in equity: (i) declare all or any portion of the unpaid Debt to be immediately due and payable; provided, however, that upon the occurrence of any of the events specified in Section 13.01(i), the entire Debt will be immediately due and payable without notice or demand or any other declaration of the amounts due and payable; or (ii) bring an action to foreclose this Security Instrument and without applying for a receiver for the Rents, but subject to the rights of the tenants under the Leases, enter into or upon the Property or any part thereof, either personally or by its agents, nominees or attorneys, and dispossess Borrower and its agents and servants therefrom, and thereupon Lender may (A) use, operate, manage, control, insure, maintain, repair, restore and otherwise deal with all and every part of the Property and conduct the business thereat, (B) make alterations, additions, renewals, replacements and improvements to or on the Property or any part thereof, (C) exercise all rights and powers of Borrower with respect to the Property or any part thereof, whether in the name of Borrower or otherwise, including, without limitation, the right to make, cancel, enforce or modify Leases, obtain and evict tenants, and demand, sue for, collect and receive all earnings, revenues, rents, issues, profits and other income of the Property and every part thereof, and (D) apply the receipts from the Property or any part thereof to the payment of the Debt, after deducting therefrom all expenses (including, without limitation, reasonable attorneys’ fees and disbursements) reasonably incurred in connection with the aforesaid operations and all amounts necessary to pay the Impositions, insurance and other charges in connection with the Property or any part thereof, as well as just and reasonable compensation for the services of Lender’s third-party agents; or (iii) have an appraisal or other valuation of the Property or any part thereof performed by an Appraiser (and Borrower covenants and agrees it shall cooperate in causing any such valuation or appraisal to be performed) and any cost or expense incurred by Lender in connection therewith shall constitute a portion of the Debt and be secured by this Security Instrument and shall be immediately due and payable to Lender with interest, at the Default Rate, until the date of receipt by Lender; or (iv) sell the Property or institute proceedings for the complete foreclosure of this Security Instrument, or take such other

64

action as may be allowed pursuant to Legal Requirements, at law or in equity, for the enforcement of this Security Instrument in which case the Property or any part thereof may be sold for cash or credit in one or more parcels; or (v) with or without entry, and to the extent permitted and pursuant to the procedures provided by applicable Legal Requirements, institute proceedings for the partial foreclosure of this Security Instrument, or take such other action as may be allowed pursuant to Legal Requirements, at law or in equity, for the enforcement of this Security Instrument for the portion of the Debt then due and payable, subject to the lien of this Security Instrument continuing unimpaired and without loss of priority so as to secure the balance of the Debt not then due; or (vi) sell the Property or any part thereof and any or all estate, claim, demand, right, title and interest of Borrower therein and rights of redemption thereof, pursuant to power of sale or otherwise, at one or more sales, in whole or in parcels, in any order or manner, at such time and place, upon such terms and after such notice thereof as may be required or permitted by law, at the discretion of Lender, and in the event of a sale, by foreclosure or otherwise, of less than all of the Property, this Security Instrument shall continue as a lien on the remaining portion of the Property; or (vii) institute an action, suit or proceeding in equity for the specific performance of any covenant, condition or agreement contained in the Loan Documents, or any of them; or (viii) recover judgment on the Note or any guaranty either before, during or after (or in lieu of) any proceedings for the enforcement of this Security Instrument; or (ix) apply, ex parte, for the appointment of a custodian, trustee, receiver, keeper, liquidator or conservator of the Property or any part thereof, irrespective of the adequacy of the security for the Debt and without regard to the solvency of Borrower or of any Person liable for the payment of the Debt, to which appointment Borrower does hereby consent and such receiver or other official shall have all rights and powers permitted by applicable law and such other rights and powers as the court making such appointment may confer, but the appointment of such receiver or other official shall not impair or in any manner prejudice the rights of Lender to receive the Rent with respect to any of the Property pursuant to this Security Instrument or the Assignment; or (x) require, at Lender’s option, Borrower to pay monthly in advance to Lender, or any receiver appointed to collect the Rents, the fair and reasonable rental value for the use and occupation of any portion of the Property occupied by Borrower and may require Borrower to vacate and surrender possession to Lender of the Property or to such receiver and Borrower may be evicted by summary proceedings or otherwise; or (xi) without notice to Borrower (A) apply all or any portion of the cash collateral in any Sub-Account and Escrow Account, including any interest and/or earnings therein, to carry out the obligations of Borrower under this Security Instrument and the other Loan Documents, to protect and preserve the Property and for any other purpose permitted under this Security Instrument and the other Loan Documents and/or (B) have all or any portion of such cash collateral immediately paid to Lender to be applied against the Debt in the order and priority set forth in the Note; or (xii) pursue any or all such other rights or remedies as Lender may have under applicable law or in equity; provided, however, that the provisions of this Section 13.02(a) shall not be construed to extend or modify any of the notice requirements or grace periods provided for hereunder or under any of the other Loan Documents. Borrower hereby waives, to the fullest extent permitted by Legal Requirements, any defense Borrower might otherwise raise or have by the failure to make any tenants parties defendant to a foreclosure proceeding and to foreclose their rights in any proceeding instituted by Lender.

     (b) Any time after an Event of Default Lender shall have the power to sell the Property or any part thereof at public auction, in such manner, at such time and place, upon such terms and conditions, and upon such public notice as Lender may deem best for the interest of Lender, or as may be required or permitted by applicable law, consisting of advertisement in a newspaper of general circulation in the jurisdiction and for such period as applicable law may require and at such other times and by such other methods, if any, as may be required by law to convey the Property in fee simple by Lender’s deed with special warranty of title to and at the cost of the purchaser, who shall not be liable to see to the application of the purchase money. The proceeds or avails of any sale made under or by virtue of this Section 13.02, together with any other sums which then may be held by Lender under this Security Instrument, whether under the provisions of this Section 13.02 or otherwise, shall be applied as follows:

First: To the payment of the third-party costs and expenses reasonably incurred in connection with any such sale and to advances, fees and expenses, including, without limitation, reasonable fees and expenses of Lender’s legal counsel as applicable, and of any judicial proceedings wherein the same may be made, and of all expenses, liabilities and advances reasonably made or incurred by Lender under this Security Instrument, together with interest as provided herein on all such advances made by Lender, and all Impositions, except any Impositions or other charges subject to which the Property shall have been sold;

65

Second: To the payment of the whole amount then due, owing and unpaid under the Note for principal and interest thereon, with interest on such unpaid principal at the Default Rate from the date of the occurrence of the earliest Event of Default that formed a basis for such sale until the same is paid;

Third: To the payment of any other portion of the Debt required to be paid by Borrower pursuant to any provision of this Security Instrument, the Note, or any of the other Loan Documents; and

Fourth: The surplus, if any, to Borrower unless otherwise required by Legal Requirements.

Lender and any receiver or custodian of the Property or any part thereof shall be liable to account for only those rents, issues, proceeds and profits actually received by it.

     (c) Lender may adjourn from time to time any sale by it to be made under or by virtue of this Security Instrument by announcement at the time and place appointed for such sale or for such adjourned sale or sales and, except as otherwise provided by any applicable provision of Legal Requirements, Lender, without further notice or publication, may make such sale at the time and place to which the same shall be so adjourned.

     (d) Upon the completion of any sale or sales made by Lender under or by virtue of this Section 13.02, Lender, or any officer of any court empowered to do so, shall execute and deliver to the accepted purchaser or purchasers a good and sufficient instrument, or good and sufficient instruments, granting, conveying, assigning and transferring all estate, right, title and interest in and to the property and rights sold. Lender is hereby irrevocably appointed the true and lawful attorney-in-fact of Borrower (coupled with an interest), in its name and stead, to make all necessary conveyances, assignments, transfers and deliveries of the property and rights so sold and for that purpose Lender may execute all necessary instruments of conveyance, assignment, transfer and delivery, and may substitute one or more Persons with like power, Borrower hereby ratifying and confirming all that its said attorney-in-fact or such substitute or substitutes shall lawfully do by virtue hereof. Nevertheless, Borrower, if so requested by Lender, shall ratify and confirm any such sale or sales by executing and delivering to Lender, or to such purchaser or purchasers all such instruments as may be advisable, in the sole judgement of Lender, for such purpose, and as may be designated in such request. Any such sale or sales made under or by virtue of this Section 13.02, whether made under the power of sale herein granted or under or by virtue of judicial proceedings or a judgment or decree of foreclosure and sale, shall operate to divest all the estate, right, title, interest, claim and demand whatsoever, whether at law or in equity, of Borrower in and to the property and rights so sold, and shall, to the fullest extent permitted under Legal Requirements, be a perpetual bar, both at law and in equity against Borrower and against any and all Persons claiming or who may claim the same, or any part thereof, from, through or under Borrower.

     (e) In the event of any sale made under or by virtue of this Section 13.02 (whether made under the power of sale herein granted or under or by virtue of judicial proceedings or a judgment or decree of foreclosure and sale), the entire Debt immediately thereupon shall, anything in the Loan Documents to the contrary notwithstanding, become due and payable.

     (f) Upon any sale made under or by virtue of this Section 13.02 (whether made under the power of sale herein granted or under or by virtue of judicial proceedings or a judgment or decree of foreclosure and sale), Lender may bid for and acquire the Property or any part thereof and in lieu of paying cash therefor may make settlement for the purchase price by crediting upon the Debt the net sales price after deducting therefrom the expenses of the sale and the costs of the action.

     (g) No recovery of any judgment by Lender and no levy of an execution under any judgment upon the Property or any part thereof or upon any other property of Borrower shall release the lien of this Security Instrument upon the Property or any part thereof, or any liens, rights, powers or remedies of Lender hereunder, but such liens, rights, powers and remedies of Lender shall continue unimpaired until all amounts due under the Note, this Security Instrument and the other Loan Documents are paid in full.

66

     (h) Upon the exercise by Lender of any power, right, privilege, or remedy pursuant to this Security Instrument which requires any consent, approval, registration, qualification, or authorization of any Governmental Authority, Borrower agrees to execute and deliver, or will cause the execution and delivery of, all applications, certificates, instruments, assignments and other documents and papers that Lender or any purchaser of the Property may be required to obtain for such governmental consent, approval, registration, qualification, or authorization and Lender is hereby irrevocably appointed the true and lawful attorney-in-fact of Borrower (coupled with an interest), in its name and stead, to execute all such applications, certificates, instruments, assignments and other documents and papers.

     Section 13.03. Payment of Debt After Default. If, following the occurrence of any Event of Default, Borrower shall tender payment of an amount sufficient to satisfy the Debt in whole or in part at any time prior to a foreclosure sale of the Property, and if at the time of such tender prepayment of the principal balance of the Note is not permitted by the Note or this Security Instrument, Borrower shall, in addition to the entire Debt, also pay to Lender a sum equal to interest which would have accrued on the principal balance of the Note at an interest rate equal to the LIBOR Margin for the Note plus the greater of (x) the then current LIBOR Rate and (y) the then current average yield for “This Week” as published by the Federal Reserve Board during the most recent full week preceding the date on which Borrower tenders such payment in Federal Reserve Statistical Release H.15 (519) for instruments having a ten (10) year maturity, from the date of such tender to the earlier of (a) the Maturity Date or (b) the first day of the period during which prepayment of the principal balance of the Note would have been permitted together with a prepayment consideration equal to the prepayment consideration which would have been payable as of the first day of the period during which prepayment would have been permitted. If at the time of such tender, prepayment of the principal balance of the Note is permitted, such tender by Borrower shall be deemed to be a voluntary prepayment of the principal balance of the Note and Borrower shall, in addition to the entire Debt, also pay to Lender the applicable prepayment consideration specified in the Note and this Security Instrument. Notwithstanding the foregoing, Lender acknowledges that the Loan may be prepaid at any time in accordance with the terms of Section 15.01 hereof.

     Section 13.04. Possession of the Property. Upon the occurrence of any Event of Default and the acceleration of the Debt or any portion thereof, Borrower, if an occupant of the Property or any part thereof, upon demand of Lender, shall immediately surrender possession of the Property (or the portion thereof so occupied) to Lender, and if Borrower is permitted to remain in possession, the possession shall be as a month-to-month tenant of Lender and, on demand, Borrower shall pay to Lender monthly, in advance, a reasonable rental for the space so occupied and in default thereof Borrower may be dispossessed. The covenants herein contained may be enforced by a receiver of the Property or any part thereof. Nothing in this Section 13.04 shall be deemed to be a waiver of the provisions of this Security Instrument making the Transfer of the Property or any part thereof without Lender’s prior written consent an Event of Default.

     Section 13.05. Interest After Default. If any amount due under the Note, this Security Instrument or any of the other Loan Documents is not paid within any applicable notice and grace period after same is due, whether such date is the stated due date, any accelerated due date or any other date or at any other time specified under any of the terms hereof or thereof, then, in such event, Borrower shall pay interest on the amount not so paid from and after the date on which such amount first becomes due at the Default Rate; and such interest shall be due and payable at such rate until the earlier of the cure of all Events of Default or the payment of the entire amount due to Lender, whether or not any action shall have been taken or proceeding commenced to recover the same or to foreclose this Security Instrument. All unpaid and accrued interest shall be secured by this Security Instrument as part of the Debt. Nothing in this Section 13.05 or in any other provision of this Security Instrument shall constitute an extension of the time for payment of the Debt.

     Section 13.06. Borrower’s Actions After Default. After the happening of any Event of Default and immediately upon the commencement of any action, suit or other legal proceedings by Lender to obtain judgment for the Debt, or of any other nature in aid of the enforcement of the Loan Documents, Borrower will (a) after receipt of notice of the institution of any such action, waive the issuance and service of process and enter its voluntary appearance in such action, suit or proceeding, and (b) if required by Lender, consent to the appointment of a receiver

67

or receivers of the Property or any part thereof and of all the earnings, revenues, rents, issues, profits and income thereof.

     Section 13.07. Control by Lender After Default. Notwithstanding the appointment of any custodian, receiver, liquidator or trustee of Borrower, or of any of its property, or of the Property or any part thereof, to the extent permitted by Legal Requirements, Lender shall be entitled to obtain possession and control of all property now and hereafter covered by this Security Instrument and the Assignment in accordance with the terms hereof.

     Section 13.08. Right to Cure Defaults. (a) Upon the occurrence of any Event of Default, Lender or its agents may, but without any obligation to do so and without notice to or demand on Borrower and without releasing Borrower from any obligation hereunder, make or do the same in such manner and to such extent as Lender may deem necessary to protect the security hereof. Lender and its agents are authorized to enter upon the Property or any part thereof for such purposes, or appear in, defend, or bring any action or proceedings to protect Lender’s interest in the Property or any part thereof or to foreclose this Security Instrument or collect the Debt, and the cost and expense thereof (including reasonable attorneys’ fees to the extent permitted by law), with interest as provided in this Section 13.08, shall constitute a portion of the Debt and shall be immediately due and payable to Lender upon demand. All such costs and expenses incurred by Lender or its agents in remedying such Event of Default or in appearing in, defending, or bringing any such action or proceeding shall bear interest at the Default Rate, for the period from the date so demanded to the date of payment to Lender. All such costs and expenses incurred by Lender or its agents together with interest thereon calculated at the above rate shall be deemed to constitute a portion of the Debt and be secured by this Security Instrument.

     (b) If Lender makes any payment or advance that Lender is authorized by this Security Instrument to make in the place and stead of Borrower (i) relating to the Impositions or tax liens asserted against the Property, Lender may do so according to any bill, statement or estimate procured from the appropriate public office without inquiry into the accuracy of the bill, statement or estimate or into the validity of any of the Impositions or the tax liens or claims thereof; (ii) relating to any apparent or threatened adverse title, lien, claim of lien, encumbrance, claim or charge, Lender will be the sole judge of the legality or validity of same; or (iii) relating to any other purpose authorized by this Security Instrument but not enumerated in this Section 13.08, Lender may do so whenever, in its judgment and discretion, the payment or advance seems necessary or desirable to protect the Property and the full security interest intended to be created by this Security Instrument. In connection with any payment or advance made pursuant to this Section 13.08, Lender has the option and is authorized, but in no event shall be obligated, to obtain a continuation report of title prepared by a title insurance company. The payments and the advances made by Lender pursuant to this Section 13.08 and the cost and expenses of said title report will be due and payable by Borrower on demand, together with interest at the Default Rate, and will be secured by this Security Instrument.

     Section 13.09. Late Payment Charge. If any portion of the Debt (other than the principal portion of the Debt due on Maturity) is not paid in full on or before the day on which it is due and payable hereunder, Borrower shall pay to Lender an amount equal to five percent (5%) of such unpaid portion of the Debt (“Late Charge”) to defray the expense incurred by Lender in handling and processing such delinquent payment, and such amount shall constitute a part of the Debt.

     Section 13.10. Recovery of Sums Required to Be Paid. Lender shall have the right from time to time to take action to recover any sum or sums which constitute a part of the Debt as the same become due and payable hereunder (after the expiration of any grace period or the giving of any notice herein provided, if any), without regard to whether or not the balance of the Debt shall be due, and without prejudice to the right of Lender thereafter to bring an action of foreclosure, or any other action, for a default or defaults by Borrower existing at the time such earlier action was commenced.

     Section 13.11. Marshalling and Other Matters. Borrower hereby waives, to the fullest extent permitted by law, the benefit of all appraisement, valuation, stay, extension, reinstatement, redemption (both equitable and statutory) and homestead laws now or hereafter in force and all rights of marshalling in the event of any sale hereunder of the Property or any part thereof or any interest therein. Nothing herein or in any other Loan Document shall be construed as requiring Lender to resort to any particular Cross-collateralized Property for the satisfaction of

68

the Debt in preference or priority to any other Cross-collateralized Property but Lender may seek satisfaction out of all the Cross-collateralized Properties or any part thereof in its absolute discretion. Further, Borrower hereby expressly waives any and all rights of redemption from sale under any order or decree of foreclosure of this Security Instrument on behalf of Borrower, whether equitable or statutory and on behalf of each and every Person acquiring any interest in or title to the Property or any part thereof subsequent to the date of this Security Instrument and on behalf of all Persons to the fullest extent permitted by applicable law.

     Section 13.12. Tax Reduction Proceedings. After an Event of Default, Borrower shall be deemed to have appointed Lender as its attorney-in-fact to seek a reduction or reductions in the assessed valuation of the Property for real property tax purposes or for any other purpose and to prosecute any action or proceeding in connection therewith. This power, being coupled with an interest, shall be irrevocable for so long as any part of the Debt remains unpaid and any Event of Default shall be continuing.

     Section 13.13. General Provisions Regarding Remedies.

     (a) Right to Terminate Proceedings. Lender may terminate or rescind any proceeding or other action brought in connection with its exercise of the remedies provided in Section 13.02 at any time before the conclusion thereof, as determined in Lender’s sole discretion and without prejudice to Lender.

     (b) No Waiver or Release. The failure of Lender to exercise any right, remedy or option provided in the Loan Documents shall not be deemed a waiver of such right, remedy or option or of any covenant or obligation contained in the Loan Documents. No acceptance by Lender of any payment after the occurrence of an Event of Default and no payment by Lender of any payment or obligation for which Borrower is liable hereunder shall be deemed to waive or cure any Event of Default. No sale of all or any portion of the Property, no forbearance on the part of Lender, and no extension of time for the payment of the whole or any portion of the Debt or any other indulgence given by Lender to Borrower or any other Person, shall operate to release or in any manner affect the interest of Lender in the Property or the liability of Borrower to pay the Debt. No waiver by Lender shall be effective unless it is in writing and then only to the extent specifically stated.

     (c) No Impairment; No Releases. The interests and rights of Lender under the Loan Documents shall not be impaired by any indulgence, including (i) any renewal, extension or modification which Lender may grant with respect to any of the Debt; (ii) any surrender, compromise, release, renewal, extension, exchange or substitution which Lender may grant with respect to the Property or any portion thereof; or (iii) any release or indulgence granted to any maker, endorser, guarantor or surety of any of the Debt.

     (d) Effect on Judgment. No recovery of any judgment by Lender and no levy of an execution under any judgment upon any Property or any portion thereof shall affect in any manner or to any extent the lien of the other Cross-collateralized Mortgages upon the remaining Cross-collateralized Properties or any portion thereof, or any rights, powers or remedies of Lender hereunder or thereunder. Such lien, rights, powers and remedies of Lender shall continue unimpaired as before.

ARTICLE XIV: COMPLIANCE WITH REQUIREMENTS

     Section 14.01. Compliance with Legal Requirements. (a) Borrower shall promptly comply with all present and future Legal Requirements, foreseen and unforeseen, ordinary and extraordinary, whether requiring structural or nonstructural repairs or alterations including, without limitation, all zoning, subdivision, building, safety and environmental protection, land use and development Legal Requirements, all Legal Requirements which may be applicable to the curbs adjoining the Property or to the use or manner of use thereof, and all rent control, rent stabilization and all other similar Legal Requirements relating to rents charged and/or collected in connection with the Leases. Borrower represents and warrants that the Property is in compliance in all respects with all Legal Requirements as of the date hereof, no notes or notices of violations of any Legal Requirements have been entered or received by Borrower and there is no basis for the entering of such notes or notices.

69

     (b) Borrower shall have the right to contest by appropriate legal proceedings diligently conducted in good faith, without cost or expense to Lender, the validity or application of any Legal Requirement and to suspend compliance therewith if permitted under applicable Legal Requirements, provided (i) failure to comply therewith may not subject Lender to any civil or criminal liability, (ii) prior to and during such contest, Borrower shall furnish to Lender security reasonably satisfactory to Lender, in its reasonable discretion, against loss or injury by reason of such contest or non-compliance with such Legal Requirement, (iii) no Event of Default shall exist during such proceedings and such contest shall not otherwise violate any of the provisions of any of the Loan Documents, (iv) such contest shall not (unless Borrower shall comply with the provisions of clause (ii) of this Section 14.01(b)) subject the Property to any lien or encumbrance the enforcement of which is not suspended or otherwise affect the priority of the lien of this Security Instrument; (v) such contest shall not affect the ownership, use or occupancy of the Property; (vi) the Property or any part thereof or any interest therein shall not be in any immediate danger of being sold, forfeited or lost by reason of such contest by Borrower; (vii) Borrower shall give Lender prompt notice of the commencement of such proceedings and, upon request by Lender, notice of the status of such proceedings and/or confirmation of the continuing satisfaction of the conditions set forth in clauses (i) — (vi) of this Section 14.01(b); and (viii) upon a final determination of such proceeding, Borrower shall take all steps necessary to comply with any requirements arising therefrom.

     (c) Borrower shall at all times comply with all applicable Legal Requirements with respect to the construction, use and maintenance of any vaults adjacent to the Property. If by reason of the failure to pay taxes, assessments, charges, permit fees, franchise taxes or levies of any kind or nature, the continued use of the vaults adjacent to Property or any part thereof is discontinued, Borrower nevertheless shall, with respect to any vaults which may be necessary for the continued use of the Property, take such steps (including the making of any payment) to ensure the continued use of vaults or replacements.

     Section 14.02. Compliance with Recorded Documents; No Future Grants. Borrower shall promptly perform and observe or cause to be performed and observed, all of the terms, covenants and conditions of all Property Agreements and all things necessary to preserve intact and unimpaired any and all appurtenances or other interests or rights affecting the Property.

ARTICLE XV: PREPAYMENT

     Section 15.01. Prepayment. (a) Except as set forth in Section 15.01(b) hereof, no prepayment of the Debt may be made in whole or in part.

     (b) At any time, Borrower may prepay the Loan, in whole or in part, as of the last day of an Interest Accrual Period, it being acknowledged that Borrower may prepay the Loan on a day other than the last day of an Interest Accrual Period, provided that Borrower pays all interest which would otherwise be due to Lender through the end of such Interest Accrual Period, in accordance with the following provisions:

     (i) Lender shall have received from Borrower, not less than thirty (30) days’, nor more than ninety (90) days’, prior written notice specifying the date proposed for such prepayment and the amount which is to be prepaid (which notice shall be revocable by Borrower up to two (2) times during the term of the Loan by giving Lender not less than one (1) Business Day prior written notice of such revocation, provided that Borrower shall remain obligated to pay Lender’s costs and expenses including, without limitation, breakage costs incurred by Lender in connection with such revocation).

     (ii) Borrower shall also pay to Lender all interest due through and including the last day of the Interest Accrual Period in which such prepayment is being made, together with any and all other amounts due and owing pursuant to the terms of the Note, this Security Instrument or the other Loan Documents.

     (iii) Any partial prepayment shall be in a minimum amount not less than $25,000 and shall be in whole multiples of $1,000 in excess thereof.

70

     (iv) No Event of Default shall have occurred and be continuing.

     (v) Any partial prepayment of the Principal Amount, including, without limitation, Unscheduled Payments, shall be applied to the installments of principal last due hereunder and shall not release or relieve Borrower from the obligation to pay the regularly scheduled installments of principal and interest becoming due under the Note.

     (vi) Borrower shall pay to Lender, together with such prepayment and all other amounts due in connection therewith, a non-refundable amount which shall be deemed earned by Lender upon the funding of the Loan and shall not count to or be credited to payment of the Principal Amount, any interest thereon or any other amounts payable under the Note, this Security Instrument or any of the other Loan Document, equal to .70% of the Principal Amount being repaid if such prepayment occurs prior to the Payment Date occurring in November, 2007 and .50% of the Principal Amount being prepaid if the prepayment occurs on or after the Payment Date occurring in November, 2007 but prior to the Payment occurring in April, 2008. The Loan may be prepaid after the Payment Date occurring in April, 2008 without such additional fee or charge, provided, however, that a portion of the Principal Amount not to exceed $56,857,500 in the aggregate may be prepaid at any time without payment of any sum otherwise due under this clause 15.01(b)(vi) and a portion of the Principal Amount up to $170,232,000 in the aggregate may be prepaid on or prior to the Payment Date occurring in May, 2007 without payment of any sums otherwise due under this clause 15.01(b)(vi) if the Loan is prepaid with the proceeds of a fixed rate mortgage loan secured by one or more Cross-collateralized Properties made by Wachovia Bank, National Association.

     Section 15.02. Release of Property. If Borrower prepays all or a portion of the Loan pursuant to Section 15.01 hereof or if Lender applies Loss Proceeds from the Property towards the repayment of the Debt, Lender shall, promptly upon satisfaction of all the following terms and conditions execute, acknowledge and deliver to Borrower a release of this Security Instrument (a “Release”) in recordable form with respect to the Property:

     (a) If such prepayment is a prepayment, in part, but not in whole, Lender shall have received on the date proposed for such prepayment, an amount equal to the greater of (i) the Release Price Percentage multiplied by the Allocated Loan Amount with respect to the Cross-collateralized Property which is the subject of the Release, (ii) such amount as would cause the Debt Yield subsequent to the contemplated Release to be equal to or greater than the Debt Yield prior to the contemplated Release and (iii) such amount as would cause the Debt Yield subsequent to the contemplated Release to be no less than the Debt Yield as of the Closing Date (the “Release Price”).

     (b) Borrower shall, at its sole expense, prepare any and all documents and instruments necessary to effect the Release, all of which shall be subject to the reasonable approval of Lender, and Borrower shall pay all costs reasonably incurred by Lender (including, but not limited to, reasonable attorneys’ fees and disbursements, title search costs or endorsement premiums) in connection with the review, execution and delivery of the Release.

     (c) No Event of Default has occurred and is continuing.

ARTICLE XVI: ENVIRONMENTAL COMPLIANCE

     Section 16.01. Covenants, Representations and Warranties. (a) Borrower has not, at any time, and, to Borrower’s best knowledge after due inquiry and investigation, except as set forth in the Environmental Report, no other Person has at any time, handled, buried, stored, retained, refined, transported, processed, manufactured, generated, produced, spilled, allowed to seep, leak, escape or leach, or pumped, poured, emitted, emptied, discharged, injected, dumped, transferred or otherwise disposed of or dealt with Hazardous Materials on, to or from the Premises or any other real property owned and/or occupied by Borrower, and Borrower does not intend to and shall not use the Property or any part thereof or any such other real property for the purpose of handling, burying, storing, retaining, refining, transporting, processing, manufacturing, generating, producing, spilling, seeping, leaking, escaping, leaching, pumping, pouring, emitting, emptying, discharging, injecting, dumping, transferring or

71

otherwise disposing of or dealing with Hazardous Materials, except for use and storage for use of heating oil, cleaning fluids, pesticides and other substances customarily used in the operation of properties that are being used for the same purposes as the Property is presently being used, provided such use and/or storage for use is in compliance with the requirements hereof and the other Loan Documents and does not give rise to liability under applicable Legal Requirements or Environmental Statutes or be the basis for a lien against the Property or any part thereof. In addition, without limitation to the foregoing provisions, Borrower represents and warrants that, to the best of its knowledge, after due inquiry and investigation, except as previously disclosed in writing to Lender or in the Environmental Report, there is no asbestos in, on, over, or under all or any portion of the fire-proofing or any other portion of the Property.

     (b) Borrower, after due inquiry and investigation, knows of no seepage, leak, escape, leach, discharge, injection, release, emission, spill, pumping, pouring, emptying or dumping of Hazardous Materials into waters on, under or adjacent to the Property or any part thereof or any other real property owned and/or occupied by Borrower, or onto lands from which such Hazardous Materials might seep, flow or drain into such waters, except as disclosed in the Environmental Report or as permitted by applicable Legal Requirements.

     (c) Borrower shall not permit any Hazardous Materials to be handled, buried, stored, retained, refined, transported, processed, manufactured, generated, produced, spilled, allowed to seep, leak, escape or leach, or to be pumped, poured, emitted, emptied, discharged, injected, dumped, transferred or otherwise disposed of or dealt with on, under, to or from the Property or any portion thereof at any time, except for use and storage for use of heating oil, ordinary cleaning fluids, pesticides and other substances customarily used in the operation of properties that are being used for the same purposes as the Property is presently being used, provided such use and/or storage for use is in compliance with the requirements hereof and the other Loan Documents and does not give rise to liability under applicable Legal Requirements or be the basis for a lien against the Property or any part thereof.

     (d) Borrower represents and warrants that no actions, suits, or proceedings have been commenced, or are pending, or to the best knowledge of Borrower, are threatened with respect to any Legal Requirement governing the use, manufacture, storage, treatment, transportation, or processing of Hazardous Materials with respect to the Property or any part thereof. Borrower has received no notice of, and, except as disclosed in the Environmental Report, after due inquiry, has no knowledge of any fact, condition, occurrence or circumstance which with notice or passage of time or both would give rise to a claim under or pursuant to any Environmental Statute pertaining to Hazardous Materials on, in, under or originating from the Property or any part thereof or any other real property owned or occupied by Borrower or arising out of the conduct of Borrower, including, without limitation, pursuant to any Environmental Statute.

     (e) Borrower has not waived any Person’s liability with regard to Hazardous Materials in, on, under or around the Property, nor has Borrower retained or assumed, contractually or by operation of law, any other Person’s liability relative to Hazardous Materials or any claim, action or proceeding relating thereto.

     (f) In the event that there shall be filed a lien against the Property or any part thereof pursuant to any Environmental Statute pertaining to Hazardous Materials, Borrower shall, within sixty (60) days or, in the event that the applicable Governmental Authority has commenced steps to cause the Premises or any part thereof to be sold pursuant to the lien, within fifteen (15) days, from the date that Borrower receives notice of such lien, either (i) pay the claim and remove the lien from the Property, or (ii) furnish (A) a bond reasonably satisfactory to Lender in the amount of the claim out of which the lien arises, (B) a cash deposit in the amount of the claim out of which the lien arises, or (C) other security reasonably satisfactory to Lender in an amount sufficient to discharge the claim out of which the lien arises.

     (g) Borrower represents and warrants that (i) except as disclosed in the Environmental Report, Borrower has no knowledge of any violation of any Environmental Statute or any Environmental Problem in connection with the Property, nor has Borrower been requested or required by any Governmental Authority to perform any remedial activity or other responsive action in connection with any Environmental Problem and (ii) to Borrower’s knowledge and except as disclosed in the Environmental Report neither the Property nor any other property owned by Borrower is included or, to Borrower’s best knowledge, after due inquiry and investigation,

72

proposed for inclusion on the National Priorities List issued pursuant to CERCLA by the United States Environmental Protection Agency (the “EPA”) or on the inventory of other potential “Problem” sites issued by the EPA or has been identified by the EPA as a potential CERCLA site or included or, to Borrower’s knowledge, after due inquiry and investigation, proposed for inclusion on any list or inventory issued pursuant to any other Environmental Statute, if any, or issued by any other Governmental Authority. Borrower covenants that Borrower will comply with all Environmental Statutes affecting or imposed upon Borrower or the Property.

     (h) Borrower covenants that it shall promptly notify Lender of the presence and/or release of any Hazardous Materials in amounts which are required by applicable Legal Requirements to be reported to and Governmental Authority and of any request for information or any inspection of the Property or any part thereof by any Governmental Authority with respect to any Hazardous Materials and provide Lender with copies of such request and any response to any such request or inspection. Borrower covenants that it shall, in compliance with applicable Legal Requirements, conduct and complete all investigations, studies, sampling and testing (and promptly shall provide Lender with copies of any such studies and the results of any such test) and all remedial, removal and other actions necessary to clean up and remove all Hazardous Materials in, on, over, under, from or affecting the Property or any part thereof in accordance with all such Legal Requirements applicable to the Property or any part thereof to the satisfaction of Lender.

     (i) Following the occurrence of an Event of Default hereunder, and without regard to whether Lender shall have taken possession of the Property or a receiver has been requested or appointed or any other right or remedy of Lender has or may be exercised hereunder or under any other Loan Document, Lender shall have the right (but no obligation) to conduct such investigations, studies, sampling and/or testing of the Property or any part thereof as Lender may, in its discretion, determine to conduct, relative to Hazardous Materials. All costs and expenses incurred in connection therewith including, without limitation, consultants’ fees and disbursements and laboratory fees, shall constitute a part of the Debt and shall, upon demand by Lender, be immediately due and payable and shall bear interest at the Default Rate from the date so demanded by Lender until reimbursed. Borrower shall, at its sole cost and expense, fully and expeditiously cooperate in all such investigations, studies, samplings and/or testings including, without limitation, providing all relevant information and making knowledgeable people available for interviews.

     (j) Borrower represents and warrants that except in accordance with all applicable Environmental Statutes and as disclosed in the Environmental Report, (i) no underground treatment or storage tanks or pumps or water, gas, or oil wells are or, to Borrower’s knowledge, have been located about the Property, (ii) no PCBs or transformers, capacitors, ballasts or other equipment that contain dielectric fluid containing PCBs are located about the Property, (iii) no insulating material containing urea formaldehyde is located about the Property and (iv) no asbestos-containing material is located about the Property.

     Section 16.02. Environmental Indemnification. Borrower shall defend, indemnify and hold harmless the Indemnified Parties for, from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature, known or unknown, contingent or otherwise, whether incurred or imposed within or outside the judicial process, including, without limitation, reasonable attorneys’ and consultants’ fees and disbursements and investigations and laboratory fees arising out of, or in any way related to any Environmental Problem, including without limitation:

     (a) the presence, disposal, escape, seepage, leakage, spillage, discharge, emission, release or threat of release of any Hazardous Materials in, on, over, under, from or affecting the Property or any part thereof whether or not disclosed by the Environmental Report;

     (b) any personal injury (including wrongful death, disease or other health condition related to or caused by, in whole or in part, any Hazardous Materials) or property damage (real or personal) arising out of or related to any Hazardous Materials in, on, over, under, from or affecting the Property or any part thereof whether or not disclosed by the Environmental Report;

73

     (c) any action, suit or proceeding brought or threatened, settlement reached, or order of any Governmental Authority relating to such Hazardous Material whether or not disclosed by the Environmental Report; and/or

     (d) any violation of the provisions, covenants, representations or warranties of Section 16.01 hereof or of any Legal Requirement which is based on or in any way related to any Hazardous Materials in, on, over, under, from or affecting the Property or any part thereof including, without limitation, the cost of any work performed and materials furnished in order to comply therewith whether or not disclosed by the Environmental Report.

     Notwithstanding the foregoing provisions of this Section 16.02 to the contrary, Borrower shall have no obligation to indemnify Lender for liabilities, claims, damages, penalties, causes of action, costs and expenses relative to the foregoing which result directly from (A) Lender’s willful misconduct or gross negligence, or (B) Hazardous Materials initially placed in, on or under the Property after Lender takes title to the Property after foreclosure or delivery of a deed in lieu thereof. Any amounts payable to Lender by reason of the application of this Section 16.02 shall be secured by this Security Instrument and shall, upon demand by Lender, become immediately due and payable and shall bear interest at the Default Rate from the date so demanded by Lender until paid.

     This indemnification shall survive the termination of this Security Instrument whether by repayment of the Debt, foreclosure or deed in lieu thereof, assignment, or otherwise. The indemnity provided for in this Section 16.02 shall not be included in any exculpation of Borrower from personal liability provided for in this Security Instrument or in any of the other Loan Documents. Nothing in this Section 16.02 shall be deemed to deprive Lender of any rights or remedies otherwise available to Lender, including, without limitation, those rights and remedies provided elsewhere in this Security Instrument or the other Loan Documents.

ARTICLE XVII: ASSIGNMENTS

     Section 17.01. Participations and Assignments. Lender shall have the right to assign this Security Instrument and/or any of the Loan Documents, and to transfer, assign or sell participations and subparticipations (including blind or undisclosed participations and subparticipations) in the Loan Documents and the obligations hereunder to any Person; provided, however, that no such participation shall increase, decrease or otherwise affect either Borrower’s or Lender’s obligations under this Security Instrument or the other Loan Documents.

ARTICLE XVIII: MISCELLANEOUS

     Section 18.01. Right of Entry. Lender and its agents shall have the right to enter and inspect the Property or any part thereof at all reasonable times, and, except in the event of an emergency, upon reasonable notice and to inspect Borrower’s books and records and to make abstracts and reproductions thereof.

     Section 18.02. Cumulative Rights. The rights of Lender under this Security Instrument shall be separate, distinct and cumulative and none shall be given effect to the exclusion of the others. No act of Lender shall be construed as an election to proceed under any one provision herein to the exclusion of any other provision. Lender shall not be limited exclusively to the rights and remedies herein stated but shall be entitled, subject to the terms of this Security Instrument, to every right and remedy now or hereafter afforded by law.

     Section 18.03. Liability. If Borrower consists of more than one Person, the obligations and liabilities of each such Person hereunder shall be joint and several.

     Section 18.04. Exhibits Incorporated. The information set forth on the cover hereof, and the Exhibits annexed hereto, are hereby incorporated herein as a part of this Security Instrument with the same effect as if set forth in the body hereof.

74

     Section 18.05. Severable Provisions. If any term, covenant or condition of the Loan Documents including, without limitation, the Note or this Security Instrument, is held to be invalid, illegal or unenforceable in any respect, such Loan Document shall be construed without such provision.

     Section 18.06. Duplicate Originals. This Security Instrument may be executed in any number of duplicate originals and each such duplicate original shall be deemed to constitute but one and the same instrument.

     Section 18.07. No Oral Change. The terms of this Security Instrument, together with the terms of the Note and the other Loan Documents, constitute the entire understanding and agreement of the parties hereto and supersede all prior agreements, understandings and negotiations between Borrower and Lender with respect to the Loan. This Security Instrument, and any provisions hereof, may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act on the part of Borrower or Lender, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought.

     Section 18.08. Waiver of Counterclaim, Etc. BORROWER HEREBY WAIVES THE RIGHT TO ASSERT A COUNTERCLAIM, OTHER THAN A COMPULSORY COUNTERCLAIM, IN ANY ACTION OR PROCEEDING BROUGHT AGAINST IT BY LENDER OR ITS AGENTS, AND WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING BROUGHT BY EITHER PARTY HERETO AGAINST THE OTHER OR IN ANY COUNTERCLAIM BORROWER MAY BE PERMITTED TO ASSERT HEREUNDER OR WHICH MAY BE ASSERTED BY LENDER OR ITS AGENTS, AGAINST BORROWER, OR IN ANY MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS SECURITY INSTRUMENT OR THE DEBT.

     Section 18.09. Headings; Construction of Documents; etc. The table of contents, headings and captions of various paragraphs of this Security Instrument are for convenience of reference only and are not to be construed as defining or limiting, in any way, the scope or intent of the provisions hereof. Borrower acknowledges that it was represented by competent counsel in connection with the negotiation and drafting of this Security Instrument and the other Loan Documents and that neither this Security Instrument nor the other Loan Documents shall be subject to the principle of construing the meaning against the Person who drafted same.

     Section 18.10. Sole Discretion of Lender. Whenever Lender exercises any right given to it to approve or disapprove, or any arrangement or term is to be satisfactory to Lender, the decision of Lender to approve or disapprove or to decide that arrangements or terms are satisfactory or not satisfactory shall be in the sole discretion of Lender and shall be final and conclusive, except as may be otherwise specifically provided herein.

     Section 18.11. Waiver of Notice. Borrower shall not be entitled to any notices of any nature whatsoever from Lender except with respect to matters for which the Loan Documents specifically and expressly provide for the giving of notice by Lender to Borrower and except with respect to matters for which Borrower is not, pursuant to applicable Legal Requirements, permitted to waive the giving of notice.

     Section 18.12. Covenants Run with the Land. All of the grants, covenants, terms, provisions and conditions herein shall run with the Premises, shall be binding upon Borrower and shall inure to the benefit of Lender, subsequent holders of this Security Instrument and their successors and assigns. Without limitation to any provision hereof, the term “Borrower” shall include and refer to the borrower named herein, any subsequent owner of the Property, and its respective heirs, executors, legal representatives, successors and assigns. The representations, warranties and agreements contained in this Security Instrument and the other Loan Documents are intended solely for the benefit of the parties hereto, shall confer no rights hereunder, whether legal or equitable, in any other Person and no other Person shall be entitled to rely thereon.

     Section 18.13. Applicable Law. THIS SECURITY INSTRUMENT WAS NEGOTIATED IN NEW YORK, AND MADE BY BORROWER AND ACCEPTED BY LENDER IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THE NOTE WERE DISBURSED FROM NEW YORK, WHICH STATE THE PARTIES

75

AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. THIS SECURITY INSTRUMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA, EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION, PRIORITY, ENFORCEMENT AND FORECLOSURE OF THE LIENS AND SECURITY INTERESTS CREATED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH THE PREMISES ARE LOCATED, IT BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE VALIDITY AND ENFORCEABILITY OF ALL LOAN DOCUMENTS, AND THE DEBT OR OBLIGATIONS ARISING HEREUNDER.

     Section 18.14. Security Agreement. (a) (i) This Security Instrument is both a real property mortgage, deed to secure debt or deed of trust, as applicable, and a “security agreement” within the meaning of the UCC. The Property includes both real and personal property and all other rights and interests, whether tangible or intangible in nature, of Borrower in the Property. This Security Instrument is filed as a fixture filing and covers goods which are or are to become fixtures on the Property. Borrower by executing and delivering this Security Instrument has granted to Lender, as security for the Debt, a security interest in the Property to the full extent that the Property may be subject to the UCC (said portion of the Property so subject to the UCC being called in this Section 18.14 the “Collateral”). If an Event of Default shall occur, Lender, in addition to any other rights and remedies which it may have, shall have and may exercise immediately and without demand, any and all rights and remedies granted to a secured party upon default under the UCC, including, without limiting the generality of the foregoing, the right to take possession of the Collateral or any part thereof, and to take such other measures as Lender may deem necessary for the care, protection and preservation of the Collateral. Upon request or demand of Lender following an Event of Default, Borrower shall, at its expense, assemble the Collateral and make it available to Lender at a convenient place acceptable to Lender. Borrower shall pay to Lender on demand any and all expenses, including reasonable legal expenses and attorneys’ fees, incurred or paid by Lender in protecting its interest in the Collateral and in enforcing its rights hereunder with respect to the Collateral. Any disposition pursuant to the UCC of so much of the Collateral as may constitute personal property shall be considered commercially reasonable if made pursuant to a public sale which is advertised at least twice in a newspaper in which sheriff’s sales are advertised in the county where the Premises is located. Any notice of sale, disposition or other intended action by Lender with respect to the Collateral given to Borrower in accordance with the provisions hereof at least ten (10) days prior to such action, shall constitute reasonable notice to Borrower. The proceeds of any disposition of the Collateral, or any part thereof, may be applied by Lender to the payment of the Debt in such priority and proportions as Lender in its discretion shall deem proper. It is not necessary that the Collateral be present at any disposition thereof. Lender shall have no obligation to clean-up or otherwise prepare the Collateral for disposition.

     (ii) The mention in a financing statement filed in the records normally pertaining to personal property of any portion of the Property shall not derogate from or impair in any manner the intention of this Security Instrument. Lender hereby declares that all items of Collateral are part of the real property encumbered hereby to the fullest extent permitted by law, regardless of whether any such item is physically attached to the Improvements or whether serial numbers are used for the better identification of certain items. Specifically, the mention in any such financing statement of any items included in the Property shall not be construed to alter, impair or impugn any rights of Lender as determined by this Security Instrument or the priority of Lender’s lien upon and security interest in the Property in the event that notice of Lender’s priority of interest as to any portion of the Property is required to be filed in accordance with the UCC to be effective against or take priority over the interest of any particular class of persons, including the federal government or any subdivision or instrumentality thereof. No portion of the Collateral constitutes or is the proceeds of “Farm Products”, as defined in the UCC.

     (iii) If Borrower is at any time a beneficiary under a letter of credit now or hereafter issued in favor of Borrower, Borrower shall promptly notify Lender thereof and, at the request and option of Lender, Borrower shall, pursuant to an agreement in form and substance satisfactory to Lender, either (A) arrange

76

for the issuer and any confirmer of such letter of credit to consent to an assignment to Lender of the proceeds of any drawing under the letter of credit or (B) arrange for Lender to become the transferee beneficiary of the letter of credit, with Lender agreeing, in each case, that the proceeds of any drawing under the letter to credit are to be applied as provided in this Security Instrument.

     (iv) Borrower and Lender acknowledge that for the purposes of Article 9 of the UCC, the law of the State of New York shall be the law of the jurisdiction of the bank in which the Central Account is located.

     (v) Lender may comply with any applicable Legal Requirements in connection with the disposition of the Collateral, and Lender’s compliance therewith will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral.

     (vi) Lender may sell the Collateral without giving any warranties as to the Collateral. Lender may specifically disclaim any warranties of title, possession, quiet enjoyment or the like. This procedure will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral.

     (vii) If Lender sells any of the Collateral upon credit, Borrower will be credited only with payments actually made by the purchaser, received by Lender and applied to the indebtedness of Borrower. In the event the purchaser of the Collateral fails to fully pay for the Collateral, Lender may resell the Collateral and Borrower will be credited with the proceeds of such sale.

     (b) Borrower hereby irrevocably appoints Lender as its attorney-in-fact, coupled with an interest, to file with the appropriate public office on its behalf any financing or other statements signed only by Lender, as secured party, or, to the extent permitted under the UCC, unsigned, in connection with the Collateral covered by this Security Instrument.

     Section 18.15. Actions and Proceedings. Lender has the right to appear in and defend any action or proceeding brought with respect to the Property in its own name or, if required by Legal Requirements or, if in Lender’s reasonable judgment, it is necessary, in the name and on behalf of Borrower, which Lender believes will adversely affect the Property or this Security Instrument and to bring any action or proceedings, in its name or in the name and on behalf of Borrower, which Lender, in its discretion, decides should be brought to protect its interest in the Property.

     Section 18.16. Usury Laws. This Security Instrument and the Note are subject to the express condition, and it is the expressed intent of the parties, that at no time shall Borrower be obligated or required to pay interest on the principal balance due under the Note at a rate which could subject the holder of the Note to either civil or criminal liability as a result of being in excess of the maximum interest rate which Borrower is permitted by law to contract or agree to pay. If by the terms of this Security Instrument or the Note, Borrower is at any time required or obligated to pay interest on the principal balance due under the Note at a rate in excess of such maximum rate, such rate of interest shall be deemed to be immediately reduced to such maximum rate and the interest payable shall be computed at such maximum rate and all prior interest payments in excess of such maximum rate shall be applied and shall be deemed to have been payments in reduction of the principal balance of the Note. No application to the principal balance of the Note pursuant to this Section 18.16 shall give rise to any requirement to pay any prepayment fee or charge of any kind due hereunder, if any.

     Section 18.17. Remedies of Borrower. In the event that a claim or adjudication is made that Lender has acted unreasonably or unreasonably delayed acting in any case where by law or under the Note, this Security Instrument or the Loan Documents, it has an obligation to act reasonably or promptly, Lender shall not be liable for any monetary damages, and Borrower’s remedies shall be limited to injunctive relief or declaratory judgment.

     Section 18.18. Offsets, Counterclaims and Defenses. Any assignee of this Security Instrument, the Assignment and the Note shall take the same free and clear of all offsets, counterclaims or defenses which are

77

unrelated to the Note, the Assignment or this Security Instrument which Borrower may otherwise have against any assignor of this Security Instrument, the Assignment and the Note and no such unrelated counterclaim or defense shall be interposed or asserted by Borrower in any action or proceeding brought by any such assignee upon this Security Instrument, the Assignment or the Note and any such right to interpose or assert any such unrelated offset, counterclaim or defense in any such action or proceeding is hereby expressly waived by Borrower.

     Section 18.19. No Merger. If Borrower’s and Lender’s estates become the same including, without limitation, upon the delivery of a deed by Borrower in lieu of a foreclosure sale, or upon a purchase of the Property by Lender in a foreclosure sale, this Security Instrument and the lien created hereby shall not be destroyed or terminated by the application of the doctrine of merger and in such event Lender shall continue to have and enjoy all of the rights and privileges of Lender as to the separate estates; and, as a consequence thereof, upon the foreclosure of the lien created by this Security Instrument, any Leases or subleases then existing and created by Borrower shall not be destroyed or terminated by application of the law of merger or as a result of such foreclosure unless Lender or any purchaser at any such foreclosure sale shall so elect. No act by or on behalf of Lender or any such purchaser shall constitute a termination of any Lease or sublease unless Lender or such purchaser shall give written notice thereof to such lessee or sublessee.

     Section 18.20. Restoration of Rights. In case Lender shall have proceeded to enforce any right under this Security Instrument by foreclosure sale, entry or otherwise, and such proceedings shall have been discontinued or abandoned for any reason or shall have been determined adversely, then, in every such case, Borrower and Lender shall be restored to their former positions and rights hereunder with respect to the Property subject to the lien hereof.

     Section 18.21. Waiver of Statute of Limitations. The pleadings of any statute of limitations as a defense to any and all obligations secured by this Security Instrument are hereby waived to the full extent permitted by Legal Requirements.

     Section 18.22. Advances. This Security Instrument shall cover any and all advances made pursuant to the Loan Documents, rearrangements and renewals of the Debt and all extensions in the time of payment thereof, even though such advances, extensions or renewals be evidenced by new promissory notes or other instruments hereafter executed and irrespective of whether filed or recorded. Likewise, the execution of this Security Instrument shall not impair or affect any other security which may be given to secure the payment of the Debt, and all such additional security shall be considered as cumulative. The taking of additional security, execution of partial releases of the security, or any extension of time of payment of the Debt shall not diminish the force, effect or lien of this Security Instrument and shall not affect or impair the liability of Borrower and shall not affect or impair the liability of any maker, surety, or endorser for the payment of the Debt.

     Section 18.23. Application of Default Rate Not a Waiver. Application of the Default Rate shall not be deemed to constitute a waiver of any Default or Event of Default or any rights or remedies of Lender under this Security Instrument, any other Loan Document or applicable Legal Requirements, or a consent to any extension of time for the payment or performance of any obligation with respect to which the Default Rate may be invoked.

     Section 18.24. Intervening Lien. To the fullest extent permitted by law, any agreement hereafter made pursuant to this Security Instrument shall be superior to the rights of the holder of any intervening lien.

     Section 18.25. No Joint Venture or Partnership. Borrower and Lender intend that the relationship created hereunder be solely that of mortgagor and mortgagee or grantor and beneficiary or borrower and lender, as the case may be. Nothing herein is intended to create a joint venture, partnership, tenancy-in-common, or joint tenancy relationship between Borrower and Lender nor to grant Lender any interest in the Property other than that of mortgagee, beneficiary or lender.

     Section 18.26. Time of the Essence. Time shall be of the essence in the performance of all obligations of Borrower hereunder.

78

     Section 18.27. Borrower’s Obligations Absolute. Borrower acknowledges that Lender and/or certain Affiliates of Lender are engaged in the business of financing, owning, operating, leasing, managing, and brokering real estate and in other business ventures which may be viewed as adverse to or competitive with the business, prospect, profits, operations or condition (financial or otherwise) of Borrower. Except as set forth to the contrary in the Loan Documents, all sums payable by Borrower hereunder shall be paid without notice or demand, counterclaim, set-off, deduction or defense and without abatement, suspension, deferment, diminution or reduction, and the obligations and liabilities of Borrower hereunder shall in no way be released, discharged, or otherwise affected (except as expressly provided herein) by reason of: (a) any damage to or destruction of or any Taking of the Property or any portion thereof or any other Cross-collateralized Property; (b) any restriction or prevention of or interference with any use of the Property or any portion thereof or any other Cross-collateralized Property; (c) any title defect or encumbrance or any eviction from the Premises or any portion thereof by title paramount or otherwise; (d) any bankruptcy proceeding relating to Borrower, any General Partner, or any guarantor or indemnitor, or any action taken with respect to this Security Instrument or any other Loan Document by any trustee or receiver of Borrower or any other Cross-collateralized Borrower or any such General Partner, guarantor or indemnitor, or by any court, in any such proceeding; (e) any claim which Borrower has or might have against Lender; (f) any default or failure on the part of Lender to perform or comply with any of the terms hereof or of any other agreement with Borrower or any other Cross-collateralized Borrower; or (g) any other occurrence whatsoever, whether similar or dissimilar to the foregoing, whether or not Borrower shall have notice or knowledge of any of the foregoing.

     Section 18.28. Publicity. All promotional news releases, publicity or advertising by Manager, Borrower or their respective Affiliates through any media intended to reach the general public shall not refer to the Loan Documents or the financing evidenced by the Loan Documents, or to Lender or to any of its Affiliates without the prior written approval of Lender or such Affiliate, as applicable, in each instance, such approval not to be unreasonably withheld or delayed. Notwithstanding anything herein to the contrary, Borrower shall be authorized to provide information relating to the Loan Documents or the financing evidenced by the Loan Documents, or to Lender or to any of its Affiliates, to rating agencies, underwriters, potential securities investors, auditors, regulatory authorities and to any Persons which may be entitled to such information by operation of law and without limiting the foregoing to issue press releases and make Form 8-K and other securities filings containing the above-described information as it or its counsel reasonably deems required by law. Lender shall be authorized to provide information relating to the Property, the Loan and matters relating thereto to rating agencies, underwriters, potential securities investors, auditors, regulatory authorities and to any Persons which may be entitled to such information by operation of law and may use basic transaction information (including, without limitation, the name of Borrower, the name and address of the Property and the Loan Amount) in press releases or other marketing materials.

     Section 18.29. Securitization Opinions. In the event the Loan is included as an asset of a Securitization by Lender or any of its Affiliates, Borrower shall, within ten (10) Business Days after Lender’s written request therefor, at Lender’s sole cost and expense, deliver opinions in form and substance and delivered by counsel reasonably acceptable to Lender and each Rating Agency, as may be reasonably required by Lender and/or the Rating Agency in connection with such securitization. Borrower’s failure to deliver the opinions required hereby within such ten (10) Business Day period shall constitute an “Event of Default” hereunder.

     Section 18.30. Cooperation with Rating Agencies; etc. Borrower covenants and agrees that in the event the Loan is to be included as an asset of a Securitization, Borrower shall, at the sole cost and expense of Lender, (a) gather any information reasonably required by each Rating Agency in connection with such a Securitization, (b) at Lender’s request, meet with representatives of each Rating Agency to discuss the business and operations of the Property, and (c) cooperate with the reasonable requests of each Rating Agency and Lender in connection with all of the foregoing as well as in connection with all other matters and the preparation of any offering documents with respect thereto, including, without limitation, entering into any amendments or modifications to this Security Instrument or to any other Loan Document which may be requested by Lender to conform to Rating Agency or market standards for a Securitization provided that no such modification shall modify (a) the interest rate payable under the Note, (b) the stated maturity of the Note, (c) the amortization of principal under the Note, (d) Section 18.32 hereof, (e) any other material economic term of the Loan or (f) any provision, the effect of which would materially increase Borrower’s obligations or materially decrease Borrower’s rights under the Loan Documents. Borrower acknowledges that the information provided by Borrower to Lender may be incorporated into the offering

79

documents for a Securitization and to the fullest extent permitted, Borrower irrevocably waives all rights, if any, to prohibit such disclosures including, without limitation, any right of privacy. Lender and each Rating Agency shall be entitled to rely on the information supplied by, or on behalf of, Borrower and Borrower indemnifies and holds harmless the Indemnified Parties, their Affiliates and each Person who controls such Persons within the meaning of Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of 1934, as same may be amended from time to time, for, from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature, known or unknown, contingent or otherwise, whether incurred or imposed within or outside the judicial process, including, without limitation, reasonable attorneys’ fees and disbursements that arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in such information supplied by or on behalf of Borrower or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated in such information supplied by or on behalf of Borrower or necessary in order to make the statements in such information, or in light of the circumstances under which they were made, not misleading.

     Section 18.31. Securitization Financials. Borrower covenants and agrees that, upon Lender’s written request therefor in connection with a Securitization, Borrower shall, at Lender’s sole cost and expense, deliver as soon as is reasonably practicable (a) audited financial statements and related documentation prepared by an Independent certified public accountant that satisfy securities laws and requirements for use in a public registration statement (which may include up to three (3) years of historical audited financial statements) and (b) if, at the time one or more Disclosure Documents are being prepared in connection with a Securitization, Lender expects that Borrower alone or Borrower and one or more of its Affiliates collectively, or the Property alone or the Property and any other parcel(s) of real property, together with improvements thereon and personal property related thereto, that is “related”, within the meaning of the definition of Significant Obligor, to the Property (a “Related Property”) collectively, will be a Significant Obligor, Borrower shall furnish to Lender upon request (i) the selected financial data or, if applicable, net operating income, required under Item 1112(b)(1) of Regulation AB and meeting the requirements thereof, if Lender expects that the principal amount of the Loan, together with any loans made to an Affiliate of Borrower or secured by a Related Property that is included in a Securitization with the Loan (a “Related Loan”), as of the cut-off date for such Securitization may, or if the principal amount of the Loan together with any Related Loans as of the cut-off date for such Securitization and at any time during which the Loan and any Related Loans are included in a Securitization does, equal or exceed ten percent (10%) (but less than twenty percent (20%)) of the aggregate principal amount of all mortgage loans included or expected to be included, as applicable, in the Securitization or (ii) the financial statements required under Item 1112(b)(2) of Regulation AB and meeting the requirements thereof, if Lender expects that the principal amount of the Loan together with any Related Loans as of the cut-off date for such Securitization may, or if the principal amount of the Loan together with any Related Loans as of the cut-off date for such Securitization and at any time during which the Loan and any Related Loans are included in a Securitization does, equal or exceed twenty percent (20%) of the aggregate principal amount of all mortgage loans included or expected to be included, as applicable, in the Securitization. Such financial data or financial statements shall be furnished to Lender as soon as reasonably practicable but in all events within twenty(20) Business Days after notice from Lender in connection with the preparation of Disclosure Documents for the Securitization and, with respect to the data or financial statements required pursuant to clause (b) hereof, (A) not later than thirty (30) days after the end of each fiscal quarter of Borrower and (B) not later than seventy-five (75) days after the end of each Fiscal Year; provided, however, that Borrower shall not be obligated to furnish financial data or financial statements pursuant to clauses (A) or (B) of this sentence with respect to any period for which a filing pursuant to the Securities Exchange Act of 1934 in connection with or relating to the Securitization is not required.

     Section 18.32. Exculpation. Notwithstanding anything in this Security Instrument or in any other Loan Document to the contrary, except as otherwise set forth in this Section 18.32 to the contrary, Lender shall not enforce the liability and obligation of Borrower or any Person holding a direct or indirect interest in Borrower or (a) if Borrower or any of its direct or indirect owners is a partnership, its or their direct or indirect constituent partners or any of their respective partners, (b) if Borrower or any of its direct or indirect owners is a trust, its or their beneficiaries or any of their respective Partners (as hereinafter defined), (c) if Borrower or any of its direct or indirect owners is a corporation, any of its or their direct or indirect shareholders, directors, principals, officers or employees, or (d) if Borrower or any of its direct or indirect owners is a limited liability company, any of its or their direct or indirect members (the Persons described in the foregoing clauses (a) — (d), as the case may be, are

80

hereinafter referred to as the “Partners”) to perform and observe the obligations contained in this Security Instrument or any of the other Loan Documents by any action or proceeding, including, without limitation, any action or proceeding wherein a money judgment shall be sought against Borrower or the Partners, except that Lender may bring a foreclosure action, action for specific performance, or other appropriate action or proceeding (including, without limitation, an action to obtain a deficiency judgment) against Borrower solely for the purpose of enabling Lender to realize upon (i) Borrower’s interest in the Property, (ii) the Rent to the extent received by Borrower during the existence of an Event of Default (all Rent covered by this clause (ii) being hereinafter referred to as the “Recourse Distributions”) and not applied towards Debt Service or the operation or maintenance of the Property and (iii) any other collateral then subject to the Loan Documents (the collateral described in the foregoing clauses (i) — (iii) is hereinafter referred to as the “Default Collateral”); provided, however, that any judgment in any such action or proceeding shall be enforceable against Borrower and the Partners only to the extent of any such Default Collateral. The provisions of this Section shall not, however, (a) impair the validity of the Debt evidenced by the Note or in any way affect or impair the lien of this Security Instrument or any of the other Loan Documents or the right of Lender to foreclose this Security Instrument during the existence of an Event of Default the cure of which has not been accepted by Lender; (b) impair the right of Lender to name Borrower as a party defendant in any action or suit for judicial foreclosure and sale under this Security Instrument; (c) affect the validity or enforceability of the Note, this Security Instrument, or any of the other Loan Documents, or impair the right of Lender to seek a personal judgment against Guarantor to the extent and for the obligations guaranteed in the Guaranty; (d) impair the right of Lender to obtain the appointment of a receiver; (e) impair the enforcement of the Assignment; (f) impair the right of Lender to bring suit for a monetary judgment against Borrower with respect to fraud or material misrepresentation by Borrower, or any Affiliate of Borrower in connection with this Security Instrument, the Note or the other Loan Documents, and the foregoing provisions shall not modify, diminish or discharge the liability of Borrower or Guarantor to the extent of Guarantor’s liability under the Guaranty delivered by Guarantor with respect to same; (g) impair the right of Lender to bring suit for a monetary judgment to obtain the Recourse Distributions received by Borrower including, without limitation, the right to bring suit for a monetary judgement to proceed against any Guarantor to the extent of Guarantor’s liability under any guaranty delivered by Guarantor and the foregoing provisions shall not modify, diminish or discharge the liability of Borrower or Guarantor with respect to same; (h) impair the right of Lender to bring suit for a monetary judgment against Borrower with respect to Borrower’s misappropriation of tenant security deposits or Rent, and the foregoing provisions shall not modify, diminish or discharge the liability of Borrower or Guarantor to the extent of Guarantor’s liability under any guaranty delivered by Guarantor with respect to same; (i) impair the right of Lender to obtain Loss Proceeds due to Lender pursuant to this Security Instrument; (j) impair the right of Lender to enforce the provisions of Sections 2.02(g) (other than the provisions of clause (vii) thereof), 12.01, 16.01 or 16.02, 18.29, 18.30 or 18.31, inclusive of this Security Instrument, even after repayment in full by Borrower of the Debt or to bring suit for a monetary judgment against Borrower with respect to any obligation set forth in said Sections; (k) prevent or in any way hinder Lender from exercising, or constitute a defense, or counterclaim, or other basis for relief in respect of the exercise of, any other remedy against any or all of the collateral securing the Note as provided in the Loan Documents; (l) impair the right of Lender to bring suit for a monetary judgment against Borrower with respect to any misapplication or conversion of Loss Proceeds, and the foregoing provisions shall not modify, diminish or discharge the liability of Borrower or Guarantor to the extent of Guarantor’s liability under any guaranty delivered by Guarantor with respect to same; (m) impair the right of Lender to sue for, seek or demand a deficiency judgment against Borrower solely for the purpose of foreclosing the Property or any part thereof, or realizing upon the Default Collateral; provided, however, that any such deficiency judgment referred to in this clause (m) shall be enforceable against Borrower and Guarantor only to the extent of any of the Default Collateral; (n) impair the ability of Lender to bring suit for a monetary judgment against Borrower with respect to arson or physical waste to or of the Property or damage to the Property resulting from the gross negligence or willful misconduct of Borrower or, to the extent that there is sufficient cash flow, failure to pay any Imposition, or in lieu thereof, deposit a sum equal to any Impositions into the Basic Carrying Costs Sub-Account; (o) impair the right of Lender to bring a suit for a monetary judgment against Borrower in the event of the exercise of any right or remedy under any federal, state or local forfeiture laws resulting in the loss of the lien of this Security Instrument, or the priority thereof, against the Property; (p) be deemed a waiver of any right which Lender may have under Sections 506(a), 506(b), 1111(b) or any other provision of the Bankruptcy Code to file a claim for the full amount of the Debt or to require that all collateral shall continue to secure all of the Debt; (q) impair the right of Lender to bring suit for monetary judgment against Borrower with respect to any losses resulting from any claims, actions or proceedings initiated by Borrower (or any Affiliate of Borrower) alleging that the relationship of Borrower and Lender is that of joint venturers, partners, tenants in

81

common, joint tenants or any relationship other than that of debtor and creditor; (r) impair the right of Lender to bring suit for a monetary judgment against Borrower in the event of a Transfer in violation of the provisions of Article IX hereof; (s) impair the right of Lender to bring suit for a monetary judgment in the event that Borrower moves its principal place of business or its books and records relating to the Property which are governed by the UCC, or changes its name, its jurisdiction of organization, type of organization or other legal structure or, if it has one, organizational identification number, without first giving Lender thirty (30) days prior written notice; (t) in the event Borrower is a tenancy-in-common, impair the right of Lender to bring suit for monetary judgment against any TIC which commences a partition action; (u) in the event Borrower is a tenancy-in-common, impair the right of Lender to bring suit for monetary judgment against any TIC or Guarantor in the event the TIC Agreement is modified or amended without obtaining the prior written consent of Lender or if the Person appointed in the TIC Agreement as manager is replaced or removed without the prior written consent of Lender; or (v) impair the right of Lender to bring suit for a monetary judgment in the event that Borrower changes its name or otherwise does anything which would make the information set forth in any UCC Financing Statements relating to the Property materially misleading without giving Lender thirty (30) days prior written notice thereof. The provisions of this Section 18.32 shall be inapplicable to Borrower if (a) any proceeding, action, petition or filing under the Bankruptcy Code, or any similar state or federal law now or hereafter in effect relating to bankruptcy, reorganization or insolvency, or the arrangement or adjustment of debts, shall be (A) filed by Borrower or Guarantor or (B) filed against Borrower or Guarantor and consented to or acquiesced in by Borrower or Guarantor or if any Affiliate of Borrower or Guarantor, or if Borrower or Guarantor or any Affiliate of either of them shall institute any proceeding for Borrower’s dissolution or liquidation, or Borrower or Guarantor shall make an assignment for the benefit of creditors, or (b) Borrower or any Affiliate contests in bad faith or in any material way interferes with in bad faith, directly or indirectly (collectively, a “Contest”), any foreclosure action, UCC sale or other material remedy exercised by Lender upon the occurrence of an Event of Default whether by making any motion, bringing any counterclaim (other than a compulsory counterclaim), claiming any defense, seeking any injunction or other restraint, commencing any action, or otherwise in bad faith (provided that if any such Person obtains a non-appealable order successfully asserting a Contest, Borrower shall have no liability under this clause (b)), in which event Lender shall have recourse against all of the assets of Borrower including, without limitation, any right, title and interest of Borrower in and to the Property.

     Section 18.33. Intentionally Omitted.

     Section 18.34. Intentionally Omitted.

     Section 18.35. Mezzanine Loan Option. (a) Lender shall have the right at any time to divide the Loan into two or more parts (the “Mezzanine Option”): a “mortgage loan” and one or more “mezzanine loans.” The principal amount of the mortgage loan plus the principal amount of the mezzanine loan(s) shall equal the outstanding principal balance of the Loan immediately prior to the creation of the mortgage loan and the mezzanine loan(s). In effectuating the foregoing, Lender will make one or more loans to one or more entities that will be the direct or indirect equity owner(s) of Borrower as described in Section 18.35(b) (collectively, the “Mezzanine Borrower”). The Mezzanine Borrower will contribute the amount of the mezzanine loan(s) to Borrower (in its capacity as borrower under the mortgage loan, “mortgage borrower”) and the mortgage borrower will apply the contribution to pay down the Loan to the mortgage loan amount. The mortgage loan and the mezzanine loan(s) will be on the same terms and subject to the same conditions set forth in the Loan Documents except as follows. The mezzanine loan(s) shall be made pursuant to Lender’s standard mezzanine loan documents.

     (b) Lender shall have the right to establish different interest rates and debt service payments for the mortgage loan and the mezzanine loan(s) and to require the payment of the mortgage loan and the mezzanine loan(s) in such order of priority as may be designated by Lender; provided, that (i) the total loan amounts for the mortgage loan and the mezzanine loan(s) shall equal the amount of the Loan immediately prior to the creation of the mortgage loan and the mezzanine loan(s), (ii) the weighted average interest rate of the mortgage loan and the mezzanine loan(s) shall on the date created equal the interest rate which was applicable to the Loan immediately prior to creation of the mortgage loan and mezzanine loan(s) and (iii) the debt service payments on the mortgage loan note and the mezzanine loan note(s) shall on the date created equal the debt service payment which was due under the Loan immediately prior to creation of a mortgage loan and a mezzanine loan(s).

82

     (c) The Mezzanine Borrower shall be a special purpose, bankruptcy remote entity pursuant to applicable Rating Agency criteria and shall own directly or indirectly one hundred percent (100%) of the mortgage borrower. The security for the mezzanine loan(s) shall be a pledge of one hundred percent (100%) of the direct and indirect ownership interests in the mortgage borrower.

     (d) Borrower shall cooperate with all reasonable requests of Lender in order to convert the Loan into a mortgage loan and one or more mezzanine loans and shall execute and deliver such documents as shall reasonably be required by Lender in connection therewith, including, without limitation, the delivery of non-consolidation, enforceability, authorization and execution opinions and an “Eagle 9” or “UCC plus” (or equivalent) UCC insurance policy and the modification of organizational documents and loan documents and the transfer of the membership interest in Borrower to the Mezzanine Borrower.

     It shall be an Event of Default if Borrower fails to cooperate in all reasonable respects in effectuating any of the terms, covenants or conditions of this Section 18.35 after expiration of ten (10) Business Days notice of non-cooperation.

     Section 18.36. Component Notes. Lender, without in any way limiting Lender’s other rights hereunder, in its sole and absolute discretion, shall have the right at any time to require Borrower to execute and deliver “component” notes (including senior and junior notes), which notes may be paid in such order of priority as may be designated by Lender, provided that (a) the aggregate principal amount of such “component” notes shall equal the outstanding principal balance of the Loan immediately prior to the creation of such “component” notes, (b) the weighted average interest rate of all such “component” notes shall on the date created equal the interest rate which was applicable to the Loan immediately prior to the creation of such “component” notes (it being acknowledged by Borrower that if an Event of Default occurs during the term of the Loan, whether or not it is subsequently cured, the weighted average interest rates of the “component” notes may increase (i.e. the Loan may have “rate creep”)), (c) the debt service payments on all such “component” notes shall on the date created equal the debt service payment which was and would be due under the Loan immediately prior to the creation of such component notes (it being acknowledged by Borrower that if an Event of Default occurs during the term of the Loan, whether or not it is subsequently cured, the weighted average interest rates of the “component” notes may increase (i.e. the Loan may have “rate creep”)) and (d) the other terms and provisions of each of the “component” notes shall be identical in substance and substantially similar in form to the Loan Documents. Borrower shall cooperate with all reasonable requests of Lender in order to establish the “component” notes and shall execute and deliver such documents as shall reasonably be required by Lender in connection therewith, all in form and substance reasonably satisfactory to Lender, including, without limitation, the severance of security documents if requested. It shall be an Event of Default if Borrower fails to comply with any of the terms, covenants or conditions of this Section 18.36 after the expiration of ten (10) Business Days after notice thereof.

     Section 18.37. Certain Matters Relating to Property Located in the State of Alabama. With respect to the Property which is located in the State of Alabama, notwithstanding anything contained herein to the contrary:

     (a) The money, property or services that are the subject of the transactions provided for in the Loan Documents are not primarily for personal, family or household purposes as contemplated by Section 5-19-1(2) of the Code of Alabama 1975, as amended.

     (b) Any time after an Event of Default, this Security Instrument shall be subject to foreclosure and may be foreclosed as provided by law in case of past-due mortgages, and Lender shall be authorized, at its option, whether or not possession of the Property is taken, to sell the Property (or such part of parts thereof as Lender may from time to time elect to sell) under the power of sale which is hereby given to Lender, at public outcry, to the highest bidder for cash, at the front or main door of the courthouse of the county in which the Premises to be sold, or a substantial or material part thereof, is located, after first giving notice by publication one a week for three successive weeks of the time, place and terms of such sale, together with a description of the Property to be sold, by publication in some newspaper published in the county or counties in which the Premises to be sold is located. If there is Premises to be sold in more than one county, publication shall be made in all counties where the Premises to be sold is located, but if no newspaper is published in any such county, the notice shall be published in a newspaper

83

published in an adjoining county for three successive weeks. The sale shall be held between the hours of 11:00 a.m. and 4:00 p.m. on the day designated for the exercise of the power of sale hereunder. Lender may bid at any sale held under this Security Instrument and may purchase the Property, or any part thereof, if the highest bidder therefor. The purchaser at any such sale shall be under no obligation to see to the proper application of the purchase money. At any sale all or any part of the Property, real, personal, or mixed, may be offered for sale in parcels or en masse for one total price, and the proceeds of any such sale en masse shall be accounted for in one amount without distinction between the items included therein and without assigning to them any proportion of such proceeds, Borrower hereby waiving the application of any doctrine of marshalling or like proceeding. In case Lender, in the exercise of the power of sale herein given, elects to sell the Property in parts or parcels, sales thereof may be held from time to time, and the power of sale granted herein shall not be fully exercised until all of the Property not previously sold shall have been sold or all the Debt shall have been paid in full and this Security Instrument shall have been terminated as provided herein. In case of any sale of the Property as authorized by this paragraph, all prerequisites to the sale shall be presumed to have been performed, and in any conveyance given hereunder all statements of facts, or other recitals therein made, as to the nonpayment of any of the Debt or as to the advertisement of sale, or the time, place and manner of sale, or as to any other fact or thing, shall be taken in all courts of law or equity as rebuttably presumptive evidence that the facts so stated or recited are true.

     (c) This Security Instrument shall be effective as a financing statement filed as a fixture filing for purposes of Article 9 of the Uniform Commercial Code. The fixture filing covers all goods that are or are to become affixed to the Realty. The goods are described by item or type in the granting clauses hereof. Borrower is the debtor, and Lender is the secured party. The names of the debtor (Borrower) and the secured party (Lender) are given in the first paragraph of this Security Instrument. This Security Instrument is signed by the debtor (Borrower) as a fixture filing. The mailing address of Lender set out in the first paragraph of this Security Instrument is an address of the secured party from which information concerning the security interest may be obtained. The mailing address of the Borrower set out in the first paragraph of this Security Instrument is a mailing address for the debtor. A statement indicating the types, or describing the items, of collateral is set forth in this Section 18.37 and in the granting clauses of this Security Instrument. The real estate to which the goods are or are to be affixed is described in Exhibit A. The Borrower is a record owner of the real estate.

     (d) This Security Instrument is given to secure the Debt; provided, however, that notwithstanding anything to the contrary contained herein: (i) the maximum amount of the principal obligations secured by this Security Instrument (the “Principal Obligations”) shall not exceed the Initial Allocated Loan Amount for the Property multiplied by two (2) (the “Maximum Principal Amount”); (ii) the Maximum Principal Amount of the Principal Obligations secured by this Security Instrument shall be deemed to be the first Principal Obligations to be advanced and the last Principal Obligations to be repaid; (iii) the security afforded by this Security Instrument for the Debt shall not be reduced by any payments or other sums applied to the reduction of the Debt so long as the total amount of the outstanding Principal Obligations exceeds the Maximum Principal Amount and thereafter shall be reduced only to the extent that any such payments and other sums are actually applied by Lender, in accordance with the Loan Documents, to reduce the outstanding Principal Obligations to an amount less than the Maximum Principal Amount; and (iv) the limitation contained in this Section on the Maximum Principal Amount shall only pertain to Principal Obligations and shall not be construed as limiting the amount of interest, fees, expenses, indemnified amounts and other Debt secured hereby that are not Principal Obligations, it being the intention of the parties to this Security Instrument that this Security Instrument shall secure any Principal Obligations remaining unpaid at the time of foreclosure up to the Maximum Principal Amount, plus interest thereon, all costs of collateral and all other amounts (except Principal Obligations in excess of the Maximum Principal Amount) included in the Debt.

     (e) The date of this Security Instrument is intended as a date for the convenient identification of this Security Instrument and is not intended to indicate that this Security Instrument was executed and delivered on that date.

     (f) The “NOW THEREFORE” clause is amended by deleting the words “Borrower has irrevocably granted, and by these presents and by the execution and delivery hereof does hereby irrevocably grant, bargain, sell, alien, demise, release, convey, assign, transfer, deed, hypothecate, pledge, set over, warrant, mortgage and confirm

84

to Lender, forever, with power of sale,” and inserting the following in its place: “Borrower has granted, bargained, sold and conveyed unto the Lender and by these presents does hereby grant, bargain, sell and convey unto the Lender, forever, with power of sale, and has granted and by these presents does hereby grant to the Lender, a security interest in,”.

     Section 18.38. Certain Matters Relating to Property located in the State of Florida. With respect to the Property which is located in the State of Florida, notwithstanding anything contained herein to the contrary:

     (a) It is agreed that, in addition to existing indebtedness, any future advances made by the then holder of the Note to or for the benefit of Borrower or Borrower’s permitted assignees, whether such advances are obligatory or are made at the option of Lender, or otherwise, at any time within twenty (20) years from the date of this Security Instrument, with interest thereon at the rate agreed upon at the time of each additional loan or advance, shall be equally secured with and have the same priority as the Debt and be subject to all of the terms and provisions of this Security Instrument, whether or not such additional loan or advance is evidenced by a promissory note of Borrower and whether or not identified by a recital that it is secured by this Security Instrument; provided that, although the total amount of the indebtedness that may be secured may decrease to zero from time to time or may increase from time to time, the aggregate amount of outstanding Debt so secured at any one time shall not exceed the sum of the Loan Amount multiplied by two (2), plus interest and disbursements made for the payment of taxes, levies or insurance on the Property with interest on such disbursements. It is understood and agreed that this future advance provision shall not be construed to obligate Lender to make any such additional loans or advances. It is further agreed that any additional note or notes executed and delivered under this future advance provision shall be included in the words “Note” or “Debt” wherever either appears in the context of this Security Instrument. Borrower, for itself and its successors in title and its successors and permitted assigns, hereby expressly waives and relinquishes any rights granted under Section 697.04 of the Florida Statutes, or otherwise, to limit the amount of indebtedness that may be secured by this Security Instrument at any time during the term of this Security Instrument. Borrower further covenants not to file for record any notice limiting the maximum principal amount that may be secured by this Security Instrument and agrees that any such notice, if filed, shall be null and void; and except as hereinafter provided, of no effect. In the event that, notwithstanding the foregoing covenant, Borrower or its successor in title files for record any notice limiting the maximum principal amount that may be secured by this Security Instrument in violation of the foregoing covenant, the Debt shall, at the option of Lender, become immediately due and payable.

     (b) Notwithstanding anything to the contrary contained in this Security Instrument, Lender shall comply with the requirements of Section 501.137. Florida Statutes, as applicable, with respect to the payment of Impositions and insurance premiums from the Basic Carrying Costs Sub-Account so that the maximum tax discount available may be obtained with regard to the Premises and so that insurance coverage on the Property does not lapse.

     (c) The assignment of leases and rents contained in this Security Instrument is intended to provide Lender with all the rights and remedies of lenders pursuant to Section 697.07 of the Florida Statutes (hereinafter “Section 697.07”), as may be amended from time to time. However, in no event shall this reference diminish, alter, impair, or affect any other rights and remedies of Lender, including but not limited to, the appointment of a receiver as provided herein, nor shall any provision in this Section diminish, alter, impair or affect any rights or powers of the receiver in law or equity or as set forth herein. In addition, this assignment shall be fully operative without regard to value of the Property or without regard to the adequacy of the Property to serve as security for the obligations owed by Borrower to Lender, and shall be in addition to any rights arising under Section 697.07. Further, except for the notices required hereunder, if any, Borrower waives any notice of default or demand for turnover of rents by Lender, together with any rights under Section 697.07 to apply to a court to deposit the Rents into the registry of the court or such other depository as the court may designate.

     Section 18.39. Certain Matters Relating to Property Located in the State of Georgia. With respect to the Property which is located in the State of Georgia, notwithstanding anything contained herein to the contrary:

85

     (a) The terms “mortgage” and “hypothecate” which are contained in the “NOW THEREFORE” paragraph of the first page hereof and in Sections 2.02(q), 2.03, 2.05(b), 2.05(f), 8.01(d), 15.02 and 18.14 hereof shall be deleted.

     (b) The terms “Borrower” and “Lender” contained in this Security Instrument shall be deemed to be “Grantor” and “Grantee”, respectively.

     (c) The “PROVIDED ALWAYS” paragraph on page 5 hereof shall be deleted in its entirety and the following provisions shall be inserted in its place:

     Grantor covenants that Grantor is lawfully seized and possessed of the Premises as aforesaid, has good right to convey the same, and that the same are unencumbered except for the Permitted Encumbrances. Grantor warrants and will forever defend the title to the Premises against the claims of all persons whomsoever, except as to the Permitted Encumbrances.

     This Deed is intended to operate and is to be construed as a deed passing the title to the Premises to Lender and is made under those provisions of the existing laws of the State of Georgia relating to deeds to secure debt, and not as a mortgage, and is given to secure the payment of the Note, the final payment on which is due on Maturity, unless otherwise extended pursuant to the terms of the Note, together with any and all renewals, modifications, consolidations and extensions of the indebtedness evidenced thereby, together with the Debt, and together with any and all additional advances made by Lender to protect or preserve the Property or the security interests created hereby on the Property, or for taxes, assessments or insurance premiums as hereinafter provided or for the performance of any of Grantor’s obligations hereunder or for any other purpose provided herein (whether or not the original Grantor remains the owner of the Property at the time of such advances).

     Should the Debt be paid according to the tenor and effect thereof when the same become due and payable, and should Grantor perform all covenants contained in this Deed in a timely manner, then Grantee shall cancel and surrender this Deed of record.

     (d) The definition of “Security Instrument” in Section 1.01 hereof shall be deleted in its entirety and the following shall be inserted in its place:

     “Security Instrument” means this Deed to Secure Debt, Security Instrument and Assignment of Rents as originally executed or as it may hereafter from time to time be supplemented, amended, modified or extended by one or more indentures supplemental hereto.

     (e) The phrase “first mortgage” found in Section 2.06 hereof shall be deleted and the phrase “first deed to secure debt” shall be inserted in its place.

     (f) Subsection 13.02(a)(vi) shall be deleted in its entirety and the following shall be inserted in its place:

     (vi) sell the Property or any part of the Property at one or more public sale or sales before the door of the courthouse of the county in which the Property or any part of the Property is situated, to the highest bidder for cash, in order to pay the Debt, and all expenses of sale and of all proceedings in connection therewith, including reasonable attorney’s fees, after advertising the time, place and terms of sale once a week for four (4) weeks immediately preceding such sale (but without regard to the number of days) in a newspaper in which Sheriff’s sales are advertised in said county. At any such public sale, Grantee may execute and deliver to the purchaser a conveyance of the Premises or any part of the Premises in fee simple, with full warranties of title and, to this end, Grantor hereby constitutes and appoints Grantee the agent and attorney-in-fact of Grantor to make such sale and conveyance, and thereby to divest Grantor of all right, title and equity that Grantor may have in and to the Premises and to vest the same in the purchaser of purchasers at such sale or sales, and all the acts and doings of said agent and attorney-in-fact

86

are hereby ratified and confirmed and any recitals in said conveyance or conveyances as to facts essential to a valid sale shall be binding upon Grantor. The aforesaid power of sale and agency hereby granted are coupled with an interest and are irrevocable by death or otherwise, are granted as cumulative of the other remedies provided hereby or by law for the collection of the Debt, and shall not be exhausted by one exercise thereof, but may be exercised until full payment of all of the Debt. In the event of any sale under this Security Instrument by virtue of the exercise of the powers herein granted, or pursuant to any order in any judicial proceedings or otherwise, the Premises may be sold as an entirety or in separate parcels and in such manner or order as Lender, in its sole discretion, may elect, and if Grantee so elects, Grantee may sell the personal property covered by this Security Instrument at one or more separate sales in any manner permitted by the Uniform Commercial Code, and one or more exercises of the powers herein granted shall not extinguish nor exhaust such powers, until the entire Property are sold or the Debt is paid in full.

     (g) As this instrument is a deed passing legal title pursuant to the laws of the State of Georgia, and is not a mortgage, whenever reference herein is made to the “lien of this Security Instrument”, or words of similar import, such words shall be construed as meaning the security title and interest created and conveyed by this Deed.

     (h) Whenever reference is made herein to “reasonable attorney’s fees” or similar words, such reference shall mean attorney’s fees computed based upon the attorney’s normal hourly rates and the amount of time expended, and not the statutory attorney’s fees provided by Official Code of Georgia Annotated § 13-1-11.

     (i) GRANTOR EXPRESSLY WAIVES THE FOLLOWING: (A) ANY RIGHT GRANTOR MAY HAVE UNDER THE CONSTITUTION OF THE STATE OF GEORGIA OR THE CONSTITUTION OF THE UNITED STATES OF AMERICA TO NOTICE OR TO A JUDICIAL HEARING PRIOR TO THE EXERCISE OF ANY RIGHT OR REMEDY PROVIDED TO GRANTEE BY THIS “SECURITY INSTRUMENT” AND GRANTOR WAIVES GRANTOR’S RIGHTS, IF ANY, TO SET ASIDE OR INVALIDATE ANY SALE UNDER POWER DULY CONSUMMATED IN ACCORDANCE WITH THE PROVISIONS OF THIS SECURITY INSTRUMENT ON THE GROUND (IF SUCH BE THE CASE) THAT THE SALE WAS CONSUMMATED WITHOUT PRIOR NOTICE OR JUDICIAL HEARING OR BOTH. ALL WAIVERS BY GRANTOR HEREIN HAVE BEEN MADE VOLUNTARILY, INTELLIGENTLY AND KNOWINGLY BY GRANTOR, AFTER GRANTOR HAS BEEN AFFORDED THE OPPORTUNITY TO BE INFORMED BY COUNSEL OF GRANTOR’S CHOICE AS TO POSSIBLE ALTERNATIVE RIGHTS AND THE EFFECT OF SAID WAIVERS. GRANTOR’S EXECUTION OF THIS SECURITY INSTRUMENT SHALL BE CONCLUSIVE EVIDENCE OF THE MAKING OF SUCH WAIVERS AND THAT SUCH WAIVERS HAVE BEEN VOLUNTARILY, INTELLIGENTLY AND KNOWINGLY MADE.

     (j) The Maturity Date is the Payment Date occurring in May, 2009.

     Section 18.40. Intentionally Omitted.

     Section 18.41. Certain Matters Relating to Property Located in the State of Massachusetts. With respect to the Property which is located in the State of Massachusetts, notwithstanding anything contained herein to the contrary:

     (a) Borrower hereby, as continuing security for payment or performance of its obligations under the Note and the other Loan Documents in accordance with the terms thereof, grants with MORTGAGE COVENANTS and assigns to Lender, and grants to Lender a continuing security interest in and to all the Property.

     (b) This Security Instrument is upon the STATUTORY CONDITION and upon the further condition that all covenants and agreements on the part of Borrower herein undertaken shall be kept and fully and seasonably performed and that no breach of any other of the covenants or conditions specified herein shall be permitted, for any breach of which, upon the occurrence of an Event of Default Lender shall have the STATUTORY POWER OF SALE together with all other remedies now or hereafter permitted by law.

87

     (c) This Security Instrument has been executed as a sealed instrument as of the date first above written.

     Section 18.42. Intentionally Omitted.

     Section 18.43. Certain Matters Relating to Property Located in the State of New York. With respect to the Property which is located in the State of New York, notwithstanding anything contained herein to the contrary:

     (a) Borrower represents that this Security Instrument does not encumber property principally improved or to be improved by one or more structures containing in the aggregate not more than six (6) residential dwelling units.

     (b) Pursuant to Section 13 of the lien law of New York, Borrower shall receive the advances secured hereby and shall hold the right to receive such advances as a trust fund to be applied first for the purpose of paying the cost of any improvement and shall apply such advances first to the payment of the cost of any such improvements on the Property before using any part of the total of the same for any other purpose.

     (c) Lender shall have all of the rights against lessees of the Property as set forth in Section 291(f) of the Real Property Law of New York.

     (d) The provisions of subsection 4 of Section 254 of the New York Real Property Law covering the insurance of buildings against loss by fire and the application of Insurance Proceeds shall not apply to this Security Instrument. In the event of any conflict, inconsistency or ambiguity between the provisions of Article III hereof and the provisions of subsection 4 of Section 254 of the New York Real Property Law covering the insurance of buildings against loss by fire and the application of Insurance Proceeds, the provisions of Article III shall control.

     (e) (i) In the event of any sale or transfer of the Property, or any part thereof, including any sale or transfer by reason of foreclosure of this Security Instrument or any prior or subordinate mortgage or by deed in lieu of any such foreclosure, Borrower shall timely and duly complete, execute and deliver to Lender all forms and supporting documentation required by any taxing authority to estimate and fix any tax payable by reason of such sale or transfer or recording of the deed evidencing such sale or transfer, including any New York State Real Estate Transfer Tax payable pursuant to Article 31 of the New York Tax Law and New York City Real Property Transfer Tax payable pursuant to Chapter 21, Title 11 of the New York City Administrative Code (individually, a “Transfer Tax” and collectively, the “Transfer Taxes”).

     (ii) Borrower shall pay the Transfer Taxes that may hereafter become due and payable with respect to any sale or transfer of the Property described in this Article, and in default of such payment, Lender may pay the same and the amount of such payment shall be added to the Debt secured hereby and, unless incurred in connection with a foreclosure of this Security Instrument or deed in lieu of such foreclosure, shall be secured by this Security Instrument.

     (iii) Borrower hereby irrevocably constitutes and appoints Lender as its attorney-in-fact, coupled with an interest, to prepare and deliver any questionnaire, statement, affidavit or tax return in connection with any Transfer Tax applicable to any foreclosure or deed in lieu of foreclosure described in this Article.

     (iv) Borrower shall indemnify and hold harmless Lender against (i) any and all liability incurred by Lender for the payment of any Transfer Tax with respect to any transfer of the Property by reason of foreclosure, and (ii) any and all expenses incurred by Lender in connection therewith including, without limitation, interest, penalties and attorneys’ fees.

     (v) The obligation to pay the Transfer Taxes and indemnify Lender under this Section is a personal obligation of Borrower, whether or not Borrower is personally obligated to pay the Debt secured

88

by this Security Instrument, and shall be binding upon and enforceable against the distributees, successors and assigns of Borrower with the same force and effect as though each of them had personally executed and delivered this Security Instrument, notwithstanding any exculpation provision in favor of Borrower with respect to the payment of any other monetary obligations under this Security Instrument.

     (vi) In the event that Borrower fails or refuses to pay a tax payable by Borrower with respect to a sale or transfer by reason of a foreclosure of this Security Instrument in accordance with this Section, the amount of the tax, any interest or penalty applicable thereto and any other amount payable pursuant to Borrower’s obligation to indemnify Lender under this Section may, at the sole option of Lender, be paid as an expense of the sale out of the proceeds of the mortgage foreclosure sale.

     (vii) The provisions of this Section shall survive any transfer and the delivery of the deed affecting such transfer. Nothing in this Section shall be deemed to grant to Borrower any greater rights to sell, assign or otherwise transfer the Premises than are expressly provided in Article IX nor to deprive Lender of any right to refuse to consent to any transaction referred to in this Section.

     (f) The clauses and covenants contained in this Security Instrument that are construed by Section 254 of the New York Real Property Law shall be construed as provided in those sections (except as provided in Section 18.43(d) hereof and Article III hereof). The additional clauses and covenants contained in this Security Instrument shall afford rights supplemental to and not exclusive of the rights conferred by the clauses and covenants construed by Section 254 and shall not impair, modify, alter or defeat such rights (except as provided in Section 18.43(d) hereof and Article III hereof), notwithstanding that such additional clauses and covenants may relate to the same subject matter or provide for different or additional rights in the same or similar contingencies as the clauses and covenants construed by Section 254. The right of Lender arising under the clauses and covenants contained in this Security Instrument shall be separate, distinct and cumulative and none of them shall be in exclusion of the others. No act of Lender shall be construed as an election to proceed under any one provision herein to the exclusion of any other provision, anything herein or otherwise to the contrary notwithstanding. In the event of any inconsistencies between the provisions of Section 254 and the provisions of this Security Instrument, the provisions of this Security Instrument shall prevail.

     (g) At Borrower’s request and sole but reasonable expense, Lender shall deliver to Borrower, within ten (10) Business Days of such request, a pay-off letter indicating the outstanding Principal Amount and any accrued but unpaid interest thereon and any other sums due and owing under the Loan, upon Borrower’s prepayment of the Debt in full, deliver an assignment of the Note and this Security Instrument to Borrower’s designee without recourse, representation or warranty, together with the Note (or an affidavit of lost note) duly endorsed by Lender to Borrower’s designee.

     (h) Notwithstanding anything to the contrary in this Security Instrument, the maximum amount of principal indebtedness secured by this Security Instrument or which under any contingency may be secured by this Security Instrument is $5,071,520.00.

     Section 18.44. Certain Matters Relating to Property Located in the State of Ohio. With respect to the Property which is located in the State of Ohio, notwithstanding anything contained herein to the contrary:

     (a) This Security Instrument is an Open-End Mortgage, and Borrower and Lender intend that this Security Instrument shall secure not only the sums advanced as of the date hereof, but also the unadvanced balance of the Note, which sums Lender is obligated to advance, and in addition shall secure any and all advances provided for in the Loan Documents to the fullest extent provided for under Section 5301.232 of the Ohio Revised Code; provided, however, that the maximum amount of the principal portion of the Debt that may be outstanding at any time is the Loan Amount multiplied by two (2). In addition to any other debt or obligation secured hereby, this Security Instrument shall also secure unpaid balances of advances made with respect to the Property for the payment of taxes, assessments, insurance premiums, and costs incurred for the protection of the Premises to the fullest extent provided for under Section 5301.233 of the Ohio Revised Code.

89

     (b) The following is hereby inserted after the word “Debt” on the fifth line of the “NOW THEREFORE” paragraph found on the first page hereof:

as well as to secure the unpaid balance of advances made by Lender for the payment of taxes, assessments, insurance premiums, and costs incurred for the protection of the Property to the fullest extent provided for under Section 5301.233 of the Ohio Revised Code.

     (c) The following is hereby inserted at the end of Section 18.14 of this Security Instrument as an additional subparagraph:

     (c) The name of the “debtor” is the “Borrower” identified on page 1 hereof; and the name of the “secured party” is the “Lender” identified on page 1 hereof; the mailing address of the “secured party” from which information concerning the security interests may be obtained and the mailing address of the “debtor” are as set forth in the preamble of this Security Instrument; and a statement indicating the types, or describing the items, of collateral is set forth hereinabove in the granting clauses. Borrower is the owner of the real property constituting the “Premises” encumbered by this Security Instrument.

     (d) Lender shall be and hereby is authorized and empowered to do, as mortgagee, all things provided to be done in the mechanics’ lien laws of the State of Ohio (including Section 1311.14 of the Ohio Revised Code), and all acts amendatory or supplementary thereto.

     (e) The maturity date of the Loan is the Payment Date occurring in May, 2009, subject to extensions as provided in the Note.

     (f) With respect to any agreement by Borrower in this Security Instrument or in any other Loan Document to pay Lender’s attorneys’ fee and disbursements incurred in connection with the Loan, Borrower agrees that each Loan Document is a “contract of indebtedness” and that the attorneys’ fees and disbursements referenced are those which are a reasonable amount, all as contemplated by Ohio Revised Code Section 1301.21, as such Section may hereafter be amended. Borrower further agrees that the indebtedness incurred in connection with the Loan is not incurred for purposes that are primarily personal, family or household and confirms that the total amount owed on the contract of indebtedness exceeds One Hundred Thousand and No/100 Dollars ($100,000.00).

     (g) Paragraph (d) of the granting clause is hereby amended by deleting the words “and are part of the real estate” which is found immediately after the definition of “Fixtures” and inserting the words “and are goods that are or are to become fixtures related to the Premises” in their place.

     Section 18.45. Intentionally Omitted.

     Section 18.46. Certain Matters Relating to the Property Located in the State of New Mexico. With respect to the Property that is located in the State of New Mexico, notwithstanding anything contained herein to the contrary:

     (a) Mortgage With No Power of Sale. This Security Instrument is not a “deed of trust,” within the scope of the New Mexico Deed of Trust Act, NMSA 1978, §§ 48-10-1 to 48-10-21 (1987), as amended from time to time; it is a mortgage within the scope of NMSA 1978, §§ 47-1-39 (1947) and 47-1-44 (6) (1975). Any power of sale granted in this Security Instrument, and any designation of Lender as Borrower’s attorney-in-fact for purposes of effecting transfers of property pursuant to any power of sale or other power, shall have no effect in this Security Instrument. Any provisions of this Security Instrument permitting Lender to exercise a power of sale or to dispose of any of the Property through a sale pursuant to the exercise of a power of sale, are of no effect in this Security Instrument, with respect to the Property. The right of the Lender to foreclose this Security Instrument as a mortgage under New Mexico law is affirmed and is in no way impaired, and such foreclosure or enforcement and any foreclosure sale shall be conducted pursuant to, and in accordance with, applicable law. Among the provisions thus deemed of no effect and deleted, with respect to Property in the State of New Mexico, are the following, but not by

90

way of limitation: (i) the words “with power of sale” appearing in the third to the last line of the first paragraph of the granting clause, which is the paragraph commencing with the words “NOW THEREFORE” immediately following the last paragraph of the recitals (each recital paragraph begins with the word “WHEREAS” and is set forth below the heading “WITNESSETH,” on page 1 of this Security Instrument); (ii) all references to power of sale and sale pursuant to any power of sale set forth in Section 13.02, including as more specifically provided for in Section 18.46(g) below. in Section 13.02 (a) (vi), the words “with power of sale or otherwise,” together with the comma following “otherwise, as well as the words “or otherwise,” following the words “and in the event of a sale by foreclosure;” (iii) in Section 13.02 (d), lines 15 and 16, the words “this Section 13.02, whether made under the power of sale herein granted or under or by virtue of judicial proceedings or;” (iv) all of Section 13.02 (e), consistent with the provision below eliminating it; and (v) in lines one through three of Section 13.02 (f), the words “this Section 13.02 (whether made under the power of sale herein granted or under or by virtue of judicial proceedings or.”

     (b) Information. Information concerning, and copies of, any documents referred to in this Security Instrument, as well as information concerning the Lender and the Debt and obligations secured by this Security Instrument, may be obtained from the Lender at the address specified for it in the opening paragraph of the Security Instrument.

     (c) Grant with Mortgage Covenants and Upon Statutory Mortgage Condition and Without Power of Sale. Lender’s grant and mortgage in the granting clause of this Security Instrument are made with mortgage covenants (except for and subject to Permitted Encumbrances and except as otherwise herein provided) and upon the statutory mortgage condition (except as otherwise herein provided) for the breach of which this Security Instrument is subject to foreclosure as provided by law, and with no power of sale. Thus, at the end of the first paragraph of the granting clause (which begins with the words “NOW, THEREFORE” and appears immediately after the last paragraph of the recitals, each recital paragraph beginning with the word “WHEREAS” and being set forth below the heading “WITNESSETH” on page 1), with the deletion of the words “with power of sale,” as called for in Subsection 18.46(a) above, the following words are substituted therefor: “with mortgage covenants (except for and subject to Permitted Encumbrances and except as otherwise herein provided) and upon the statutory mortgage condition (except as otherwise herein provided) for the breach of which this Security Instrument is subject to foreclosure as provided by law,” followed by a comma and the existing final words of the first paragraph of the granting clause, that is, “all right, title and interest of Borrower in and to all of the following property, rights, interests and estates,” followed by a colon.

     (d) Release of Security Instrument Upon Satisfaction of Secured Debt and Obligations. In the second paragraph immediately preceding “ARTICLE I: DEFINITIONS,” which second preceding paragraph begins with the words “PROVIDED ALWAYS,” the following words are added at the end of said second preceding paragraph after the word “void” and before the period: “and Lender shall cause this Security Instrument to be released of record in accordance with the applicable provisions of NMSA 1978, § 48-7-4 (1991), as amended from time to time.”

     (e) Maximum Amount Secured. This Security Instrument secures not only amounts advanced as of the date hereof but also any other advances made in the future under the terms of the Note, this Security Instrument or the other Loan Documents. Notwithstanding any other provisions, even if inconsistent, in any of the Loan Documents, the maximum amount secured by the lien of this Security Instrument shall not exceed the aggregate principal amount at any one time outstanding of $630,000,000, plus interest thereon, as well as costs and attorneys’ fees and any interest due thereon. This statement of the maximum amount secured is made to comply with NMSA 1978, § 48-7-9 (1975), as amended from time to time, and does not in any way imply that Lender is obligated at any time to make any future advances or to lend all or any part of such maximum amount. The statement of such maximum amount limits, pursuant to NMSA 1978, § 48-7-9 (1975), as amended from time to time, only the total amount which may be, at any one time outstanding and secured on the terms here set forth.

     (f) Mechanics’ Liens. The provisions of this Security Instrument relating to mechanics’ and materialmen’s liens, including, without limitation, as set forth at Sections 2.06 and 4.04 of this Security Instrument, shall be modified to reflect that, in New Mexico, Borrower’s options for discharge of any lien of a mechanic or

91

materialman include payment of the lien and a petition to cancel the lien brought pursuant to NMSA 1978 § 48-2-9 (1975), which may be pursued by Borrower, subject to the time and other requirements for lien removal set forth in this Security Instrument, with provisions for removal of such mechanics’ and materialmen’s liens by bonding or contest or other procedures deemed inapplicable, but only to the extent such bonding or contest or other procedures are unavailable in New Mexico outside an action for cancellation brought pursuant to § 48-2-9 (1975).

     (g) Remedies. The following references to a power of sale and/or sale pursuant to a power of sale are deleted from Section 13.02: (i) the opening words of Section 13.02 (a) (iv), which read “sell the Property or;” (ii) in Section 13.02 (a) (vi) the words “with power of sale or otherwise,” together with the comma following “otherwise”, as well as the words “or otherwise,” following the words “and in the event of a sale by foreclosure;” (iii) in Section 13.02 (d), lines 15 and 16, the words “this Section 13.02, whether made under the power of sale herein granted or under or by virtue of judicial proceedings or;” (iv) all of Section 13.02 (e); (v) in lines one through three of Section 13.02 (f), the words “this Section 13.02 (whether made under the power of sale herein granted or under or by virtue of judicial proceedings or;” and (vi) the initial paragraph of Section 13.02 (b), as provided for in more detail below.

     Section 13.02 is further modified as here set forth. The following is added at the beginning of Section 13.02 (a) (ix): “Subject to the provisions of NMSA 1978, §§ 44-8-1 through 44-8-10 (1995 & 1996), as amended from time to time, and Rule 1-066 NMRA, to the extent applicable,” followed by a comma.

     The first paragraph of Section 13.02 (b) is deleted in its entirety and the following is substituted therefor:

Foreclosure. Upon the occurrence of an Event of Default hereunder and at any time thereafter, in addition to proceeding by suit or suits at law or in equity to enforce the payment of the Debt and obligations secured hereunder in accordance with their terms under applicable law or in equity, and in addition to the other rights and remedies which Lender may have hereunder or at law or equity, Lender may, at its option, initiate judicial proceedings to foreclose the lien of this Security Instrument as to all or any portion of the Property, whether real property or personal property, and to have such Property sold under the judgment or decree of a court of competent jurisdiction, in such portions, order and parcels as Lender, with the approval of the court, may determine, with or without having first taken possession of same, to the highest bidder for cash at public auction. Sale pursuant to a judicial decree of foreclosure shall be conducted by a court-appointed special master, or otherwise as ordered by the court, in compliance with all notice and other requirements of the laws of the State, and in accordance with the terms of the foreclosure decree or related court orders. Any person, including Lender, may be a purchaser of any of the Property at a judicial foreclosure sale, to the extent permitted by law, and Lender will be entitled to a credit on the purchase price in the amount of any judgment received by Lender in the foreclosure action or any portion thereof, except that cost and expenses adjudged payable to others than Lender will be payable in cash. The special master appointed by the court in a foreclosure action may deliver to the purchaser a special master’s deed and bill of sale conveying the Property so sold, without any covenant or warranty, express or implied. If the proceeds of a foreclosure sale of less than the whole of the Property shall be less than the aggregate of the Debt and secured obligations, this Security Instrument and the lien hereof shall remain in force and effect as to the unsold portion of the Property, just as though no sale had been made; provided, however, that Borrower shall never have any right to require the sale of less than the whole of the Property, but Lender shall have the right, at its sole election, to request the special master to sell less than the whole of the Property. In the event any sale hereunder is not completed or is defective in the opinion of Lender, such sale shall not exhaust the right of foreclosure sale hereunder, and Lender shall have the right to cause a subsequent sale or sales to be made hereunder. Nothing in this or any other provision in this Security Instrument dealing with foreclosure procedures or specifying particular actions to be taken shall be deemed to contradict or add to the requirements and procedures now or hereafter specified by the law of the State, and any such inconsistency shall be resolved in favor of the law of the State applicable at the time of the foreclosure..

     (h) Redemption Period. The redemption period following a court-ordered judicial foreclosure sale shall be one month instead of nine months, as provided for in NMSA 1978, § 39-5-19 NMSA (1965), as it may be

92

amended from time to time. The waiver of redemption provisions in Section 13.11 of this Security Instrument are modified by the redemption provision in the preceding sentence.

     (i) Certain UCC Provisions. Section 18.14 of this Security Instrument is supplemented by the provisions set forth below:

This Security Instrument constitutes a financing statement filed as a fixture filing pursuant to the provisions of Article 9 of the UCC, with respect to any goods included in the Property that are now or are to become fixtures. This Security Instrument shall also be effective as a financing statement covering those of the following, if any, in which a security interest is granted by this Security Instrument: as-extracted collateral (including oil and gas), accounts and general intangibles under the UCC which will be financed at the wellhead or minehead of the wells or mines located on the Premises, and is to be filed for record in the real estate records of each county where any part of the Premises is situated. The names of the debtor (Borrower) and the secured party (Lender) are given in the first paragraph of this Security Instrument. The mailing address of Lender set out in the first paragraph of this Security Instrument is an address of the secured party from which information concerning the security interest may be obtained. The mailing address of Borrower set out in the first paragraph of this Security Instrument is a mailing address for the debtor. A statement indicating the types, or describing the items, of Property collateral is set forth in Section 18.14 and in the granting clauses of this Security Instrument. The real estate (Premises) to which the goods are or are to be affixed and to which the as—extracted collateral relates is described in Exhibit A to this Security Instrument. Borrower is a record owner of the real estate.

     (j) Limitation on Indemnification. The parties reaffirm their intent that this Security Instrument be governed by, and construed in accordance with, the law chosen in Section 18.13. Nevertheless, to the extent, if at all, that any provision requiring one party to indemnify, hold harmless, insure, or defend another party (including such other party’s employees or agents) contained herein or in any related documents is found to be within the scope of NMSA (1978), § 56-7-1 (2005), as amended from time to time, or in any way subject to, or conditioned upon consistency with, the provisions of NMSA (1978), § 56-7-1 (2005), as amended from time to time, for its enforceability, then such provision, regardless of whether it makes reference to this or any other limitation provision, shall not extend to liability, claims, damages, losses or expenses, including attorney fees, arising out of bodily injury to persons or damage to property caused by or resulting from, in whole or in part, the negligence, act or omission of the indemnitee or additional insured, as the case may be, its officers, employees or agents, and shall be further modified, if required, by the provisions of NMSA (1978), § 56-7-1 (B)(2005), as amended from time to time.

     (k) Commitment in Writing. Under NMSA 1978, § 58-6-5 (1999), a contract, promise or commitment to loan money or to grant, extend or renew credit or any modification thereof, in an amount greater than Twenty-Five Thousand and No/100 Dollars ($25,000.00) not primarily for personal, family or household purposes made by a financial institution is not enforceable unless in writing and signed by the parties to be charged or that party’s authorized representatives.

* * * * *

93

     IN WITNESS WHEREOF, Borrower has duly executed this Security Instrument the day and year first above written.

Borrower’s Organizational Identification Number:	BORROWER:
3763816
	ASHFORD ATLANTIC BEACH LP, a Delaware limited partnership
	By:	Ashford Sapphire GP LLC, a Delaware limited liability company, its general partner
		By:	/s/ David A. Brooks
			Name: David A. Brooks
			Title: Vice President

94

EXHIBIT A

LEGAL DESCRIPTION OF PREMISES

EXHIBIT B

SUMMARY OF RESERVES

See Cross-collateralization Agreement between Borrower and Lender of even date herewith.

EXHIBIT C

CROSS-COLLATERALIZED PROPERTIES AND INITIAL ALLOCATED LOAN AMOUNTS

See Cross-collateralization Agreement between Borrower and Lender of even date herewith.

EXHIBIT D

REQUIRED ENGINEERING WORK

See Cross-collateralization Agreement between Borrower and Lender of even date herewith.

EXHIBIT E

CASH FLOW STATEMENT

Intentionally Omitted.

EXHIBIT F

APPROVED MANAGERS

Starwood Hotels and Resorts Worldwide Inc.

Marriott International, Inc.

Hilton Hotels Corporation

Hyatt

Interstate Hotels and Resorts

Remington

APPROVED FRANCHISERS

Starwood Hotels and Resorts Worldwide Inc.

Marriott International, Inc.

Hilton Hotels Corporation

Hyatt

EX-10.25.4.3A

Exhibit 10.25.4.3a

Schedule of Omitted Mortgage Agreements

(Floating Rate Pools)

The agreements listed below are substantially identical in all material respects to the Mortgage Security Agreement, Assignment of Rents and Fixture Filing from Ashford Atlantic Beach LP, as Borrower to Wachovia Bank, National Association, as Lender, dated April 11, 2007, with respect to Sea Turtle Inn, Atlantic Beach, Florida, filed as Exhibit 10.25.4.3 (the “Form Agreement”), except as to the parties thereto, the name and legal description of the property, and the title of the document (to conform to applicable state law and convention). There are no other material differences between any of the listed documents and the Form Agreement. These agreements are not being filed as exhibits in reliance on Instruction 2 to Item 601 of Regulation S-K.

• Open-End Mortgage, Security Agreement, Assignment of Rents and Fixture Filing from Ashford Columbus LP, as Borrower to Wachovia Bank, National Association, as Lender dated April 11, 2007, with respect to Doubletree Guest Suites, Columbus, Ohio

• Mortgage, Security Agreement, Assignment of Rents and Fixture Filing from Ashford Coral Gables LP, as Borrower to Wachovia Bank, National Association, as lender dated April 11, 2007, with respect to Hyatt Regency, Coral Gables, Florida

• Deed to Secure Debt, Security Agreement and Assignment of Rents from Ashford Kennesaw I LP, as Borrower to Wachovia Bank, National Association, as Lender dated April 11, 2007, with respect to Fairfield Inn, Kennesaw, Georgia

• Deed to Secure Debt, Security Agreement and Assignment of Rents from Ashford Kennesaw II LP, as Borrower to Wachovia Bank, National Association, as Lender dated April 11, 2007, with respect to Springhill Suites, Kennesaw, Georgia

• Deed to Secure Debt, Security Agreement and Assignment of Rents from Ashford Lawrenceville LP, as Borrower to Wachovia Bank, National Association, as Lender dated April 11, 2007, with respect to Hampton Inn, Lawrenceville, Georgia

• Mortgage, Security Agreement, Assignment of Rents and Fixture Filing from Ashford Mobile LP, as Borrower to Wachovia Bank, National Association, as Lender dated April 11, 2007, with respect to Homewood Suites, Mobile, Alabama

• Mortgage, Security Agreement, Assignment of Rents and Fixture Filing from Ashford Santa Fe LP, as Borrower to Wachovia Bank, National Association, as Lender dated April 11, 2007, with respect to Hilton, Santa Fe, New Mexico

      The two agreements listed below (the “Deeds of Trust”) are substantially identical in all material respects to the Form Agreement, except as to the parties thereto, the name and legal description of the property, the title of the document (to conform to applicable state law and convention) and the specific provisions noted below. These agreements are not being filed as exhibits in reliance on Instruction 2 to Item 601 of Regulation S-K.

• Purchase Money Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing from Ashford BWI Airport, LP, as Borrower, to Linda L. Rose, as Trustee and Wachovia Bank, National Association, as Lender dated April 11, 2007, with respect to Springhill Suites, BWI Airport, Maryland

• Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing from Ashford LV Hughes Center LP, as Borrower to United Title of Nevada, as Trustee and Wachovia Bank, National Association, as Lender dated April 11, 2007, with respect to Residence Inn, Las Vegas, Nevada

     The Deeds of Trust include the concept of a trustee, acting for the benefit of the lender, and each includes the following additional provisions, related to the utilization of a trustee, which provisions are not included in the Form Agreement:

     Section 18.33. Concerning the Trustee. Trustee shall be under no duty to take any action hereunder except as expressly required hereunder or by law, or to perform any act which would: involve Trustee in any expense or liability or to institute or defend any suit in respect hereof, unless properly indemnified to Trustee’s reasonable satisfaction. Trustee, by acceptance of this Security Instrument, covenants to perform and fulfill the trusts herein created, being liable, however, only for gross negligence or willful misconduct,. and hereby waives any statutory fee and agrees to accept reasonable compensation, in lieu thereof, for any services rendered by Trustee in accordance with the terms hereof. Trustee may resign at any time by written instrument to that effect delivered to Lender. Lender may remove Trustee at any time or from time to time and select a successor trustee. In the event of the death, removal, resignation, refusal to act, or inability to act of Trustee, or in its sole discretion for any reason whatsoever Lender may, without notice and without specifying any reasons therefor and without applying to any court, select and appoint a successor trustee, by an instrument recorded wherever this Security Instrument is recorded, and all powers, rights, duties and authority of Trustee, as aforesaid, shall thereupon become vested in such successor. Such substitute trustee shall not be required to give a bond for the faithful performance of the duties of Trustee hereunder unless required by Lender. The procedure provided for in this Section 18.33 for substitution of Trustee shall be in addition to and not in exclusion of any other provisions for substitution, by law or otherwise.

     Section 18.34. Trustee’s Fees. Borrower shall pay all costs, fees and expenses incurred by Trustee and Trustee’s agents and counsel in. connection with the performance by Trustee of Trustee’s duties hereunder, and all such costs, fees and expenses shall be secured by this Security Instrument.

     This following sections of each of the Deeds of Trust replace, in their entirety, the identically numbered sections included in the Form Agreement:

     Section 18.37. Intentionally Omitted.

     Section 18.38. Certain Matters Relating to Property Located in the State of California. With respect to the Property which is located in the State of California, notwithstanding anything contained herein:

     (a) Power of Sale. Lender may deliver to Trustee a written declaration of an Event of Default and demand for sale which requests that Trustee record and serve a written notice of default and of election to cause the Property to be sold, and cause any or all of the Property to be sold under the power of sale granted by this Security Instrument in the manner herein below specified in this Section.

     (i) Declaration of Default: Acceptance. Lender shall (1) deliver to Trustee a written declaration of an Event of Default which recites facts which demonstrate Borrower’s default; and a demand that Trustee sell the Property, and (2) deposit the Note and this Security Instrument, if required by law, with Trustee. Trustee shall accept Lender’s declaration of an Event of Default as true and as demonstrative of Borrower’s default, and shall record and serve a written notice of default and of election to cause the Property to be sold in the manner required by applicable law.

     (ii) Rescission of Notice of Default. Lender may rescind any notice of default at anytime before Trustee’s sale by executing a notice of rescission and recording it. The recordation of the notice will constitute a cancellation of any prior declaration of an Event of Default and demand for sale and of any acceleration of maturity of the Debt affected by any prior declaration or notice of an Event of Default. The exercise by Lender of the right of rescission will not constitute a waiver of any default then existing or subsequently occurring, or impair the right of Lender to execute other declarations of default and demand for sale, or notices of default and of election to cause the Property to be sold, nor otherwise affect the Note or this Security Instrument, or any of the rights, obligations or remedies of Lender or Trustee hereunder or under applicable taw.

     (iii) Date of Trustee’s Sale. If, after the expiration of any period of time provided by applicable law, Borrower’s Event of Default has not been cured and Borrower’s Debt has not been reinstated in the manner required by applicable law, Trustee shall establish a date for the sale of the Property and record and serve a notice of sale in the manner required by applicable law.

     (iv) Trustee’s Sale. If, on or before the date scheduled for the sale of the Property, Borrower’s Event of Default has not been cured and Borrower’s Debt has not been reinstated, Trustee, without demand on Borrower, shall sell the Property at the time and place fixed by Trustee in the notice of sale, either as a whole or in separate. parcels, and in such order as Trustee may determine, at public auction, and to any Person, including Borrower, Lender or Trustee. The Property shall be sold to the highest bidder for cash payable at the time of sale. Notwithstanding the foregoing, instead of paying

cash for the Property, Lender may credit the amount of its auction sale bid by the amount of the Debt, or any fraction thereof, including, without limitation, Trustee’s cost and expenses from the sale of the Property. Lender will be entitled to bid, at any trustee’s or foreclosure sale of the Property, the amount of the Environmental Damages (as hereinafter defined), any costs incurred by Lender with respect to any Environmental Problem and interest in addition to the amount of other Debt as a credit bid, the equivalent of cash. Furthermore, if a bid has been made by Lender in the amount of the Debt, other than Debt for Environmental Damages and any costs incurred by Lender with respect to any Environmental Problem incurred by Lender, any Debt comprised of the Environmental Damages and any costs incurred by Lender with respect to any Environmental Problem shall not be discharged by virtue of the full credit bid and shall remain an obligation of Borrower to be satisfied under this Security Instrument.

     (v) Delivery of Deed. Trustee shall deliver to the purchaser of the Property a deed which conveys title to the Property without any covenant or warranty, express or implied. The recitals in the deed of any matters or facts shall be conclusive proof of their truthfulness.

     (vi) Postponement of Trustee’s Sale. Trustee may postpone the sale of all or any portion of the Property in accordance with California Civil Code §29248, by public announcement at the time and place of sale, and from time to time thereafter Trustee may postpone such sale by public announcement at the time fixed by the preceding postponement or as otherwise allowed by said statute.

     (vii) Application of Sale Proceeds The proceeds of Trustee’s public auction of the Property shall be applied in the following manner. (1) payment of the portion of the Debt attributable to the costs and expenses of the sale; (2) repayment of the portion of the Debt attributable to any sums expended or advanced by Lender (other than the Environmental Damages and costs incurred by Lender with respect to any Environmental Problem) under the terms of this Security Instrument, plus interest at the Default Rate attributable only to the time during which the Default Rate is charged; (3) payment of all other Debt and all other obligations of Borrower secured by this Security Instrument, in any order that Lender chooses; (4) repayment of the portion of the Debt attributable to the Environmental Damages and costs incurred by Lender with respect to any Environmental Problem under the terms of this Security Instrument, plus interest at the Default Rate; and (5) the remainder, if any, to satisfy the outstanding balance of obligations secured by any junior encumbrances in the order of their priority, then to Borrower or Borrower’s successor in interest

     (viii) Proof of Compliance with the Law. If there is a sale of the Property, or any part of it, and the execution of a deed for it, the recital of default and of recording notice of breach and publication of election of sale, and of the elapsing of the required time between the recording and the following notice, and of the sale should be made, will be conclusive proof of the default, recording, election, elapsing of time, and the due giving of notice, and that the sale was regularly and validly made on proper demand by Lender. Any deed with these recitals will be effectual and conclusive against Borrower, its successors, and assigns, and all other Persons. The receipt for the purchase money

recited or in any deed executed to the purchaser will be sufficient discharge to the purchaser from all obligations to see to the proper application of the purchase money.

     (b) Acceptance by Trustee. Trustee accepts this trust when this Security Instrument, duly executed and acknowledged, is made a public record as provided by law. Trustee is not obligated to notify any party hereto of pending sale under any other deed of trust or of any action or proceeding in which Borrower, Lender or Trustee shall be a party unless brought by Trustee.

     (c) Rights and Duties. It shall be no part of the duty of Trustee to see to any recording, filing or registration of this Security Instrument or any other instrument in addition or supplemental hereto, or to give any notice thereof, or to see to the payment of or be under any duty in respect of any tax or assessment or other governmental charge which may be levied or assessed on the Property, or any part thereof, or against Trustee, or to see to the performance or observance by Borrower of any of the covenants and agreements contained herein. Trustee shall not be responsible for the execution, acknowledgement or validity of this Security Instrument or of any instrument in addition or supplemental hereto or for the sufficiency of the security purported to be created hereby, and makes no representation in respect thereof or in respect of the rights of Lender. Trustee shall have the right to advice of counsel upon any matters arising hereunder and shall be fully protected in relying as to legal matters on the advice of counsel. Trustee shall not incur any personal liability hereunder except for its own gross negligence or willful misconduct and Trustee shall have the right to rely on any instrument, document or signature authorizing or supporting any action taken or proposed to be taken by Trustee hereunder and believed by Trustee in good faith to be genuine.

     (d) Subrogation to Existing Liens; Vendor’s Lien. To the extent that proceeds of the Note are used to pay Debt secured by any outstanding lien, security interest, charge or prior encumbrance against the Property, such proceeds have been advanced by Lender at Trustee’s request, and Lender shall be subrogated to any and all rights, security interests and liens owned by any owner or holder of such outstanding liens, security interests, charges or encumbrances, however remote, irrespective of whether said liens, security interests, charges or encumbrances are released, and all of the same are recognized as valid and subsisting and are renewed and continued and merged herein to secure the Debt, but the terms and provisions of this Security Instrument shall govern and control the manner and terms of enforcement of the liens, security interests, charges and encumbrances to which Lender is subrogated hereunder. It is expressly understood that, in consideration of the payment of such indebtedness by Lender, Borrower hereby waives and releases all demands and causes of action for offsets and payments in connection with the said indebtedness. If all or any portion of the proceeds of the Loan or of the Debt has been advanced for the purpose of paying the purchase price for all or a part of the Property, no vendor’s lien is waived; and Lender shall have, and is hereby granted, a vendor’s lien on the Property as cumulative additional security for the secured indebtedness. Lender may foreclose under this Security Instrument or under the vendor’s lien without waiving the other or may foreclose under both.

     (e) Substitute Trustee. Trustee may resign by an instrument in writing addressed to Lender, or Trustee may be removed at any time with or without cause by an instrument in writing executed by Lender. In case of the death, resignation, removal or disqualification of Trustee, or if

for any reason Lender shall deem it desirable to appoint a substitute or successor trustee to act instead of the herein named trustee or any substitute or successor trustee, then Lender shall have the right and is hereby authorized and empowered to appoint a successor trustee, or a substitute trustee, without other formality than appointment and designation in writing executed by Lender, and the authority hereby conferred shall extend to the appointment of other successor and substitute trustees successively. until the Debt secured hereby has been paid in full, or until the Property is fully and finally sold hereunder. In the event that the Debt is owned by more than one person or entity, the holder or holders of not less than a majority in amount of such indebtedness shall have the right and authority to make the appointment of a successor or substitute trustee as provided for in the preceding sentence or to remove Trustee as provided in the first sentence of this Section 18.38(e). Such appointment and designation by Lender, or by the holder or holders of not less than a majority of the Debt secured hereby, shall be fall evidence of the right and authority to make the same and of all facts therein recited. If Lender is a corporation or association or trust and such appointment is executed in its behalf by an officer or trustee of such corporation or association or trust, such appointment shall be conclusively presumed to be executed with authority and shall be valid and sufficient without proof of any action by the board of directors or any superior officer of the corporation or association or trust. Upon the making of any such appointment and designation, all of the estate and title of Trustee in the Property shall vest in the named successor or substitute trustee, and it shall thereupon succeed to and shall hold, possess and execute, all of the rights, powers, privileges, immunities and duties herein conferred upon Trustee; but, nevertheless, upon the written request of Lender or of the successor or substitute trustee, the trustee ceasing to act shall execute and deliver an instrument transferring to such successor or substitute trustee all of the estate and title in the Property of the trustee so ceasing to act, together with all the rights, powers, privileges, immunities and duties herein conferred upon the Trustee, and shall duly assign, transfer and deliver any of the properties and moneys held by said trustee hereunder to said. successor or substitute trustee. All references herein to “Trustee” shall be deemed to refer to Trustee (including any successor or substitute appointed and designated as herein provided) from time to time acting hereunder.

     (f) No Liability of Trustee. TRUSTEE SHALL NOT BE LIABLE FOR ANY ERROR OF JUDGMENT OR ACT DONE BY TRUSTEE IN GOOD FAITH, OR BE OTHERWISE RESPONSIBLE OR ACCOUNTABLE UNDER ANY CIRCUMSTANCES WHATSOEVER (INCLUDING TRUSTEE’S NEGLIGENCE), EXCEPT FOR TRUSTEE’S GROSS NEGLIGENCE OR MISCONDUCT. Trustee shall have the right to rely on any instrument, document or signature authorizing or supporting any action taken or proposed to be taken by it hereunder, believed by it in good faith to be genuine. All moneys received by Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated in any manner from any other moneys (except to the extent required by law), and Trustee shall be under no liability for interest on any moneys received by it hereunder. Trustee hereby ratifies and confirms any and all acts which the herein-named Trustee or its successor or successors, substitute or substitutes, in this trust, shall do lawfully by virtue hereof.

     (g) Judgment on Environmental Provision.

     (i) Judgment Sought Pursuant to California Code of Civil Procedure §736, Lender may bring an action (as such term is defined in California Code of Civil

Procedure §22) for breach of contract against Borrower for breach of any provision contained in Article XVI hereof of the type defined as an “environmental provision” under California Code of Civil Procedure §736 (the “Environmental Provision”), for the recovery of the Environmental Damages listed in Section (ii) hereof, and for the enforcement of the Environmental Provision. Notwithstanding the foregoing, no injunction for the enforcement of an Environmental Provision may be issued after (x) satisfaction of the Debt or (y) transfer of Borrower’s right, title and interest in and to the “Real Property Security” (as such tens is defined in California Code of Civil Procedure §736(£)(4)) in a bona fide transaction to an unaffiliated third parry for fair value.

     (ii) Damages. The damages that Lender may recover pursuant to Section (i) above shall be limited to reimbursement or indemnification of the following (collectively, the “Environmental Damages”);: (w) if not pursuant to an order of any Governmental Authority relating to the cleanup, remediation, or other response action required by any applicable rule promulgated by a Governmental Authority or applicable law, those casts relating to a reasonable and good faith cleanup, remediation, or other response action concerning a Release (notwithstanding anything to the contrary, such term shall have the meaning ascribed to it under California Civil Code of Procedure §736) or threatened release of any hazardous substances (as defined in California Civil Code of Procedure §736) which is anticipated by the Environmental Provision; (x) if pursuant to an order of any Governmental Authority relating to the cleanup, remediation or other response required by applicable law which is anticipated by the Environmental Provision, all amounts reasonably advanced in good faith by Lender in connection therewith, provided that Lender negotiated, or attempted to negotiate, in good faith to minimize the amounts it was required to advance under the order; (y) indemnification against all liabilities of Lender to any third party relating to the breach and not arising from acts, omissions or other conduct which occur after Borrower is no longer an owner or operator of the “Real Property Security,” and provided Lender is not responsible for the environmentally impaired condition of the “Real Property Security” in accordance with the standards set forth in California Code of Civil Procedure §726.5(d) (for the purposes of this Section (ii), the term “owner or operator” means those persons described in § 101(20)(A) of CERCLA); and (z) attorneys’ fees and costs incurred by Lender relating to the breach. Notwithstanding the foregoing, the Environmental Damages recoverable by Lender shall not include (w) any part of the principal amount or accrued interest of the Debt, except for any amounts advanced by Lender to cure or mitigate the breach of any Environmental Provision that is added to the principal amount, and contractual interest thereon, or (x) amounts which relate to a Release which was knowingly permitted, caused or contributed to by Lender or any affiliate or agent of Lender.

     (h) Waiver of Lien. Subject to the terms of California Code of Civil Procedure §726.5, Lender may elect between the following when the “Real Property Security” is “environmentally impaired” and an Event of Default has occurred and is continuing: (1) (i) waive its lien against (A) any parcel of “Real Property Security” that is “environmentally impaired” (as such term is defined in California Code of Civil Procedure §726.5(e)(3)), or is an “affected parcel” (as such term is defined in California Code Civil Procedure §726.5(e)(1)), and (B) all or any portion of the personal property attached to such parcels and (ii) exercise (A) the rights and remedies of an unsecured creditor including reduction of its claim against Borrower to judgment and (B) any

other rights and remedies permitted by law or (2) exercise (i) the rights and remedies of a creditor secured by a deed of trust or mortgage, and, if applicable, a lien against fixtures or personal property attached to the “Real Property Security”, and (ii) any other fights and remedies permitted by law. As between Lender and Borrower, for purposes of California Code of Civil Procedure §726.5, Borrower shall have the burden of proving that (1) the Release or threatened Release was not (x) knowingly or negligently caused or contributed to, or (y) knowingly or willfully permitted or acquiesced to, by Borrower or any related party (as such term is defined in California Code of Civil Procedure §726.5(e)(6)), or any affiliate or agent of Borrower or any related party, and (2) in conjunction with the making, renewal or modification of the Debt, (x) neither Borrower, any related party nor any affiliate or agent of Borrower or any related parry had actual knowledge or notice of the Release or threatened Release of any Hazardous Materials, or (y) if such a person had knowledge or notice of the Release or threatened Release, Borrower made written disclosure thereof to Lender after Lender’s written request for information concerning the environmental condition of the Real Property Security, or (z) Lender otherwise obtained actual knowledge thereof prior to the making, renewal. or modification of the Debt.

     (i) Reconveyance Upon Payment of Debt. In the event that Borrower shall cause to be paid the entire Debt and perform in full all of its obligations under the Loan Documents, Lender shall release and shall cause Trustee to release the Property from the lien of this Security Instrument and to reconvey (without warranty by or recourse against Trustee or Lender) the Property to Borrower. Upon Trustee’s receipt of Lender’s request for reconveyance; Trustee shall reconvey, without warranty, the Property or that portion held. When the Property has been fully reconveyed, the last reconveyance will be deemed to be, and will operate as an assignment and release of all current and future Rents to the person legally entitled.

     (j) Environmental Addendum.

     (i) Lender shall have the right, but not the obligation, to enter upon the Property, from time to time upon prior reasonable notice, and in its sole and absolute discretion, to conduct inspections of the Property and the activities conducted thereon to determine the compliance with all Environmental Statutes, the presence of Hazardous Materials and the existence of any potential damages as a result of the condition of the Property. In furtherance thereof, Borrower hereby grants to Lender and its agents, employees and qualified consultants and contractors, the right to enter upon the Property and to perform such tests on the Property (including invasive tests) as are reasonably necessary. Lender shall conduct such inspections and tests at reasonable times, shall use its best efforts to minimize interference with the operation of the Property and agrees to restore the condition of the Property, but Lender shall not be liable for any interference caused thereby unless due to the gross negligence or willful misconduct or omission. of Lender. In furtherance of the purposes above, without limitation of any of Lender’s other rights, Lender may: (x) obtain a court order to enforce Lender’s right to enter and inspect the Property under California Civil Code §2929.5, to which the decision of Lender as to whether there exists any Hazardous Materials on or about the Property in violation of any Environmental Statutes, or a breach by Borrower of any environmental provision of this Security Instrument or any of the other Loan Documents, will be deemed reasonable and conclusive as between the parties; and (y) have a receiver be appointed under

California Code of Civil Procedure §564 to enforce Lender’s right to enter and inspect the Property for the purpose set forth above.

     (ii) Borrower and Lender agree that. (x) this paragraph is intended as Lender’s written request for information and Borrower’s written response concerning the environmental condition of the Property as provided in California Cade of Civil Procedure §726.5; and (y) each representation, warranty or covenant, or indemnity made by Borrower in this Security Instrument or in the other Loan Documents that relates to the existence, location, nature, use, generation, manufacture, storage, disposal, handling, or past, present or future release (as defined in California Civil Code of Procedure §736(f)(5)), or threatened release, of any hazardous substance (as defined in California Civil Code of Procedure §736(1)(3)) into, onto, beneath or from the Property is intended by Borrower and Lender to he an “environmental provision” for the purposes of California Code of Civil Procedure §736 and will survive the payment of the Debt and the termination or expiration of this Security Instrument only if Lender acquires any interest in the Property and will not be affected by Lender’s acquisition of any. interest in the Property, whether by full credit bid at foreclosure, deed in lieu of that, or otherwise. If there is any transfer of any portion of Borrower’s interest in the Property, any successor-in-interest to Borrower agrees by its succession to that interest that the written request made pursuant to this paragraph will be deemed remade to the successor-in-interest without any further or additional action on the part of Lender and that by assuming the Debt secured by this Security Instrument or by accepting the interest of Borrower subject to the lien of this Security Instrument, the successor remakes each of the representations and warranties in this Security Instrument and agrees to be bound by each covenant in this Security Instrument, including but not limited to any indemnity provision.

     (k) Financing Statement This Security Instrument shall also constitute a financing statement pursuant to UCC §9502, and shall be filed as a fixture filing in the Official Records of the County Recorder of the Counties in which the Property is located and covers goods which are or are to become fixtures on the Property.

     (l) Border Zone Property. Borrower represents and warrants that the Property has not been designated as Border Zone Property under the provisions of California Health and Safety Code §25220 et seq, or any regulation adopted in accordance therewith and to Borrower’s knowledge there has been no occurrence or condition on any real property adjoining or in the vicinity of the. Property that is reasonably likely to cause the Property or any part thereof to be designated as Border Zone Property.

     (m) Waiver of Statutory Regulation. By initialing below, Borrower waives any right under California Civil Code §2954.10 or otherwise to prepay the Note, in whole or in part, without a Prepayment Charge (as described. in Section 13.03 hereof). Borrower acknowledges that prepayment of the Note may result in Lender’s incurring additional losses, costs, expenses, and liabilities, including, but not limited to, lost revenue and lost profits. Borrower therefore agrees to pay any prepayment charges on the terms and conditions provided herein, including, without limitation, upon arty Event of Default attributable to the transfer or conveyance of any right, title, or interest in the Property.

     BORROWER AGREES THAT LENDER’S WILLINGNESS TO MAKE THE LOAN AT THE INTEREST RATE FOR THE TERM SET FORTH HEREIN CONSTITUTES ADEQUATE CONSIDERATION, GIVEN INDIVIDUAL WEIGHT BY BORROWER, FOR THIS WAIVER AND AGREEMENT.

     (n) Waivers. All of the following waivers are made only to the extent allowable under California law.

     (i) Borrower waives all benefits and defenses it may have under California Civil Code Section 2809 and agrees that Borrower’s liability pursuant to the Loan Documents may be larger in amount and more burdensome than that of the Cross-collateralized Borrowers. Borrower’s liability under this Security Instrument shall continue until all sums due under the Loan Documents have been paid in full and shall not be limited or affected in any way by any impairment or any diminution or loss of value of any security or collateral for the obligations under the Loan Documents, from whatever cause, including, without limitation, Lender’s failure to perfect a security interest in any such security or collateral or any disability or other defense of the Cross-collateralized Borrowers, any guarantor, other surety, or any pledgor of collateral for the obligations under the Loan Documents or any other person related to the Loan Documents.

     (ii) Borrower agrees that its liability under, and the enforceability of, this Security Instrument are absolute and we not contingent upon the genuineness, validity or enforceability of the Loan Documents or the availability of any defense to the Cross-collateralized Borrowers, any guarantor, other surety, other pledgor of collateral for the obligations under the Loan Documents or any other person related to the obligations under the Loan Documents. Borrower waives all benefits and defenses it may have under California Civil Code Section 2810 and agrees that Borrower shall be liable even if the Cross-collateralized Borrowers, any guarantor, other surety, other pledgor of collateral or any other person related to the obligations under the Loan Documents had no liability at the time of execution of the Loan Documents or later ceases to be liable.

     (iii) Borrower waives its rights under California Civil Code Section 2815 and agrees that by doing so Borrower has no right to revoke this Security Instrument until all obligations under the Loan Documents have been fully satisfied.

     (iv) Borrower waives its rights under California Civil Code Section 2819 and agrees that by doing so Borrower’s liability and the enforceability of this Security Instrument shall continue even if Lender alters any term or obligation under the Loan Documents in any respect.

     (v) Borrower waives its rights under California Civil Code Section 2839 and agrees that by doing so (A) its obligations under this Security Instrument shall not be deemed satisfied by a mere offer of payment by the Cross-collateralized Borrowers, or any other person, of the principal obligations under the Loan Documents, and (B) Borrower’s liability under and the enforceability of this Security instrument shall continue until all obligations under the Loan Documents have been fully satisfied.

     (vi) Borrower waives all benefits and defenses it may have under California Civil Code Sections 2845, 2849 and 2850, including, without limitation, the right to require Lender to (A) proceed against the Cross-collateralized Borrowers, any guarantor, other surety, other pledgor of collateral for the obligations under the Loan Documents or any other person related to the obligations under the Loan Documents, (B) proceed against or exhaust any other security or collateral Lender may hold, or (C) pursue any other right or remedy for Borrower’s benefit, and agree that Lender may foreclose against all or a part of any security Lender may hold without taking any action against the Cross-collateralized Borrowers, any guarantor, other surety, other pledgor of collateral for the obligations under the Loan Documents or any other person related to the obligations outstanding under the Loan Documents, and without proceeding. against or exhausting any security or collateral Lender holds.

     (vii) Borrower waives its rights under California Civil Code Sections 2899 and 3433 and agrees that by doing so Lender has no obligation regarding the order in which Lender exercises its remedies against any collateral security encumbered pursuant to any of the Loan Documents.

     (viii) Borrower waives diligence and all demands, protests, presentments and notices of every kind or nature, including notices of protest, dishonor, nonpayment, acceptance of this Security Instrument and creation, renewal, extension, modification or accrual of any of the obligations under the Loan Documents, Borrower also waives the right to plead all statutes of limitation as a defense to Borrower’s liability under, or the enforceability of, this Security Instrument.

     (ix) Borrower waives any rights or benefits it may have by reason of California Code of Civil Procedure Section 580a which could limit the amount which Lender could recover in a foreclosure of the Property to the difference between the amount owing under the Loan Documents and the fair value of the Property or other real property sold at a nonjudicial foreclosure sale or sales of any other real property held by Lender as security for the obligations under the Loan Documents.

     (x) Borrower waives all rights and defenses arising out of an election of remedies by Lender, even though that election of remedies, such as a nonjudicial foreclosure of the Property or any other real property given to secure the obligations under the Loan Documents, destroys Borrower’s rights of subrogation and reimbursement against the Cross-collateralized Borrowers by the operation of Section 580d of the California Code of Civil Procedure or otherwise.

     (o) Borrower Informed of the Cross-collateralized Borrowers’ Condition. Borrower acknowledges that it has had an opportunity to review the Loan Documents, the value of the security for the obligations under the Loan Documents and the other Cross-collateralized Borrowers’ financial condition and ability to satisfy the obligations under the Loan Documents to which any o£ the-other Cross-collateralized Borrowers is a party. Borrower agrees to keep itself fully informed of all aspects of the other Cross-collateralized Borrowers’ financial condition and the performance of the other Cross-collateralized Borrowers’ obligations to Lender and that Lender has no duty to disclose to Borrower any information pertaining to the

other Cross-collateralized Borrowers or any security for the obligations under the Loan Documents.

     (p) Subrogation, Reimbursement and Contribution Rights. Borrower agrees that its rights of subrogation and reimbursement against the other Cross-collateralized Borrowers, their rights of subrogation against any other collateral or security for the obligations under the Loan Documents or the pledgor of such collateral or security and its rights of contribution from any guarantor, other surety or other pledgor of collateral shall be subordinate to Lender’s rights against the other Cross-collateralized Borrowers, in such collateral or security and against any such guarantor, surety or pledgor. Borrower shall have no such rights of subrogation, reimbursement or contribution until all amounts due under the Loan Documents have been paid in full and Lender has released, transferred or disposed of all of its rights in any collateral or security. To the extent allowable under California. laws, Borrower waives its rights under California Civil Code Sections 2847, 2848 and 28.49 to the extern inconsistent with the foregoing.

     (q) Confirmation of Waivers: the Cross-collateralized Borrowers’ Obligations are Secured by Real Property. The following waivers are made only to the extent allowable under California law.

     (i) Borrower waives all rights and defenses that Borrower may have because the Cross-collateralized Borrowers’ obligations are secured by real property. This means, among other things:

     (A) Lender may collect from Borrower without first foreclosing on any real or personal property collateral for the Cross-collateralized Borrowers’ obligations pledged by the Crass-collateralized Borrowers or any other person; and

     (B) if Lender forecloses on any real property collateral pledged by the Cross-collateralized Borrowers or any other person:

     (1) the amount of the Cross-collateralized Borrowers’ obligations outstanding may be reduced only by the price for which the real property collateral is sold at the foreclosure sale, even if the real property collateral is worth more than the sale price; and

     (2) Lender may collect from Borrower even if Lender, by foreclosing on the real property collateral, has destroyed any right Borrower may have to collect from the Cross-collateralized Borrowers.

     (ii) These are unconditional and irrevocable waivers of any rights and defenses Borrower may have because the Cross-collateralized Borrowers’ debt is secured by real property. These rights and defenses include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d or 726 of the California Code of Civil Procedure.

     (r) Fixture Filing. The personal property in which Lender has a security interest includes goods which are or shall become fixtures on the Property. This Security Instrument is intended to serve as a fixture filing pursuant to the terms of the California Uniform Commercial Code. This filing shall remain in effect as a fixture filing until this Security Instrument is released or otherwise satisfied of record or its effectiveness otherwise terminates with respect to the Property. In that regard, the following information is provided:

Name of Debtor:	The name of “Borrower” as set forth on signature page
Address of Debtor:	See Section 11.01 above.
Name of Secured Party:	Wachovia Bank, National Association
Address of Secured Party:	See Section 11.01 above.

     Section 18.39. Certain Matters Relating to the Premises Located in the State of Maryland. With respect to the property which is located in the State of Maryland, notwithstanding anything contained herein to the contrary:

     (a) Until an Event of Default in payment of any matter of indebtedness hereby secured as herein provided for, or until breach of any of the covenants, agreements, terms or conditions contained herein or contained in the Note or other Loan Documents to permit Borrower to possess and enjoy said Property and to receive the rents, issues and profits thereof; and on full payment of said Note, and of any extensions or renewals thereof, and interest thereon, and all sums advanced or expended as herein provided, and all other proper costs, charges, expenses, commissions, at any time before the sale hereinafter provided for, to release and reconvey unto and at the cost of Borrower, or the patty or parties than claiming under it, the aforesaid Property.

     (b) Upon the occurrence of an Event of Default:

     (i) Borrower, in accordance with Section 7-105 of the Real Property Article of the Annotated Code of Maryland, as amended, Rule 14201 et. seq. of the Maryland Rules of Procedure or any public general law or public local law of the State of Maryland relating to deeds of trust or mortgages, including any supplements, amendments or additions thereto, does hereby assent to the passage of a decree for the sale of the Property by the Circuit Court for the County in which the Premises is located; or

     (ii) Borrower agrees that Trustee or substitute trustee, at the option of Lender, shall take possession of the Property and/or shall have the power and duty to sell and, in the event of default by any purchaser, to re-sell all or any part of the Premises at public auction.

     (c) Upon any such sale, whether made under the assent to the passing of a decree or under the power of sale, the party selling may sell the Property as a whole, in such parcel or parcels, manner or order as said party selling may, in his sole discretion, elect; such sale may also be at the sole discretion of the party selling, subject to any one or more existing tenancies entered into subsequent to the recordation of this Security Instrument, in accordance with

Section 7-105(f)(2) of the Real Property Article of the Annotated Code of Maryland, as amended. Such sale shall be at public auction, at such time and place, upon such terms and conditions, and after notice to Borrower and such previous public notice (in compliance with the Maryland Rules of procedure) as the Trustee, or substitute trustee, shall deem best for the interest of all parties concerned, and (the terms of the sale being complied with) shall deliver to the purchaser or purchasers (at the cost of such purchaser or purchasers) a trustee’s deed conveying the Property so sold without any covenant or warranty, expressed or implied, such purchaser being hereby discharged from all liability for the application of the purchase of the purchase money; and shall apply the proceeds of sale in the following order: (i) to all expenses of sale of every kind and nature whatsoever, including, without limitation, reasonable attorneys’ fees, all taxes and assessments thereon due, all insurance premiums and fees for guard or watchmen services, all utility charges of whatsoever nature whether or not listed on the real property tax bill, all sums advanced as herein provided, and a trustees’ commission equal to the commission allowed trustees for making sales of property under decrees of the equity courts having jurisdiction, (ii) to the payment of the indebtedness due and outstanding under the Note, whether manned or not, and the interest thereon to date of payment from purchaser, and (iii) to the said Borrower, its successors or assigns, upon the surrender and delivery to the purchaser or to their heirs, personal representatives, successors or assigns of purchaser, of the possession of the Property so sold and conveyed, the surplus (if any) less the expenses (if any) of obtaining possession thereof In the event that the Debt is paid after the first insertion of an advertisement of sale of the Property, but prior to the sale thereof, half of such commissions and all such expenses and costs shall be paid by Borrower, its heirs, successors or assigns.

     (d) In addition, Borrower agrees that Lender may,. upon the occurrence of an Event of Default, proceed under the Uniform Commercial Code as presently contained in the Commercial Law Article of the Annotated Code of Maryland and any and all amendments, additions and supplements thereto, as to all or any part of the chattels, personal property, equipment and fixtures aforesaid, all the rights, remedies and power of a secured parry under the Uniform Commercial Code including, without limitation, the right and power to replevy, sell or otherwise dispose of, foreclose upon, lease or utilize all or any part of such chattels, personal property, equipment and fixtures aforesaid in any manner authorized or permitted under said Uniform Commercial Code.

     (e) Lender may from time to time, without notice to Borrower and with or without cause, substitute a successor or successors to any Trustee named herein or acting hereunder. Upon such appointment, and without conveyance to the successor trustee, the latter shall be vested with all title, powers and duties conferred upon any Trustee herein named or acting hereunder. Each such appointment and substitution shall be made by written Deed of appointment executed by Lender containing reference to this Security Instrument and its place of record which, when duly recorded among the Land Records of the county or city in which the Premises are situated, shall be conclusive proof of proper appointment of the successor trustee. The procedure herein provided for substitution of trustees shall not be exclusive of all other provisions for substitution, statutory or otherwise.

     (f) In the event that two or more trustees are named herein, any one or more of the trustees shall be clothed with full power to act when action hereunder is required; in the event that two or more trustees are named herein and the substitution of a trustee shall become

necessary for any reason, the substitution of one or more trustees in the place of the two or more named herein shall be sufficient.

     (g) The Trustee may act hereunder and may sell and convey the Premises under power granted by this instrument, although the Trustee has been, may now be and may hereafter be an attorney or agent of the holder of the Note secured hereby. The holder of the Note secured hereby may bid and become the purchaser at any sale under this Security Instrument.

     (h) Borrower expressly represents and warrants that the loan secured by this Security Instrument is a Commercial Loan within the meaning of Section 12-101(c) and 12-103(c) of the Commercial Law Article of the Annotated Code of Maryland, and Borrower further warrants that all loan proceeds will be used for said business or commercial investment purpose.

     (i) Fixture Filing and Financing Statements. This Security constitutes a security agreement, fixture filing and financing statement as those terms are used in the UCC. This Security Instrument is to be filed and recorded in, among other places, the real estate records of the County in which the Premises is located and the following information is included: (1) the Borrower shall be deemed. the “Debtor” with the address set forth for the Borrower in the introductory paragraph of this Deed of Trust; (2) the Lender shall be deemed to be the “Secured Party” with the address set forth for the Lender in the introductory paragraph of this Security Instrument and shall have all of the rights of a secured party under the UCC; (3) this Security Instrument covers goods which are or are to become fixtures; (4) the name of the record owner of the land is the Borrower; (5) the organizational identification number of the Borrower is as set forth on the signature page hereof; (6) the Borrower is a limited partnership or a limited liability company, as applicable, organized under the laws of the State of Delaware; and (7) the legal name of Borrower is as set forth on the signature page hereof, and Borrower is not known by any other name(s). Borrower hereby authorizes Lender to file any financing statements and terminations thereof or amendments or modifications thereto without the signature of Borrower where permitted by law.

     Section 18.40. Certain Matters Relating to Property Located in Missouri. With respect to the Property located in the State of Missouri, notwithstanding anything contained herein to the contrary:

     (a) FUTURE ADVANCES ARE SECURED HEREBY PURSUANT TO SECTION 443.055 OF THE REVISED STATUTES OF MISSOURI.

     (b) In the event any foreclosure advertisement is running or has run at the time of such appointment of a successor Trustee, the successor Trustee may, to the extent permitted by applicable law, consummate the advertised sale without the necessity of republishing such advertisement.

     (c) Upon the occurrence of an Event of Default, the Trustee shall, at the request of Lender, proceed to sell the Property as one parcel in its entirety or any part thereof, either in mass or in parcels, at the absolute discretion of Trustee, at public venue, to the highest bidder for cash at the door of the Court House or other location then customarily employed for that purpose in the county (or city) where the Property is located, first giving notice of the time and

place of sale, and a description of the property to be sold, by advertisement published and as is provided by the laws of the State of Missouri then in effect, and upon sale shall execute and deliver a deed of conveyance of the property sold to the purchaser or purchasers thereof, and any statement or recital of fact in such deed, in relation to the non-payment of the money hereby secured to be paid, existence of the indebtedness so secured, notice of advertisement, sale and receipt of the proceeds of sale, shall be presumptive evidence of the truth of such statements or recital. The power of sale hereunder shall not be exhausted by any one or more such sales (or attempts to sell) as to all or any portion of the Property remaining unsold, but shall continue unimpaired until all of the Property has been sold or the Note and all other indebtedness of Borrower to Lender secured hereby shall have been paid in full.

     (d) The Trustee may sell and convey the Property under the power aforesaid, although the Trustee has been, may now be or may hereafter be attorney or agent of the Lender in respect to the loan made by Lender evidenced by the Note or this Security Instrument or in respect to any matter of business whatsoever:

     (e) The Trustee hereby lets the Property to the Borrower until a sale be had under the foregoing provisions, upon the following terms and conditions, such letting being to-wit: The Borrower and every and all persons claiming or possessing the Property, or any part thereof, by, through or under Borrower shall pay. rent therefor during said term at the rate of one cent (1¢) per month, payable monthly upon demand, and shall surrender immediate peaceable possession of said premises, to the purchaser thereof, under such sale, without notice or demand therefor. Should possession not be surrendered as provided for herein the purchaser. shall be entitled to institute proceedings for possession as aforesaid.

     (f) The following is added pursuant to Section 432.047 of the Missouri Revised Statutes. As used below “borrower(s)” shall mean Borrower and “creditor” shall mean Lender:

     ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE, REGARDLESS OF THE LEGAL THEORY UPON WHICH IT IS BASED THAT IS IN ANYWAY RELATED TO THE LOAN. TO PROTECT YOU (BORROWER) AND US (LENDER) FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT.

     (g) In the event any person legally entitled thereto shall at any time deliver or cause to be delivered to the Lender a notice pursuant to subsection 6 or 8 of Section 443.055 of the Missouri Revised Statutes electing to terminate the operation of this Security Instrument as security for future advances or future obligations made or incurred after the date of such notice, then upon receipt of such notice Lender shall have no further obligation under the Note, this Security Instrument or otherwise to advance monies to or for the account of Borrower, notwithstanding anything in the Note or this Security Instrument to the contrary. Moreover, any request by Borrower for an advance under the Note or hereunder shall constitute a certification that no such notice of lien termination has been given.

     (h) The following notice is provided pursuant to Section 427.120 of the Missouri Revised Statutes. As used herein, the terms “you” and “your” shall refer to Borrower, and the terms “we” and “us” shall refer to Lender,

     UNLESS YOU PROVIDE EVIDENCE OF THE INSURANCE COVERAGE REQUIRED BY YOUR AGREEMENT WITH US, WE MAY PURCHASE INSURANCE AT YOUR EXPENSE TO PROTECT OUR INTERESTS IN YOUR COLLATERAL. THIS INSURANCE MAY, BUT NEED NOT, PROTECT YOUR INTERESTS IN YOUR COLLATERAL. THIS INSURANCE MAY, BUT NEED NOT, PROTECT YOUR INTERESTS. THE COVERAGE THAT WE PURCHASE MAY NOT PAY ANY CLAIM THAT YOU MAKE OR ANY CLAIM THAT IS MADE AGAINST YOU IN CONNECTION WITH THE COLLATERAL. YOU MAY LATER CANCEL ANY INSURANCE PURCHASED BY US, BUT ONLY AFTER PROVIDING EVIDENCE THAT YOU HAVE OBTAINED INSURANCE AS REQUIRED BY OUR AGREEMENT. IF WE PURCHASE INSURANCE FOR THE COLLATERAL, YOU WILL BE RESPONSIBLE FOR THE COSTS OF THAT INSURANCE, INCLUDING THE INSURANCE PREMIUM, INTEREST AND ANY OTHER CHARGES WE MAY IMPOSE IN CONNECTION WITH THE PLACEMENT OF THE INSURANCE, UNTIL THE EFFECTIVE DATE OF THE CANCELLATION OR EXPIRATION OF THE INSURANCE. THE COSTS OF THE INSURANCE MAY BE ADDED TO YOUR TOTAL OUTSTANDING BALANCE OR OBLIGATION. THE COSTS OF THE INSURANCE MAY BE MORE THAN THE COST OF INSURANCE YOU MAY BE ABLE TO OBTAIN ON YOUR OWN.

     (i) This Security Instrument is effective as a financing statement filed as a fixture filing under Sections 9-313 and 9-402 of the Uniform Commercial Code, as amended or recodified from time to time, covering any of the Fixtures which now is or later may become fixtures attached to the Premises. The addresses set forth in Section 110 1 hereof are the mailing address of Borrower, as debtor under the Uniform Commercial Code, and Lender, as secured party under the Uniform Commercial Code, respectively and the organizational identification number of Borrower is set forth on the signature page hereof. The fixture collateral relates to the real property described on Exhibit A of which Borrower is the record owner.

     Section 18.41. Intentionally Omitted.

     Section 18.42. Intentionally Omitted.

     Section 18.43. Intentionally Omitted.

     Section 18.44. Intentionally Omitted.

     Each of the Deeds of Trust ends with Section 18.44, omitting, in their entirety, Sections 18.45 and 18.46 included in the Form Agreement.

EX-10.25.4.4

Exhibit 10.25.4.4

Ashford
(Pool 1)

ASHFORD EDISON LP,

as Borrower

to

WACHOVIA BANK, NATIONAL ASSOCIATION,

as Lender

MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF RENTS

AND FIXTURE FILING

Dated: April 11, 2007

PREPARED BY AND UPON RECORDATION RETURN TO:

Proskauer Rose llp
1585 Broadway
New York, New York 10036

Attention: David J. Weinberger, Esq.

     THIS MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF RENTS AND FIXTURE FILING (the “Security Instrument”) is made as of the 11th day of April, 2007, by the party set forth as Borrower on the signature page hereof, having their chief executive office at 14185 Dallas Parkway, Suite 1100, Dallas, Texas 75254-4308 (hereinafter referred to as “Borrower”), to WACHOVIA BANK, NATIONAL ASSOCIATION, having an address at Wachovia Bank, National Association, Commercial Real Estate Services, 8739 Research Drive URP 4, NC 1075, Charlotte, North Carolina 28262 (hereinafter referred to as “Lender”).

W I T N E S S E T H:

     WHEREAS, Lender has authorized a loan (hereinafter referred to as the “Loan”) to the Cross-collateralized Borrowers in the maximum principal sum of ONE HUNDRED THREE MILLION NINE HUNDRED SIX THOUSAND and NO/100 DOLLARS ($103,906,000.00) (hereinafter referred to as the “Loan Amount”), which Loan is evidenced by that certain promissory note, dated the date hereof (together with any supplements, amendments, modifications or extensions thereof, hereinafter referred to as the “Note”) given by the Cross-collateralized Borrowers, as maker, to Lender, as payee;

     WHEREAS, in consideration of the Loan, the Cross-collateralized Borrowers have agreed to make payments in amounts sufficient to pay and redeem, and provide for the payment and redemption of the principal of, premium, if any, and interest on the Note when due;

     WHEREAS, Borrower desires by this Security Instrument to provide for, among other things, the issuance of the Note and for the deposit, deed and pledge by Borrower with, and the creation of a security interest in favor of, Lender, as security for the Cross-collateralized Borrowers’ obligations to Lender from time to time pursuant to the Note and the other Loan Documents;

     WHEREAS, Borrower and Lender intend these recitals to be a material part of this Security Instrument; and

     WHEREAS, all things necessary to make this Security Instrument the valid and legally binding obligation of Borrower in accordance with its terms, for the uses and purposes herein set forth, have been done and performed.

     NOW THEREFORE, to secure the payment of the principal of, prepayment premium (if any) and interest on the Note and all other obligations, liabilities or sums due or to become due under this Security Instrument, the Note or any other Loan Documents, including, without limitation, interest on said obligations, liabilities or sums (said principal, premium, interest and other sums being hereinafter referred to as the “Debt”), and the performance of all other covenants, obligations and liabilities of the Cross-collateralized Borrowers pursuant to the Loan Documents, Borrower has executed and delivered this Security Instrument; and Borrower has irrevocably granted, and by these presents and by the execution and delivery hereof does hereby irrevocably grant, bargain, sell, alien, demise, release, convey, assign, transfer, deed, hypothecate, pledge, set over, warrant, mortgage and confirm to Lender, forever with power of sale, all right, title and interest of Borrower in and to all of the following property, rights, interests and estates:

     (a) the plot(s), piece(s) or parcel(s) of real property described in Exhibit A attached hereto and made a part hereof (individually and collectively, hereinafter referred to as the “Premises”);

     (b) (i) all buildings, foundations, structures, fixtures, additions, enlargements, extensions, modifications, repairs, replacements and improvements of every kind or nature now or hereafter located on the Premises (hereinafter collectively referred to as the “Improvements”); and (ii) to the extent permitted by law and the Management Agreement, the Franchise Agreement, the name or names, if any, as may now or hereafter be used for any of the Improvements, and the goodwill associated therewith;

     (c) all easements, servitudes, rights-of-way, strips and gores of land, streets, ways, alleys, passages, sewer rights, water, water courses, water rights and powers, ditches, ditch rights, reservoirs and reservoir rights, air rights and development rights, lateral support, drainage, gas, oil and mineral rights, tenements, hereditaments and appurtenances of any nature whatsoever, in any way belonging, relating or pertaining to the Premises or the Improvements and the reversion and reversions, remainder and remainders, whether existing or hereafter acquired,

and all land lying in the bed of any street, road or avenue, opened or proposed, in front of or adjoining the Premises to the center line thereof and any and all sidewalks, drives, curbs, passageways, streets, spaces and alleys adjacent to or used in connection with the Premises and/or Improvements and all the estates, rights, titles, interests, property, possession, claim and demand whatsoever, both in law and in equity, of Borrower of, in and to the Premises and Improvements and every part and parcel thereof, with the appurtenances thereto;

     (d) all machinery, equipment, systems, fittings, apparatus, appliances, furniture, furnishings, tools, fixtures, Inventory (as hereinafter defined) and articles of personal property and accessions thereof and renewals, replacements thereof and substitutions therefor (including, but not limited to, all plumbing, lighting and elevator fixtures, office furniture, beds, bureaus, chiffonniers, chests, chairs, desks, lamps, mirrors, bookcases, tables, rugs, carpeting, drapes, draperies, curtains, shades, venetian blinds, wall coverings, screens, paintings, hangings, pictures, divans, couches, luggage carts, luggage racks, stools, sofas, chinaware, flatware, linens, pillows, blankets, glassware, foodcarts, cookware, dry cleaning facilities, dining room wagons, keys or other entry systems, bars, bar fixtures, liquor and other drink dispensers, icemakers, radios, television sets, intercom and paging equipment, electric and electronic equipment, dictating equipment, telephone systems, computerized accounting systems, engineering equipment, vehicles, medical equipment, potted plants, heating, lighting and plumbing fixtures, fire prevention and extinguishing apparatus, theft prevention equipment, cooling and air-conditioning systems, elevators, escalators, fittings, plants, apparatus, stoves, ranges, refrigerators, laundry machines, tools, machinery, engines, dynamos, motors, boilers, incinerators, switchboards, conduits, compressors, vacuum cleaning systems, floor cleaning, waxing and polishing equipment, call systems, brackets, signs, bulbs, bells, ash and fuel, conveyors, cabinets, lockers, shelving, spotlighting equipment, dishwashers, garbage disposals, washers and dryers), other customary hotel equipment, inventory and other property of every kind and nature whatsoever owned by Borrower, or in which Borrower has or shall have an interest, now or hereafter located upon, or in, or used in connection with the Premises or the Improvements, or appurtenant thereto, and all building equipment, materials and supplies of any nature whatsoever owned by Borrower, or in which Borrower has or shall have an interest, now or hereafter located upon, or in, or used in connection with the Premises or the Improvements or appurtenant thereto, (hereinafter, all of the foregoing items described in this paragraph (d) are collectively called the “Equipment”), all of which, and any replacements, modifications, alterations and additions thereto, to the extent permitted by applicable law, shall be deemed to constitute fixtures (the “Fixtures”), and are part of the real estate and security for the payment of the Debt and the performance of Borrower’s obligations. To the extent any portion of the Equipment is not real property or fixtures under applicable law, it shall be deemed to be personal property, and this Security Instrument shall constitute a security agreement creating a security interest therein in favor of Lender under the UCC;

     (e) all awards or payments, including interest thereon, which may hereafter be made with respect to the Premises, the Improvements, the Fixtures, or the Equipment, whether from the exercise of the right of eminent domain (including but not limited to any transfer made in lieu of or in anticipation of the exercise of said right), or for a change of grade, or for any other injury to or decrease in the value of the Premises, the Improvements or the Equipment or refunds with respect to the payment of property taxes and assessments, and all other proceeds of the conversion, voluntary or involuntary, of the Premises, Improvements, Equipment, Fixtures or any other Property or part thereof into cash or liquidated claims;

     (f) all leases, tenancies, franchises (to the extent not prohibited in the Franchise Agreement), licenses and permits, Property Agreements and other agreements affecting the use, enjoyment or occupancy of the Premises, the Improvements, the Fixtures, or the Equipment or any portion thereof now or hereafter entered into, whether before or after the filing by or against Borrower of any petition for relief under the Bankruptcy Code and all reciprocal easement agreements, license agreements and other agreements, including, without limitation the existing Operating Lease (hereinafter collectively referred to as the “Leases”), together with all receivables, revenues, rentals, credit card receipts, receipts and all payments received which relate to the rental, lease, franchise and use of space at the Premises and rental and use of guest rooms or meeting rooms or banquet rooms or recreational facilities or bars, beverage or food sales, vending machines, mini-bars, room service, telephone, video and television systems, electronic mail, internet connections, guest laundry, bars, the provision or sale of other goods and services, and all other payments received from guests or visitors of the Premises, and other items of revenue, receipts or income as identified in the Uniform System of Accounts (as hereinafter defined), all cash or security deposits, lease termination payments, advance rentals and payments of similar nature and guarantees or other security held by, or issued in favor of, Borrower in connection therewith to the extent of Borrower’s right or interest therein and all

2

remainders, reversions and other rights and estates appurtenant thereto, and all base, fixed, percentage or additional rents, and other rents, oil and gas or other mineral royalties, and bonuses, issues, profits and rebates and refunds or other payments made by any Governmental Authority from or relating to the Premises, the Improvements, the Fixtures or the Equipment plus all rents, common area charges and other payments now existing or hereafter arising, whether paid or accruing before or after the filing by or against Borrower of any petition for relief under the Bankruptcy Code (the “Rents”) and all proceeds from the sale or other disposition of the Leases and the right to receive and apply the Rents to the payment of the Debt;

     (g) all proceeds of and any unearned premiums on any insurance policies covering the Premises, the Improvements, the Fixtures, the Rents or the Equipment, including, without limitation, the right to receive and apply the proceeds of any insurance, judgments, or settlements made in lieu thereof, for damage to the Premises, the Improvements, the Fixtures or the Equipment and all refunds or rebates of Impositions, and interest paid or payable with respect thereto;

     (h) all deposit accounts, securities accounts, funds or other accounts maintained or deposited with Lender, or its assigns, in connection herewith, including, without limitation, the Escrow Accounts, the Central Account, the Collection Account, and the Sub-Accounts and all monies and investments deposited or to be deposited in such accounts;

     (i) all accounts receivable, contract rights, franchises (to the extent not prohibited in the Franchise Agreement), interests, estate or other claims, both at law and in equity, now existing or hereafter arising, and relating to the Premises, the Improvements, the Fixtures or the Equipment, not included in Rents;

     (j) all now existing or hereafter arising claims against any Person with respect to any damage to the Premises, the Improvements, the Fixtures or the Equipment, including, without limitation, damage arising from any defect in or with respect to the design or construction of the Improvements, the Fixtures or the Equipment and any damage resulting therefrom;

     (k) all deposits or other security or advance payments, including rental payments now or hereafter made by or on behalf of Borrower to others, with respect to (i) insurance policies, (ii) utility services, (iii) cleaning, maintenance, repair or similar services, (iv) refuse removal or sewer service, (v) parking or similar services or rights and (vi) rental of Equipment, if any, relating to or otherwise used in the operation of the Premises, the Improvements, the Fixtures or the Equipment;

     (l) all intangible property (to the extent assignable) now or hereafter relating to the Premises, the Improvements, the Fixtures or the Equipment or its operation, including, without limitation, software, letter of credit rights, trade names, trademarks (including, without limitation, any licenses of or agreements to license trade names or trademarks now or hereafter entered into by Borrower), logos, building names and goodwill;

     (m) all now existing or hereafter arising advertising material, guaranties, warranties, building permits, other permits, licenses, plans and specifications, shop and working drawings, soil tests, appraisals and other documents, materials and/or personal property of any kind now or hereafter existing in or relating to the Premises, the Improvements, the Fixtures, and the Equipment;

     (n) all now existing or hereafter arising drawings, designs, plans and specifications prepared by architects, engineers, interior designers, landscape designers and any other consultants or professionals for the design, development, construction, repair and/or improvement of the Property, as amended from time to time;

     (o) the right, in the name of and on behalf of Borrower, to appear in and defend any now existing or hereafter arising action or proceeding brought with respect to the Premises, the Improvements, the Fixtures or the Equipment and to commence any action or proceeding to protect the interest of Lender in the Premises, the Improvements, the Fixtures or the Equipment;

3

     (p) in the event Borrower is a tenancy-in-common, all rights of TICs under the TIC Agreement including, without limitation, any rights of first refusal, options to purchase and similar rights and any rights of first refusal arising under Section 363(i) of the Bankruptcy Code; and

     (q) all proceeds, products, substitutions and accessions (including claims and demands therefor) of each of the foregoing.

     All of the foregoing items (a) through (q), together with all of the right, title and interest of Borrower therein, are collectively referred to as the “Property”.

     TO HAVE AND TO HOLD the above granted and described Property unto Lender, and the successors and assigns of Lender in fee simple, forever.

     PROVIDED, ALWAYS, and these presents are upon this express condition, if Borrower shall well and truly pay and discharge the Debt and perform and observe the terms, covenants and conditions set forth in the Loan Documents, then these presents and the estate hereby granted shall cease and be void.

     AND Borrower covenants with and warrants to Lender that:

ARTICLE I: DEFINITIONS

     Section 1.01. Certain Definitions.

     For all purposes of this Security Instrument, except as otherwise expressly provided or unless the context clearly indicates a contrary intent:

     (i) the capitalized terms defined in this Section have the meanings assigned to them in this Section, and include the plural as well as the singular;

     (ii) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP; and

     (iii) the words “herein”, “hereof”, and “hereunder” and other words of similar import refer to this Security Instrument as a whole and not to any particular Section or other subdivision.

     “Adjusted Net Cash Flow” shall mean Net Operating Income for the twelve (12)-month period prior to the date of calculation less, without duplication, (a) the Recurring Replacement Reserve Monthly Installment (assuming for purposes of this definition that the definition of Recurring Replacement Reserve Monthly Installment only includes the first sentence thereof) multiplied by twelve (12) and (b) extraordinary capital improvements projected by Lender, in its reasonable discretion, for the subsequent twelve (12) month period for which sums were not deposited into the Recurring Replacement Reserve Escrow Account. The Adjusted Net Cash Flow shall be calculated by Borrower and shall be subject to the reasonable review and approval of Lender.

     “Affiliate” of any specified Person shall mean any other Person directly or indirectly Controlling or Controlled by or under direct or indirect common Control with such specified Person.

     “Aggregate Debt Service Coverage” shall mean the quotient obtained by dividing the aggregate Adjusted Net Cash Flow for all of the Cross-collateralized Properties for a specified period by the sum of the (a) aggregate payments of interest, principal and all other sums due under the Note for such specified period (determined as of the date the calculation of Aggregate Debt Service Coverage is required or requested hereunder and assuming during any period of time during which the Loan Amount is not amortizing pursuant to the terms of the Note, a thirty year amortization schedule of level payments utilizing an interest rate equal to the Interest Rate and a 360 day year consisting of twelve (12) thirty day months) and (b) aggregate payments of interest, principal and all other sums due for such specified period pursuant to the terms of subordinate or mezzanine financing, if any, then affecting or

4

related to the Cross-collateralized Properties or, if Aggregate Debt Service Coverage is being calculated in connection with a request for consent to any subordinate financing, then proposed.

     “Allocated Loan Amount” shall mean the Initial Allocated Loan Amount of each Cross-collateralized Property as such amount may be adjusted from time to time as hereinafter set forth. Upon each adjustment of the Principal Amount (each a “Total Adjustment”), whether as a result of amortization, defeasance or prepayment or as otherwise expressly provided herein or in any other Loan Document, each Allocated Loan Amount shall be increased or decreased, as the case may be, by an amount equal to the product of (a) the Total Adjustment, and (b) a fraction, the numerator of which is the applicable Allocated Loan Amount (prior to the adjustment in question) and the denominator of which is the Principal Amount prior to the adjustment to the Principal Amount which results in the recalculation of the Allocated Loan Amount. However, when the Principal Amount is reduced as a result of Lender’s receipt of (a) a Release Price or, in connection with a Release, funds sufficient to prepay a portion of the Principal Amount in the amount of the Release Price, the Allocated Loan Amount for the Cross-collateralized Property being released and discharged from the encumbrance of the applicable Cross-collateralized Mortgage and related Loan Documents shall be reduced to zero (the amount by which such Allocated Loan Amount is reduced being referred to as the “Released Allocated Amount”), and each other Allocated Loan Amount shall be decreased by an amount equal to the product of (i) the excess of (A) the Release Price over (B) the Released Allocated Amount and (ii) a fraction, the numerator of which is the applicable Allocated Loan Amount (prior to the adjustment in question) and the denominator of which is the aggregate of all of the Allocated Loan Amounts other than the Allocated Loan Amount applicable to the Cross-collateralized Property for which the Release Price was paid, or (b) Net Proceeds, the Allocated Loan Amount for the Cross-collateralized Property with respect to which the Net Proceeds were received shall be reduced to zero (the amount by which such Allocated Loan Amount is reduced being referred to as the “Foreclosed Allocated Amount”) and each other Allocated Loan Amount shall (A) if the Net Proceeds exceed the Foreclosed Allocated Amount (such excess being referred to as the “Surplus Net Proceeds”), be decreased by an amount equal to the product of (i) the Surplus Net Proceeds and (ii) a fraction, the numerator of which is the applicable Allocated Loan Amount (prior to the adjustment in question) and the denominator of which is the aggregate of all of the Allocated Loan Amounts (prior to the adjustment in question) other than the Allocated Loan Amount applicable to the Cross-collateralized Property with respect to which the Net Proceeds were received (such fraction being referred to as the “Net Proceeds Adjustment Fraction”), (B) if the Foreclosed Allocated Amount exceeds the Net Proceeds (such excess being referred to as the “Net Proceeds Deficiency”), be increased by an amount equal to the product of (i) the Net Proceeds Deficiency and (ii) the Net Proceeds Adjustment Fraction, or (C) if the Net Proceeds equal the Foreclosed Allocated Amount, remain unadjusted, or (c) Loss Proceeds or partial prepayments or defeasances, as applicable, made in accordance with Section 15.01 hereof, the Allocated Loan Amount for the Cross-collateralized Property with respect to which the Loss Proceeds or partial prepayments or defeasances, as applicable, were received shall be decreased by an amount equal to the sum of (i) with respect to Loss Proceeds, Loss Proceeds which are applied towards the reduction of the Principal Amount as set forth in Article III hereof, if any, and (ii) with respect to partial prepayments or defeasances, as applicable, the amount of any such partial prepayment which is applied towards the reduction of the Principal Amount in accordance with the provisions of the Note, if any, but in no event shall the Allocated Loan Amount for the Cross-collateralized Property with respect to which the Loss Proceeds or partial prepayments were received be reduced to an amount less than zero (the amount by which such Allocated Loan Amount is reduced being referred to as the “Loss Proceeds or Prepayment Allocated Amount”) and each other Allocated Loan Amount shall be decreased by an amount equal to the product of (i) the excess of (A) the Loss Proceeds or such partial prepayments or defeasances, as applicable, over (B) the Loss Proceeds or Prepayment Allocated Amount, and (ii) a fraction, the numerator of which is the applicable Allocated Loan Amount (prior to the adjustment in question) and the denominator of which is the aggregate of all of the Allocated Loan Amounts (prior to the adjustment in question) other than the Allocated Loan Amount applicable to the Cross-collateralized Property to which such Loss Proceeds or partial prepayments or defeasances, as applicable, were applied.

     “Annual Budget” shall mean an annual budget submitted by Borrower to Lender in accordance with the terms of Section 2.09 hereof.

     “Appraisal” shall mean the appraisal of the Property and all supplemental reports or updates thereto previously delivered to Lender in connection with the Loan.

5

     “Appraiser” shall mean the Person who prepared the Appraisal.

     “Approved Annual Budget” shall mean each Annual Budget approved by Lender in accordance with the terms hereof.

     “Approved Franchisor” shall mean the Franchisors listed on Exhibit F attached hereto and made a part hereof and any flag operated thereby.

     “Approved Letter of Credit” shall mean an irrevocable, unconditional, transferable, clean sight draft letter of credit in favor of Lender and its successors and/or assigns, the obligation to reimburse draws made in connection with which are those of a Person other than Borrower, with a term of not less than one (1) year and which is drawable in whole or in part by sight draft in New York City, issued by a bank having a long-term unsecured debt rating of not less than “AA” (or its equivalent) and a short-term unsecured debt rating of not less than “A-1” (or its equivalent) by each Rating Agency and otherwise reasonably acceptable to Lender.

     “Approved Manager” shall mean (a) the Manager as of the Closing Date or (b) the property managers listed on Exhibit F attached hereto and made a part hereof (or an Affiliate 51% or more of the legal and beneficial interest of which is owned by the managers listed on Exhibit F attached hereto), provided that each such property manager continues to be Controlled by substantially the same persons Controlling such property manager as of the Closing Date (or if such manager is a publicly traded company, such manager continues to be traded on a national stock exchange or quoted on the NASDAQ Stock Market) and such additional management companies as are reasonably approved by Lender, which approval may, subsequent to a Securitization, be conditioned upon, among other things, confirmation from each Rating Agency that any rating issued by the Rating Agency in connection with a Securitization will not, as a result of the proposed change of Manager, be downgraded from the current ratings thereof, qualified or withdrawn.

     “Approved Manager Standard” shall mean the standard of business operations, practices and procedures customarily employed by entities having a senior executive with at least seven (7) years’ experience in the management of hotels of the same class and quality (as of the Closing Date) as the Improvements which manage not less than five (5) such hotel properties having an aggregate number of hotel rooms of not less than five thousand (5,000) hotel rooms.

     “Architect” shall have the meaning set forth in Section 3.04(b)(i) hereof.

     “Assignment” shall mean the Assignment of Leases and Rents and Security Deposits of even date herewith relating to the Property given by Borrower to Lender, as the same may be modified, amended or supplemented from time to time.

     “Bank” shall mean the bank, trust company, savings and loan association or savings bank designated by Lender, in its sole and absolute discretion, in which the Central Account shall be located.

     “Bankruptcy Code” shall mean 11 U.S.C. §101 et seq., as amended from time to time.

     “Basic Carrying Costs” shall mean the sum of the following costs associated with the Property: (a) Real Estate Taxes and (b) insurance premiums.

     “Basic Carrying Costs Escrow Account” shall mean the Escrow Account maintained pursuant to Section 5.06 hereof.

     “Basic Carrying Costs Monthly Installment” shall mean Lender’s estimate of one-twelfth (1/12th) of the annual amount for Basic Carrying Costs. “Basic Carrying Costs Monthly Installment” shall also include, if required by Lender, a sum of money which, together with such monthly installments, will be sufficient to make the payment of each such Basic Carrying Cost at least thirty (30) days prior to the date initially due. Should such Basic Carrying Costs not be ascertainable at the time any monthly deposit is required to be made, the Basic Carrying Costs Monthly Installment shall be determined by Lender in its reasonable discretion on the basis of the aggregate Basic Carrying

6

Costs for the prior Fiscal Year or month or the prior payment period for such cost. As soon as the Basic Carrying Costs are fixed for the then current Fiscal Year, month or period, the next ensuing Basic Carrying Costs Monthly Installment shall be adjusted to reflect any deficiency or surplus in prior monthly payments. If at any time during the term of the Loan Lender determines that there will be insufficient funds in the Basic Carrying Costs Escrow Account to make payments when they become due and payable, Lender shall have the right to adjust the Basic Carrying Costs Monthly Installment such that there will be sufficient funds to make such payments. Notwithstanding the foregoing, provided that no Event of Default exists, if Borrower is depositing a sum with Manager on a monthly basis pursuant to the Management Agreement to be used for the payment of Basic Carrying Costs, such sums are controlled by Manager, and Borrower shall have delivered, or caused to be delivered to Lender proof that the Basic Carrying Costs with respect to which Manager is receiving deposits are paid not less than five (5) Business Days prior to the date upon which any fine, penalty, interest or cost for nonpayment is imposed, the Basic Carrying Costs Monthly Installment shall be reduced by the amount of Basic Carrying Costs which are deposited with Manager.

     “Basic Carrying Costs Sub-Account” shall mean the Sub-Account of the Central Account established pursuant to Section 5.02 into which the Basic Carrying Costs Monthly Installments shall be deposited.

     “Borrower” shall mean Borrower named herein and any successor to the obligations of Borrower.

     “Business Day” shall mean any day other than (a) a Saturday or Sunday, or (b) a day on which banking and savings and loan institutions in the State of New York or the State of North Carolina are authorized or obligated by law or executive order to be closed, or at any time during which the Loan is an asset of a Securitization, the cities, states and/or commonwealths used in the comparable definition of “Business Day” in the Securitization documents.

     “Capital Expenditures” shall mean for any period, the amount expended for items capitalized under GAAP including expenditures for building improvements or major repairs, leasing commissions and tenant improvements.

     “Cash Expenses” shall mean for any period, the operating expenses (excluding Capital Expenditures) for the Property as set forth in an Approved Annual Budget to the extent that such expenses are actually incurred by Borrower minus payments into the Basic Carrying Costs Sub-Account, the Debt Service Payment Sub-Account and the Recurring Replacement Reserve Sub-Account (to the extent such sums are for the payment of sums set forth as operating expenses in the Approved Annual Budget).

     “Central Account” shall mean an Eligible Account, maintained at the Bank, in the name of Lender or its successors or assigns (as secured party) as may be designated by Lender.

     “Closing Date” shall mean the date of the Note.

     “Code” shall mean the Internal Revenue Code of 1986, as amended and as it may be further amended from time to time, any successor statutes thereto, and applicable U.S. Department of Treasury regulations issued pursuant thereto.

     “Collection Account” shall mean one or more Eligible Accounts maintained in a bank acceptable to Lender in the joint names of Borrower and Lender or such other name as Lender may designate in writing.

     “Condemnation Proceeds” shall mean all of the proceeds in respect of any Taking or purchase in lieu thereof.

     “Contractual Obligation” shall mean, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or undertaking to which such Person is a party or by which it or any of the property owned by it is bound.

     “Control” means, when used with respect to any specific Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person whether through ownership

7

of voting securities, beneficial interests, by contract or otherwise. The definition is to be construed to apply equally to variations of the word “Control” including “Controlled,” “Controlling” or “Controlled by.”

     “CPI” shall mean “The Consumer Price Index (New Series) (Base Period 1982-84=100) (all items for all urban consumers)” issued by the Bureau of Labor Statistics of the United States Department of Labor (the “Bureau”). If the CPI ceases to use the 1982-84 average equaling 100 as the basis of calculation, or if a change is made in the term, components or number of items contained in said index, or if the index is altered, modified, converted or revised in any other way, then the index shall be adjusted to the figure that would have been arrived at had the change in the manner of computing the index in effect at the date of this Security Instrument not been made. If at any time during the term of this Security Instrument the CPI shall no longer be published by the Bureau, then any comparable index issued by the Bureau or similar agency of the United States issuing similar indices shall be used in lieu of the CPI.

     “Cross-collateralization Agreement” shall mean that certain Cross-collateralization Agreement of even date herewith between Borrower, the other Cross-collateralized Borrowers and Lender.

     “Cross-collateralized Borrowers” shall mean each Person which has executed the Note.

     “Cross-collateralized Mortgage” shall mean each mortgage, deed of trust, deed to secure debt, security agreement, assignment of rents and fixture filing as originally executed or as same may hereafter from time to time be supplemented, amended, modified or extended by one or more indentures supplemental thereto granted by a Cross-collateralized Borrower to Lender as security for the Note.

     “Cross-collateralized Property” shall mean each parcel or parcels of real property encumbered by a Cross-collateralized Mortgage as identified on Exhibit C attached hereto and made a part hereof; provided, however, at such time, if any, that a Cross-collateralized Mortgage is released by Lender, the property which was encumbered by such Cross-collateralized Property shall no longer constitute a Cross-collateralized Property.

     “Curtailment Reserve Escrow Account” shall mean the Escrow Account maintained pursuant to Section 5.11 hereof into which sums shall be deposited during an O&M Operative Period.

     “Curtailment Reserve Sub-Account” shall mean the Sub-Account of the Central Account established pursuant to Section 5.02 hereof into which excess cash flow shall be deposited pursuant to Section 5.05.

     “Debt” shall have the meaning set forth in the Recitals hereto.

     “Debt Service” shall mean the amount of interest and principal payments due and payable in accordance with the Note during an applicable period.

     “Debt Service Coverage” shall mean the quotient obtained by dividing Adjusted Net Cash Flow by the sum of the (a) aggregate payments of interest, principal and all other sums due for such specified period which are allocable to a principal portion of the Note equal to the Allocated Loan Amount (determined as of the date the calculation of Debt Service Coverage is required or requested hereunder and assuming during any period of time during which the Loan Amount is not amortizing pursuant to the terms of the Note, a thirty year amortization schedule of level payments utilizing an interest rate equal to the Interest Rate and a 360 day year consisting of twelve (12) thirty day months) and (b) aggregate payments of interest, principal and all other sums due for such specified period pursuant to the terms of subordinate or mezzanine financing (to the extent allocable to the Property, as determined by Lender in its reasonable discretion), if any, then affecting or related to the Property or, if Debt Service Coverage is being calculated in connection with a request for consent to any subordinate or mezzanine financing, then proposed.

     “Debt Service Payment Sub-Account” shall mean the Sub-Account of the Central Account established pursuant to Section 5.02 hereof into which the Required Debt Service Payment shall be deposited.

8

     “Debt Yield” shall mean Adjusted Net Cash Flow for all of the Cross-collateralized Properties divided by the sum of (a) the unpaid Principal Amount and (b) the outstanding principal balance of any subordinate or mezzanine financing then affecting or related to the Property or any interest therein (determined as of the date of the calculation of Debt Yield).

     “Default” shall mean any Event of Default or event which would constitute an Event of Default if all requirements in connection therewith for the giving of notice, the lapse of time, and the happening of any further condition, event or act, had been satisfied.

     “Default Management Period” shall mean any period of time during the term hereof when the Property is not being managed by an Approved Manager pursuant to the terms hereof.

     “Default Rate” shall mean the lesser of (a) the highest rate allowable at law and (b) five percent (5%) above the interest rate set forth in the Note.

     “Default Rate Interest” shall mean, to the extent the Default Rate becomes applicable, interest in excess of the interest which would have accrued on (a) the Principal Amount and (b) any accrued but unpaid interest, if the Default Rate was not applicable.

     “Defeasance Deposit” shall mean an amount equal to the total cost incurred or to be incurred in the purchase on behalf of Borrower of Federal Obligations necessary to meet the Scheduled Defeasance Payments.

     “Defeased Note” shall have the meaning set forth in Section 15.01 hereof.

     “Development Laws” shall mean all applicable subdivision, zoning, environmental protection, wetlands protection, or land use laws or ordinances, and any and all applicable rules and regulations of any Governmental Authority promulgated thereunder or related thereto.

     “Disclosure Document” shall mean a prospectus, prospectus supplement, private placement memorandum, or similar offering memorandum or offering circular, in each case in preliminary or final form, used to offer securities in connection with a Securitization.

     “Dollar” and the sign “$” shall mean lawful money of the United States of America.

     “Eligible Account” shall mean a segregated account which is either (a) an account or accounts maintained with a federal or state chartered depository institution or trust company the long term unsecured debt obligations of which are rated by each of the Rating Agencies (or, if not rated by Fitch, Inc. (“Fitch”), otherwise acceptable to Fitch, as confirmed in writing that such account would not, in and of itself, result in a downgrade, qualification or withdrawal of the then current ratings assigned to any certificates issued in connection with a Securitization) in its second highest rating category at all times (or, in the case of the Basic Carrying Costs Escrow Account, the long term unsecured debt obligations of which are rated at least “AA” (or its equivalent)) by each of the Rating Agencies (or, if not rated by Fitch, otherwise acceptable to Fitch, as confirmed in writing that such account would not, in and of itself, result in a downgrade, qualification or withdrawal of the then current ratings assigned to any certificates issued in connection with a Securitization) or, if the funds in such account are to be held in such account for less than thirty (30) days, the short term obligations of which are rated by each of the Rating Agencies (or, if not rated by Fitch, otherwise acceptable to Fitch, as confirmed in writing that such account would not, in and of itself, result in a downgrade, qualification or withdrawal of the then current ratings assigned to any certificates issued in connection with a Securitization) in its second highest rating category at all times or (b) a segregated trust account or accounts maintained with a federal or state chartered depository institution or trust company acting in its fiduciary capacity which, in the case of a state chartered depository institution is subject to regulations substantially similar to 12 C.F.R. § 9.10(b), having in either case a combined capital and surplus of at least $100,000,000 and subject to supervision or examination by federal and state authority, or otherwise acceptable (as evidenced by a written confirmation from each Rating Agency that such account would not, in and of itself, cause a downgrade, qualification or withdrawal of the then current ratings assigned to any certificates issued in connection with a Securitization) to each Rating Agency, which may be an account maintained by Lender or its agents. Eligible

9

Accounts may bear interest. The title of each Eligible Account shall indicate that the funds held therein are held in trust for the uses and purposes set forth herein.

     “Engineer” shall have the meaning set forth in Section 3.04(b)(i) hereof.

     “Engineering Escrow Account” shall mean an Escrow Account established and maintained pursuant to Section 5.12 hereof relating to payments for any Required Engineering Work.

     “Environmental Problem” shall mean any of the following:

     (a) the presence of any Hazardous Material on, in, under, or above all or any portion of the Property in violation of any Environmental Statute;

     (b) the release of any Hazardous Material from or onto the Property to the extent such release is required to be reported pursuant to Environmental Statutes;

     (c) the violation or threatened violation of any Environmental Statute with respect to the Property; or

     (d) the failure to obtain or to abide by the terms or conditions of any permit or approval required under any Environmental Statute with respect to the Property.

A condition described above shall be an Environmental Problem regardless of whether or not any Governmental Authority has taken any action in connection with the condition and regardless of whether that condition was in existence on or before the date hereof.

     “Environmental Report” shall mean the environmental audit report for the Property and any supplements or updates thereto, previously delivered to Lender in connection with the Loan.

     “Environmental Statute” shall mean any federal, state or local statute, ordinance, rule or regulation, any judicial or administrative order (whether or not on consent) or judgment applicable to Borrower or the Property including, without limitation, any judgment or settlement based on common law theories, and any provisions or conditions of any permit, license or other authorization binding on Borrower relating to (a) the protection of the environment, the safety and health of persons (including employees) or the public welfare from actual or potential exposure (or effects of exposure) to any actual or potential release, discharge, disposal or emission (whether past or present) of any Hazardous Materials or (b) the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of any Hazardous Materials, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”), as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §9601 et seq., the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976, as amended by the Solid and Hazardous Waste Amendments of 1984, 42 U.S.C. §6901 et seq., the Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C. §1251 et seq., the Toxic Substances Control Act of 1976, 15 U.S.C. §2601 et seq., the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. §1101 et seq., the Clean Air Act of 1966, as amended, 42 U.S.C. §7401 et seq., the National Environmental Policy Act of 1975, 42 U.S.C. §4321, the Rivers and Harbors Act of 1899, 33 U.S.C. §401 et seq., the Endangered Species Act of 1973, as amended, 16 U.S.C. §1531 et seq., the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. §651 et seq., and the Safe Drinking Water Act of 1974, as amended, 42 U.S.C. §300(f) et seq., and all rules, regulations and guidance documents promulgated or published thereunder.

     “Equipment” shall have the meaning set forth in granting clause (d) of this Security Instrument.

     “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated thereunder. Section references to ERISA are to ERISA, as in effect at the date of this Security Instrument and, as of the relevant date, any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor.

10

     “ERISA Affiliate” shall mean any corporation or trade or business that is a member of any group of organizations (a) described in Section 414(b) or (c) of the Code of which Borrower or Guarantor is a member and (b) solely for purposes of potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of the Code and the lien created under Section 302(f) of ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of which Borrower or Guarantor is a member.

     “Escrow Account” shall mean each of the Engineering Escrow Account, the Basic Carrying Costs Escrow Account, the Recurring Replacement Reserve Escrow Account, the Operation and Maintenance Expense Escrow Account and the Curtailment Reserve Escrow Account, each of which shall be an Eligible Account or book entry sub-account of an Eligible Account.

     “Event of Default” shall have the meaning set forth in Section 13.01 hereof.

     “Extraordinary Expense” shall mean an extraordinary operating expense or capital expense not set forth in the Approved Annual Budget or allotted for in the Recurring Replacement Reserve Sub-Account.

     “Federal Obligations” shall mean non-callable direct obligations of, or obligations fully guaranteed as to payment of principal and interest by, the United States of America or any agency or instrumentality thereof provided that such obligations are backed by the full faith and credit of the United States of America or, provided, that Lender has received written confirmation from each Rating Agency that the defeasance of the Loan with other “governmental securities” within the meaning of §2(a)(16) of the Investment Company Act of 1940, as amended, is acceptable and such securities are permitted pursuant to the rules and regulations relating to REMICs (as defined in Section 15.01 hereof) or other governmental securities, in each case as chosen by Borrower.

     “Fiscal Year” shall mean the twelve (12) month period commencing on January 1 and ending on December 31 during each year of the term of this Security Instrument, or such other fiscal year of Borrower as Borrower may select from time to time with the prior written consent of Lender.

     “Fixtures” shall have the meaning set forth in granting clause (d) of this Security Instrument.

     “Force Majeure” shall mean acts of god, governmental restrictions, stays, judgments, orders, decrees, enemy actions, civil commotion, fire, casualty, strikes or work stoppages which are industry-wide and not aimed at Borrower nor its Affiliates, or other causes beyond the reasonable control of Borrower and/or its Affiliates, but Borrower’s lack of funds in and of itself shall not be deemed a cause beyond the control of Borrower.

     “Franchise Agreement” shall mean any franchise or license agreement relating to the branding or operation of the Premises or any other agreement pursuant to which a franchise system, reservation system or brand affiliation is made available to the hotel operator of the Premises, together with all renewals and replacements thereof.

     “GAAP” shall mean generally accepted accounting principles in the United States of America, as of the date of the applicable financial report, consistently applied.

     “General Partner” shall mean, if Borrower or Operating Tenant is a partnership, each general partner of Borrower or Operating Tenant, as applicable, and, if Borrower or Operating Tenant is a limited liability company, each managing member, if any, of Borrower or Operating Tenant, as applicable, and in each case, if applicable, each general partner or managing member of such general partner or managing member. In the event that Borrower or Operating Tenant or any General Partner is a single member limited liability company with a managing member, the term “General Partner” shall include such single member.

     “Governmental Authority” shall mean, with respect to any Person, any federal or State government or other political subdivision thereof and any entity, including any regulatory or administrative authority or court, exercising executive, legislative, judicial, regulatory or administrative or quasi-administrative functions of or pertaining to government, and any arbitration board or tribunal, in each case having jurisdiction over such applicable Person or such Person’s property and any stock exchange on which shares of capital stock of such Person are listed or admitted for trading.

11

     “Guarantor” shall mean any Person guaranteeing, in whole or in part, the obligations of Borrower under the Loan Documents.

     “Hazardous Material” shall mean any flammable, explosive or radioactive materials, hazardous materials or wastes, hazardous or toxic substances, pollutants or related materials, asbestos or any material containing asbestos, molds, spores and fungus which may pose a risk to human health or the environment or any other substance or material as defined in or regulated by any Environmental Statutes.

     “Impositions” shall mean all taxes (including, without limitation, all real estate, ad valorem, sales (including those imposed on lease rentals), use, single business, gross receipts, value added, intangible, transaction, privilege or license or similar taxes), assessments (including, without limitation, all assessments for public improvements or benefits, whether or not commenced or completed prior to the date hereof and whether or not commenced or completed within the term of this Security Instrument), ground rents, water, sewer or other rents and charges, excises, levies, fees (including, without limitation, license, permit, inspection, authorization and similar fees), and all other governmental charges, in each case whether general or special, ordinary or extraordinary, or foreseen or unforeseen, of every character in respect of the Property and/or any Rent (including all interest and penalties thereon), which at any time prior to, during or in respect of the term hereof may be assessed or imposed on or in respect of or be a lien upon (a) Borrower (including, without limitation, all franchise, single business or other taxes imposed on Borrower for the privilege of doing business in the jurisdiction in which the Property or any other collateral delivered or pledged to Lender in connection with the Loan is located) or Lender, (b) the Property or any part thereof or any Rents therefrom or any estate, right, title or interest therein, or (c) any occupancy, operation, use or possession of, or sales from, or activity conducted on, or in connection with the Property, or any part thereof, or the leasing or use of the Property, or any part thereof, or the acquisition or financing of the acquisition of the Property, or any part thereof, by Borrower. Impositions shall not include any taxes imposed on Lender’s income and franchise taxes imposed on Lender by the law or regulation of any Governmental Authority.

     “Improvements” shall have the meaning set forth in granting clause (b) of this Security Instrument.

     “Indemnified Parties” shall have the meaning set forth in Section 12.01 hereof.

     “Independent” shall mean, when used with respect to any Person, a Person who (a) is in fact independent, (b) does not have any direct financial interest or any material indirect financial interest in Borrower, or in any Affiliate of Borrower or any constituent partner, shareholder, member or beneficiary of Borrower, (c) is not connected with Borrower or any Affiliate of Borrower or any constituent partner, shareholder, member or beneficiary of Borrower as an officer, employee, promoter, underwriter, trustee, partner, director or person performing similar functions and (d) is not a member of the immediate family of a Person defined in (b) or (c) above. Whenever it is herein provided that any Independent Person’s opinion or certificate shall be provided, such opinion or certificate shall state that the Person executing the same has read this definition and is Independent within the meaning hereof.

     “Initial Allocated Loan Amount” shall mean the portion of the Loan Amount allocated to each Cross-collateralized Property as set forth on Exhibit C annexed hereto and made a part hereof.

     “Initial Engineering Deposit” shall equal the amount set forth on Exhibit B attached hereto and made a part hereof.

     “Institutional Lender” shall mean any of the following Persons: (a) any bank, savings and loan association, savings institution, trust company or national banking association, acting for its own account or in a fiduciary capacity, (b) any charitable foundation, (c) any insurance company or pension and/or annuity company, (d) any fraternal benefit society, (e) any pension, retirement or profit sharing trust or fund within the meaning of Title I of ERISA or for which any bank, trust company, national banking association or investment adviser registered under the Investment Advisers Act of 1940, as amended, is acting as trustee or agent, (f) any investment company or business development company, as defined in the Investment Company Act of 1940, as amended, (g) any small business investment company licensed under the Small Business Investment Act of 1958, as amended, (h) any broker or dealer registered under the Securities Exchange Act of 1934, as amended, or any investment adviser

12

registered under the Investment Adviser Act of 1940, as amended, (i) any government, any public employees’ pension or retirement system, or any other government agency supervising the investment of public funds, or (j) any other entity all of the equity owners of which are Institutional Lenders; provided that each of said Persons shall have net assets in excess of $1,000,000,000 and a net worth in excess of $500,000,000, be in the business of making commercial mortgage loans, secured by properties of like type, size and value as the Property and have a long term credit rating which is not less than “BBB-” (or its equivalent) from each Rating Agency.

     “Insurance Proceeds” shall mean all of the proceeds received under the insurance policies required to be maintained by Borrower pursuant to Article III hereof.

     “Insurance Requirements” shall mean all terms of any insurance policy required by this Security Instrument, all requirements of the issuer of any such policy, and all regulations and then current standards applicable to or affecting the Property or any use or condition thereof, which may, at any time, be recommended by the Board of Fire Underwriters, if any, having jurisdiction over the Property, or such other Person exercising similar functions.

     “Interest Accrual Period” shall mean each one (1) month period, which shall commence on the eleventh (11th) day of each calendar month and end on and include the tenth (10th) day of the next occurring calendar month.

     “Interest Rate” shall have the meaning set forth in the Note.

     “Interest Shortfall” shall mean any shortfall in the amount of interest required to be paid with respect to the Loan Amount on any Payment Date.

     “Inventory” shall have the meaning as such term is defined in the Uniform Commercial Code applicable in the State in which the Property is located, including, without limitation, provisions in storerooms, refrigerators, pantries and kitchens, beverages in wine cellars and bars, other merchandise for sale, fuel, mechanical supplies, stationery and other expenses, supplies and similar items, as defined in the Uniform System of Accounts.

     “Late Charge” shall have the meaning set forth in Section 13.09 hereof.

     “Leases” shall have the meaning set forth in granting clause (f) of this Security Instrument.

     “Legal Requirement” shall mean as to any Person, the certificate of incorporation, by-laws, certificate of limited partnership, agreement of limited partnership or other organization or governing documents of such Person, and any law, statute, order, ordinance, judgement, decree, injunction, treaty, rule or regulation (including, without limitation, Environmental Statutes, Development Laws and Use Requirements) or determination of an arbitrator or a court or other Governmental Authority and all covenants, agreements, restrictions and encumbrances contained in any instruments, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

     “Lender” shall mean the Lender named herein and its successors or assigns.

     “Loan” shall have the meaning set forth in the Recitals hereto.

     “Loan Amount” shall have the meaning set forth in the Recitals hereto.

     “Loan Documents” shall mean this Security Instrument, the Note, the Assignment, and any and all other agreements, instruments, certificates or documents executed and delivered by Borrower, any of the Cross-collateralized Borrowers or any Affiliate of Borrower in connection with the Loan, together with any supplements, amendments, modifications or extensions thereof.

     “Loan Year” shall mean each 365 day period (or 366 day period if the month of February in a leap year is included) commencing on the first day of the month following the Closing Date (provided, however, that the first

13

Loan Year shall also include the period from the Closing Date to the end of the month in which the Closing Date occurs).

     “Lockout Expiration Date” shall have the meaning set forth in Section 15.01 hereof.

     “Loss Proceeds” shall mean, collectively, all Insurance Proceeds and all Condemnation Proceeds.

     “Major Space Lease” shall mean any Space Lease of a tenant or Affiliate of such tenant where such tenant, together with such Affiliate, leases, in the aggregate, 10,000 square feet or more and each restaurant, bar and/or casino lease.

     “Management Agreement” shall have the meaning set forth in Section 7.02 hereof.

     “Manager” shall mean the Person, other than Borrower and/or Operating Tenant, which manages the Property on behalf of Borrower.

     “Material Adverse Effect” shall mean any event or condition that has a material adverse effect on (a) the Property, (b) the business, prospects, profits, management, operations or condition (financial or otherwise) of Borrower, (c) the enforceability, validity, perfection or priority of the lien of any Loan Document or (d) the ability of Borrower to perform any obligations under any Loan Document.

     “Maturity”, when used with respect to the Note, shall mean the Maturity Date set forth in the Note or such other date pursuant to the Note on which the final payment of principal, and premium, if any, on the Note becomes due and payable as therein or herein provided, whether at Stated Maturity or by declaration of acceleration, or otherwise.

     “Maturity Date” shall mean the Maturity Date set forth in the Note.

     “Multiemployer Plan” shall mean a multiemployer plan defined as such in Section 3(37) of ERISA to which contributions have been, or were required to have been, made by Borrower, Guarantor or any ERISA Affiliate and which is covered by Title IV of ERISA.

     “Net Capital Expenditures” shall mean for any period the amount by which Capital Expenditures during such period exceed reimbursements for such items during such period from any fund established pursuant to the Loan Documents.

     “Net Operating Income” shall mean in each Fiscal Year or portion thereof during the term hereof, Operating Income less Operating Expenses.

     “Net Proceeds” shall mean the excess of (a)(i) the purchase price (at foreclosure or otherwise) actually received by Lender with respect to the Property as a result of the exercise by Lender of its rights, powers, privileges and other remedies after the occurrence of an Event of Default, or (ii) in the event that Lender (or Lender’s nominee) is the purchaser at foreclosure by credit bid, then the amount of such credit bid, in either case, over (b) all costs and expenses, including, without limitation, all attorneys’ fees and disbursements and any brokerage fees, if applicable, incurred by Lender in connection with the exercise of such remedies, including the sale of such Property after a foreclosure against the Property.

     “Note” shall have the meaning set forth in the Recitals hereto.

     “O&M Operative Period” shall mean the period of time (a) commencing upon the earlier to occur of (i) an Event of Default and (ii) determination by Lender that the Aggregate Debt Service Coverage (tested quarterly except during the continuance of an O&M Operative Period, in which event the Aggregate Debt Service Coverage shall be tested monthly and shall be calculated based upon information contained in the reports furnished to Lender pursuant to Section 2.09 hereof) is less than 1.10:1 and (b) and terminating (i) if the O&M Operative Period commenced pursuant to clause (a)(i) above, upon the cure of all Events of Default, provided that Lender accepts the

14

cure of all Events of Default, the Loan has not been accelerated and Lender has not moved for the appointment of a receiver with respect to one or more Cross-collateralized Properties nor commenced foreclosure proceedings with respect to any Cross-collateralized Properties, and (ii) if the O&M Operative Period commenced pursuant to clause (a)(ii) above, on the Payment Date next succeeding the date upon which Lender determines that the Aggregate Debt Service Coverage for three (3) consecutive months is 1.10:1 or greater.

     “OFAC List” shall mean the list of specially designated nationals and blocked persons subject to financial sanctions that is maintained by the U.S. Treasury Department, Office of Foreign Assets Control and accessible through the internet website www.treas.gov/ofac/t11sdn.pdf.

     “Officer’s Certificate” shall mean a certificate delivered to Lender by Borrower which is signed on behalf of Borrower by an authorized representative of Borrower which states that the items set forth in such certificate are true, accurate and complete in all respects.

     “Operating Expenses” shall mean, in each Fiscal Year or portion thereof during the term hereof, all expenses directly attributable to the operation, repair and/or maintenance of the Property including, without limitation, (a) Impositions, (b) insurance premiums, (c) management fees, whether or not actually paid, equal to the greater of the actual management fees and four percent (4%) of annual gross operating income and (d) costs attributable to the operation, repair and maintenance of the systems for heating, ventilating and air conditioning the Improvements and actually paid for by Borrower. Operating Expenses shall not include interest, principal and premium, if any, due under the Note or otherwise in connection with the Debt, income taxes, extraordinary capital improvement costs, any non-cash charge or expense such as depreciation or amortization or any item of expense otherwise includable in Operating Expenses which is paid directly by any tenant except real estate taxes paid directly to any taxing authority by any tenant.

     “Operating Income” shall mean, in each Fiscal Year or portion thereof during the term hereof, all revenue derived by Borrower or Operating Tenant (or by Manager for the Account of Borrower or Operating Tenant) arising from the Property including, without limitation, room revenues, vending machines revenues, beverage revenues, food revenues, and packaging revenues, rental revenues (whether denominated as basic rent, additional rent, escalation payments, electrical payments or otherwise) and other fees and charges payable pursuant to Leases or otherwise in connection with the Property, and business interruption, rent or other similar insurance proceeds. Operating Income shall not include (a) Insurance Proceeds (other than proceeds of rent, business interruption or other similar insurance allocable to the applicable period) and Condemnation Proceeds (other than Condemnation Proceeds arising from a temporary taking or the use and occupancy of all or part of the applicable Property allocable to the applicable period), or interest accrued on such Condemnation Proceeds, (b) proceeds of any financing, (c) proceeds of any sale, exchange or transfer of the Property or any part thereof or interest therein, (d) capital contributions or loans to Borrower or an Affiliate of Borrower, (e) any item of income otherwise includable in Operating Income but paid directly by any tenant to a Person other than Borrower except for real estate taxes paid directly to any taxing authority by any tenant, (f) any other extraordinary, non-recurring revenues, (g) Rent paid by or on behalf of any lessee under an Operating Lease or Space Lease which is the subject of any proceeding or action relating to its bankruptcy, reorganization or other arrangement pursuant to the Bankruptcy Code or any similar federal or state law or which has been adjudicated a bankrupt or insolvent unless such Operating Lease or Space Lease, as applicable, has been affirmed by the trustee in such proceeding or action, (h) Rent paid by or on behalf of any lessee under a Lease the demised premises of which are not occupied either by such lessee or by a sublessee thereof for sixty (60) or more days unless the lessee has a long term unsecured debt rating of not less than “A” (or its equivalent) from each Rating Agency; (i) Rent paid by or on behalf of any lessee under a Lease in whole or partial consideration for the termination of any Lease, or (j) sales tax rebates from any Governmental Authority.

     “Operating Lease” shall mean any Lease of the entire Property pursuant to which a Person other than Borrower assumes responsibility for the operation and management of the Property, as the same may be amended from time to time.

     “Operating Tenant” shall mean the tenant under the Operating Lease.

15

     “Operation and Maintenance Expense Escrow Account” shall mean the Escrow Account maintained pursuant to Section 5.09 hereof relating to the payment of Operating Expenses (exclusive of Basic Carrying Costs).

     “Operation and Maintenance Expense Sub-Account” shall mean the Sub-Account of the Central Account established pursuant to Section 5.02 hereof into which sums allocated for the payment of Cash Expenses, Net Capital Expenditures and approved Extraordinary Expenses shall be deposited.

     “Payment Date” shall mean, with respect to each month, the eleventh (11th) calendar day in such month, or if such day is not a Business Day, the next following Business Day.

     “PBGC” shall mean the Pension Benefit Guaranty Corporation established under ERISA, or any successor thereto.

     “Permitted Encumbrances” shall have the meaning set forth in Section 2.05(a) hereof.

     “Permitted Liens” shall mean (a) the lien of any Equipment leases and Equipment financing permitted in accordance with the terms of this Security Instrument, (b) the liens created by the Loan Documents, (c) liens, if any, for Impositions not yet due or delinquent or being contested in accordance with the terms of this Security Instrument, (d) any and all governmental, public utility and private restrictions, covenants, reservations, easements, licenses or other similar agreements which may hereafter be granted by Borrower in the ordinary course of business and which may not reasonably be expected to have a Material Adverse Effect, (e) rights of existing and future tenants, licensees and concessionaries pursuant to Leases in effect as of the date hereof or entered into in accordance with the terms of the Loan Documents, and (f) the Operating Lease and any renewal or replacement thereof in accordance with the terms of this Security Agreement at the expiration thereof.

     “Permitted Transfer” shall mean, (a) Permitted Liens; (b) all transfers of Equipment and other items of personal property as expressly permitted in the Loan Documents; (c) transfers of direct and indirect interests in Borrower (other than interests held by a General Partner) and/or in General Partner to one or more Affiliates of Borrower; (d) transfers, issuances, conversions, pledges and redemptions of capital stock and partnership interests convertible into capital stock in Ashford Hospitality Trust, Inc., a Maryland corporation or Ashford Hospitality Limited Partnership, a Delaware limited partnership (or their respective successors) in the ordinary course of business and not in connection with a tender offer, merger or sale of such Persons and (e) the merger or consolidation of Ashford Hospitality Trust, Inc., Ashford OP General Partner LLC, Ashford OP Limited Partner LLC or Ashford Hospitality Limited Partnership (or their respective successors) whereby such entity is the surviving entity in such merger or consolidation, provided that, subsequent to a Securitization, each Rating Agency shall have delivered written confirmation that any ratings issued by the Rating Agency in connection with a Securitization will not, as a result of the proposed merger or consolidation, be downgraded from the then current ratings thereof, qualified or withdrawn, provided in each of the foregoing events, (a) ultimate Control of Borrower remains with the same Persons which ultimately Controlled Borrower as of the Closing Date, (b) in the event that any Person which as of the Closing Date does not own 49% or more of the director or indirect interest in Borrower or Operating Tenant, if applicable, obtains a 49% or greater direct or indirect interest in Borrower or Operating Partnership, Borrower shall deliver a substantive non-consolidation opinion to Lender in form and substance and from counsel reasonably acceptable to Lender and (c) no Transfer may be to a Prohibited Person.

     “Person” shall mean any individual, corporation, limited liability company, partnership, joint venture, estate, trust, unincorporated association, any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing.

     “Plan” shall mean an employee benefit or other plan established or maintained by Borrower, Guarantor or any ERISA Affiliate during the five-year period ended prior to the date of this Security Instrument or to which Borrower, Guarantor or any ERISA Affiliate makes, is obligated to make or has, within the five year period ended prior to the date of this Security Instrument, been required to make contributions (whether or not covered by Title IV of ERISA or Section 302 of ERISA or Section 401(a) or 412 of the Code), other than a Multiemployer Plan.

     “Premises” shall have the meaning set forth in granting clause (a) of this Security Instrument.

16

     “Principal Amount” shall mean the Loan Amount as such amount may be reduced from time to time pursuant to the terms of this Security Instrument, the Note or the other Loan Documents.

     “Principal Payments” shall mean all payments of principal made pursuant to the terms of the Note.

     “Prohibited Person” shall mean any Person and/or any Affiliate thereof identified on the OFAC List or any other Person or foreign country or agency thereof with whom a U.S. Person may not conduct business or transactions by prohibition of Federal law or Executive Order of the President of the United States of America.

     “Property” shall have the meaning set forth in the granting clauses of this Security Instrument.

     “Property Agreements” shall mean all agreements, grants of easements and/or rights-of-way, reciprocal easement agreements, permits, declarations of covenants, conditions and restrictions, disposition and development agreements, planned unit development agreements, parking agreements, party wall agreements or other instruments affecting the Property, but not including any brokerage agreements, Management Agreements, Operating Leases, Franchise Agreements, service contracts, Space Leases or the Loan Documents.

     “Property Available Cash” shall mean all amounts payable to Borrower and/or Operating Tenant pursuant to the Management Agreement.

     “Rating Agency” shall mean each of Standard & Poor’s Ratings Services, a division of The McGraw-Hill Company, Inc. (“Standard & Poor’s”), Fitch, Inc., and Moody’s Investors Service, Inc. (“Moody’s”) and any successor to any of them; provided, however, that at any time after a Securitization, “Rating Agency” shall mean those of the foregoing rating agencies that from time to time rate the securities issued in connection with such Securitization.

     “Real Estate Taxes” shall mean all real estate taxes, assessments (including, without limitation, all assessments for public improvements or benefits, whether or not commenced or completed prior to the date hereof and whether or not commenced or completed within the term of this Security Instrument), water, sewer or other rents and charges, and all other governmental charges, in each case whether general or special, ordinary or extraordinary, or foreseen or unforeseen, of every character in respect of the Property (including all interest and penalties thereon), which at any time prior to, during or in respect of the term hereof may be assessed or imposed on or in respect of or be a lien upon the Property or any part thereof or any estate, right, title or interest therein.

     “Realty” shall have the meaning set forth in Section 2.05(b) hereof.

     “Recurring Replacement Expenditures” shall mean expenditures related to capital repairs, replacements and improvements performed at the Property from time to time.

     “Recurring Replacement Reserve Escrow Account” shall mean the Escrow Account maintained pursuant to Section 5.08 hereof relating to the payment of Recurring Replacement Expenditures.

     “Recurring Replacement Reserve Monthly Installment” shall mean the amount per month set forth on Exhibit B attached hereto and made a part hereof (the “Initial Recurring Installments”) until the end of 2007 and an amount per month in each subsequent year or portion thereof occurring prior to the Maturity Date equal to four percent (4%) (or such lesser amount as is required to be reserved for replacements pursuant to the Management Agreement (but in no event less than three (3%) percent of the total revenues of the Property) of the total revenues of the Property for the prior calendar year divided by twelve (12). Notwithstanding the foregoing, if Borrower has delivered evidence reasonably satisfactory to Lender on or before the Payment Date occurring in March of each year that Borrower has deposited with Manager on account of the prior year pursuant to the Management Agreement a sum equal to the Recurring Replacement Reserve Monthly Installment described in the first sentence of this definition multiplied by twelve (12) (the “Minimum Replacement Expenditure”) to be used for Recurring Replacement Expenditures or that Borrower and/or Manager on behalf of Borrower has incurred and paid a sum which when added to the amounts on deposit with Manager are equal to or greater than the Minimum Replacement Expenditure during the prior calendar year, the Recurring Replacement Reserve Monthly Installment shall be zero

17

and, if the sum of the amounts on deposit with manager to be used for Recurring Replacement Expenditures pursuant to the Management Agreement together with the sums that Borrower and/or Manager on behalf of Borrower has incurred and paid for Recurring Replacement Expenditures are less than the Minimum Replacement Expenditure, the Recurring Replacement Reserve Monthly Installment shall be the lesser of the amount described in the first sentence of this definition and the amount by which the amount described in the first sentence of this definition exceeds one-twelfth of the difference between the Minimum Replacement Expenditure and the sum of the amounts actually on deposit with manager to be used for Recurring Replacement Expenditures pursuant to the Management Agreement together with the sums that Borrower and/or Manager on behalf of Borrower has incurred and paid for Recurring Replacement Expenditures but in no event more than the sums on deposit in the Central Account on such Payment Date less sums allocated pursuant to clause (i) — (iv) of Section 5.05(a) hereof (the “Required RRE Shortfall”).

     “Recurring Replacement Reserve Sub-Account” shall mean the Sub-Account of the Central Account established pursuant to Section 5.02 hereof into which the Recurring Replacement Reserve Monthly Installment shall be deposited.

     “Regulation AB” shall mean Regulation AB under the Securities Act and the Securities Exchange Act of 1934 (as amended).

     “Release” shall have the meaning set forth in Section 15.02 hereof.

     “Release Price Percentage” shall mean the percentage for each Cross-collateralized Property set forth on Exhibit C annexed hereto and made a part hereof.

     “Rents” shall have the meaning set forth in granting clause (f) of this Security Instrument.

     “Rent Roll” shall have the meaning set forth in Section 2.05 (o) hereof.

     “Required Debt Service Coverage” shall mean a Debt Service Coverage of not less than 1.0:1.

     “Required Debt Service Payment” shall mean, as of any Payment Date, the amount of interest and principal then due and payable pursuant to the Note, together with any other sums due thereunder, including, without limitation, any prepayments required to be made or for which notice has been given (and not revoked in writing in accordance with Section 15.01 hereof) under this Security Instrument, Default Rate Interest and premium, if any, paid in accordance therewith.

     “Required Engineering Work” shall mean the immediate engineering and/or environmental remediation work set forth on Exhibit D attached hereto and made a part hereof.

     “Retention Amount” shall have the meaning set forth in Section 3.04(b)(vii) hereof.

     “RevPAR” shall mean the average revenues per available room per day.

     “RevPAR Yield Index” shall mean the percentage amount determined by dividing the RevPAR of the Property by the RevPAR of the Property’s Competitive Set as determined by Smith Travel Research (“STR”) or if STR is no longer publishing, a successor reasonably acceptable to Lender.

     “Scheduled Defeasance Payments” shall mean:

     (a) with respect to a defeasance of the Loan in whole, payments on or prior to, but as close as possible to (i) each scheduled Payment Date, after the date of defeasance and through and including the Lockout Expiration Date, upon which interest payments or interest and Principal Payments are required under the Loan Documents and in amounts equal to the scheduled payments due on such dates under the Loan Documents and (ii) the Lockout Expiration Date, of the Principal Amount and any accrued and unpaid interest thereon; or

18

     (b) with respect to any defeasance of the Loan in part, payments on or prior to, but as close as possible to, (i) each scheduled Payment Date after the date of defeasance through and including the Lockout Expiration Date, of a proportionate share (based on the percentage of outstanding principal prior to the defeasance represented by the amount of principal defeased) of the monthly installments of principal and interest due on such dates under the Loan Documents and (ii) the Lockout Expiration Date, of the unpaid portion of the portion of the Principal Amount so defeased and any accrued and unpaid interest thereon.

     (c) with respect to any defeasance of the Loan in part which is made in connection with a Release pursuant to Section 15.02 hereof, payments on or prior to, but as close as possible to, (i) each scheduled Payment Date after the date of defeasance through and including the Lockout Expiration Date, of a proportionate share (based on the percentage of outstanding principal prior to the defeasance represented by the Release Price) of the monthly installments of principal and interest due on such dates under the Loan Documents and (ii) the Lockout Expiration Date, of the Release Price and any accrued and unpaid interest thereon.

     “Securities Act” shall mean the Securities Act of 1933, as the same shall be amended from time to time.

     “Securitization” shall mean a public or private offering of securities by Lender or any of its Affiliates or their respective successors and assigns which are collateralized, in whole or in part, by this Security Instrument.

     “Security Agreement” shall have the meaning set forth in Section 15.01 hereof.

     “Security Instrument” shall mean this Security Instrument as originally executed or as it may hereafter from time to time be supplemented, amended, modified or extended by one or more indentures supplemental hereto.

     “Significant Obligor” shall have the meaning set forth in Item 1101(k) of Regulation AB.

     “Single Purpose Entity” shall mean a corporation, partnership, joint venture, limited liability company, trust or unincorporated association, which is formed or organized solely for the purpose of holding, directly, an ownership interest in the Property or, with respect to General Partner, holding an ownership interest in and managing a Person which holds an ownership interest in the Property, or, with respect to Operating Tenant, holding a interest in the Property, does not engage in any business unrelated to, with respect to Borrower, the Property and, with respect to General Partner, its interest in Borrower or, in the case of a General Partner of the Operating Tenant, its interest in the Operating Tenant, does not have any assets other than those related to, with respect to Borrower, its interest in the Property and, with respect to General Partner, its interest in Borrower, in the case of a General Partner of the Operating Tenant, its interest in the Operating Tenant, or any indebtedness other than as permitted by this Security Instrument or the other Loan Documents, has its own separate books and records and has its own accounts, in each case which are separate and apart from the books and records and accounts of any other Person, holds itself out as being a Person separate and apart from any other Person and which otherwise satisfies the criteria of the Rating Agency, as in effect on the Closing Date, for a special-purpose bankruptcy-remote entity.

     “Solvent” shall mean, as to any Person, that (a) the sum of the assets of such Person, at a fair valuation, exceeds its liabilities, including contingent liabilities, (b) such Person has sufficient capital with which to conduct its business as presently conducted and as proposed to be conducted and (c) such Person has not incurred debts, and does not intend to incur debts, beyond its ability to pay such debts as they mature. For purposes of this definition, “debt” means any liability on a claim, and “claim” means (a) a right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured, or (b) a right to an equitable remedy for breach of performance if such breach gives rise to a payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured. With respect to any such contingent liabilities, such liabilities shall be computed in accordance with GAAP at the amount which, in light of all the facts and circumstances existing at the time, represents the amount which can reasonably be expected to become an actual or matured liability.

19

     “Space Leases” shall mean any Lease or sublease thereunder (including, without limitation, any Major Space Lease) creating a leasehold right of possession for the use and occupancy of a portion of the Property as a tenant together with any supplements, renewals, amendments, modifications or extensions thereof excluding room reservations and other functions held at the Property, and excluding the Operating Lease.

     “State” shall mean any of the states which are members of the United States of America.

     “Stated Maturity” when used with respect to the Note or any installment of interest and/or principal payment thereunder, shall mean the date specified in the Note as the fixed date on which a payment of all or any portion of principal and/or interest is due and payable.

     “Sub-Accounts” shall have the meaning set forth in Section 5.02 hereof.

     “Substantial Casualty” shall have the meaning set forth in Section 3.04 hereof.

     “Taking” shall mean a condemnation or taking pursuant to the lawful exercise of the power of eminent domain.

     “TIC” shall have the meaning set forth in Section 2.12.

     “TIC Agreement” shall have the meaning set forth in Section 2.12.

     “Transfer” shall mean the conveyance, assignment, sale, mortgaging, encumbrance, pledging, hypothecation, granting of a security interest in, granting of options with respect to, or other disposition of (directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, and whether or not for consideration or of record) all or any portion of any legal or beneficial interest (a) in all or any portion of the Property; (b) if Borrower is a corporation or, if Borrower is a partnership and any General Partner is a corporation, in the stock of Borrower or any General Partner; (c) in Borrower (or any trust of which Borrower is a trustee); or (d) if Borrower is a limited or general partnership, joint venture, limited liability company, trust, nominee trust, tenancy in common or other unincorporated form of business association or form of ownership interest, in any Person having a legal or beneficial ownership in Borrower, excluding any legal or beneficial interest in any constituent limited partner, if Borrower is a limited partnership, or in any non-managing member, if Borrower is a limited liability company, unless such interest would, or together with all other direct or indirect interests in Borrower which were previously transferred, aggregate 49% or more of the partnership or membership, as applicable, interest in Borrower or would result in any Person who, as of the Closing Date, did not own, directly or indirectly, 49% or more of the partnership or membership, as applicable, interest in Borrower, owning, directly or indirectly, 49% or more of the partnership or membership, as applicable, interest in Borrower and excluding any legal or beneficial interest in any General Partner unless such interest would, or together with all other direct or indirect interest in the General Partner which were previously transferred, aggregate 49% or more of the partnership or membership, as applicable, interest in the General Partner (or result in a change in control of the management of the General Partner from the individuals exercising such control immediately prior to the conveyance or other disposition of such legal or beneficial interest) and shall also include, without limitation to the foregoing, the following: an installment sales agreement wherein Borrower agrees to sell the Property or any part thereof or any interest therein for a price to be paid in installments; an agreement by Borrower leasing all or substantially all of the Property to one or more Persons pursuant to a single or related transactions, or a sale, assignment or other transfer of, or the grant of a security interest in, Borrower’s right, title and interest in and to any Leases or any Rent; any instrument subjecting the Property to a condominium regime or transferring ownership to a cooperative corporation; and the dissolution or termination of Borrower or the merger or consolidation of Borrower with any other Person.

     “UCC” shall mean the Uniform Commercial Code as in effect on the date hereof in the State in which the Realty is located; provided, however, that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection or priority of the security interest in any item or portion of the collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State in which the Realty is located (“Other UCC State”), “UCC” means the Uniform Commercial Code as in effect in such Other UCC State for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection or priority.

20

     “Undefeased Note” shall have the meaning set forth in Section 15.01 hereof.

     “Uniform System of Accounts” shall mean the Uniform System of Accounts for the Lodging Industry, 10th Revised Edition, Educational Institute of the American Hotel and Motel Association and Hotel Association of New York City (2006), as from time to time amended.

     “Unscheduled Payments” shall mean (a) all Loss Proceeds that Borrower has elected or is required to apply to the repayment of the Debt pursuant to this Security Instrument, the Note or any other Loan Documents, (b) any funds representing a voluntary or involuntary principal prepayment other than scheduled Principal Payments and (c) any Net Proceeds.

     “Use Requirements” shall mean any and all building codes, permits, certificates of occupancy or compliance, laws, regulations, or ordinances (including, without limitation, health, pollution, fire protection, medical and day-care facilities, waste product and sewage disposal regulations), restrictions of record, easements, reciprocal easements, declarations or other agreements affecting the use of the Property or any part thereof.

     “Welfare Plan” shall mean an employee welfare benefit plan as defined in Section 3(1) of ERISA established or maintained by Borrower, Guarantor or any ERISA Affiliate or that covers any current or former employee of Borrower, Guarantor or any ERISA Affiliate.

     “Work” shall have the meaning set forth in Section 3.04(a)(i) hereof.

ARTICLE II: REPRESENTATIONS, WARRANTIES

AND COVENANTS OF BORROWER

     Section 2.01. Payment of Debt. Borrower will pay the Debt at the time and in the manner provided in the Note and the other Loan Documents, all in lawful money of the United States of America in immediately available funds.

     Section 2.02. Representations, Warranties and Covenants of Borrower. Borrower represents and warrants to and covenants with Lender:

          (a) Organization and Authority. Borrower (i) is a limited liability company, general partnership, limited partnership or corporation, as the case may be, duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation, (ii) has all requisite power and authority and all necessary licenses and permits to own and operate the Property and to carry on its business as now conducted and as presently proposed to be conducted and (iii) is duly qualified, authorized to do business and in good standing in the jurisdiction where the Property is located and in each other jurisdiction where the conduct of its business or the nature of its activities makes such qualification necessary. If Borrower is a limited liability company, limited partnership or general partnership, each general partner or managing member, as applicable, of Borrower which is a corporation is duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation.

          (b) Power. Borrower and, if applicable, each General Partner has full power and authority to execute, deliver and perform, as applicable, the Loan Documents to which it is a party, to make the borrowings thereunder, to execute and deliver the Note and to grant to Lender a first, prior, perfected and continuing lien on and security interest in the Property, subject only to the Permitted Encumbrances.

          (c) Authorization of Borrowing. The execution, delivery and performance of the Loan Documents to which Borrower is a party, the making of the borrowings thereunder, the execution and delivery of the Note, the grant of the liens on the Property pursuant to the Loan Documents to which Borrower is a party and the consummation of the Loan are within the powers of Borrower and have been duly authorized by Borrower and, if applicable, the General Partners, by all requisite action (and Borrower hereby represents that no approval or action which has not already been obtained of any member, limited partner or shareholder, as applicable, of Borrower is

21

required to authorize any of the Loan Documents to which Borrower is a party) and will constitute the legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with their terms, except as enforcement may be stayed or limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity (whether considered in proceedings at law or in equity) and will not (i) violate any provision of its partnership agreement or partnership certificate or certificate of incorporation or by-laws, or operating agreement, certificate of formation or articles of organization, as applicable, or, to its knowledge, any law, judgment, order, rule or regulation of any court, arbitration panel or other Governmental Authority, domestic or foreign, or other Person affecting or binding upon Borrower or the Property, or (ii) violate any provision of any indenture, agreement, mortgage, deed of trust, contract or other instrument to which Borrower or, if applicable, any General Partner is a party or by which any of their respective property, assets or revenues are bound, or be in conflict with, result in an acceleration of any obligation or a breach of or constitute (with notice or lapse of time or both) a default or require any payment or prepayment under, any such indenture, agreement, mortgage, deed of trust, contract or other instrument, or (iii) result in the creation or imposition of any lien, except those in favor of Lender as provided in the Loan Documents to which it is a party.

          (d) Consent. Neither Borrower nor, if applicable, any General Partner, is required to obtain any consent, approval or authorization from, or to file any declaration or statement with, any Governmental Authority or other agency in connection with or as a condition to the execution, delivery or performance of this Security Instrument, the Note or the other Loan Documents which has not been so obtained or filed.

          (e) Interest Rate. The rate of interest paid under the Note and the method and manner of the calculation thereof do not violate any usury or other law or applicable Legal Requirement.

          (f) Other Agreements. Borrower is not a party to nor is otherwise bound by any agreements or instruments which, individually or in the aggregate, are reasonably likely to have a Material Adverse Effect. Neither Borrower nor, if applicable, any General Partner, is in violation of its organizational documents or other restriction or any agreement or instrument by which it is bound, or any judgment, decree, writ, injunction, order or award of any arbitrator, court or Governmental Authority, or any Legal Requirement, in each case, applicable to Borrower or the Property, except for such violations that would not have a Material Adverse Effect.

          (g) Maintenance of Existence. (i) Borrower is familiar with the criteria of the Rating Agency required to qualify as a special-purpose bankruptcy-remote entity and Borrower, Operating Tenant and, if applicable, each General Partner at all times since their formation have been duly formed and existing at all times and at all times have preserved and shall preserve and has kept and shall keep in full force and effect their existence as a Single Purpose Entity.

     (ii) Borrower, Operating Tenant and, if applicable, each General Partner, at all times since their organization have complied, and will continue to comply in all material respects, with the provisions of its certificate of limited partnership and agreement of limited partnership or certificate of incorporation and by-laws or articles of organization, certificate of formation and operating agreement, as applicable, and the laws of its jurisdiction of organization relating to partnerships, corporations or limited liability companies, as applicable.

     (iii) Borrower, Operating Tenant and, if applicable, each General Partner have done or caused to be done and will do all things reasonably necessary to observe organizational formalities and preserve their existence and Borrower, Operating Tenant and, if applicable, each General Partner will not hereafter amend, modify or otherwise change the certificate of limited partnership and agreement of limited partnership or certificate of incorporation and by-laws or articles of organization, certificate of formation and operating agreement, as applicable, or other organizational documents of Borrower, Operating Tenant and, if applicable, each General Partner, except for non-material amendments which do not modify the Single Purpose Entity provisions.

     (iv) Borrower, Operating Tenant and, if applicable, each General Partner, have at all times accurately maintained, and will continue to accurately maintain in all material respects, their respective

22

financial statements, accounting records and other partnership, company or corporate documents separate from those of any other Person and Borrower, Operating Tenant and/or, if applicable, General Partner, have filed and will file its own tax returns or, if Borrower, Operating Tenant and/or, if applicable, General Partner is part of a consolidated group for purposes of filing tax returns, Borrower, Operating Tenant and, General Partner, as applicable, have been shown and will be shown as separate members of such group. Borrower, Operating Tenant and, if applicable, each General Partner have not at any time since their formation commingled, and will not commingle, their respective assets with those of any other Person and each has maintained and will maintain their assets in such a manner such that it will not be costly or difficult to segregate, ascertain or identify their individual assets from those of any other Person. Borrower, Operating Tenant and, if applicable, each General Partner has not permitted and will not permit any Affiliate independent access to their bank accounts. Borrower, Operating Tenant and, if applicable, each General Partner have at all times since their formation accurately maintained and utilized, and will continue to accurately maintain and utilize, their own separate bank accounts, payroll and separate books of account, stationery, invoices and checks.

     (v) Borrower, Operating Tenant and, if applicable, each General Partner, have at all times paid, and will continue to pay, their own liabilities from their own separate assets and each has allocated and charged and shall each allocate and charge fairly and reasonably any overhead which Borrower, Operating Tenant and, if applicable, any General Partner, shares with any other Person, including, without limitation, for office space and services performed by any employee of another Person.

     (vi) Borrower, Operating Tenant and, if applicable, each General Partner, have at all times identified themselves, and will continue to identify themselves, in all dealings with the public, under their own names and as separate and distinct entities and have corrected and shall correct any known misunderstanding regarding their status as separate and distinct entities. Borrower, Operating Tenant and, if applicable, each General Partner, have not at any time identified themselves, and will not identify themselves, as being a division of any other Person.

     (vii) Borrower, Operating Tenant and, if applicable, each General Partner, have been at all times, and will continue to be, adequately capitalized in light of the nature of their respective businesses.

     (viii) Borrower, Operating Tenant and, if applicable, each General Partner, (A) have not owned, do not own and will not own any assets or property other than, with respect to Borrower, the Property and any incidental personal property necessary for the ownership, management or operation of the Property or, with respect to Operating Tenant, its leasehold interest in the Property, and, with respect to General Partner, if applicable, its interest in Borrower or, with respect to a General Partner of Operating Tenant, its interest in Operating Tenant, (B) have not engaged and will not engage in any business other than, with respect to Borrower, the ownership, management and operation of the Property, or with respect to Operating Tenant, its interest in the Property, or, with respect to General Partner, if applicable, its interest in Borrower or, with respect to a General Partner of Operating Tenant, its interest in Operating Tenant, (C) have not incurred any outstanding debt as of the date hereof, and will not incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than, with respect to Borrower, (W) the Loan, (X) unsecured trade and operational debt which (1) is not evidenced by a note, (2) is incurred in the ordinary course of the operation of the Property, (3) does not, together with any equipment financing incurred pursuant to clause (Y) hereof exceed in the aggregate two percent (2%) of the Allocated Loan Amount for the Property and (4) is, unless being contested in accordance with the terms of this Security Instrument, paid prior to the earlier to occur of the sixtieth (60th) day after the date incurred and the date when due, (Y) equipment financing relating to equipment used in connection with the operation of the Property which (1) is incurred in the ordinary course of the operation of the Property and (2) does not, together with any unsecured trade and operational debt incurred pursuant to clause (X) hereof, exceed in the aggregate two percent (2%) of the Allocated Loan Amount and (Z) contingent obligations to repay customer, membership and security deposits held in the ordinary course of Borrower’s business, (D) have not pledged (other than pledges which have been released which were given in connection with obligations which have been paid in full) and will not pledge their assets for the benefit of any other

23

Person, and (E) have not made and will not make any loans or advances to any Person (including any Affiliate).

     (ix) None of Borrower, Operating Tenant nor, if applicable, any General Partner will hereafter change its name or principal place of business.

     (x) None of Borrower, Operating Tenant nor, if applicable, any General Partner has, and neither of such Persons will have, any subsidiaries (other than, with respect to General Partner, Borrower or, with respect to General Partner of Operating Tenant, Operating Tenant).

     (xi) Borrower has preserved and maintained and will preserve and maintain its existence as a Delaware limited partnership or a Delaware limited liability company, as applicable, and all material rights, privileges, tradenames and franchises and Operating Tenant has preserved and maintained and will preserve and maintain its existence as a Delaware limited partnership and all material rights, privileges, tradenames and franchises. General Partner, if applicable, has preserved and maintained and will preserve and maintain its existence as a Delaware limited liability company and all material rights, privileges, tradenames and franchises.

     (xii) None of Borrower, Operating Tenant nor, if applicable, any General Partner, has merged or consolidated with, and none will merge or consolidate with, and none has sold all or substantially all of its respective assets to any Person, and none will sell all or substantially all of its respective assets to any Person, and none has liquidated, wound up or dissolved itself (or suffered any liquidation, winding up or dissolution) and none will liquidate, wind up or dissolve itself (or suffer any liquidation, winding up or dissolution). None of Borrower, Operating Tenant nor, if applicable, any General Partner has acquired nor will acquire any business or assets from, or capital stock or other ownership interest of, or be a party to any acquisition of, any Person (other than, with respect to General Partner, if applicable, its interest in Borrower and Operating Tenant).

     (xiii) Borrower, Operating Tenant and, if applicable, each General Partner, have not at any time since their formation assumed, guaranteed or held themselves out to be responsible for, and will not assume, guarantee or hold themselves out to be responsible for the liabilities or the decisions or actions respecting the daily business affairs of their partners, shareholders or members or any predecessor company, corporation or partnership, each as applicable, any Affiliates, or any other Persons other than the Loan and other loans which have been paid in full, and liens granted thereunder fully discharged, prior to the date hereof. None of Borrower, Operating Tenant nor, if applicable, each General Partner, have at any time since its formation acquired, and will not acquire, obligations or securities of its partners or shareholders, members or any predecessor company, corporation or partnership, each as applicable, or any Affiliates (other than, with respect to General Partner, its interest in Borrower or, with respect to General Partner of Operating Tenant, its interest in Operating Tenant). Borrower, Operating Tenant and, if applicable, each General Partner, have not at any time since their formation made, and will not make, loans to its partners, members or shareholders or any predecessor company, corporation or partnership, each as applicable, or any Affiliates of any of such Persons. Borrower, Operating Tenant and, if applicable, each General Partner, have no known material contingent liabilities nor do they have any material financial liabilities under any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which such Person is a party or by which it is otherwise bound other than under the Loan Documents.

     (xiv) Neither Borrower nor Operating Tenant nor, if applicable, General Partner, has at any time since its formation entered into and was not a party to, and, will not enter into or be a party to, any transaction with its Affiliates, members, partners or shareholders, as applicable, or any Affiliates thereof except in the ordinary course of business of such Person on terms which are no less favorable to such Person than would be obtained in a comparable arm’s length transaction with an unrelated third party.

     (xv) If Borrower or Operating Tenant is a limited partnership, the General Partner shall be a corporation or limited liability company whose sole asset is its interest in Borrower or Operating Tenant, as

24

applicable, and the General Partner will at all times comply, and will cause Borrower or Operating Tenant, as applicable, to comply, with each of the representations, warranties, and covenants contained in this Section 2.02(g) as if such representation, warranty or covenant was made directly by such General Partner.

     (xvi) Borrower and Operating Tenant shall at all times cause there to be at least two duly appointed members of the board of directors or board of managers or other governing board or body, as applicable (each, an “Independent Director”), of, if Borrower or Operating Tenant is a corporation, Borrower or Operating Tenant, as applicable, if Borrower or Operating Tenant is a limited partnership, of the General Partner, and if Borrower or Operating Tenant is a limited liability company, of the General Partner or of Borrower or Operating Tenant, as applicable, reasonably satisfactory to Lender who shall not have been at the time of such individual’s appointment, and may not be or have been at any time (A) a shareholder, officer, director, attorney, counsel, partner, member or employee of Borrower, Operating Tenant or any of the foregoing Persons or Affiliates thereof, (B) a customer or creditor of, or supplier or service provider to, Borrower or any of its shareholders, partners, members or their Affiliates, (C) a member of the immediate family of any Person referred to in (A) or (B) above or (D) a Person Controlling, Controlled by or under common Control with any Person referred to in (A) through (C) above. A natural person who otherwise satisfies the foregoing definition except for being the Independent Director of a Single Purpose Entity Affiliated with Borrower, Operating Tenant or General Partner shall not be disqualified from serving as an Independent Director if such individual is at the time of initial appointment, or at any time while serving as the Independent Director, an Independent Director of a Single Purpose Entity Affiliated with Borrower, Operating Tenant or General Partner if such individual is an independent director provided by a nationally-recognized company that provides professional independent directors.

     (xvii) Borrower, Operating Tenant and, if applicable, each General Partner, shall not cause or permit the board of directors or board of managers or other governing board or body, as applicable, of Borrower, Operating Tenant or, if applicable, each General Partner, to take any action which, under the terms of any certificate of incorporation, by-laws, limited liability company agreement, operating agreement, certificate of formation or articles of organization requires a vote of the board of directors or board of managers or other governing board or body of Borrower, Operating Tenant, or, if applicable, the General Partner and also requires the vote of the Independent Directors therewith, unless at the time of such action there shall be at least two members who are Independent Directors.

     (xviii) Borrower, Operating Tenant and, if applicable, each General Partner has paid and shall pay the salaries of their own employees and has maintained and shall maintain a sufficient number of employees in light of their contemplated business operations.

     (xvix) Borrower and Operating Tenant shall, and shall cause its Affiliates to, and Borrower and Operating Tenant have and have caused their Affiliates to, conduct its business so that the assumptions made with respect to Borrower, Operating Tenant and, if applicable, each General Partner, in that certain opinion letter relating to substantive non-consolidation dated the date hereof (the “Insolvency Opinion”) delivered in connection with the Loan has been and shall be true and correct in all respects.

     Notwithstanding anything to the contrary contained in this Section 2.02(g), provided Borrower or Operating Tenant, as applicable, is a Delaware single member limited liability company which satisfies the single purpose bankruptcy remote entity requirements of each Rating Agency for a single member limited liability company, the foregoing provisions of this Section 2.02(g) shall not apply to the General Partner.

     (h) No Defaults. No Event of Default or, to Borrower’s knowledge, Default has occurred and is continuing or would occur as a result of the consummation of the transactions contemplated by the Loan Documents. Borrower is not in default in the payment or performance of any of its Contractual Obligations in any material respect.

     (i) Consents and Approvals. Borrower and, if applicable, each General Partner, have obtained or made all necessary (i) consents, approvals and authorizations, and registrations and filings of or with all

25

Governmental Authorities and (ii) consents, approvals, waivers and notifications of partners, stockholders, members, creditors, lessors and other nongovernmental Persons, in each case, which are required to be obtained or made by Borrower or, if applicable, the General Partner, in connection with the execution and delivery of, and the performance by Borrower of its obligations under, the Loan Documents.

     (j) Investment Company Act Status, etc. Borrower is not (i) an “investment company,” or a company “controlled” by an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended, (ii) a “holding company” or a “subsidiary company” of a “holding company” or an “affiliate” of either a “holding company” or a “subsidiary company” within the meaning of the Public Utility Holding Company Act of 1935, as amended, or (iii) subject to any other federal or state law or regulation which purports to restrict or regulate its ability to borrow money.

     (k) Compliance with Law. To Borrower’s knowledge, Borrower is in compliance with all Legal Requirements to which it or the Property is subject, including, without limitation, all Environmental Statutes (except as previously disclosed in the Environmental Report), the Americans with Disabilities Act (except as previously disclosed in the engineering report relating to the Property delivered to Lender in connection with the origination of the Loan), the Occupational Safety and Health Act of 1970 and ERISA. No portion of the Property has been or will be purchased, improved, fixtured, equipped or furnished with proceeds of any illegal activity and, to the best of Borrower’s knowledge, no illegal activities are being conducted at or from the Property.

     (l) Financial Information. All financial data that has been delivered by Borrower to Lender (i) is true, complete and correct in all material respects, (ii) accurately represents the financial condition and results of operations in all material respects of the Persons covered thereby as of the date on which the same shall have been furnished, and (iii) in the case of audited financial statements, has been prepared in accordance with GAAP and the Uniform System of Accounts (or such other accounting basis as is reasonably acceptable to Lender) throughout the periods covered thereby. As of the date hereof, neither Borrower nor, if applicable, any General Partner, has any material contingent liability, material liability for taxes or other unusual or forward commitment not reflected in such financial statements delivered to Lender. Since the date of the last financial statements delivered by Borrower to Lender except as otherwise disclosed in such financial statements or notes thereto, there has been no change in the assets, liabilities or financial position of Borrower nor, if applicable, any General Partner, or in the results of operations of Borrower which would have a Material Adverse Effect. Neither Borrower nor, if applicable, any General Partner, has incurred any obligation or liability, contingent or otherwise not reflected in such financial statements which would have a Material Adverse Effect.

     (m) Transaction Brokerage Fees. Borrower has not dealt with any financial advisors, brokers, underwriters, placement agents, agents or finders in connection with the transactions contemplated by this Security Instrument. All brokerage fees, commissions and other expenses payable in connection with the transactions contemplated by the Loan Documents have been paid in full by Borrower contemporaneously with the execution of the Loan Documents and the funding of the Loan. Borrower hereby agrees to indemnify and hold Lender harmless for, from and against any and all claims, liabilities, costs and expenses of any kind in any way relating to or arising from (i) a claim by any Person that such Person acted on behalf of Borrower in connection with the transactions contemplated herein or (ii) any breach of the foregoing representation. The provisions of this subsection (m) shall survive the repayment of the Debt.

     (n) Federal Reserve Regulations. No part of the proceeds of the Loan will be used for the purpose of “purchasing” or “carrying” any “margin stock” within the meaning of Regulations T, U or X of the Board of Governors of the Federal Reserve System or for any other purpose which would be inconsistent with such Regulations T, U or X or any other Regulations of such Board of Governors, or for any purposes prohibited by Legal Requirements or by the terms and conditions of the Loan Documents.

     (o) Pending Litigation. There are no actions, suits or proceedings pending or, to the best knowledge of Borrower, threatened against or affecting Borrower or the Property in any court or before any Governmental Authority which if adversely determined either individually or collectively has or is reasonably likely to have a Material Adverse Effect.

26

     (p) Solvency; No Bankruptcy. Each of Borrower and, if applicable, the General Partner, (i) is and has at all times been Solvent and will remain Solvent immediately upon the consummation of the transactions contemplated by the Loan Documents and (ii) is free from bankruptcy, reorganization or arrangement proceedings or a general assignment for the benefit of creditors and is not contemplating the filing of a petition under any state or federal bankruptcy or insolvency laws or the liquidation of all or a major portion of such Person’s assets or property and Borrower has no knowledge of any Person contemplating the filing of any such petition against it or, if applicable, the General Partner. None of the transactions contemplated hereby will be or have been made with an intent to hinder, delay or defraud any present or future creditors of Borrower and Borrower has received reasonably equivalent value in exchange for its obligations under the Loan Documents. Borrower’s assets do not, and immediately upon consummation of the transaction contemplated in the Loan Documents will not, constitute unreasonably small capital to carry out its business as presently conducted or as proposed to be conducted. Borrower does not intend to, nor believes that it will, incur debts and liabilities beyond its ability to pay such debts as they may mature.

     (q) Use of Proceeds. The proceeds of the Loan shall be applied by Borrower to, inter alia, (i) purchase the Property and, if applicable, satisfy certain mortgage loans presently encumbering all or a part of the Property and (ii) pay certain transaction costs incurred by Borrower in connection with the Loan. No portion of the proceeds of the Loan will be used for family, personal, agricultural or household use.

     (r) Tax Filings. Borrower and, if applicable, each General Partner, have filed all federal, state and local tax returns required to be filed and have paid or made adequate provision for the payment of all federal, state and local taxes, charges and assessments payable by Borrower and, if applicable, the General Partners. Borrower and, if applicable, the General Partners, believe that their respective tax returns properly reflect the income and taxes of Borrower and said General Partner, if any, for the periods covered thereby, subject only to reasonable adjustments required by the Internal Revenue Service or other applicable tax authority upon audit.

     (s) Not Foreign Person. Borrower is not a “foreign person” within the meaning of §1445(f)(3) of the Code.

     (t) ERISA. (i) Neither Borrower nor Guarantor is, or is acting on behalf of: (a) an “employee benefit plan” within the meaning of Section 3(3) of ERISA, that is subject to Part 4 of Title I of ERISA; (b) a “plan” within the meaning of section 4975(e)(1) of the Code that is subject to section 4975 of the Code or (c) any other entity that is deemed under applicable law to hold the assets of a plan described in (a) or (b) and this representation shall be deemed to be continuing in nature for all periods that this Security Instrument is in effect. Each Plan is in compliance with, and has been administered in all material respects in compliance with, its terms and the applicable provisions of ERISA, the Code and any other applicable Legal Requirement, except to the extent the foregoing could not have a Material Adverse Effect, and no event or condition has occurred and is continuing as to which Borrower would be under an obligation to furnish a report to Lender under clause (ii)(A) of this Section. With respect to each Plan maintained or contributed to by Borrower, Guarantor or any ERISA Affiliate thereof (a) there is no actual or contingent material liability of Borrower, Guarantor or any ERISA Affiliate under Title IV of ERISA or Section 412 of the Code to any person or entity, including the Pension Benefit Guaranty Corporation, IRS, any such Plan or participants (or their beneficiaries) in any such Plan (other than the obligation to pay routine benefit claims when due under the terms of such Plan), (b) the assets of Borrower or Guarantor have not been subject to a lien under ERISA or the Code and (c) there is no basis for such material liability or the assertion of any such lien with respect to the assets of Borrower or Guarantor as the result of or after the consummation of the transactions contemplated by this Security Instrument. Except to the extent the following could not have a Material Adverse Effect, no Welfare Plan provides or will provide benefits, including, without limitation, death or medical benefits (whether or not insured) with respect to any current or former employee of Borrower or Guarantor beyond his or her retirement or other termination of service other than (A) coverage mandated by applicable law, (B) death or disability benefits that have been fully provided for by fully paid up insurance or (C) severance benefits.

     (ii) Borrower will furnish to Lender as soon as possible, and in any event within ten (10) days after Borrower knows or has reason to believe that any of the events or conditions specified below with respect to any Plan, Welfare Plan or Multiemployer Plan has occurred or exists, an Officer’s

27

Certificate setting forth details respecting such event or condition and the action, if any, that Borrower or its ERISA Affiliate proposes to take with respect thereto (and a copy of any report or notice required to be filed with or given to PBGC (or any other relevant Governmental Authority)) by Borrower or an ERISA Affiliate with respect to such event or condition, if such report or notice is required to be filed with the PBGC or any other relevant Governmental Authority:

     (A) any reportable event, as defined in Section 4043 of ERISA and the regulations issued thereunder, with respect to a Plan, as to which PBGC has not by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within thirty (30) days of the occurrence of such event (provided that a failure to meet the minimum funding standard of Section 412 of the Code and of Section 302 of ERISA, including, without limitation, the failure to make on or before its due date a required installment under Section 412(m) of the Code and of Section 302(e) of ERISA, shall be a reportable event regardless of the issuance of any waivers in accordance with Section 412(d) of the Code), and any request for a waiver under Section 412(d) of the Code for any Plan;

     (B) the distribution under Section 4041 of ERISA of a notice of intent to terminate any Plan or any action taken by Borrower or an ERISA Affiliate to terminate any Plan;

     (C) the institution by PBGC of proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by Borrower or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by PBGC with respect to such Multiemployer Plan;

     (D) the complete or partial withdrawal from a Multiemployer Plan by Borrower or any ERISA Affiliate that results in material liability under Section 4201 or 4204 of ERISA (including the obligation to satisfy secondary liability as a result of a purchaser default) or the receipt by Borrower or any ERISA Affiliate of notice from a Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or that it intends to terminate or has terminated under Section 4041A of ERISA;

     (E) the institution of a proceeding by a fiduciary of any Multiemployer Plan against Borrower or any ERISA Affiliate to enforce Section 515 of ERISA, which proceeding is not dismissed within thirty (30) days;

     (F) the adoption of an amendment to any Plan that, pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA, would result in the loss of tax-exempt status of the trust of which such Plan is a part if Borrower or an ERISA Affiliate fails to timely provide security to the Plan in accordance with the provisions of said Sections;

     (G) the imposition of a lien or a security interest in connection with a Plan; or

     (H) Borrower or Guarantor permits any Welfare Plan to provide benefits, including without limitation, medical benefits (whether or not insured), with respect to any current or former employee of Borrower or Guarantor beyond his or her retirement or other termination of service other than (1) coverage mandated by applicable law, (2) death or disability benefits that have been fully provided for by paid up insurance or otherwise or (3) severance benefits.

     (iii) Borrower shall not knowingly engage in or permit any transaction in connection with which Borrower or Guarantor could be subject to either a material civil penalty or tax assessed pursuant to Section 502(i) or 502(l) of ERISA or Section 4975 of the Code, to the extent it could have a Material Adverse Effect, permit any Welfare Plan to provide benefits, including without limitation, medical benefits (whether or not insured), with respect to any current or former employee of Borrower or Guarantor beyond

28

his or her retirement or other termination of service other than (A) coverage mandated by applicable law, (B) death or disability benefits that have been fully provided for by paid up insurance or otherwise or (C) severance benefits, permit the assets of Borrower or Guarantor to become “plan assets”, as defined under ERISA Section 3(42) and regulations promulgated thereunder or, to the extent it could have a Material Adverse Effect, adopt, amend (except as may be required by applicable law) or increase the amount of any benefit or amount payable under, or permit any ERISA Affiliate to adopt, amend (except as may be required by applicable law) or increase the amount of any benefit or amount payable under, any employee benefit plan (including, without limitation, any employee welfare benefit plan) or other plan, policy or arrangement, except for normal increases in the ordinary course of business consistent with past practice that, in the aggregate, do not result in a material increase in benefits expense to Borrower, Guarantor or any ERISA Affiliate.

     (u) Labor Matters. No organized work stoppage or labor strike is pending or threatened by employees or other laborers at the Property and neither Borrower nor Manager (i) is involved in or threatened with any labor dispute, grievance or litigation relating to labor matters involving any employees and other laborers at the Property, including, without limitation, violation of any federal, state or local labor, safety or employment laws (domestic or foreign) and/or charges of unfair labor practices or discrimination complaints; (ii) has engaged in any unfair labor practices within the meaning of the National Labor Relations Act or the Railway Labor Act; or (iii) except to the extent previously disclosed to Lender in writing, is a party to, or bound by, any collective bargaining agreement or union contract with respect to employees and other laborers at the Property and no such agreement or contract is currently being negotiated by Borrower, Manager or any of their Affiliates.

     (v) Borrower’s Legal Status. Borrower’s exact legal name that is indicated on the signature page hereto, organizational identification number and place of business or, if more than one, its chief executive office, as well as Borrower’s mailing address, if different, which were identified by Borrower to Lender and contained in this Security Instrument, are true, accurate and complete. Borrower (i) will not change its name, its place of business or, if more than one place of business, its chief executive office, or its mailing address or organizational identification number if it has one without giving Lender at least thirty (30) days prior written notice of such change, (ii) if Borrower does not have an organizational identification number and later obtains one, Borrower shall promptly notify Lender of such organizational identification number and (iii) will not change its type of organization, jurisdiction of organization or other legal structure.

     (w) Compliance with Anti-Terrorism, Embargo and Anti-Money Laundering Laws. (i) None of Borrower, General Partner, any Guarantor, or any Person who owns any equity interest in or Controls Borrower, General Partner or any Guarantor currently is identified on the OFAC List or otherwise qualifies as a Prohibited Person, and Borrower has implemented procedures, approved by Borrower and, if applicable, General Partner, to ensure that no Person who now or hereafter owns an equity interest in Borrower or General Partner is a Prohibited Person or Controlled by a Prohibited Person, (ii) no proceeds of the Loan will be used to fund any operations in, finance any investments or activities in or make any payments to, Prohibited Persons, and (iii) none of Borrower, General Partner, or any Guarantor is in violation of any Legal Requirements relating to anti-money laundering or anti-terrorism, including, without limitation, Legal Requirements related to transacting business with Prohibited Persons or the requirements of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, U.S. Public Law 107-56, and the related regulations issued thereunder, including temporary regulations, all as amended from time to time. Notwithstanding the foregoing, with respect to the holders of shares in publicly traded corporations which hold an equity interest in Borrower, General Partner or Guarantor and which holders of shares in publicly traded corporations do not Control Borrower, General Partner or Guarantor, the representations contained in clauses (i) and (iii) of the preceding sentence are made to the knowledge of Borrower. No tenant at the Property currently is identified on the OFAC List or otherwise qualifies as a Prohibited Person, and, to the best of Borrower’s knowledge, no tenant at the Property is owned or Controlled by a Prohibited Person. Borrower has determined that Manager has implemented procedures, approved by Borrower, to ensure that no tenant at the Property is a Prohibited Person or owned or Controlled by a Prohibited Person.

     Section 2.03. Further Acts, etc. Borrower will, at the cost of Borrower, and without expense to Lender, do, execute, acknowledge and deliver all and every such further acts, deeds, conveyances, mortgages or deeds of

29

trust, as applicable, assignments, notices of assignments, transfers and assurances as Lender shall, from time to time, reasonably require for the better assuring, conveying, assigning, transferring, and confirming unto Lender the property and rights hereby mortgaged, given, granted, bargained, sold, alienated, enfeoffed, conveyed, confirmed, pledged, assigned and hypothecated, or which Borrower may be or may hereafter become bound to convey or assign to Lender, or for carrying out or facilitating the performance of the terms of this Security Instrument or for filing, registering or recording this Security Instrument and, on demand, will execute and deliver and hereby authorizes Lender to execute in the name of Borrower or without the signature of Borrower to the extent Lender may lawfully do so, one or more financing statements, chattel mortgages or comparable security instruments to evidence more effectively the lien hereof upon the Property. Borrower grants to Lender an irrevocable power of attorney coupled with an interest for the purpose of protecting, perfecting, preserving and realizing upon the interests granted pursuant to this Security Instrument and to effect the intent hereof, all as fully and effectually as Borrower might or could do; and Borrower hereby ratifies all that Lender shall lawfully do or cause to be done by virtue hereof; provided, however, that Lender shall not exercise such power of attorney unless and until Borrower fails to take the required action within the five (5) Business Day time period stated above unless the failure to so exercise, could, in Lender’s reasonable judgment, result in a Material Adverse Effect. Upon (a) receipt of an affidavit of an officer of Lender as to the loss, theft, destruction or mutilation of the Note or any other Loan Document which is not of public record, (b) receipt of an indemnity of Lender related to losses resulting solely from the issuance of a replacement note or other applicable Loan Document and (c) in the case of any such mutilation, upon surrender and cancellation of such Note or other applicable Loan Document, Borrower will issue, in lieu thereof, a replacement Note or other applicable Loan Document, dated the date of such lost, stolen, destroyed or mutilated Note or other Loan Document in the same principal amount thereof and otherwise of like tenor.

     Section 2.04. Recording of Security Instrument, etc. Borrower forthwith upon the execution and delivery of this Security Instrument and thereafter, from time to time, will cause this Security Instrument, and any security instrument creating a lien or security interest or evidencing the lien hereof upon the Property and each instrument of further assurance to be filed, registered or recorded in such manner and in such places as may be required by any present or future law in order to publish notice of and fully protect the lien or security interest hereof upon, and the interest of Lender in, the Property. Borrower will pay all filing, registration or recording fees, and all expenses incident to the preparation, execution and acknowledgment of this Security Instrument, any mortgage or deed of trust, as applicable, supplemental hereto, any security instrument with respect to the Property and any instrument of further assurance, and all federal, state, county and municipal, taxes, duties, imposts, assessments and charges arising out of or in connection with the execution and delivery of this Security Instrument, any mortgage or deed of trust, as applicable, supplemental hereto, any security instrument with respect to the Property or any instrument of further assurance, except where prohibited by law to do so, in which event Lender may declare the Debt to be immediately due and payable. Borrower shall hold harmless and indemnify Lender and its successors and assigns, against any liability incurred as a result of the imposition of any tax on the making and recording of this Security Instrument.

     Section 2.05. Representations, Warranties and Covenants Relating to the Property. Borrower represents and warrants to and covenants with Lender with respect to the Property as follows:

     (a) Lien Priority. This Security Instrument is a valid and enforceable first lien on the Property, free and clear of all encumbrances and liens having priority over the lien of this Security Instrument, except for the items set forth as exceptions to or subordinate matters in the title insurance policy insuring the lien of this Security Instrument, none of which, individually or in the aggregate, materially interfere with the benefits of the security intended to be provided by this Security Instrument, materially affect the value or marketability of the Property, impair the use or operation of the Property for the use currently being made thereof or impair Borrower’s ability to pay its obligations in a timely manner (such items being the “Permitted Encumbrances”).

     (b) Title. Borrower has, subject only to the Permitted Encumbrances, good, insurable and marketable fee simple title to the Premises, Improvements and Fixtures (collectively, the “Realty”) and to all easements and rights benefiting the Realty and has the right, power and authority to mortgage, encumber, give, grant, bargain, sell, alien, enfeoff, convey, confirm, pledge, assign, and hypothecate the Property. Borrower will preserve its interest in and title to the Property, subject to the Permitted Encumbrances and will forever warrant and defend the same to

30

Lender against any and all other claims made by, through or under Borrower and will forever warrant and defend the validity and priority of the lien and security interest created herein against the claims of all Persons whomsoever claiming by, through or under Borrower. The foregoing warranty of title shall survive the foreclosure of this Security Instrument and shall inure to the benefit of and be enforceable by Lender in the event Lender acquires title to the Property pursuant to any foreclosure. In addition, there are no outstanding options or rights of first refusal to purchase the Property or Borrower’s ownership thereof.

     (c) Taxes and Impositions. All taxes and other Impositions and governmental assessments due and owing in respect of, and affecting, the Property have been paid. Borrower has paid all Impositions which constitute special governmental assessments in full, except for those assessments which are permitted by applicable Legal Requirements to be paid in installments, in which case all installments which are due and payable have been paid in full. There are no pending, or to Borrower’s best knowledge, proposed special or other assessments for public improvements or otherwise affecting the Property, nor are there any contemplated improvements to the Property that may result in such special or other assessments.

     (d) Casualty; Flood Zone. The Realty is in good repair and free and clear of any damage, destruction or casualty (whether or not covered by insurance) that would materially affect the value of the Realty or the use for which the Realty was intended, there exists no structural or other material defects or damages in or to the Property and Borrower has not received any written notice from any insurance company or bonding company of any material defect or inadequacies in the Property, or any part thereof, which would materially and adversely affect the insurability of the same or cause the imposition of extraordinary premiums or charges thereon or of any termination or threatened termination of any policy of insurance or bond. Except as disclosed on the survey of the Premises delivered to Lender in connection with the origination of the Loan, no portion of the Premises is located in an “area of special flood hazard,” as that term is defined in the regulations of the Federal Insurance Administration, Department of Housing and Urban Development, under the National Flood Insurance Act of 1968, as amended (24 CFR § 1909.1) or Borrower has obtained the flood insurance required by Section 3.01(a)(vi) hereof. The Premises either does not lie in a 100 year flood plain that has been identified by the Secretary of Housing and Urban Development or any other Governmental Authority or, if it does, Borrower has obtained the flood insurance required by Section 3.01(a)(vi) hereof.

     (e) Completion; Encroachment. All Improvements necessary for the efficient use and operation of the Premises, including, without limitation, all Improvements which were included for purposes of determining the appraised value of the Property in the Appraisal, have been completed and, except as disclosed on the survey of the Premises delivered to Lender in connection with the origination of the Loan, none of said Improvements lie outside the boundaries and building restriction lines of the Premises. Except as disclosed on the survey of the Premises delivered to Lender in connection with the origination of the Loan and as set forth in the title insurance policy insuring the lien of this Security Instrument, no improvements on adjoining properties encroach upon the Premises.

     (f) Separate Lot. The Premises are taxed separately without regard to any other real estate and constitute a legally subdivided lot under all applicable Legal Requirements (or, if not subdivided, no subdivision or platting of the Premises is required under applicable Legal Requirements), and for all purposes may be mortgaged, encumbered, conveyed or otherwise dealt with as an independent parcel. The Property does not benefit from any tax abatement or exemption.

     (g) Use. Except as previously disclosed in the zoning report relating to the Premises delivered to Lender in connection with the origination of the Loan, the existence of all Improvements, the present use and operation thereof and the access of the Premises and the Improvements to all of the utilities and other items referred to in paragraph (k) below are in compliance in all material respects with all Leases affecting the Property. Borrower has not received any notice from any Governmental Authority alleging any uncured violation relating to the Property of any applicable Legal Requirements.

     (h) Licenses and Permits. Borrower currently holds and will continue to hold all certificates of occupancy, licenses, registrations, permits, consents, franchises and approvals of any Governmental Authority or any other Person which are material for the lawful occupancy and operation of the Realty or which are material to

31

the ownership or operation of the Property or the conduct of Borrower’s business. All such certificates of occupancy, licenses, registrations, permits, consents, franchises and approvals are current and in full force and effect.

     (i) Environmental Matters. Borrower has received and reviewed the Environmental Report and has no reason to believe that the Environmental Report contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained therein or herein, in light of the circumstances under which such statements were made, not misleading.

     (j) Property Proceedings. There are no actions, suits or proceedings pending or, to Borrower’s best knowledge, threatened in any court or before any Governmental Authority or arbitration board or tribunal (i) relating to (A) the zoning of the Premises or any part thereof, (B) any certificates of occupancy, licenses, registrations, permits, consents or approvals issued with respect to the Property or any part thereof, (C) the condemnation of the Property or any part thereof, or (D) the condemnation or relocation of any roadways abutting the Premises required for access or the denial or limitation of access to the Premises or any part thereof from any point of access to the Premises, (ii) asserting that (A) any such zoning, certificates of occupancy, licenses, registrations, permits, consents and/or approvals do not permit the operation of any material portion of the Realty as presently being conducted, (B) any material improvements located on the Property or any part thereof cannot be located thereon or operated with their intended use or (C) the operation of the Property or any part thereof is in violation in any material respect of any Environmental Statutes, Development Laws or other Legal Requirements or Space Leases or Property Agreements or (iii) which might (A) affect the validity or priority of any Loan Document or (B) have a Material Adverse Effect. Borrower is not aware of any facts or circumstances which may give rise to any actions, suits or proceedings described in the preceding sentence.

     (k) Utilities. The Premises has all necessary legal access to water, gas and electrical supply, storm and sanitary sewerage facilities, other required public utilities (with respect to each of the aforementioned items, by means of either a direct connection to the source of such utilities or through connections available on publicly dedicated roadways directly abutting the Premises or through permanent insurable easements benefiting the Premises), fire and police protection, parking, and means of direct access between the Premises and public highways over recognized curb cuts (or such access to public highways is through private roadways which may be used for ingress and egress pursuant to permanent insurable easements).

     (l) Mechanics’ Liens. The Property is free and clear of any mechanics’ liens or liens in the nature thereof, and no rights are outstanding that under law could give rise to any such liens, any of which liens are or may be prior to, or equal with, the lien of this Security Instrument, except those which are insured against by the title insurance policy insuring the lien of this Security Instrument.

     (m) Title Insurance. Lender has received a lender’s title insurance policy insuring this Security Instrument as a first lien on the Realty subject only to Permitted Encumbrances.

     (n) Insurance. The Property is insured in accordance with the requirements set forth in Article III hereof.

     (o) Space Leases.

     (i) To Borrower’s best knowledge, Borrower has delivered a true, correct and complete schedule of all Space Leases as of the date hereof, which accurately and completely sets forth in all material respects, for each such Space Lease, the following (collectively, the “Rent Roll”): the name and address of the tenant; the lease expiration date, extension and renewal provisions; the base rent and percentage rent payable; and the security deposit held thereunder.

     (ii) Each Space Lease constitutes the legal, valid and binding obligation of Borrower or, the Operating Tenant, as applicable, and, to the knowledge of Borrower, is enforceable against the tenant

32

thereof. No default exists, or with the passing of time or the giving of notice would exist, which would, in the aggregate, have a Material Adverse Effect.

     (iii) To Borrower’s best knowledge, no tenant under any Major Space Lease has, as of the date hereof, paid Rent more than thirty (30) days in advance, and the Rents under such Major Space Leases have not been waived, released, or otherwise discharged or compromised.

     (iv) To Borrower’s best knowledge, except as disclosed in writing to Lender, all work to be performed by Borrower under the Space Leases has been substantially performed, all contributions to be made by Borrower to the tenants thereunder have been made except for any held-back amounts, and all other conditions precedent to each such tenant’s obligations thereunder have been satisfied.

     (v) To Borrower’s best knowledge, except as previously disclosed to Lender in writing or contained in the Space Leases, there are no options to terminate any Space Lease.

     (vi) To Borrower’s best knowledge, each tenant under a Major Space Lease or such tenant’s authorized subtenant is currently occupying the space demised by such Major Space Lease.

     (vii) To Borrower’s best knowledge, Borrower has delivered to Lender true, correct and complete copies of all Space Leases described in the Rent Roll.

     (viii) No Space Lease has been assigned or, to Borrower’s best knowledge, modified, supplemented or amended in any way.

     (ix) To Borrower’s best knowledge, each tenant under each Space Lease is free from bankruptcy, reorganization or arrangement proceedings or a general assignment for the benefit of creditors.

     (x) To Borrower’s best knowledge, no Space Lease provides any party with the right to obtain a lien or encumbrance upon the Property superior to the lien of this Security Instrument.

     (p) Property Agreements.

     (i) Borrower has delivered to Lender true, correct and complete copies of all Property Agreements of record or which could bind any owner of the Property other than Borrower.

     (ii) No Property Agreement provides any party with the right to obtain a lien or encumbrance upon the Property superior to the lien of this Security Instrument.

     (iii) No default exists or with the passing of time or the giving of notice or both would exist under any Property Agreement which would, individually or in the aggregate, have a Material Adverse Effect.

     (iv) Borrower has not received or given any written communication which alleges that a default exists or, with the giving of notice or the lapse of time, or both, would exist under the provisions of any Property Agreement.

     (v) No condition currently exists whereby Borrower or any future owner of the Property may be required to purchase any other parcel of land which is subject to any Property Agreement or which gives any Person a right to purchase, or right of first refusal with respect to, the Property.

     (vi) To the best knowledge of Borrower, no offset or any right of offset exists respecting continued contributions to be made by any party to any Property Agreement except as expressly set forth

33

therein. Except as previously disclosed to Lender in writing, no material exclusions or restrictions on the utilization, leasing or improvement of the Property (including non-compete agreements) exists in any Property Agreement.

     (vii) Except as previously disclosed in writing to Lender, all work, if any, required to be performed by Borrower prior to the date hereof under each of the Property Agreements has been substantially performed, all contributions to be made by Borrower to any party to such Property Agreements have been made, and all other conditions to such party’s obligations thereunder have been satisfied.

     (q) Personal Property. Except as previously disclosed in writing to Lender, Borrower represents that it or Operating Tenant has good and marketable title to all personal property used in connection with the operation of the Property, free and clear of any liens, except for liens created under the Loan Documents and liens which describe the equipment and other personal property owned by tenants and upon termination of any Operating Lease any personal property owned by Operating Tenant will be transferred free and clear of any liens to Borrower.

     (r) Leasing Brokerage and Management Fees. Except as previously disclosed to Lender in writing, there are no brokerage fees or commissions payable by Borrower with respect to the leasing of space at the Property.

     (s) Security Deposits. Borrower is in compliance with all Legal Requirements relating to such security deposits as to which failure to comply might, individually or in the aggregate, have a Material Adverse Effect.

     (t) Loan to Value Ratio. To the best knowledge of Borrower, based on the substantial real estate expertise of Borrower, Borrower’s familiarity with the Property, and the Appraisal (which Borrower believes to contain a reasonable assessment of the fair market value of the Property), the Initial Allocated Loan Amount does not exceed one hundred twenty-five percent (125%) of the fair market value of the Property. For the purposes of this clause (t), the term “fair market value” shall be reduced by (i) the amount of any indebtedness secured by a lien affecting the Property that is prior to, or on a parity with, the lien of this Security Instrument, and (ii) the value of any property that is not “real property” within the meaning of Treas. Reg. §§ 1.860G-2 and 1.856-3(d).

     (u) Representations Generally. The representations and warranties contained in this Security Instrument, and the review and inquiry made on behalf of Borrower therefor, have all been made by Persons having the requisite expertise and knowledge to provide such representations and warranties. No representation, warranty or statement of fact made by or on behalf of Borrower in this Security Instrument or in any certificate, document or schedule furnished to Lender pursuant hereto, contains any untrue statement of a material fact or omits to state any material fact necessary to make statements contained therein or herein not misleading (which may be to Borrower’s best knowledge where so provided herein). There are no facts presently known to Borrower which have not been disclosed to Lender which would, individually or in the aggregate, have a Material Adverse Effect nor as far as Borrower can foresee might, individually or in the aggregate, have a Material Adverse Effect.

     (v) Liquor License. All licenses, permits, approvals and consents which are required for the sale and service of alcoholic beverages on the Premises have been obtained from the applicable Governmental Authorities.

     Section 2.06. Removal of Lien. (a) Borrower shall, at its expense, maintain this Security Instrument as a first lien on the Property and shall keep the Property free and clear of all liens and encumbrances of any kind and nature other than the Permitted Encumbrances. Borrower shall, within thirty (30) days following receipt of knowledge of any lien, promptly discharge of record, by bond or otherwise, any such liens and, promptly upon request by Lender, shall deliver to Lender evidence reasonably satisfactory to Lender of the discharge thereof.

     (b) Without limitation to the provisions of Section 2.06(a) hereof, Borrower shall (i) pay, from time to time when the same shall become due, all claims and demands of mechanics, materialmen, laborers, and others which, if unpaid, might result in, or permit the creation of, a lien on the Property or any part thereof, (ii) cause to be

34

removed of record (by payment or posting of bond or settlement or otherwise) any mechanics’, materialmens’, laborers’ or other lien on the Property, or any part thereof, or on the revenues, rents, issues, income or profit arising therefrom, and (iii) in general, do or cause to be done, without expense to Lender, everything reasonably necessary to preserve in full the lien of this Security Instrument. If Borrower fails to comply with the requirements of this Section 2.06(b), then, upon five (5) Business Days’ prior notice to Borrower, Lender may, but shall not be obligated to, pay any such lien, and Borrower shall, within five (5) Business Days after Lender’s demand therefor, reimburse Lender for all sums so expended, together with interest thereon at the Default Rate from the date advanced, all of which shall be deemed part of the Debt. Nothing contained herein shall be deemed a consent or request of Lender, express or implied, by inference or otherwise, to the performance of any alteration, repair or other work by any contractor, subcontractor or laborer or the furnishing of any materials by any materialmen in connection therewith.

     (c) Notwithstanding the foregoing, Borrower may contest any lien (other than a lien relating to non-payment of Impositions, the contest of which shall be governed by Section 4.04 hereof) of the type set forth in subparagraph (b)(ii) of this Section 2.06 provided that, following prior notice to Lender (i) Borrower is contesting the validity of such lien with due diligence and in good faith and by appropriate proceedings, without cost or expense to Lender or any of its agents, employees, officers, or directors, (ii) Borrower shall preclude the collection of, or other realization upon, any contested amount from the Property or any revenues from or interest in the Property, (iii) neither the Property nor any part thereof nor interest therein, shall be in any danger of being sold, forfeited or lost by reason of such contest by Borrower, (iv) such contest by Borrower shall not affect the ownership, use or occupancy of the Property, (v) such contest by Borrower shall not subject Lender or Borrower to the risk of civil or criminal liability (other than the civil liability of Borrower for the amount of the lien in question), (vi) such lien is subordinate to the lien of this Security Instrument, (vii) Borrower has not consented to such lien, (viii) Borrower has given Lender prompt notice of the filing of such lien and the bonding thereof by Borrower and, upon request by Lender from time to time, notice of the status of such contest by Borrower and/or confirmation of the continuing satisfaction of the conditions set forth in this Section 2.06(c), (ix) Borrower shall promptly pay the obligation secured by such lien upon a final determination of Borrower’s liability therefor, and (x) Borrower shall deliver to Lender cash, a bond or other security acceptable to Lender equal to 125% of the contested amount pursuant to collateral arrangements reasonably satisfactory to Lender.

     Section 2.07. Cost of Defending and Upholding this Security Instrument Lien. If any action or proceeding is commenced to which Lender is made a party relating to the Loan Documents and/or the Property or Lender’s interest therein or in which it becomes necessary to defend or uphold the lien of this Security Instrument or any other Loan Document, Borrower shall, on demand, reimburse Lender for all expenses (including, without limitation, reasonable attorneys’ fees and disbursements) incurred by Lender in connection therewith, and such sum, together with interest thereon at the Default Rate from and after such demand until fully paid, shall constitute a part of the Debt.

     Section 2.08. Use of the Property. Borrower will use, or cause to be used, the Property for such use as is permitted pursuant to applicable Legal Requirements including, without limitation, under the certificate of occupancy applicable to the Property, and which is required by the Loan Documents. Borrower shall not suffer or permit the Property or any portion thereof to be used by the public, any tenant, or any Person not subject to a Lease, in a manner as is reasonably likely to impair Borrower’s title to the Property, or in such manner as may give rise to a claim or claims of adverse usage or adverse possession by the public, or of implied dedication of the Property or any part thereof.

     Section 2.09. Financial Reports. (a) Borrower will keep and maintain or will cause to be kept and maintained on a Fiscal Year basis, in accordance with GAAP and The Uniform System of Accounts (or such other accounting basis reasonably acceptable to Lender) consistently applied, proper and accurate books, tax returns, records and accounts reflecting (i) all of the financial affairs of Borrower and Guarantor and (ii) all items of income and expense in connection with the operation of the Property or in connection with any services, equipment or furnishings provided in connection with the operation thereof, whether such income or expense may be realized by Borrower or by any other Person whatsoever, excepting lessees unrelated to and unaffiliated with Borrower who have leased from Borrower portions of the Premises for the purpose of occupying the same. Lender shall have the right from time to time at all times during normal business hours upon reasonable notice to examine such books, tax

35

returns, records and accounts at the office of Borrower or other Person maintaining such books, tax returns, records and accounts and to make such copies or extracts thereof as Lender shall desire. After the occurrence of an Event of Default, Borrower shall pay any costs and expenses incurred by Lender to examine Borrower’s and Guarantor’s accounting records with respect to the Property, as Lender shall determine to be necessary or appropriate in the protection of Lender’s interest.

     (b) Borrower will furnish Lender (i) annually, within one hundred twenty (120) days following the end of each Fiscal Year of Borrower and (ii) on a quarterly basis, within forty-five (45) days following the end of each fiscal quarter of Borrower, with a complete copy of Borrower’s financial statement consistently applied covering (i) all of the financial affairs of Borrower and (ii) the operation of the Property for such Fiscal Year or fiscal quarters, as applicable, and containing a statement of revenues and expenses, a statement of assets and liabilities and a statement of Borrower’s equity. Each annual financial statement shall be accompanied by audited financial statements of Ashford Hospitality Trust Inc. which are audited by a nationally recognized Independent certified public accountant that is acceptable to Lender in accordance with GAAP and The Uniform System of Accounts (or such other accounting basis reasonably acceptable to Lender). Together with the financial statements required to be furnished pursuant to this Section 2.09(b), Borrower shall furnish to Lender (A) an Officer’s Certificate certifying as of the date thereof (1) that the financial statements accurately represent the results of operations and financial condition of Borrower and the Property all in accordance with GAAP and The Uniform System of Accounts (or such other accounting basis reasonably acceptable to Lender) consistently applied, and (2) whether there exists a Default under the Note or any other Loan Document executed and delivered by Borrower, and if such event or circumstance exists, the nature thereof, the period of time it has existed and the action then being taken to remedy such event or circumstance and (B) together with the financial statements delivered pursuant to Section 2.09(b)(ii) above, a statement showing (1) projected Net Operating Income for the subsequent twelve (12) month period adjusted to reflect the Adjusted Net Cash Flow (subject to verification by Lender in its reasonable discretion) and (2) the calculation of the Aggregate Debt Service Coverage.

     (c) During the continuance of an O&M Operative Period and when requested by Lender, Borrower will furnish Lender monthly, within twenty (20) days following the end of each month, with a true, complete and correct cash flow statement with respect to the Property in the form required to be delivered pursuant to the Management Agreement and made a part hereof or such other form acceptable to Lender, showing (i) all cash receipts of any kind whatsoever and all cash payments and disbursements, (ii) year-to-date summaries of such cash receipts, payments and disbursements, and (iii) during an O&M Operative Period, a calculation of the Aggregate Debt Service Coverage, together with a certification of Manager stating that such cash flow statement is true, complete and correct and a list of all litigation and proceedings affecting Borrower or the Property in which the amount involved is $250,000 or more, if not covered by insurance (or $1,000,000 or more whether or not covered by insurance).

     (d) Intentionally Omitted.

     (e) At any time during which (i) an O&M Operative Period exists or (ii) the Rent under Space Leases exceeds five percent (5%) of the annual Operating Income, Borrower will furnish Lender annually, within twenty (20) days following the end of each year and within twenty (20) days following receipt of such request therefor, with a true, complete and correct rent roll for the Property which includes the information contained on the Rent Roll, including a list of which tenants are in default under their respective Major Space Leases, dated as of the date of Lender’s request, identifying each tenant that has filed a bankruptcy, insolvency, or reorganization proceeding since delivery of the last such rent roll, and the arrearages for such tenant, if any, and, if requested by Lender, a summary of the material terms of the Major Space Leases, including, without limitation, the dates of occupancy, the dates of expiration, any Rent concessions, work obligations or other inducements granted to the tenants thereunder, and any renewal options, and such rent roll shall be accompanied by an Officer’s Certificate, dated as of the date of the delivery of such rent roll, certifying that such rent roll is true, correct and complete in all material respects as of its date.

36

     (f) Borrower shall furnish to Lender, within thirty (30) days after Lender’s request therefor, with such further detailed information with respect to the operation of the Property and the financial affairs of Borrower as may be reasonably requested by Lender.

     (g) Borrower shall cause Manager to furnish to Lender, within twenty (20) days following the end of each year, a schedule of tenant security deposits to the extent such security deposits aggregate $1,000,000 or more.

     (h) Borrower will furnish Lender annually, within ninety (90) days after the end of each Fiscal Year, with a report setting forth (i) the average occupancy rate of the Property during such Fiscal Year, and (ii) the capital repairs, replacements and improvements performed at the Property during such Fiscal Year and the aggregate Recurring Replacement Expenditures made in connection therewith.

     (i) Borrower will furnish Lender monthly, within thirty (30) days following the end of each month, an occupancy summary for the Property setting forth the occupancy rates, average daily room rates, advance booking information (excluding customer names), RevPAR Yield Index, RevPAR and room revenues for each month of the preceding calendar year, as well as annual averages of the same, and such other information as may customarily be reflected thereon or reasonably requested by Lender, together with all franchise inspection reports and STR Reports received by Borrower during the preceding month.

     (j) Borrower shall and shall cause Guarantor to furnish to Lender annually, within thirty (30) days of filing its respective tax return, a copy of such tax return.

     (k) Borrower shall submit to Lender for Lender’s written approval (provided that such approval shall only be required in the event that Borrower or any Affiliate of Borrower has the right to approve any such budget pursuant to the terms of the Management Agreement) not to be unreasonably withheld, an Annual Budget within ten (10) Business Days after receipt thereof from Manager, in form satisfactory to Lender setting forth in reasonable detail budgeted monthly operating income and monthly operating capital and other expenses for the Property. In the event Lender shall have the right to approve such Annual Budget and Lender objects to the proposed Annual Budget submitted by Borrower, Lender shall advise Borrower of such objections within fifteen (15) days after receipt thereof (and deliver to Borrower a reasonably detailed description of such objections) and Borrower shall, within three (3) days after receipt of notice of any such objections, revise such Annual Budget and resubmit the same to Lender. Lender shall advise Borrower of any objections to such revised Annual Budget within ten (10) days after receipt thereof (and deliver to Borrower a reasonably detailed description of such objections) and Borrower shall revise the same in accordance with the process described herein until Lender approves an Annual Budget, provided, however, that if Lender shall not advise Borrower of its objections to any proposed Annual Budget within the applicable time period set forth in this Section, then such proposed Annual Budget shall be deemed approved by Lender. If Lender has the right to approve the Annual Budget pursuant to the terms of the Management Agreement, until such time that Lender approves a proposed Annual Budget, the most recently Approved Annual Budget shall, except as otherwise provided in the Management Agreement, apply; provided that, such Approved Annual Budget shall be adjusted to reflect actual increases in Basic Carrying Costs and utilities expenses and to delete any non-recurring expenses. In the event that Borrower must incur an Extraordinary Expense, then Borrower shall promptly deliver to Lender a reasonably detailed explanation of such proposed Extraordinary Expense which, if Borrower has the right to approve such expenditures pursuant to the terms of the Management Agreement, shall be subject to Lender’s approval, which approval may be granted or denied in Lender’s reasonable discretion.

     (l) In the event that Borrower fails to deliver any of the financial statements, reports or other information required to be delivered to Lender pursuant to this Section 2.09 on or prior to their due dates, if any such failure shall continue for ten (10) days following notice thereof from Lender, Borrower shall pay to Lender on each Payment Date for each month or portion thereof that any such financial statement, report or other information remains undelivered, an administrative fee in the amount of Two Thousand Five Hundred Dollars ($2,500) in the aggregate for all failures occurring in any applicable month. Borrower agrees that such administrative fee (i) is a fair and reasonable fee necessary to compensate Lender for its additional administrative costs and increased costs relating to Borrower’s failure to deliver the aforementioned statements, reports or other items as and when required hereunder and (ii) is not a penalty.

37

     Section 2.10. Litigation. Borrower will give prompt written notice to Lender of any litigation or governmental proceedings pending or threatened (in writing) against Borrower which might have a Material Adverse Effect.

     Section 2.11. Updates of Representations. Borrower shall deliver to Lender within ten (10) Business Days of the request of Lender an Officer’s Certificate updating all of the representations and warranties contained in this Security Instrument and the other Loan Documents and certifying that all of the representations and warranties contained in this Security Instrument and the other Loan Documents, as updated pursuant to such Officer’s Certificate, are true, accurate and complete in all material respects as of the date of such Officer’s Certificate or shall set forth the exceptions to representations and/or warranties in reasonable detail, as applicable, and, upon Lender’s request for further information with respect to such exceptions, shall provide Lender such additional information as Lender may reasonably request

     Section 2.12. Tenancy-in-Common. In the event that title to the Property is held by tenants-in-common, Borrower has delivered a true and complete written tenancy-in-common agreement (the “TIC Agreement”) which has been duly executed by each tenant-in-common having an interest in the Property (each, a “TIC”). The TIC Agreement provides, or, if not otherwise provided for in the TIC Agreement, each TIC agrees, that (a) each TIC irrevocably waives any and all rights of partition available at law, in equity or by contract, (b) each TIC shall at all times be a Single Purpose Entity all of the legal and beneficial interest in which is owned by an “Accredited Investor” as defined in Regulation D, as promulgated under the Securities Act, (c) each TIC irrevocably waives any and all rights it may have at law or in equity to obtain a lien on any tenant-in-common interest in the Property, (d) each TIC agrees that (i) any liens, security interests, judgment liens, charges or other encumbrances upon the Property or any interest of another TIC in the Property and (ii) any options to purchase or rights of first refusal or similar rights with respect to another TIC’s interest in the Property shall be and remain inferior and subordinate to any liens, security interests, judgment liens, charges or other encumbrances upon Borrower’s assets securing payment of the Debt, regardless of whether such liens, security interests, judgment liens, charges or other encumbrances, rights or options presently exist or are hereafter created or attach and that no TIC shall (i) exercise or enforce any creditor’s right it may have against Borrower or any other TIC or (ii) foreclose, repossess, sequester or otherwise take steps or institute any action or proceedings (judicial or otherwise, including without limitation the commencement of, or joinder in, any liquidation, bankruptcy, rearrangement, debtor’s relief or insolvency proceeding) to enforce any liens, security interests, judgment liens, charges or other encumbrances on assets of Borrower or any other TIC, (e) at no time shall there be more than three (3) TICs with respect to the Property, (f) the minimum investment in the Property of each TIC shall be $500,000 and (g) Lender is a third-party beneficiary to the provisions relating to the items set forth in (a) through (f) above. Borrower shall not amend, modify or terminate the TIC Agreement.

ARTICLE III: INSURANCE AND CASUALTY RESTORATION

     Section 3.01. Insurance Coverage. Borrower shall, at its expense, maintain or cause to be maintained the following insurance coverages with respect to the Property during the term of this Security Instrument:

(a) (i) Insurance against loss or damage by fire, casualty and other hazards included in an “all-risk” coverage endorsement or its equivalent (which, in the case of insurance during the time of any construction work (“Construction”) shall be in “builder’s risk completed value non-reporting form” together with rents, earnings and extra expense insurance covering loss due to delay in completion of the Improvements), with such endorsements as Lender may from time to time reasonably require and which are customarily required by Institutional Lenders of similar properties similarly situated, including, without limitation, if the Property constitutes a legal non-conforming use, an ordinance of law coverage endorsement which contains “Demolition Cost”, “Loss Due to Operation of Law” and “Increased Cost of Construction” coverages, covering the Property in an amount not less than the greater of (A) 100% of the insurable replacement value of the Property (exclusive of the Premises and footings and foundations) and (B) such other amount as is necessary to prevent any reduction in such policy by reason of and to prevent Borrower, Lender or any other insured thereunder from being deemed to be a co-insurer. Not less frequently than once every three (3) years, Borrower, at its option, shall either (A) have the Appraisal updated or obtain a new appraisal of

38

the Property, (B) have a valuation of the Property made by or for its insurance carrier conducted by an appraiser experienced in valuing properties of similar type to that of the Property which are in the geographical area in which the Property is located or (C) provide such other evidence as will, in Lender’s sole judgment, enable Lender to determine whether there shall have been an increase in the insurable value of the Property and Borrower shall deliver such updated Appraisal, new appraisal, insurance valuation or other evidence acceptable to Lender, as the case may be, and, if such updated Appraisal, new appraisal, insurance valuation, or other evidence acceptable to Lender reflects an increase in the insurable value of the Property, the amount of insurance required hereunder shall be increased accordingly and Borrower shall deliver evidence satisfactory to Lender that such policy has been so increased.

     (ii) Commercial general liability insurance against claims for personal and bodily injury and/or death to one or more persons or property damage, occurring on, in or about the Property (including the adjoining streets, sidewalks and passageways therein) in such amounts as Lender may from time to time reasonably require (but in no event shall Lender’s requirements be increased more frequently than once during each twelve (12) month period) and which are customarily required by Institutional Lenders for similar properties similarly situated, but not less than $1,000,000 per occurrence and $2,000,000 general aggregate on a per location basis and, in addition thereto, not less than $50,000,000, or such lesser amount as is required by the term of the Management Agreement (but in no event less than $10,000,000) excess and/or umbrella liability insurance shall be maintained for any and all claims.

     (iii) Business interruption, rent loss or other similar insurance with an unlimited indemnity period (A) with loss payable to Lender, (B) covering all risks required to be covered by the insurance provided for in Section 3.01(a)(i) hereof and (C) in an amount not less than 100% of the projected total revenues derived from the Property for the succeeding twenty-four (24) month period based on an occupancy rate taking into account historical and projected occupancy. The amount of such insurance shall be determined upon the execution of this Security Instrument, and not more frequently than once each calendar year thereafter based on Borrower’s reasonable estimate of projected total revenues derived from the Property for the next succeeding twenty-four (24) months together with a six (6) month extended period of indemnity. In the event the Property shall be damaged or destroyed, Borrower shall and hereby does assign to Lender all payment of claims under the policies of such insurance, and all amounts payable thereunder, and all net amounts, shall be collected by Lender under such policies and shall be applied in accordance with this Security Instrument.

     (iv) Intentionally Omitted.

     (v) Insurance against loss or damages from (A) leakage of sprinkler systems and (B) explosion of steam boilers, air conditioning equipment, pressure vessels or similar apparatus now or hereafter installed at the Property, in such amounts as Lender may from time to time reasonably require and which are then customarily required by Institutional Lenders of similar properties similarly situated.

     (vi) Flood insurance in an amount equal to the full insurable value of the Property or the maximum amount available, whichever is less, if the Improvements are located in an area designated by the Secretary of Housing and Urban Development as being “an area of special flood hazard” under the National Flood Insurance Program (i.e., having a one percent or greater chance of flooding), and if flood insurance is available under the National Flood Insurance Act.

     (vii) Worker’s compensation insurance or other similar insurance which may be required by Governmental Authorities or Legal Requirements.

     (viii) Insurance against loss resulting from mold, spores or fungus on or about the Premises.

     (ix) Insurance against damage resulting from acts of terrorism, or an insurance policy without an exclusion for damages resulting from terrorism, on terms consistent with the commercial property insurance policy required under subsections (i), (ii) and (iii) above.

39

     (x) At all times during Construction, contractor’s liability insurance to a limit of not less than $25,000,000 on a per occurrence basis covering each contractor’s construction operation at the Premises.

     (xi) Such other insurance as may from time to time be required by Lender and which is then customarily required by Institutional Lenders for similar properties similarly situated, against other insurable hazards, including, but not limited to, malicious mischief, vandalism, sinkhole and mine subsidence, acts of terrorism, war risk, windstorm and/or earthquake, due regard to be given to the size and type of the Premises, Improvements, Fixtures and Equipment and their location, construction and use. Additionally, Borrower shall carry such insurance coverage as Lender may from time to time require if the failure to carry such insurance may result in a downgrade, qualification or withdrawal of any class of securities issued in connection with a Securitization or, if the Loan is not yet part of a Securitization, would result in an increase in the subordination levels of any class of securities anticipated to be issued in connection with a proposed Securitization.

     (xii) If Borrower, any of its Affiliates or Manager holds a liquor license for the Premises, liquor liability insurance in the amount of no less than $10,000,000.

     (xiii) Automobile liability insurance covering owned, hired and not owned vehicles in an amount of not less than $1,000,000 per accident.

     (b) Borrower shall cause any Manager of the Property to maintain fidelity insurance in an amount equal to or greater than the Operating Income of the Property for the six (6) month period immediately preceding the date on which the premium for such insurance is due and payable or such lesser amount as Lender shall approve.

     Section 3.02. Policy Terms. (a) All insurance required by this Article III shall be in the form (other than with respect to Sections 3.01(a)(vi) and (vii) above when insurance in those two sub-sections is placed with a governmental agency or instrumentality on such agency’s forms) and amount and with deductibles as, from time to time, shall be reasonably acceptable to Lender, under valid and enforceable policies issued by financially responsible insurers authorized to do business in the State where the Property is located, with a general policyholder’s service rating of not less than A and a financial rating of not less than XIII as rated in the most currently available Best’s Insurance Reports (or the equivalent, if such rating system shall hereafter be altered or replaced) and shall have a claims paying ability rating and/or financial strength rating, as applicable, of not less than “AA” (or its equivalent), or such lower claims paying ability rating and/or financial strength rating, as applicable, as Lender shall, in its sole and absolute discretion, consent to, from a Rating Agency (one of which after a Securitization in which Standard & Poor’s rates any securities issued in connection with such Securitization, shall be Standard & Poor’s). Upon request of Lender originals or certified copies of all insurance policies shall be delivered to and held by Lender. All such policies (except policies for worker’s compensation) shall name Lender, its successors and/or assigns as an additional insured or, with respect to the insurance required pursuant to Section 3.01(a)(iii) above, shall provide for loss payable to Lender, its successors and/or assigns and shall contain (or have attached): (i) standard “non-contributory mortgagee” endorsement or its equivalent relating, inter alia, to recovery by Lender notwithstanding the negligent or willful acts or omissions of Borrower; (ii) a waiver of subrogation endorsement as to Lender; (iii) an endorsement indicating that neither Lender nor Borrower shall be or be deemed to be a co-insurer with respect to any casualty risk insured by such policies and shall provide for a deductible per loss of an amount not more than $25,000, and (iv) a provision that such policies shall not be canceled, terminated, denied renewal or amended, including, without limitation, any amendment reducing the scope or limits of coverage, without at least thirty (30) days’ prior written notice to Lender in each instance. Not less than thirty (30) days prior to the expiration dates of the insurance policies obtained pursuant to this Security Instrument, certificates evidencing such renewals bearing notations evidencing the payment of premiums or accompanied by other reasonable evidence of such payment (which premiums shall not be paid by Borrower through or by any financing arrangement which would entitle an insurer to terminate a policy) shall be delivered by Borrower to Lender. Borrower shall not carry separate insurance, concurrent in kind or form or contributing in the event of loss, with any insurance required under this Article III.

40

     (b) If Borrower fails to maintain and deliver to Lender the original policies or certificates of insurance required by this Security Instrument, or if there are insufficient funds in the Basic Carrying Costs Escrow Account to pay the premiums for same, Lender may, at its option, procure such insurance, and Borrower shall pay, or as the case may be, reimburse Lender for, all premiums thereon promptly, upon demand by Lender, with interest thereon at the Default Rate from the date paid by Lender to the date of repayment and such sum shall constitute a part of the Debt.

     (c) Borrower shall notify Lender of the renewal premium of each insurance policy and Lender shall be entitled to pay such amount on behalf of Borrower from the Basic Carrying Costs Escrow Account.

     (d) The insurance required by this Security Instrument may, at the option of Borrower, be effected by blanket and/or umbrella policies issued to Borrower or Manager covering the Property provided that, in each case, the policies otherwise comply with the provisions of this Security Instrument and allocate to the Property, from time to time (but in no event less than once a year), the coverage specified by this Security Instrument, without possibility of reduction or coinsurance by reason of, or damage to, any other property (real or personal) named therein. If the insurance required by this Security Instrument shall be effected by any such blanket or umbrella policies, Borrower shall furnish to Lender (i) an original certificate of insurance together with reasonable access to the original of such policy to review such policy’s coverage of the Property, with schedules attached thereto showing the amount of the insurance provided under such policies applicable to the Property and (ii) an Officer’s Certificate setting forth (A) the number of properties covered by such policy, (B) the location by city (if available, otherwise, county) and state of the properties, (C) the average square footage of the properties, (D) a brief description of the typical construction type included in the blanket policy and (E) such other information as Lender may reasonably request.

     Section 3.03. Assignment of Policies. (a) Borrower hereby assigns to Lender the proceeds of all insurance (other than worker’s compensation and liability insurance) obtained pursuant to this Security Instrument, all of which proceeds shall be payable to Lender as collateral and further security for the payment of the Debt and the performance of the Cross-collateralized Borrowers’ obligations hereunder and under the other Loan Documents, and Borrower hereby authorizes and directs the issuer of any such insurance to make payment of such proceeds directly to Lender. Except as otherwise expressly provided in Section 3.04 or elsewhere in this Article III, Lender shall have the option, in its discretion, and without regard to the adequacy of its security, to apply all or any part of the proceeds it may receive pursuant to this Article in such manner as Lender may elect to any one or more of the following: (i) the payment of the Debt, whether or not then due, in any proportion or priority as Lender, in its discretion, may elect, (ii) the repair or restoration of the Property, (iii) the cure of any Default or (iv) the reimbursement of the costs and expenses of Lender incurred pursuant to the terms hereof in connection with the recovery of the Insurance Proceeds. Nothing herein contained shall be deemed to excuse Borrower from repairing or maintaining the Property as provided in this Security Instrument or restoring all damage or destruction to the Property, regardless of the sufficiency of the Insurance Proceeds, and the application or release by Lender of any Insurance Proceeds shall not cure or waive any Default or notice of Default.

     (b) In the event of the foreclosure of this Security Instrument or any other transfer of title or assignment of all or any part of the Property in extinguishment, in whole or in part, of the Debt, all right, title and interest of Borrower in and to all policies of insurance required by this Security Instrument shall inure to the benefit of the successor in interest to Borrower or the purchaser of the Property. If, prior to the receipt by Lender of any proceeds, the Property or any portion thereof shall have been sold on foreclosure of this Security Instrument or by deed in lieu thereof or otherwise, or any claim under such insurance policy arising during the term of this Security Instrument is not paid until after the extinguishment of the Debt, and Lender shall not have received the entire amount of the Debt outstanding at the time of such extinguishment, whether or not a deficiency judgment on this Security Instrument shall have been sought or recovered or denied, then, the proceeds of any such insurance to the extent of the amount of the Debt not so received, shall be paid to and be the property of Lender, together with interest thereon at the Default Rate, and the reasonable attorney’s fees, costs and disbursements incurred by Lender in connection with the collection of the proceeds which shall be paid to Lender and Borrower hereby assigns, transfers and sets over to Lender all of Borrower’s right, title and interest in and to such proceeds. Notwithstanding any provisions of this Security Instrument to the contrary, Lender shall not be deemed to be a trustee or other fiduciary with respect to its receipt of any such proceeds, which may be commingled with any other monies of

41

Lender; provided, however, that Lender shall use such proceeds for the purposes and in the manner permitted by this Security Instrument. Any proceeds deposited with Lender shall be held by Lender in an interest-bearing account, but Lender makes no representation or warranty as to the rate or amount of interest, if any, which may accrue on such deposit and shall have no liability in connection therewith. Interest accrued, if any, on the proceeds shall be deemed to constitute a part of the proceeds for purposes of this Security Instrument. The provisions of this Section 3.03(b) shall survive the termination of this Security Instrument by foreclosure, deed in lieu thereof or otherwise as a consequence of the exercise of the rights and remedies of Lender hereunder after a Default.

     Section 3.04. Casualty Restoration. (a) (i) In the event of any damage to or destruction of the Property the cost to repair which could reasonably be expected to be in excess of $250,000 in the aggregate, Borrower shall give prompt written notice to Lender (which notice shall set forth Borrower’s good faith estimate of the cost of repairing or restoring such damage or destruction, or if Borrower cannot reasonably estimate the anticipated cost of restoration, Borrower shall nonetheless give Lender prompt notice of the occurrence of such damage or destruction, and will diligently proceed to obtain estimates to enable Borrower to quantify the anticipated cost and time required for such restoration, whereupon Borrower shall promptly notify Lender of such good faith estimate) and, provided that restoration does not violate any Legal Requirements, Borrower shall promptly commence and diligently prosecute to completion the repair, restoration or rebuilding of the Property so damaged or destroyed to a condition such that the Property shall be at least equal in value to that immediately prior to the damage to the extent practicable, in full compliance with all Legal Requirements and the provisions of all Leases, and in accordance with Section 3.04(b) below. Such repair, restoration or rebuilding of the Property are sometimes hereinafter collectively referred to as the “Work”.

     (ii) Borrower shall not adjust, compromise or settle any claim for Insurance Proceeds without the prior written consent of Lender, which shall not be unreasonably withheld or delayed and Lender shall have the right, at Borrower’s sole cost and expense, to participate in any settlement or adjustment of Insurance Proceeds; provided, however, that, except during the continuance of an Event of Default, Lender’s consent shall not be required with respect to the adjustment, compromising or settlement of any claim for Insurance Proceeds in an amount less than $1,000,000.

     (iii) Subject to Section 3.04(a)(iv), Lender shall apply any Insurance Proceeds which it may receive towards the Work in accordance with Section 3.04(b) and the other applicable sections of this Article III.

     (iv) If (A) an Event of Default shall have occurred, (B) Lender is not reasonably satisfied that the Debt Service Coverage, after substantial completion of the Work, will be at least equal to the Required Debt Service Coverage, (C) more than thirty percent (30%) of the reasonably estimated fair market value of the Property is damaged or destroyed, (D) Lender is not reasonably satisfied that the Work can be completed six (6) months prior to Maturity or (E) Lender is not reasonably satisfied that the Work can be completed within twelve (12) months of the damage to or destruction of the Property (each, a “Substantial Casualty”), Lender shall have the option, in its sole discretion to apply any Insurance Proceeds it may receive pursuant to this Security Instrument (less any cost to Lender of recovering and paying out such proceeds incurred pursuant to the terms hereof and not otherwise reimbursed to Lender, including, without limitation, reasonable attorneys’ fees and expenses) to the payment of the Debt, without any prepayment fee or charge of any kind, or to allow such proceeds to be used for the Work pursuant to the terms and subject to the conditions of Section 3.04(b) hereof and the other applicable sections of this Article III.

     (v) In the event that Lender elects or is obligated hereunder to allow Insurance Proceeds to be used for the Work, any excess proceeds remaining after completion of such Work shall be applied to the payment of the Debt without any prepayment fee or charge of any kind.

     (vi) If any Insurance Proceeds are applied to the payment of the Debt, provided that no Event of Default exists, Borrower may prepay the balance of the Release Price with respect to the Property in connection with obtaining a Release of the Property without any prepayment fee or charge of any kind.

42

     (b) If any Condemnation Proceeds in accordance with Section 6.01(a), or any Insurance Proceeds in accordance with Section 3.04(a), are to be applied to the repair, restoration or rebuilding of the Property, then such proceeds shall be deposited into a segregated interest-bearing bank account at the Bank, which shall be an Eligible Account, held by Lender and shall be paid out from time to time to Borrower as the Work progresses (less any cost to Lender of recovering and paying out such proceeds, including, without limitation, reasonable attorneys’ fees and costs allocable to inspecting the Work and the plans and specifications therefor) subject to Section 5.13 hereof and to all of the following conditions:

     (i) An Independent architect or engineer selected by Borrower and reasonably acceptable to Lender (an “Architect” or “Engineer”) or a Person otherwise reasonably acceptable to Lender, shall have delivered to Lender a certificate estimating the cost of completing the Work, and, if the amount set forth therein is more than the sum of the amount of Insurance Proceeds then being held by Lender in connection with a casualty and amounts agreed or reasonably expected to be agreed to be paid as part of a final settlement under the insurance policy upon or before completion of the Work, Borrower shall have delivered to Lender (A) cash collateral in an amount equal to such excess, (B) an unconditional, irrevocable, clean sight draft letter of credit, in form, substance and issued by a bank reasonably acceptable to Lender, in the amount of such excess and draws on such letter of credit shall be made by Lender to make payments pursuant to this Article III following exhaustion of the Insurance Proceeds therefor or (C) a completion bond in form, substance and issued by a surety company reasonably acceptable to Lender.

     (ii) If the cost of the Work is reasonably estimated by an Architect or Engineer in a certification reasonably acceptable to Lender to be equal to or exceed five percent (5%) of the Allocated Loan Amount, such Work shall be performed under the supervision of an Architect or Engineer, it being understood that the plans and specifications with respect thereto shall provide for Work so that, upon completion thereof, the Property shall be at least equal in replacement value and general utility to the Property prior to the damage or destruction.

     (iii) Each request for payment shall be made on not less than ten (10) days’ prior notice to Lender and shall be accompanied by a certificate of an Architect or Engineer, or, if the Work is not required to be supervised by an Architect or Engineer, by an Officer’s Certificate stating (A) that payment is for Work completed substantially in compliance with the plans and specifications, if required under clause (ii) above, (B) that the sum requested is required to reimburse Borrower for payments by Borrower to date, or is due to the contractors, subcontractors, materialmen, laborers, engineers, architects or other Persons rendering services or materials for the Work (giving a brief description of such services and materials), and that when added to all sums previously paid out by Lender does not exceed the value of the Work done to the date of such certificate, (C) if the sum requested is to cover payment relating to repair and restoration of personal property required or relating to the Property, that title to the personal property items covered by the request for payment is vested in Borrower (unless Borrower is lessee of such personal property), and (D) that the Insurance Proceeds and other amounts deposited by Borrower held by Lender after such payment is more than the estimated remaining cost to complete such Work; provided, however, that if such certificate is given by an Architect or Engineer, such Architect or Engineer shall certify as to clause (A) above, and such Officer’s Certificate shall certify as to the remaining clauses above, and provided, further, that Lender shall not be obligated to disburse such funds if Lender determines, in Lender’s reasonable discretion, that Borrower shall not be in compliance with this Section 3.04(b). Additionally, each request for payment shall contain a statement signed by Borrower stating that the requested payment is for Work satisfactorily done to date.

     (iv) Each request for payment shall be accompanied by waivers of lien, in customary form and substance, covering that part of the Work for which payment has been made pursuant to any previous request for payment and, if required by Lender, a search prepared by a title company or licensed abstractor, or by other evidence reasonably satisfactory to Lender that there has not been filed with respect to the Property any mechanic’s or other lien or instrument for retention of title relating to any part of the Work not discharged of record. Additionally, as to any personal property covered by the request for payment, Lender shall be furnished with evidence of Borrower having incurred a payment obligation therefor and

43

such further evidence reasonably satisfactory to assure Lender that UCC filings therefor provide a valid first lien on the personal property in favor of Lender.

     (v) Lender shall have the right to inspect the Work at all reasonable times upon reasonable prior notice and may condition any disbursement of Insurance Proceeds upon satisfactory compliance by Borrower with the provisions hereof. Neither the approval by Lender of any required plans and specifications for the Work nor the inspection by Lender of the Work shall make Lender responsible for the preparation of such plans and specifications, or the compliance of such plans and specifications of the Work, with any applicable law, regulation, ordinance, covenant or agreement.

     (vi) Insurance Proceeds shall not be disbursed more frequently than once every thirty (30) days.

     (vii) Until such time as the Work has been substantially completed, Lender shall not be obligated to disburse to Borrower an amount (the “Retention Amount”) up to (A) until fifty percent (50%) of the Work has been completed (as reasonably determined by Lender), ten percent (10%) of the cost of the Work and (B) after fifty percent (50%) of the Work has been completed (as reasonably determined by Lender), five percent (5%) of the cost of the Work. Upon substantial completion of the Work, Borrower shall send notice thereof to Lender and, subject to the conditions of Section 3.04(b)(i)-(iv), Lender shall disburse one-half of the Retention Amount to Borrower; provided, however, that the remaining one-half of the Retention Amount shall be disbursed to Borrower when Lender shall have received copies of any and all final certificates of occupancy or other certificates, licenses and permits required for the ownership, occupancy and operation of the Property in accordance with all Legal Requirements. Borrower hereby covenants to diligently seek to obtain any such certificates, licenses and permits.

     (viii) Upon failure on the part of Borrower promptly to commence the Work or to proceed diligently and continuously to completion of the Work, subject to Force Majeure, not to exceed sixty (60) days, which failure shall continue after notice for thirty (30) days, Lender may apply any Insurance Proceeds or Condemnation Proceeds it then or thereafter holds to the payment of the Debt in accordance with the provisions of the Note; provided, however, that Lender shall be entitled to apply at any time all or any portion of the Insurance Proceeds or Condemnation Proceeds it then holds to the extent necessary to cure any Event of Default.

     (c) If Borrower (i) within ninety (90) days (plus, if all approvals from Governmental Authorities have not been obtained within such period and Borrower has continuously and expeditiously attempted to obtain such approvals within such time period, such additional period of time required to obtain approvals from all Governmental Authorities up to one hundred eighty (180) days in total, provided Borrower deposits with Lender an amount, as reasonably determined by Lender, equal to the Required Debt Service Payment for each additional thirty (30) day period) after the occurrence of any damage to the Property or any portion thereof (or such shorter period as may be required under any Major Space Lease) shall fail to submit to Lender for approval plans and specifications for the Work (approved by the Architect and by all Governmental Authorities whose approval is required), (ii) after any such plans and specifications are approved by all Governmental Authorities, the Architect and Lender, shall fail to promptly commence such Work or (iii) shall fail to diligently prosecute such Work to completion, then, in addition to all other rights available hereunder, at law or in equity, Lender, or any receiver of the Property or any portion thereof, upon five (5) days’ prior notice to Borrower (except in the event of emergency in which case no notice shall be required), may (but shall have no obligation to) perform or cause to be performed such Work, and may take such other steps as it reasonably deems advisable. Borrower hereby waives, for Borrower, any claim, other than for gross negligence or willful misconduct, against Lender and any receiver arising out of any act or omission of Lender or such receiver pursuant hereto, and Lender may apply all or any portion of the Insurance Proceeds (without the need to fulfill any other requirements of this Section 3.04) to reimburse Lender and such receiver, for all costs not reimbursed to Lender or such receiver upon demand together with interest thereon at the Default Rate from the date such amounts are advanced until the same are paid to Lender or the receiver.

44

     (d) If the Insurance Proceeds are greater than $1,000,000 or an Event of Default exists Borrower hereby irrevocably appoints Lender as its attorney-in-fact, coupled with an interest, to collect and receive any Insurance Proceeds paid with respect to any portion of the Property or the insurance policies required to be maintained hereunder, and to endorse any checks, drafts or other instruments representing any Insurance Proceeds whether payable by reason of loss thereunder or otherwise.

     (e) Notwithstanding the foregoing provisions of this Section 3.04, upon the occurrence of any damage to or destruction of the Property, provided that such damage or destruction is not a Substantial Casualty, if in Lender’s reasonable judgment the cost of repair of or restoration to the Property required as a result of any damage or destruction is less than $1,000,000 in the aggregate and the Work can be completed in less than one hundred twenty (120) days (but in no event beyond the date which is six (6) months prior to the Maturity Date), then Lender, upon request by Borrower, shall permit Borrower to apply for and receive the Insurance Proceeds directly from the insurer (and Lender shall advise the insurer to pay over such Insurance Proceeds directly to Borrower), to the extent required to pay for any such Work, with any excess thereof to be promptly paid by Borrower to Lender to be applied against the Debt.

     Section 3.05. Compliance with Insurance Requirements. Borrower promptly shall comply with, and shall cause the Property to comply with, all Insurance Requirements, even if such compliance requires structural changes or improvements or would result in interference with the use or enjoyment of the Property or any portion thereof provided Borrower shall have a right to contest in good faith and with diligence such Insurance Requirements provided (a) no Event of Default shall exist during such contest and such contest shall not subject the Property or any portion thereof to any lien or affect the priority of the lien of this Security Instrument, (b) failure to comply with such Insurance Requirements will not subject Lender or any of its agents, employees, officers or directors to any civil or criminal liability, (c) such contest will not cause any reduction in insurance coverage, (d) such contest shall not affect the ownership, use or occupancy of the Property, (e) the Property or any part thereof or any interest therein shall not be in any danger of being sold, forfeited or lost by reason of such contest by Borrower, (f) Borrower has given Lender prompt notice of such contest and, upon request by Lender from time to time, notice of the status of such contest by Borrower and/or information of the continuing satisfaction of the conditions set forth in clauses (a) through (e) of this Section 3.05, (g) upon a final determination of such contest, Borrower shall promptly comply with the requirements thereof, and (h) prior to and during such contest, Borrower shall furnish to Lender security satisfactory to Lender, in its reasonable discretion, against loss or injury by reason of such contest or the non-compliance with such Insurance Requirement (and if such security is cash, Lender shall deposit the same in an interest-bearing account and interest accrued thereon, if any, shall be deemed to constitute a part of such security for purposes of this Security Instrument, but Lender (i) makes no representation or warranty as to the rate or amount of interest, if any, which may accrue thereon and shall have no liability in connection therewith and (ii) shall not be deemed to be a trustee or fiduciary with respect to its receipt of any such security and any such security may be commingled with other monies of Lender). If Borrower shall use the Property or any portion thereof in any manner which could permit the insurer to cancel any insurance required to be provided hereunder, Borrower immediately shall obtain a substitute policy which shall satisfy the requirements of this Security Instrument and which shall be effective on or prior to the date on which any such other insurance policy shall be canceled. Borrower shall not by any action or omission invalidate any insurance policy required to be carried hereunder unless such policy is replaced as aforesaid, or materially increase the premiums on any such policy above the normal premium charged for such policy. Borrower shall cooperate with Lender in obtaining for Lender the benefits of any Insurance Proceeds lawfully or equitably payable to Lender in connection with the transaction contemplated hereby.

     Section 3.06. Event of Default During Restoration. Notwithstanding anything to the contrary contained in this Security Instrument including, without limitation, the provisions of this Article III, if, at the time of any casualty affecting the Property or any part thereof, or at any time during any Work, or at any time that Lender is holding or is entitled to receive any Insurance Proceeds pursuant to this Security Instrument, a Default exists and is continuing (whether or not it constitutes an Event of Default), Lender shall then have no obligation to make such proceeds available for Work and Lender shall have the right and option, to be exercised in its sole and absolute discretion and election, with respect to the Insurance Proceeds, either to retain and apply such proceeds in reimbursement for the actual costs, fees and expenses incurred by Lender in accordance with the terms hereof in connection with the adjustment of the loss and, after the occurrence of an Event of Default, any balance toward

45

payment of the Debt in such priority and proportions as Lender, in its sole discretion, shall deem proper, or towards the Work, upon such terms and conditions as Lender shall determine, or to cure such Event of Default, or to any one or more of the foregoing as Lender, in its sole and absolute discretion, may determine. If Lender shall receive and retain such Insurance Proceeds, the lien of this Security Instrument shall be reduced only by the amount thereof received, after reimbursement to Lender of expenses of collection, and actually applied by Lender in reduction of the principal sum payable under the Note in accordance with the Note.

     Section 3.07. Application of Proceeds to Debt Reduction. (a) No damage to the Property, or any part thereof, by fire or other casualty whatsoever, whether such damage be partial or total, shall relieve Borrower from its liability to pay in full the Debt and to perform its obligations under this Security Instrument and the other Loan Documents.

     (b) If any Insurance Proceeds are applied to reduce the Debt, Lender shall apply the same in accordance with the provisions of the Note.

ARTICLE IV: IMPOSITIONS

     Section 4.01. Payment of Impositions, Utilities and Taxes, etc. (a) Borrower shall pay or cause to be paid all Impositions at least five (5) days prior to the date upon which any fine, penalty, interest or cost for nonpayment is imposed, and furnish to Lender, upon request, receipted bills of the appropriate taxing authority or other documentation reasonably satisfactory to Lender evidencing the payment thereof. If Borrower shall fail to pay any Imposition in accordance with this Section and is not contesting or causing a contesting of such Imposition in accordance with Section 4.04 hereof, or if there are insufficient funds in the Basic Carrying Costs Escrow Account to pay any Imposition, Lender shall have the right, but shall not be obligated, to pay that Imposition, and Borrower shall repay to Lender, on demand, any amount paid by Lender, with interest thereon at the Default Rate from the date of the advance thereof to the date of repayment, and such amount shall constitute a portion of the Debt secured by this Security Instrument and the other Cross-collateralized Mortgages.

     (b) Borrower shall, prior to the date upon which any fine, penalty, interest or cost for the nonpayment is imposed, pay or cause to be paid all charges for electricity, power, gas, water and other services and utilities in connection with the Property. If Borrower shall fail to pay any amount required to be paid by Borrower pursuant to this Section 4.01 and is not contesting such charges in accordance with Section 4.04 hereof, Lender shall have the right, but shall not be obligated, to pay that amount, and Borrower will repay to Lender, on demand, any amount paid by Lender with interest thereon at the Default Rate from the date of the advance thereof to the date of repayment, and such amount shall constitute a portion of the Debt secured by this Security Instrument and the other Cross-collateralized Mortgages.

     (c) Borrower shall pay all taxes, charges, filing, registration and recording fees, excises and levies imposed upon Lender by reason of or in connection with its ownership of any Loan Document or any other instrument related thereto, or resulting from the execution, delivery and recording of, or the lien created by, or the obligation evidenced by, any of them, other than income, franchise and other similar taxes imposed on Lender and shall pay all corporate stamp taxes, if any, and other taxes, required to be paid on the Loan Documents. If Borrower shall fail to make any such payment within ten (10) days after written notice thereof from Lender, Lender shall have the right, but shall not be obligated, to pay the amount due, and Borrower shall reimburse Lender therefor, on demand, with interest thereon at the Default Rate from the date of the advance thereof to the date of repayment, and such amount shall constitute a portion of the Debt secured by this Security Instrument and the other Cross-collateralized Mortgages.

     Section 4.02. Deduction from Value. In the event of the passage after the date of this Security Instrument of any Legal Requirement deducting from the value of the Property for the purpose of taxation, any lien thereon or changing in any way the Legal Requirements now in force for the taxation of this Security Instrument, the other Cross-collateralized Mortgages and/or the Debt for federal, state or local purposes, or the manner of the operation of any such taxes so as to adversely affect the interest of Lender, or imposing any tax or other charge on any Loan Document, then Borrower will pay such tax, with interest and penalties thereon, if any, within the

46

statutory period. In the event the payment of such tax or interest and penalties by Borrower would be unlawful, or taxable to Lender or unenforceable or provide the basis for a defense of usury, then in any such event, Lender shall have the option, by written notice of not less than thirty (30) days, to declare the Debt (or, if Lender determines in its sole and absolute discretion, that no Material Adverse Effect may result therefrom, the Release Price with respect to the Property) immediately due and payable, with no prepayment fee or charge of any kind.

     Section 4.03. No Joint Assessment. Borrower shall not consent to or initiate the joint assessment of the Premises or the Improvements (a) with any other real property constituting a separate tax lot and Borrower represents and covenants that the Premises and the Improvements are and shall remain a separate tax lot or (b) with any portion of the Property which may be deemed to constitute personal property, or any other procedure whereby the lien of any taxes which may be levied against such personal property shall be assessed or levied or charged to the Property as a single lien.

     Section 4.04. Right to Contest. Borrower shall have the right, after prior notice to Lender, at its sole expense, to contest by appropriate legal proceedings diligently conducted in good faith, without cost or expense to Lender or any of its agents, employees, officers or directors, the validity, amount or application of any Imposition, provided that (a) no Event of Default shall exist during such proceedings and such contest shall not (unless Borrower shall comply with clause (d) of this Section 4.04) subject the Property or any portion thereof to any lien or affect the priority of the lien of this Security Instrument, (b) failure to pay such Imposition or charge will not subject Lender or any of its agents, employees, officers or directors to any civil or criminal liability, (c) the contest suspends enforcement of the Imposition or charge (unless Borrower first pays the Imposition or charge), (d) prior to and during such contest, Borrower shall furnish to Lender security satisfactory to Lender, in its reasonable discretion, against loss or injury by reason of such contest or the non-payment of such Imposition or charge (and if such security is cash, Lender may deposit the same in an interest-bearing account and interest accrued thereon, if any, shall be deemed to constitute a part of such security for purposes of this Security Instrument, but Lender (i) makes no representation or warranty as to the rate or amount of interest, if any, which may accrue thereon and shall have no liability in connection therewith and (ii) shall not be deemed to be a trustee or fiduciary with respect to its receipt of any such security and any such security may be commingled with other monies of Lender), (e) such contest shall not affect the ownership, use or occupancy of the Property, (f) the Property or any part thereof or any interest therein shall not be in any danger of being sold, forfeited or lost by reason of such contest by Borrower, (g) Borrower has given Lender notice of the commencement of such contest and upon request by Lender, from time to time, notice of the status of such contest by Borrower and/or confirmation of the continuing satisfaction of clauses (a) through (f) of this Section 4.04, and (h) upon a final determination of such contest, Borrower shall promptly comply with the requirements thereof. Upon completion of any contest, Borrower shall immediately pay the amount due, if any, and deliver to Lender proof of the completion of the contest and payment of the amount due, if any, following which Lender shall return the security, if any, deposited with Lender pursuant to clause (d) of this Section 4.04, provided that Lender shall, so long as no Event of Default exists, disburse to Borrower any sums held by Lender pursuant to clause (d) hereof to pay any contested Impositions. Borrower shall not pay any Imposition in installments unless permitted by applicable Legal Requirements, and shall, upon the request of Lender, deliver copies of all notices and bills relating to any Imposition or other charge covered by this Article IV to Lender.

     Section 4.05. No Credits on Account of the Debt. Borrower will not claim or demand or be entitled to any credit or credits on account of the Debt for any part of the Impositions assessed against the Property or any part thereof and no deduction shall otherwise be made or claimed from the taxable value of the Property, or any part thereof, by reason of this Security Instrument or the Debt. In the event such claim, credit or deduction shall be required by Legal Requirements, Lender shall have the option, by written notice of not less than thirty (30) days, to declare the Debt (or, if Lender determines in its sole and absolute discretion, that no Material Adverse Effect may result therefrom, the Release Price with respect to the Property) immediately due and payable, and Borrower hereby agrees to pay such amounts not later than thirty (30) days after such notice.

     Section 4.06. Documentary Stamps. If, at any time, the United States of America, any State or Commonwealth thereof or any subdivision of any such State shall require revenue or other stamps to be affixed to the Note, this Security Instrument or any other Loan Document, or impose any other tax or charges on the same, Borrower will pay the same, with interest and penalties thereon, if any.

47

ARTICLE V: CENTRAL CASH MANAGEMENT

     Section 5.01. Cash Flow. All payments constituting Rent shall be delivered to Manager. Manager shall collect all Rent and shall deposit in the Collection Account, the name and address of the bank in which such account is located and the account number of which to be identified in writing by Borrower to Lender, all Property Available Cash. Pursuant to the Collection Account Agreement of even date herewith, the bank in which the Collection Account is located has been instructed that all collected funds deposited in the Collection Account shall be automatically transferred through automated clearing house funds (“ACH”) or by Federal wire to the Central Account prior to 3:00 p.m. (New York City time) on the Business Day immediately prior to each Payment Date or, if an O&M Operative Period has occurred and is continuing, on a daily basis. Within two (2) Business Days of the Closing Date, Borrower shall deliver to Lender a copy of the irrevocable notice which Borrower delivered to the bank in which the Rent Account is located pursuant to the provisions of this Section 5.01, the receipt of which is acknowledged in writing by such bank. Lender may elect to change the financial institution in which the Central Account shall be maintained; however, Lender shall give Borrower and the bank in which the Collection Account is located not fewer than five (5) Business Days’ prior notice of such change. Neither Borrower nor Manager shall change such bank or the Collection Account without the prior written consent of Lender. All fees and charges of the bank(s) in which the Collection Account and the Central Account are located shall be paid by Borrower.

     Section 5.02. Establishment of Accounts. Lender has established the Escrow Accounts and the Central Account in the name of Lender and the Collection Account in the joint name of Borrower and Lender, as secured party. The Escrow Accounts , the Collection Account and the Central Account shall be under the sole dominion and control of Lender and funds held therein shall not constitute trust funds. Borrower hereby irrevocably directs and authorizes Lender to withdraw funds from the Collection Account, and to deposit into and withdraw funds from the Central Account and the Escrow Accounts, all in accordance with the terms and conditions of this Security Instrument. Borrower shall have no right of withdrawal in respect of the Collection Account, the Central Account or the Escrow Accounts except as specifically provided herein. Each transfer of funds to be made hereunder shall be made only to the extent that funds are on deposit in the Collection Account, the Central Account or the affected Sub-Account or Escrow Account, and Lender shall have no responsibility to make additional funds available in the event that funds on deposit are insufficient. The Central Account shall contain the Basic Carrying Costs Sub-Account, the Debt Service Payment Sub-Account, the Recurring Replacement Reserve Sub-Account, the Operation and Maintenance Expense Sub-Account and the Curtailment Reserve Sub-Account, each of which accounts shall be Eligible Accounts or book-entry sub-accounts of an Eligible Account (each a “Sub-Account” and collectively, the “Sub-Accounts”) to which certain funds shall be allocated and from which disbursements shall be made pursuant to the terms of this Security Instrument. Sums held in the Escrow Accounts may be commingled with other monies held by Lender.

     Section 5.03. Intentionally Omitted.

     Section 5.04. Servicer. At the option of Lender, the Loan may be serviced by a servicer (the “Servicer”) selected by Lender and Lender may delegate all or any portion of its responsibilities under this Security Instrument to the Servicer.

     Section 5.05. Monthly Funding of Sub-Accounts and Escrow Accounts. (a) On or before each Payment Date during the term of the Loan, commencing on the first (1st) Payment Date occurring after the month in which the Loan is initially funded, Borrower shall pay or cause to be paid to the Central Account all sums required to be deposited in the Sub-Accounts pursuant to this Section 5.05(a) and all funds transferred or deposited into the Central Account shall be allocated among the Sub-Accounts as follows and in the following priority:

     (i) first, to the Basic Carrying Costs Sub-Account, until an amount equal to the Basic Carrying Costs Monthly Installment for such Payment Date has been allocated to the Basic Carrying Costs Sub-Account;

48

     (ii) second, to the Debt Service Payment Sub-Account, until an amount equal to the Required Debt Service Payment for such Payment Date has been allocated to the Debt Service Payment Sub-Account;

     (iii) third, but only during any Default Management Period, to the Operation and Maintenance Expense Sub-Account in an amount equal to the Cash Expenses, other than management fees payable to Affiliates of Borrower, for the Interest Accrual Period ending immediately prior to such Payment Date pursuant to the related Approved Annual Budget;

     (iv) fourth, but only during any Default Management Period, to the Operation and Maintenance Expense Sub-Account in an amount equal to the amount, if any, of the Net Capital Expenditures for the Interest Accrual Period ending immediately prior to such Payment Date pursuant to the related Approved Annual Budget;

     (v) fifth, to the Recurring Replacement Reserve Sub-Account, but only until an amount equal to the Recurring Replacement Reserve Monthly Installment for such Payment Date has been allocated to the Recurring Replacement Reserve Sub-Account;

     (vi) sixth, but only during any Default Management Period, to the Operation and Maintenance Expense Sub-Account in an amount equal to the amount, if any, of the Extraordinary Expenses approved by Lender for the Interest Accrual Period ending immediately prior to such Payment Date; and

     (vii) seventh, but only during an O&M Operative Period, the balance, if any, to the Curtailment Reserve Sub-Account.

     Provided that no Event of Default has occurred and is continuing, Lender agrees that in each Interest Accrual Period any amounts deposited into or remaining in the Central Account after the Sub-Accounts have been funded as set forth in this Section 5.05(a) with respect to such Interest Accrual Period and any periods prior thereto, shall be disbursed by Lender to Borrower on each Payment Date and on the 15th day of each month (or if such date is not a Business Day, the first Business Day after such date) applicable to such Interest Accrual Period. The balance of the funds distributed to Borrower after payment of all Operating Expenses by or on behalf of Borrower may be retained by Borrower. After the occurrence, and during the continuance, of an Event of Default, no funds held in the Central Account shall be distributed to, or withdrawn by, Borrower, and Lender shall have the right to apply all or any portion of the funds held in the Central Account or any Sub-Account or any Escrow Account to the Debt in Lender’s sole discretion.

     (b) On each Payment Date, (i) sums held in the Basic Carrying Costs Sub-Account shall be transferred to the Basic Carrying Costs Escrow Account, (ii) sums held in the Debt Service Payment Sub-Account, together with any amounts deposited into the Central Account that are either (x) Loss Proceeds that Lender has elected to apply to reduce the Debt in accordance with the terms of Article III hereof or (y) excess Loss Proceeds remaining after the completion of any restoration required hereunder, shall be transferred to Lender to be applied towards the Required Debt Service Payment, (iii) sums held in the Recurring Replacement Reserve Sub-Account shall be transferred to the Recurring Replacement Reserve Escrow Account, (iv) sums held in the Operation and Maintenance Expense Sub-Account shall be transferred to the Operation and Maintenance Expense Escrow Account and (v) sums held in the Curtailment Reserve Sub-Account shall be transferred to the Curtailment Reserve Escrow Account.

     Section 5.06. Payment of Basic Carrying Costs. Borrower hereby agrees to pay all Basic Carrying Costs (without regard to the amount of money in the Basic Carrying Costs Sub-Account or the Basic Carrying Costs Escrow Account). At least ten (10) Business Days prior to the due date of any Basic Carrying Costs, and not more frequently than once each month, Borrower may notify Lender in writing and request that Lender pay such Basic Carrying Costs on behalf of Borrower on or prior to the due date thereof, and, provided that no Event of Default has occurred and is continuing and that there are sufficient funds available in the Basic Carrying Costs Escrow Account, Lender shall make such payments out of the Basic Carrying Costs Escrow Account before same shall be delinquent.

49

Together with each such request, Borrower shall furnish Lender with bills and all other documents necessary, as reasonably determined by Lender, for the payment of the Basic Carrying Costs which are the subject of such request. Borrower’s obligation to pay (or cause Lender to pay) Basic Carrying Costs pursuant to this Security Instrument shall include, to the extent permitted by applicable law, Impositions resulting from future changes in law which impose upon Lender an obligation to pay any property taxes or other Impositions or which otherwise adversely affect Lender’s interests.

     Provided that no Event of Default shall have occurred and is continuing, all funds deposited into the Basic Carrying Costs Escrow Account shall be held by Lender pursuant to the provisions of this Security Instrument and shall be applied in payment of Basic Carrying Costs in accordance with the terms hereof. Should an Event of Default occur, the sums on deposit in the Basic Carrying Costs Sub-Account and the Basic Carrying Costs Escrow Account may be applied by Lender in payment of any Basic Carrying Costs or may be applied to the payment of the Debt or any other charges affecting all or any portion of the Cross-collateralized Properties as Lender in its sole discretion may determine; provided, however, that no such application shall be deemed to have been made by operation of law or otherwise until actually made by Lender as herein provided.

     Section 5.07. Intentionally Omitted.

     Section 5.08. Recurring Replacement Reserve Escrow Account. (a) Borrower hereby agrees to pay all Recurring Replacement Expenditures with respect to the Property (without regard to the amount of money then available in the Recurring Replacement Reserve Sub-Account or the Recurring Replacement Reserve Escrow Account). Provided that Lender has received written notice from Borrower at least five (5) Business Days prior to the due date of any payment relating to Recurring Replacement Expenditures and not more frequently than once each month, and further provided that no Event of Default has occurred and is continuing, that there are sufficient funds available in the Recurring Replacement Reserve Escrow Account and Borrower shall have theretofore furnished Lender with lien waivers (if the cost incurred in connection therewith is greater than $25,000), copies of bills, invoices and other reasonable documentation as may be required by Lender to establish that the Recurring Replacement Expenditures which are the subject of such request represent amounts due for completed or partially completed capital work and improvements performed at the Property, Lender shall make such payments out of the Recurring Replacement Reserve Escrow Account.

     (b) In lieu of making deposits into the Recurring Replacement Reserve Sub-Account, Borrower may deliver an Approved Letter of Credit to Lender in the amount of the Required RRE Shortfall (as the same may be amended, replaced, extended or drawn down upon pursuant to the provisions of this Section 5.08, the “Delivered Letter of Credit”). The Delivered Letter of Credit shall be held in accordance with this Section 5.08 and otherwise constitute security for the payment of the Debt. On or prior to the thirtieth (30^th) day prior to the expiration of any Delivered Letter of Credit, Borrower shall provide Lender with a replacement to such Delivered Letter of Credit which shall be an Approved Letter of Credit, and otherwise in the same form and amount as the Delivered Letter of Credit being replaced or such other form reasonably approved by Lender. In the event (i) Borrower shall fail to provide Lender with a replacement Delivered Letter of Credit on or prior to the thirtieth (30^th) day prior to the expiration of any previously existing Delivered Letter of Credit or (ii) the long-term unsecured debt rating or the short-term unsecured debt rating of the bank issuing the Delivered Letter of Credit shall be downgraded below “AA-” (or its equivalent) or “A-1” (or its equivalent), respectively, withdrawn or qualified by any Rating Agency and the letter of credit required to be delivered hereunder is not replaced within thirty (30) days of receipt of notice of such downgrading, withdrawal or qualification, Lender may draw on the Delivered Letter of Credit, deposit all sums received in connection with such draw into the Recurring Replacement Reserve Sub-Account, and disburse such sums in accordance with Section 5.08 above. Provided no Event of Default shall have occurred and is continuing, upon Lender’s receipt of a written request from Borrower together with such other documentation as may be reasonably requested by Lender, Lender shall draw on all or a portion of the Delivered Letter of Credit, deposit any sums received in connection with such draw into the Recurring Replacement Reserve Sub-Account, and apply such sums towards the reimbursement of Borrower for the cost of any Recurring Replacement Expenditures in accordance with the provisions of Section 5.08 hereof. Upon the occurrence of an Event of Default, Lender may draw on the Delivered Letter of Credit and apply the sums received towards the payment of Recurring Replacement Expenditures or towards payment of the Debt or any other charges affecting all or any portion of the Property, as Lender in its sole discretion may determine; provided, however, that no such application shall be deemed to have

50

been made by operation of law or otherwise until actually made by Lender as herein provided. Provided that no Event of Default shall have occurred and is continuing, Borrower may deliver to Lender Dollars in the amount of any Delivered Letter of Credit and, upon receipt of such Dollars, Lender will return to Borrower the Delivered Letter of Credit.

     (c) Provided that no Event of Default shall have occurred and is continuing, all funds deposited into the Recurring Replacement Reserve Escrow Account shall be held by Lender pursuant to the provisions of this Security Instrument and shall be applied in payment of Recurring Replacement Expenditures. Should an Event of Default occur, the sums on deposit in the Recurring Replacement Reserve Sub-Account and the Recurring Replacement Reserve Escrow Account may be applied by Lender in payment of any Recurring Replacement Expenditures or may be applied to the payment of the Debt or any other charges affecting all or any portion of the Cross-collateralized Properties, as Lender in its sole discretion may determine; provided, however, that no such application shall be deemed to have been made by operation of law or otherwise until actually made by Lender as herein provided.

     Section 5.09. Operation and Maintenance Expense Escrow Account. Borrower hereby agrees to pay or cause to be paid all Operating Expenses and extraordinary capital improvement costs with respect to the Property (without regard to the amount of money then available in the Operation and Maintenance Expense Sub-Account or the Operation and Maintenance Expense Escrow Account). All funds allocated to the Operation and Maintenance Expense Escrow Account shall be held by Lender pursuant to the provisions of this Security Instrument. Any sums held in the Operation and Maintenance Expense Escrow Account shall be disbursed to Borrower within five (5) Business Days of receipt by Lender from Borrower of (a) a written request for such disbursement which shall indicate the Operating Expenses (exclusive of Basic Carrying Costs and any management fees payable to Borrower, or to any Affiliate of Borrower) and/or extraordinary capital improvement costs approved in writing by Lender for which the requested disbursement is to pay and (b) an Officer’s Certificate stating that no Operating Expenses with respect to the Property are more than sixty (60) days past due; provided, however, in the event that Borrower legitimately disputes any invoice for an Operating Expense and/or extraordinary capital improvement costs approved in writing by Lender, and (i) no Event of Default has occurred and is continuing hereunder, (ii) Borrower shall have set aside adequate reserves for the payment of such disputed sums together with all interest and late fees thereon, (iii) Borrower has complied with all the requirements of this Security Instrument relating thereto, and (iv) the contesting of such sums shall not constitute a default under any other instrument, agreement, or document to which Borrower is a party, then Borrower may, after certifying to Lender as to items (i) through (iv) hereof, contest such invoice. Together with each such request, Borrower shall furnish Lender with bills and all other documents necessary for the payment of the Operating Expenses and/or extraordinary capital improvement costs approved in writing by Lender which are the subject of such request. Borrower may request a disbursement from the Operation and Maintenance Expense Escrow Account no more than one (1) time per calendar month. Should an Event of Default occur and be continuing, the sums on deposit in the Operation and Maintenance Expense Sub-Account or the Operation and Maintenance Expense Escrow Account may be applied by Lender in payment of any Operating Expenses and/or extraordinary capital improvement costs for the Cross-collateralized Properties or may be applied to the payment of the Debt or any other charges affecting all or any portion of the Property as Lender, in its sole discretion, may determine; provided, however, that no such application shall be deemed to have been made by operation of law or otherwise until actually made by Lender as herein provided.

     Section 5.10. Intentionally Omitted.

     Section 5.11. Curtailment Reserve Escrow Account. Funds deposited into the Curtailment Reserve Escrow Account shall be held by Lender in the Curtailment Reserve Escrow Account as additional security for the Loan until the Loan has been paid in full. Provided that no Event of Default has occurred and is continuing, and no O&M Operative Period has existed for three (3) consecutive calendar months, Lender shall, upon written request from Borrower, release all sums contained in the Curtailment Reserve Escrow Account and the Operation and Maintenance Expense Escrow Account to Borrower. Should an Event of Default occur, the sums on deposit in the Curtailment Reserve Sub-Account and the Curtailment Reserve Escrow Account may be applied by Lender to the payment of the Debt or other charges affecting all or any portion of the Cross-collateralized Properties, as Lender, in

51

its sole discretion, may determine; provided, however, that no such application shall be deemed to have been made by operation of law or otherwise until actually made by Lender as herein provided.

     Section 5.12. Performance of Engineering Work. (a) Borrower shall promptly commence and diligently thereafter pursue to completion (without regard to the amount of money then available in the Engineering Escrow Account) the Required Engineering Work prior to the six (6) month anniversary of the Closing Date. After Borrower completes an item of Required Engineering Work, Borrower may submit to Lender an invoice therefor with lien waivers and a statement from the Engineer, reasonably acceptable to Lender, indicating that the portion of the Required Engineering Work in question has been completed substantially in compliance with all Legal Requirements, and Lender shall, within twenty (20) days thereafter, although in no event more frequently than once each month, reimburse such amount to Borrower from the Engineering Escrow Account; provided, however, that Borrower shall not be reimbursed more than the amount set forth on Exhibit D hereto as the amount allocated to the portion of the Required Engineering Work for which reimbursement is sought.

     (b) From and after the date all of the Required Engineering Work is completed, Borrower may submit a written request, which request shall be delivered together with final lien waivers and a statement from the Engineer, as the case may be, reasonably acceptable to Lender, indicating that all of the Required Engineering Work has been completed substantially in compliance with all Legal Requirements, and Lender shall, within twenty (20) days thereafter, disburse any balance of the Engineering Escrow Account to Borrower. Should an Event of Default occur, the sums on deposit in the Engineering Escrow Account may be applied by Lender in payment of any Required Engineering Work or may be applied to the payment of the Debt or any other charges affecting all or any portion of the Cross-collateralized Properties, as Lender in its sole discretion may determine; provided, however, that no such application shall be deemed to have been made by operation of law or otherwise until actually made by Lender as herein provided.

     Section 5.13. Loss Proceeds. In the event of a casualty to the Property, unless Lender elects, or is required pursuant to Article III hereof to make all of the Insurance Proceeds available to Borrower for restoration, Lender and Borrower shall cause all such Insurance Proceeds to be paid by the insurer directly to the Central Account, whereupon Lender shall, after deducting Lender’s costs of recovering and paying out such Insurance Proceeds, including without limitation, reasonable attorneys’ fees, apply same to reduce the Debt in accordance with the terms of the Note; provided, however, that if Lender elects, or is deemed to have elected, to make the Insurance Proceeds available for restoration, all Insurance Proceeds in respect of rent loss, business interruption or similar coverage shall be maintained in the Central Account, to be applied by Lender in the same manner as Rent received with respect to the operation of the Property; provided, further, however, that in the event that the Insurance Proceeds with respect to such rent loss, business interruption or similar insurance policy are paid in a lump sum in advance, Lender shall hold such Insurance Proceeds in a segregated interest-bearing escrow account, which shall be an Eligible Account, shall estimate, in Lender’s reasonable discretion, the number of months required for Borrower to restore the damage caused by the casualty, shall divide the aggregate rent loss, business interruption or similar Insurance Proceeds by such number of months, and shall disburse from such bank account into the Central Account each month during the performance of such restoration such monthly installment of said Insurance Proceeds minus, if the sum which otherwise would be required to be deposited into the Operation and Maintenance Expense Sub-Account if a Default Management Period existed, which sum shall be remitted by Lender to Manager to pay Operating Expenses. In the event that Insurance Proceeds are to be applied toward restoration, Lender shall hold such funds in a segregated bank account at the Bank, which shall be an Eligible Account, and shall disburse same in accordance with the provisions of Section 3.04 hereof. Unless Lender elects, or is required pursuant to Section 6.01 hereof to make all of the Condemnation Proceeds available to Borrower for restoration, Lender and Borrower shall cause all such Condemnation Proceeds to be paid to the Central Account, whereupon Lender shall, after deducting Lender’s costs of recovering and paying out such Condemnation Proceeds, including without limitation, reasonable attorneys’ fees, apply same to reduce the Debt in accordance with the terms of the Note; provided, however, that any Condemnation Proceeds received in connection with a temporary Taking shall be maintained in the Central Account, to be applied by Lender in the same manner as Rent received with respect to the operation of the Property; provided, further, however, that in the event that the Condemnation Proceeds of any such temporary Taking are paid in a lump sum in advance, Lender shall hold such Condemnation Proceeds in a segregated interest-bearing bank account, which shall be an Eligible Account, shall estimate, in Lender’s reasonable discretion, the number of months that the Property shall be affected by such temporary Taking, shall divide the aggregate Condemnation Proceeds in

52

connection with such temporary Taking by such number of months, and shall disburse from such bank account into the Central Account each month during the pendency of such temporary Taking such monthly installment of said Condemnation Proceeds. In the event that Condemnation Proceeds are to be applied toward restoration, Lender shall hold such funds in a segregated bank account at the Bank, which shall be an Eligible Account, and shall disburse same in accordance with the provisions of Section 3.04 hereof. If any Loss Proceeds are received by Borrower, such Loss Proceeds shall be received in trust for Lender, shall be segregated from other funds of Borrower, and shall be forthwith paid into the Central Account, or paid to Lender to hold in a segregated bank account at the Bank, in each case to be applied or disbursed in accordance with the foregoing. Any Loss Proceeds made available to Borrower for restoration in accordance herewith, to the extent not used by Borrower in connection with, or to the extent they exceed the cost of, such restoration, shall be deposited into the Central Account, whereupon Lender shall apply the same to reduce the Debt in accordance with the terms of the Note.

     Section 5.14. Intentionally Omitted.

ARTICLE VI: CONDEMNATION

     Section 6.01. Condemnation. (a) Borrower shall notify Lender promptly of the commencement or threat of any Taking of the Property or any portion thereof. Lender is hereby irrevocably appointed as Borrower’s attorney-in-fact, coupled with an interest, with exclusive power to collect, receive and retain the proceeds of any such Taking and to make any compromise or settlement in connection with such proceedings (subject to Borrower’s reasonable approval, except after the occurrence of an Event of Default, in which event Borrower’s approval shall not be required), subject to the provisions of this Security Instrument; provided, however, that Borrower may participate in any such proceedings and shall be authorized and entitled to compromise or settle any such proceeding with respect to Condemnation Proceeds in an amount less than five percent (5%) of the Allocated Loan Amount. Borrower shall execute and deliver to Lender any and all instruments reasonably required in connection with any such proceeding promptly after request therefor by Lender. Except as set forth above, Borrower shall not adjust, compromise, settle or enter into any agreement with respect to such proceedings without the prior consent of Lender. All Condemnation Proceeds are hereby assigned to and shall be paid to Lender. With respect to Condemnation Proceeds in an amount in excess of five percent (5%) of the Allocated Loan Amount, (subject to Borrower’s reasonable approval, except after the occurrence of an Event of Default, in which event Borrower’s approval shall not be required), Borrower hereby authorizes Lender to compromise, settle, collect and receive such Condemnation Proceeds, and to give proper receipts and acquittance therefor. Subject to the provisions of this Article VI, Lender may apply such Condemnation Proceeds (less any cost to Lender of recovering and paying out such proceeds, including, without limitation, reasonable attorneys’ fees and disbursements and costs allocable to inspecting any repair, restoration or rebuilding work and the plans and specifications therefor) toward the payment of the Debt or to allow such proceeds to be used for the Work.

          (b) “Substantial Taking” shall mean (i) a Taking of such portion of the Property that would, in Lender’s reasonable discretion, leave remaining a balance of the Property which would not under then current economic conditions, applicable Development Laws and other applicable Legal Requirements, permit the restoration of the Property so as to constitute a complete, rentable facility of the same sort as existed prior to the Taking, having adequate ingress and egress to the Property, capable of producing a projected Net Operating Income (as reasonably determined by Lender) yielding a projected Debt Service Coverage therefrom for the next two (2) years of not less than the Required Debt Service Coverage, (ii) a Taking which occurs less than two (2) years prior to the Maturity Date, (iii) a Taking which Lender is not reasonably satisfied could be restored within twelve (12) months and at least six (6) months prior to the Maturity Date or (iv) a Taking of more than fifteen percent (15%) of the reasonably estimated fair market value of the Property.

          (c) In the case of a Substantial Taking, Condemnation Proceeds shall be payable to Lender in reduction of the Debt but without any prepayment fee or charge of any kind and, provided that no Event of Default exists, if Borrower elects to apply any Condemnation Proceeds it may receive pursuant to this Security Instrument to the payment of the Debt, Borrower may prepay the balance of the Release Price with respect to the Property without any prepayment fee or charge of any kind.

53

          (d) In the event of a Taking which is less than a Substantial Taking, Borrower at its sole cost and expense (whether or not the award shall have been received or shall be sufficient for restoration) shall proceed diligently to restore, or cause the restoration of, the remaining Improvements not so taken, to maintain a complete, rentable, self-contained fully operational facility of the same sort as existed prior to the Taking in as good a condition as is reasonably possible. In the event of such a Taking, Lender shall receive the Condemnation Proceeds and shall pay over the same:

     (i) first, provided no Event of Default shall have occurred, to Borrower to the extent of any portion of the award as may be necessary to pay the reasonable cost of restoration of the Improvements remaining, and

     (ii) second, to Lender, in reduction of the Debt without any prepayment premium or charge of any kind.

  If one or more Takings in the aggregate create a Substantial Taking, then, in such event, the sections of this Article VI above applicable to Substantial Takings shall apply.

          (e) In the event Lender is obligated to or elects to make Condemnation Proceeds available for the restoration or rebuilding of the Property, such proceeds shall be disbursed in the manner and subject to the conditions set forth in Section 3.04(b) hereof. If, in accordance with this Article VI, any Condemnation Proceeds are used to reduce the Debt, they shall be applied in accordance with the provisions of the Note. Borrower shall promptly execute and deliver all instruments requested by Lender for the purpose of confirming the assignment of the Condemnation Proceeds to Lender. Application of all or any part of the Condemnation Proceeds to the Debt shall be made in accordance with the provisions of Sections 3.06 and 3.07 hereof. No application of the Condemnation Proceeds to the reduction of the Debt shall have the effect of releasing the lien of this Security Instrument until the remainder of the Debt has been paid in full. In the case of any Taking, Lender, to the extent that Lender has not been reimbursed by Borrower, shall be entitled, as a first priority out of any Condemnation Proceeds, to reimbursement for all reasonable costs, fees and expenses reasonably incurred in the determination and collection of any Condemnation Proceeds. All Condemnation Proceeds deposited with Lender pursuant to this Section, until expended or applied as provided herein, shall be held in accordance with Section 3.04(b) hereof and shall constitute additional security for the payment of the Debt and the payment and performance of Borrower’s obligations, but Lender shall not be deemed a trustee or other fiduciary with respect to its receipt of such Condemnation Proceeds or any part thereof. All awards so deposited with Lender shall be held by Lender in an Eligible Account, but Lender makes no representation or warranty as to the rate or amount of interest, if any, which may accrue on any such deposit and shall have no liability in connection therewith. For purposes hereof, any reference to the award shall be deemed to include interest, if any, which has accrued thereon.

ARTICLE VII: LEASES AND RENTS

     Section 7.01. Assignment. (a) Borrower does hereby bargain, sell, assign and set over unto Lender, all of Borrower’s interest in the Leases and Rents. The assignment of Leases and Rents in this Section 7.01 is an absolute, unconditional and present assignment from Borrower to Lender and not an assignment for security and the existence or exercise of Borrower’s revocable license to collect Rent shall not operate to subordinate this assignment to any subsequent assignment. The exercise by Lender of any of its rights or remedies pursuant to this Section 7.01 shall not be deemed to make Lender a mortgagee-in-possession. In addition to the provisions of this Article VII, Borrower shall comply with all terms, provisions and conditions of the Assignment.

     (b) So long as there shall exist and be continuing no Event of Default, Borrower shall have a revocable license to take all actions with respect to all Leases and Rents, present and future, including the right to collect and use the Rents, subject to the terms of this Security Instrument and the Assignment.

     (c) In a separate instrument Borrower shall, as requested from time to time by Lender, assign to Lender or its nominee by specific or general assignment, any and all Leases, such assignments to be in form and

54

content reasonably acceptable to Lender, but subject to the provisions of Section 7.01(a) and (b) hereof. Borrower agrees to deliver to Lender, within thirty (30) days after Lender’s request, a true and complete copy of every Lease.

     (d) The rights of Lender contained in this Article VII, the Assignment or any other assignment of any Lease shall not result in any obligation or liability of Lender to Borrower or any lessee under a Lease or any party claiming through any such lessee.

     (e) At any time during the continuance of an Event of Default, the license granted hereinabove may be revoked by Lender, and Lender or a receiver appointed in accordance with this Security Instrument may enter upon the Property, and collect, retain and apply the Rents toward payment of the Debt in such priority and proportions as Lender in its sole discretion shall deem proper.

     (f) In addition to the rights which Lender may have herein, during the continuance of any Event of Default, Lender, at its option, may require Borrower to pay monthly in advance to Lender, or any receiver appointed to collect the Rents, the fair and reasonable rental value for the use and occupation of such part of the Property as may be used and occupied by Borrower and may require Borrower to vacate and surrender possession of the Property to Lender or to such receiver and, in default thereof, Borrower may be evicted by summary proceedings or otherwise.

     Section 7.02. Management of Property. (a) Borrower shall manage the Property or cause the Property to be managed in a manner which is consistent with the Approved Manager Standard. All Space Leases shall provide for rental rates comparable to then existing local market rates and terms and conditions which constitute good and prudent business practice and are consistent with prevailing market terms and conditions, and shall be arms-length transactions. All Space Leases entered into after the date hereof shall provide that they are subordinate to this Security Instrument and that the lessees thereunder attorn to Lender. Borrower shall deliver copies of all Leases, amendments, modifications and renewals thereof to Lender. All proposed Leases for the Property shall be subject to the prior written approval of Lender, not to be unreasonably withheld, conditioned or delayed, provided, however that Borrower may enter into new leases with unrelated third parties without obtaining the prior consent of Lender provided that: (i) the proposed leases conform with the requirements of this Section 7.02; (ii) the proposed Space Lease is not a Major Space Lease and the space to be leased pursuant to such proposed lease together with any space leased or to be leased to an Affiliate of the tenant thereunder does not exceed 10,000 square feet; and (iii) the term of the proposed lease inclusive of all extensions and renewals, does not exceed ten (10) years.

     (b) Borrower (i) shall or shall cause Operating Tenant to observe and perform all of its material obligations under the Leases pursuant to applicable Legal Requirements and shall not do or permit to be done anything to impair the value of the Major Space Leases as security for the Debt; (ii) shall promptly send copies to Lender of all notices of default which Borrower shall receive under the Major Space Leases; (iii) shall, consistent with the Approved Manager Standard, enforce all of the terms, covenants and conditions contained in the Leases to be observed or performed; (iv) shall not collect any of the Rents under the Major Space Leases more than one (1) month in advance (except that Borrower may collect in advance such security deposits as are permitted pursuant to applicable Legal Requirements and are commercially reasonable in the prevailing market); (v) shall not execute any other assignment of lessor’s interest in the Leases or the Rents except as otherwise expressly permitted pursuant to this Security Instrument; (vi) shall not cancel or terminate any of the Leases or accept a surrender thereof in any manner inconsistent with the Approved Manager Standard; (vii) shall not convey, transfer or suffer or permit a conveyance or transfer of all or any part of the Premises or the Improvements or of any interest therein so as to effect a merger of the estates and rights of, or a termination or diminution of the obligations of, lessees thereunder; (viii) shall not alter, modify or change the terms of any guaranty of any Major Space Lease or cancel or terminate any such guaranty in a manner inconsistent with the Approved Manager Standard; (ix) shall, in accordance with the Approved Manager Standard, make all reasonable efforts to seek lessees for space as it becomes vacant and enter into Leases in accordance with the terms hereof; (x) shall not cancel or terminate or materially modify, alter or amend any Major Space Lease or Property Agreement without Lender’s consent, which consent will not be unreasonably withheld or delayed; and (xi) shall, without limitation to any other provision hereof, execute and deliver at the request of Lender all such further assurances, confirmations and assignments in connection with the Property as are required herein and as Lender shall from time to time reasonably require.

55

     (c) All security deposits shall be held in accordance with all Legal Requirements. Following the occurrence and during the continuance of any Event of Default, Borrower shall, upon Lender’s request, if permitted by applicable Legal Requirements, turn over the security deposits (and any interest thereon) to Lender to be held by Lender in accordance with the terms of the Leases and all Legal Requirements.

     (d) If requested by Lender, Borrower shall furnish, or shall cause the applicable lessee to furnish, to Lender financial data and/or financial statements in accordance with Regulation AB for any lessee of the Property if, in connection with a Securitization, Lender expects there to be, with respect to such lessee or any group of affiliated lessees, a concentration within all of the mortgage loans included or expected to be included, as applicable, in such Securitization such that such lessee or group of affiliated lessees would constitute a Significant Obligor; provided, however, that in the event the related Space Lease does not require the related lessee to provide the foregoing information, Borrower shall use commercially reasonable efforts to cause the applicable lessee to furnish such information.

     (e) Borrower covenants and agrees with Lender that (i) the Property will be managed at all times by an Approved Manager pursuant to the management agreement approved by Lender (the “Management Agreement”), such approval not to be unreasonably withheld or delayed, (ii) after Borrower has knowledge of a fifty percent (50%) or more change in control of the ownership of Manager, Borrower will promptly give Lender notice thereof (a “Manager Control Notice”) and (iii) the Management Agreement may be terminated by Lender at any time (A) for cause to the extent provided in the Management Agreement (including, but not limited to, Manager’s gross negligence, misappropriation of funds, willful misconduct or fraud) following the occurrence of an Event of Default of the type set forth in Section 13.01(a) through (c), or (B) to the extent provided in the Management Agreement, following the receipt of a Manager Control Notice and a substitute Approved Manager shall be appointed by Borrower. Notwithstanding the foregoing, transfers of publicly traded stock of Manager on a national stock exchange or on the NASDAQ Stock Market in the normal course of business and not in connection with a tender offer or sale of Manager or substantially all of the assets of Manager shall not require the giving of a Manager Control Notice. Borrower may from time to time appoint a successor manager to manage the Property, provided that any such successor manager shall be an Approved Manager. Borrower further covenants and agrees that Borrower shall require Manager (or any successor managers) to maintain at all times during the term of the Loan worker’s compensation insurance as required by Governmental Authorities.

     (f) Borrower shall not enter into any new or replacement Franchise Agreement without obtaining the prior written consent of Lender, such consent not to be unreasonably withheld, conditioned or delayed (provided that any Franchise Agreement which is on a form in all material respects (including, without limitation, all fees due thereunder) the same as the form of any Franchise Agreement which is contained in the uniform franchise offering circular for any Approved Franchisor shall be deemed an acceptable form), and shall (i) pay or shall cause to be paid all sums required to be paid by Borrower under any Franchise Agreement and Operating Lease, (ii) diligently perform and observe all of the material terms, covenants and conditions of any Franchise Agreement on the part of Borrower to be performed and observed to the end that all things shall be done which are necessary to keep unimpaired the rights of Borrower under any Franchise Agreement and Operating Lease, (iii) promptly notify Lender of the giving of any notice to Borrower of any material default by Borrower in the performance or observance of any of the terms, covenants or conditions of and Franchise Agreement or Operating Lease on the part of Borrower to be performed and observed and deliver to Lender a true copy of each such notice, and (iv) promptly deliver to Lender a copy of each financial statement, business plan, capital expenditures plan, report and estimate received by it under the Franchise Agreement or the Management Agreement or the Operating Lease. Borrower shall not, without the prior consent of the Lender, such consent not to be unreasonably withheld, conditioned or delayed, surrender any Franchise Agreement or Operating Lease or terminate or cancel any Franchise Agreement or modify, change, supplement, alter or amend any Franchise Agreement or Operating Lease, in any material respect, either orally or in writing, and Borrower hereby assigns to Lender as further security for the payment of the Debt and for the performance and observance of the terms, covenants and conditions of this Security Instrument, all the rights, privileges and prerogatives of Borrower to surrender any Franchise Agreement or Operating Lease or to terminate, cancel, modify, change, supplement, alter or amend any Franchise Agreement or Operating Lease in any respect, and any such surrender of any Franchise Agreement or termination, cancellation, modification, change, supplement, alteration or amendment of any Franchise Agreement or Operating Lease without the prior consent of

56

Lender shall be void and of no force and effect, provided, however, Borrower may terminate any Franchise Agreement if Borrower enters into a new Franchise Agreement with an Approved Franchisor pursuant to a Franchise Agreement which is reasonably acceptable to Lender. Notwithstanding the foregoing, Borrower may renew or replace any Operating Lease, provided such renewal or replacement shall be upon the same terms and conditions as the Operating Lease being renewed or replaced, except rent payable thereunder may be adjusted to the extent necessary to comply with the then-current requirements of the Code for real estate investment trusts. If Borrower shall default in the performance or observance of any material term, covenant or condition of any Franchise Agreement or Operating Lease on the part of Borrower to be performed or observed, then, without limiting the generality of the other provisions of this Security Instrument, and without waiving or releasing Borrower from any of its obligations hereunder, Lender shall have the right, but shall be under no obligation, to pay any sums and to perform any act or take any action as may be appropriate to cause all the terms, covenants and conditions of any Franchise Agreement or Operating Lease on the part of Borrower to be performed or observed to be promptly performed or observed on behalf of Borrower, to the end that the rights of Borrower in, to and under any Franchise Agreement and Operating Lease shall be kept unimpaired and free from default. Lender and any Person designated by Lender shall have, and are hereby granted, the right to enter upon the Property at any time and from time to time for the purpose of taking any such action. If the franchisor under any Franchise Agreement or lessee under an Operating Lease shall deliver to Lender a copy of any notice sent to Borrower of default under any Franchise Agreement or Operating Lease, as applicable, such notice shall constitute full protection to Lender for any action to be taken by Lender in good faith, in reliance thereon. Borrower shall, from time to time, use its best efforts to obtain from the franchisor or lessee under any Franchise Agreement such certificates of estoppel with respect to compliance by Borrower with the terms of any Franchise Agreement as may be requested by Lender. Borrower shall exercise each individual option, if any, to extend or renew the term of any Franchise Agreement within four (4) months of the last day upon which any such option may be exercised, unless Lender consents to the non-renewal of such Franchise Agreement in writing, and Borrower hereby expressly authorizes and appoints Lender its attorney-in-fact to exercise any such option in the name of and upon behalf of Borrower, which power of attorney shall be irrevocable and shall be deemed to be coupled with an interest, provided, however, that Lender shall not exercise such power of attorney unless and until Borrower fails to take the actions required herein.

     (g) Intentionally Omitted.

     (h) Borrower shall fund and operate, or shall cause Manager to fund and operate, the Property in a manner consistent with a hotel of the same type and category as the Property and in compliance in all material respects with any Franchise Agreement and Operating Lease.

     (i) Borrower shall maintain or cause Operating Tenant to cause Manager to maintain Inventory in kind and amount sufficient to meet hotel industry standards for hotels comparable to the hotel located at the Premises and at levels sufficient for the operation of the hotel located at the Premises at historic occupancy levels.

     (j) Borrower shall deliver to Lender all notices of default or termination received by Borrower, Operating Tenant or Manager with respect to any licenses and permits, contracts, Property Agreements or insurance policies within three (3) Business Days of receipt of the same.

     (k) Borrower shall not permit any Equipment or other personal property to be removed from the Property unless the removed item is consumed or sold in the ordinary course of business, removed temporarily for maintenance and repair, or, if removed permanently, replaced by an article of equivalent suitability and not materially less value, owned by Borrower free and clear of any lien.

ARTICLE VIII: MAINTENANCE AND REPAIR

     Section 8.01. Maintenance and Repair of the Property; Alterations; Replacement of Equipment. Borrower hereby covenants and agrees:

     (a) Borrower shall not (i) desert or abandon the Property, (ii) change the use of the Property or cause or permit the use or occupancy of any part of the Property to be discontinued if such discontinuance or use change

57

would violate any zoning or other law, ordinance or regulation; (iii) consent to or seek any lowering of the zoning classification, or greater zoning restriction affecting the Property; or (iv) take any steps whatsoever to convert the Property, or any portion thereof, to a condominium or cooperative form of ownership.

     (b) Borrower shall, or shall cause Operating Tenant to, at its expense, (i) take good care of the Property including grounds generally, and utility systems and sidewalks, roads, alleys, and curbs therein, and shall keep the same in good, safe and insurable condition and in compliance with all applicable Legal Requirements, (ii) promptly make all necessary repairs to the Property, above grade and below grade, interior and exterior, structural and nonstructural, ordinary and extraordinary, unforeseen and foreseen, and maintain the Property in a manner appropriate for the facility and (iii) not commit or suffer to be committed any waste of the Property or do or suffer to be done anything which will impair the value of the Property or increase in any respect the risk of fire or other hazard to the Property. Borrower shall keep the sidewalks, vaults, gutters and curbs comprising, or adjacent to, the Property, clean and free from dirt, snow, ice, rubbish and obstructions. All repairs made by Borrower shall be made with first-class materials, in a good and workmanlike manner, shall be equal or better in quality and class to the original work and shall comply with all applicable Legal Requirements and Insurance Requirements. To the extent any of the above obligations are obligations of tenants under Space Leases or other Persons under Property Agreements, Borrower may fulfill its obligations hereunder by causing such tenants or other Persons, as the case may be, to perform their obligations thereunder. As used herein, the terms “repair” and “repairs” shall be deemed to include all necessary replacements.

     (c) Borrower shall not demolish, remove, construct, or, except as otherwise expressly provided herein, restore, or alter the Property or any portion thereof, nor consent to or permit any such demolition, removal, construction, restoration, addition or alteration, which would diminish the value of the Property without Lender’s prior written consent in each instance, which consent shall not be unreasonably withheld or delayed.

     (d) Borrower represents and warrants to Lender that together with Equipment owned by Operating Tenant and Manager (i) there are no fixtures, machinery, apparatus, tools, equipment or articles of personal property attached or appurtenant to, or located on, or used in connection with the management, operation or maintenance of the Property, except for the Equipment and equipment leased by Borrower and/or Operating Tenant and/or Manager for the management, operation or maintenance of the Property in accordance with the Loan Documents; (ii) the Equipment and the leased equipment constitute all of the fixtures, machinery, apparatus, tools, equipment and articles of personal property necessary to the proper operation and maintenance of the Property; and (iii) all of the Equipment is free and clear of all liens, except for the lien of this Security Instrument and the Permitted Encumbrances. All right, title and interest of Borrower in and to all extensions, improvements, betterments, renewals and appurtenances to the Property hereafter acquired by, or released to, Borrower or constructed, assembled or placed by Borrower in the Property, and all changes and substitutions of the security constituted thereby, shall be and, in each such case, without any further mortgage, encumbrance, conveyance, assignment or other act by Lender or Borrower, shall become subject to the lien and security interest of this Security Instrument as fully and completely, and with the same effect, as though now owned by Borrower and specifically described in this Security Instrument, but at any and all times Borrower shall execute and deliver to Lender any documents Lender may reasonably deem necessary or appropriate for the purpose of specifically subjecting the same to the lien and security interest of this Security Instrument.

     (e) Notwithstanding the provisions of this Security Instrument to the contrary, Borrower shall have the right, at any time and from time to time, to remove and dispose of Equipment which may have become obsolete or unfit for use or which is no longer useful in the management, operation or maintenance of the Property. Borrower shall promptly replace any such Equipment so disposed of or removed with other Equipment of equal value and utility, free of any security interest or superior title, liens or claims; except that, if by reason of technological or other developments, replacement of the Equipment so removed or disposed of is not necessary or desirable for the proper management, operation or maintenance of the Property, Borrower shall not be required to replace the same. All such replacements or additional equipment shall be deemed to constitute “Equipment” and shall be covered by the security interest herein granted.

58

ARTICLE IX: TRANSFER OR ENCUMBRANCE OF THE PROPERTY

     Section 9.01. Other Encumbrances. Borrower shall not further encumber or permit the further encumbrance in any manner (whether by grant of a pledge, security interest or otherwise) of the Property or any part thereof or interest therein, including, without limitation, of the Rents therefrom. In addition, except for a Permitted Encumbrance, Borrower shall not further encumber and shall not permit the further encumbrance in any manner (whether by grant of a pledge, security interest or otherwise) of Borrower or any direct or indirect interest in Borrower except as expressly permitted pursuant to this Security Instrument.

     Section 9.02. No Transfer. Borrower acknowledges that Lender has examined and relied on the expertise of Borrower and, if applicable, each General Partner, in owning and operating properties such as the Property in agreeing to make the Loan and will continue to rely on Borrower’s ownership of the Property as a means of maintaining the value of the Property as security for repayment of the Debt and Borrower acknowledges that Lender has a valid interest in maintaining the value of the Property. Borrower shall not Transfer, other than Permitted Transfers, nor permit any Transfer, other than Permitted Transfers, without the prior written consent of Lender, which consent Lender may withhold in its sole and absolute discretion. Lender shall not be required to demonstrate any actual impairment of its security or any increased risk of default hereunder in order to declare the Debt immediately due and payable upon a Transfer without Lender’s consent. This provision shall apply to every Transfer regardless of whether voluntary or not, or whether or not Lender has consented to any previous Transfer.

     Section 9.03. Due on Sale. Lender may declare the Debt immediately due and payable upon any Transfer, other than Permitted Transfers, or further encumbrance without Lender’s consent without regard to whether any impairment of its security or any increased risk of default hereunder can be demonstrated. This provision shall apply to every Transfer or further encumbrance of the Property or any part thereof or interest in the Property or in Borrower regardless of whether voluntary or not, or whether or not Lender has consented to any previous Transfer or further encumbrance of the Property or interest in Borrower.

ARTICLE X: CERTIFICATES

     Section 10.01. Estoppel Certificates. (a) After request by Lender, Borrower, within fifteen (15) days and at its expense, will furnish Lender with a statement, duly acknowledged and certified, setting forth (i) the amount of the original principal amount of the Note, and the unpaid principal amount of the Note, (ii) the rate of interest of the Note, (iii) the date payments of interest and/or principal were last paid, (iv) any offsets or defenses to the payment of the Debt that Borrower shall have knowledge of, and if any are alleged, the nature thereof, (v) that the Note, this Security Instrument and the other Loan Documents have not been modified or if modified, giving particulars of such modification and (vi) that to Borrower’s best knowledge, there has occurred and is then continuing no Default or if such Default exists, the nature thereof, the period of time it has existed, and the action being taken to remedy such Default.

     (b) Within fifteen (15) days after written request by Borrower, Lender shall furnish to Borrower a written statement confirming the amount of the Debt, the maturity date of the Note and the date to which interest has been paid.

     (c) At Lender’s request Borrower shall use all reasonable efforts to obtain estoppel certificates from tenants in form and substance reasonably acceptable to Lender.

ARTICLE XI: NOTICES

     Section 11.01. Notices. Any notice, demand, statement, request or consent made hereunder shall be in writing and delivered personally or sent to the party to whom the notice, demand or request is being made by Federal Express or other nationally recognized overnight delivery service, as follows and shall be deemed given (a) when delivered personally, (b) on the date of sending by telefax if sent during normal business hours on a Business Day (otherwise on the next Business Day) provided that any notice given by telefax is also given by at least one

59

other method provided herein, or (c) one (1) Business Day after being deposited with Federal Express or such other nationally recognized delivery service:

If to Lender:	Wachovia Bank, National Association
	Commercial Real Estate Services
	8739 Research Drive URP 4
	NC 1075
	Charlotte, North Carolina 28262
	Loan Number: 502860049
	Attention: Portfolio Management
	Fax No.: (704) 715-0036
with a copy to:	Proskauer Rose llp
	1585 Broadway
	New York, New York 10036
	Attn: David J. Weinberger, Esq.
	Fax No.: (212) 969-2900
If to Borrower:	c/o Ashford Hospitality Trust, Inc.
	14185 Dallas Parkway, Suite 1100
	Dallas, Texas 75254-4308
	Attn: David Brooks
	Facsimile: (972) 778-9270
	E-mail: dbrooks@ahreit.com
with a copy to:	Akin Gump Strauss Hauer & Feld LLP
	590 Madison Avenue
	New York, New York 10022-2524
	Attn: Peter Miller, Esq.
	Facsimile: (212) 872-1002
	E-mail: pamiller@akingump.com,

or such other address as either Borrower or Lender shall hereafter specify by not less than ten (10) days prior written notice as provided herein; provided, however, that notwithstanding any provision of this Article to the contrary, such notice of change of address shall be deemed given only upon actual receipt thereof. Rejection or other refusal to accept or the inability to deliver because of changed addresses of which no notice was given as herein required shall be deemed to be receipt of the notice, demand, statement, request or consent.

ARTICLE XII: INDEMNIFICATION

     Section 12.01. Indemnification Covering Property. In addition, and without limitation, to any other provision of this Security Instrument or any other Loan Document, Borrower shall protect, indemnify and save harmless Lender and its successors and assigns, and each of their agents, employees, officers, directors, stockholders, partners and members (collectively, “Indemnified Parties”) for, from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature, known or unknown, contingent or otherwise, whether incurred or imposed within or outside the judicial process, including, without limitation, reasonable attorneys’ fees and disbursements imposed upon or incurred by or asserted against any of the Indemnified Parties by reason of (a) ownership of this Security Instrument, the Assignment, the Property or any part thereof or any interest therein or receipt of any Rents; (b) any accident, injury to or death of any person or loss of or damage to property occurring in, on or about the Property or any part thereof or on the adjoining sidewalks, curbs, parking areas, streets or ways; (c) any use, nonuse or condition in, on or about, or possession, alteration, repair, operation, maintenance or management of, the Property or any part thereof or on the adjoining sidewalks, curbs, parking areas, streets or ways; (d) any failure on the part of Borrower to perform or comply with any of the terms of this Security Instrument or the Assignment; (e) performance of any labor or services or the furnishing of any

60

materials or other property in respect of the Property or any part thereof; (f) any claim by brokers, finders or similar Persons claiming to be entitled to a commission in connection with any Lease or other transaction involving the Property or any part thereof; (g) any Imposition including, without limitation, any Imposition attributable to the execution, delivery, filing, or recording of any Loan Document, Lease or memorandum thereof; (h) any lien or claim arising on or against the Property or any part thereof under any Legal Requirement or any liability asserted against any of the Indemnified Parties with respect thereto; (i) any claim arising out of or in any way relating to any tax or other imposition on the making and/or recording of this Security Instrument, the Note or any of the other Loan Documents; (j) a Default under Sections 2.02(f), 2.02(g), 2.02(k), 2.02(t) or 2.02(w) hereof, (k) the failure of any Person to file timely with the Internal Revenue Service an accurate Form 1099-B, Statement for Recipients of Proceeds from Real Estate, Broker and Barter Exchange Transactions, which may be required in connection with the Loan, or to supply a copy thereof in a timely fashion to the recipient of the proceeds of the Loan; (l) the claims of any lessee or any Person acting through or under any lessee or otherwise arising under or as a consequence of any Lease or (m) the failure to pay any insurance premiums. Notwithstanding the foregoing provisions of this Section 12.01 to the contrary, Borrower shall have no obligation to indemnify the Indemnified Parties pursuant to this Section 12.01 for liabilities, obligations, claims, damages, penalties, causes of action, costs and expenses relative to the foregoing which result from Lender’s, and its successors’ or assigns’, willful misconduct or gross negligence or with respect to matters which first occur after Lender has taken title to the Property through a foreclosure or delivery of a deed in lieu thereof. Any amounts payable to Lender by reason of the application of this Section 12.01 shall constitute a part of the Debt secured by this Security Instrument and the other Loan Documents and shall become immediately due and payable and shall bear interest at the Default Rate from the date the liability, obligation, claim, cost or expense is sustained by Lender, as applicable, until paid. The provisions of this Section 12.01 shall survive the termination of this Security Instrument whether by repayment of the Debt, foreclosure or delivery of a deed in lieu thereof, assignment or otherwise. In case any action, suit or proceeding is brought against any of the Indemnified Parties by reason of any occurrence of the type set forth in (a) through (m) above, Borrower shall, at Borrower’s expense, resist and defend such action, suit or proceeding or will cause the same to be resisted and defended by counsel at Borrower’s expense for the insurer of the liability or by counsel designated by Borrower (unless reasonably disapproved by Lender promptly after Lender has been notified of such counsel); provided, however, that nothing herein shall compromise the right of Lender (or any other Indemnified Party) to appoint its own counsel at Borrower’s expense for its defense with respect to any action which, in the reasonable opinion of Lender or such other Indemnified Party, as applicable, presents a conflict or potential conflict between Lender or such other Indemnified Party that would make such separate representation advisable. Any Indemnified Party will give Borrower prompt notice after such Indemnified Party obtains actual knowledge of any potential claim by such Indemnified Party for indemnification hereunder. The Indemnified Parties shall not settle or compromise any action, proceeding or claim as to which it is indemnified hereunder without notice to Borrower. Notwithstanding the foregoing, so long as no Default has occurred and is continuing and Borrower is resisting and defending such action, suit or proceeding as provided above in a prudent and commercially reasonable manner, in order to obtain the benefit of this Section 12.01 with respect to such action, suit or proceeding, Lender and the Indemnified Parties agree that they shall not settle such action, suit or proceeding without obtaining Borrower’s consent which Borrower agrees not to unreasonably withhold, condition or delay; provided, however, (x) if Borrower is not diligently defending such action, suit or proceeding in a prudent and commercially reasonable manner as provided above and Lender has provided Borrower with thirty (30) days’ prior written notice, or shorter period if mandated by the requirements of the applicable law, and Borrower has failed to correct such failure, or (y) failure to settle could, in Lender’s reasonable judgment, expose Lender to criminal liability, Lender may settle such action, suit or proceeding without the consent of Borrower and be entitled to the benefits of this Section 12.01 with respect to the settlement of such action, suit or proceeding.

ARTICLE XIII: DEFAULTS

     Section 13.01. Events of Default. The Debt shall become immediately due at the option of Lender upon any one or more of the following events (“Event of Default”):

     (a) if the final payment or prepayment premium, if any, due under the Note shall not be paid on Maturity;

61

     (b) if any monthly payment of interest and/or principal due under the Note (other than the sums described in (a) above) shall not be fully paid on the date upon which the same is due and payable thereunder; provided, that the failure of any such amount to be paid when due shall not be an Event of Default if adequate funds were on deposit in the relevant Sub-Account (or would have been on deposit therein if Lender had timely allocated such funds thereto from the Central Account and/or the Collection Account in accordance with the provisions of Article V hereof);

     (c) if payment of any sum (other than the sums described in (a) above or (b) above) required to be paid pursuant to the Note, this Security Instrument or any other Loan Document shall not be paid within five (5) Business Days after Lender delivers written notice to Borrower that same is due and payable thereunder or hereunder;

     (d) if Borrower, Operating Tenant, Guarantor or, if Borrower, Operating Tenant or Guarantor is a partnership, any general partner of Borrower, Operating Tenant or Guarantor, or, if Borrower, Operating Tenant or Guarantor is a limited liability company, any managing member of Borrower, Operating Tenant or Guarantor, shall institute or cause to be instituted any proceeding for the termination or dissolution of Borrower, Operating Tenant, Guarantor or any such general partner or member;

     (e) if (i) Borrower fails to deliver to Lender the original insurance policies or certificates as herein provided (provided, however, that if the insurance policies required by this Security Instrument are maintained in full force and effect, then Borrower shall have five (5) Business Days after notice from Lender of Borrower’s failure to deliver the original policies or certificates (whichever has not been delivered as required) to deliver same to Lender before such failure becomes an Event of Default) or (ii) if the insurance policies required hereunder are not kept in full force and effect as herein provided (no notice or cure period applies to this item (ii));

     (f) if Borrower or Guarantor attempts to assign its rights under this Security Instrument or any other Loan Document or any interest herein or therein, or if any Transfer occurs other than in accordance with the provisions hereof;

     (g) if any representation or warranty of Borrower or Guarantor made herein or in any other Loan Document or in any certificate, report, financial statement or other instrument or agreement furnished to Lender shall prove false or misleading in any material respect as of the date made; provided, however, that if such representation or warranty which was false or misleading in any material respect is, by its nature, curable and is not reasonably likely to have a Material Adverse Effect, and such representation or warranty was not, to the best of Borrower’s knowledge, false or misleading in any material respect when made, then the same shall not constitute an Event of Default unless Borrower has not cured the same within five (5) Business Days after receipt by Borrower of notice from Lender in writing of such breach;

     (h) if Borrower, Operating Tenant, Guarantor or any general partner of Borrower, Operating Tenant or Guarantor shall make an assignment for the benefit of creditors or shall admit in writing its inability to pay its debts generally as they become due;

     (i) if a receiver, liquidator or trustee of Borrower, Operating Tenant, Guarantor or any general partner of Borrower, Operating Tenant or Guarantor shall be appointed or if Borrower, Operating Tenant, Guarantor or their respective general partners shall be adjudicated a bankrupt or insolvent, or if any petition for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any similar federal or state law, shall be filed by or against, consented to, or acquiesced in, by Borrower, Operating Tenant, Guarantor or their respective general partners or if any proceeding for the dissolution or liquidation of Borrower, Operating Tenant, Guarantor or their respective general partners shall be instituted; however, if such appointment, adjudication, petition or proceeding was involuntary and not consented to by Borrower, Operating Tenant, Guarantor or their respective general partners, as applicable, upon the same not being discharged, stayed or dismissed within ninety (90) days or if Borrower, Operating Tenant, Guarantor or their respective general partners shall generally not be paying its debts as they become due;

62

     (j) if Borrower shall be in default beyond any notice or grace period, if any, under any other mortgage or deed of trust or security agreement covering any part of the Property without regard to its priority relative to this Security Instrument; provided, however, this provision shall not be deemed a waiver of the provisions of Article IX prohibiting further encumbrances affecting the Property or any other provision of this Security Instrument;

     (k) if the Property becomes subject (i) to any lien which is superior to the lien of this Security Instrument, other than a lien for real estate taxes and assessments not due and payable, or (ii) to any mechanic’s, materialman’s or other lien which is or is asserted to be superior to the lien of this Security Instrument, and such lien shall remain undischarged (by payment, bonding, or otherwise) for fifteen (15) days unless contested in accordance with the terms hereof;

     (l) if Borrower discontinues the operation of the Property or any material part thereof for reasons other than repair or restoration arising from a casualty or condemnation or any renovation project for ten (10) days or more;

     (m) except as permitted in this Security Instrument, any material alteration, demolition or removal of any of the Improvements without the prior consent of Lender;

     (n) if Borrower consummates a transaction which would cause this Security Instrument or Lender’s rights under this Security Instrument, the Note or any other Loan Document to constitute a non-exempt prohibited transaction under ERISA or result in a violation of a state statute regulating government plans subjecting Lender to liability for a violation of ERISA or a state statute;

     (o) if a default by Borrower beyond applicable notice and grace periods, if any, occurs under the Franchise Agreement or Operating Lease, or if the Franchise Agreement or Operating Lease is terminated, or if, without Lender’s prior written consent, there is a material change to the Franchise Agreement or Operating Lease unless, with respect to any default under or termination of the Franchise Agreement, Borrower enters into a replacement Franchise Agreement within thirty (30) days of the termination or receipt of notice of any such default, as applicable, in accordance with the terms hereof;

     (p) if an Event of Default shall occur and be continuing under any of the other Cross-collateralized Mortgages;

     (q) if Borrower is a tenancy-in-common, if any TIC brings a partition action without first offering its interest to the other TICs or if, upon the making of such offer, one or more of the TICs does not purchase the tenant-in-common interest of the TIC which desires to bring a partition action;

     (r) if Borrower is a tenancy-in-common, if the TIC Agreement is modified without the prior written consent of Lender or if the Person appointed in the TIC Agreement as manager is replaced or removed without obtaining the prior written consent of Lender; or

     (s) if a default shall occur under any of the other terms, covenants or conditions of the Note, this Security Instrument or any other Loan Document, other than as set forth in (a) through (r) above, for ten (10) days after notice from Lender in the case of any default which can be cured by the payment of a sum of money, or for thirty (30) days after notice from Lender in the case of any other default or an additional ninety (90) days if Borrower is diligently and continuously effectuating a cure of a curable non-monetary default, other than as set forth in (a) through (r) above.

     Section 13.02. Remedies. (a) Upon the occurrence and during the continuance of any Event of Default, Lender may, in addition to any other rights or remedies available to it hereunder or under any other Loan Document, at law or in equity, take such action, without notice or demand, as it reasonably deems advisable to protect and enforce its rights against Borrower or any one or more of the Cross-collateralized Borrowers and in and to the Property or any one or more of the Cross-collateralized Properties including, but not limited to, the following

63

actions, each of which may be pursued singly, concurrently or otherwise, at such time and in such order as Lender may determine, in its sole discretion, without impairing or otherwise affecting any other rights and remedies of Lender hereunder, at law or in equity: (i) declare all or any portion of the unpaid Debt to be immediately due and payable; provided, however, that upon the occurrence of any of the events specified in Section 13.01(i), the entire Debt will be immediately due and payable without notice or demand or any other declaration of the amounts due and payable; or (ii) bring an action to foreclose this Security Instrument and without applying for a receiver for the Rents, but subject to the rights of the tenants under the Leases, enter into or upon the Property or any part thereof, either personally or by its agents, nominees or attorneys, and dispossess Borrower and its agents and servants therefrom, and thereupon Lender may (A) use, operate, manage, control, insure, maintain, repair, restore and otherwise deal with all and every part of the Property and conduct the business thereat, (B) make alterations, additions, renewals, replacements and improvements to or on the Property or any part thereof, (C) exercise all rights and powers of Borrower with respect to the Property or any part thereof, whether in the name of Borrower or otherwise, including, without limitation, the right to make, cancel, enforce or modify Leases, obtain and evict tenants, and demand, sue for, collect and receive all earnings, revenues, rents, issues, profits and other income of the Property and every part thereof, and (D) apply the receipts from the Property or any part thereof to the payment of the Debt, after deducting therefrom all expenses (including, without limitation, reasonable attorneys’ fees and disbursements) reasonably incurred in connection with the aforesaid operations and all amounts necessary to pay the Impositions, insurance and other charges in connection with the Property or any part thereof, as well as just and reasonable compensation for the services of Lender’s third-party agents; or (iii) have an appraisal or other valuation of the Property or any part thereof performed by an Appraiser (and Borrower covenants and agrees it shall cooperate in causing any such valuation or appraisal to be performed) and any cost or expense incurred by Lender in connection therewith shall constitute a portion of the Debt and be secured by this Security Instrument and shall be immediately due and payable to Lender with interest, at the Default Rate, until the date of receipt by Lender; or (iv) sell the Property or institute proceedings for the complete foreclosure of this Security Instrument, or take such other action as may be allowed pursuant to Legal Requirements, at law or in equity, for the enforcement of this Security Instrument in which case the Property or any part thereof may be sold for cash or credit in one or more parcels; or (v) with or without entry, and to the extent permitted and pursuant to the procedures provided by applicable Legal Requirements, institute proceedings for the partial foreclosure of this Security Instrument, or take such other action as may be allowed pursuant to Legal Requirements, at law or in equity, for the enforcement of this Security Instrument for the portion of the Debt then due and payable, subject to the lien of this Security Instrument continuing unimpaired and without loss of priority so as to secure the balance of the Debt not then due; or (vi) sell the Property or any part thereof and any or all estate, claim, demand, right, title and interest of Borrower therein and rights of redemption thereof, pursuant to power of sale or otherwise, at one or more sales, in whole or in parcels, in any order or manner, at such time and place, upon such terms and after such notice thereof as may be required or permitted by law, at the discretion of Lender, and in the event of a sale, by foreclosure or otherwise, of less than all of the Property, this Security Instrument shall continue as a lien on the remaining portion of the Property; or (vii) institute an action, suit or proceeding in equity for the specific performance of any covenant, condition or agreement contained in the Loan Documents, or any of them; or (viii) recover judgment on the Note or any guaranty either before, during or after (or in lieu of) any proceedings for the enforcement of this Security Instrument; or (ix) apply, ex parte, for the appointment of a custodian, trustee, receiver, keeper, liquidator or conservator of the Property or any part thereof, irrespective of the adequacy of the security for the Debt and without regard to the solvency of Borrower or of any Person liable for the payment of the Debt, to which appointment Borrower does hereby consent and such receiver or other official shall have all rights and powers permitted by applicable law and such other rights and powers as the court making such appointment may confer, but the appointment of such receiver or other official shall not impair or in any manner prejudice the rights of Lender to receive the Rent with respect to any of the Property pursuant to this Security Instrument or the Assignment; or (x) require, at Lender’s option, Borrower to pay monthly in advance to Lender, or any receiver appointed to collect the Rents, the fair and reasonable rental value for the use and occupation of any portion of the Property occupied by Borrower and may require Borrower to vacate and surrender possession to Lender of the Property or to such receiver and Borrower may be evicted by summary proceedings or otherwise; or (xi) without notice to Borrower (A) apply all or any portion of the cash collateral in any Sub-Account and Escrow Account, including any interest and/or earnings therein, to carry out the obligations of Borrower under this Security Instrument and the other Loan Documents, to protect and preserve the Property and for any other purpose permitted under this Security Instrument and the other Loan Documents and/or (B) have all or any portion of such cash collateral immediately paid to Lender to be applied against the Debt in the order and priority set forth in the Note; or (xii) pursue any or all such other rights or remedies as Lender may have under applicable law or

64

in equity; provided, however, that the provisions of this Section 13.02(a) shall not be construed to extend or modify any of the notice requirements or grace periods provided for hereunder or under any of the other Loan Documents. Borrower hereby waives, to the fullest extent permitted by Legal Requirements, any defense Borrower might otherwise raise or have by the failure to make any tenants parties defendant to a foreclosure proceeding and to foreclose their rights in any proceeding instituted by Lender.

     (b) Any time after an Event of Default Lender shall have the power to sell the Property or any part thereof at public auction, in such manner, at such time and place, upon such terms and conditions, and upon such public notice as Lender may deem best for the interest of Lender, or as may be required or permitted by applicable law, consisting of advertisement in a newspaper of general circulation in the jurisdiction and for such period as applicable law may require and at such other times and by such other methods, if any, as may be required by law to convey the Property in fee simple by Lender’s deed with special warranty of title to and at the cost of the purchaser, who shall not be liable to see to the application of the purchase money. The proceeds or avails of any sale made under or by virtue of this Section 13.02, together with any other sums which then may be held by Lender under this Security Instrument, whether under the provisions of this Section 13.02 or otherwise, shall be applied as follows:

First: To the payment of the third-party costs and expenses reasonably incurred in connection with any such sale and to advances, fees and expenses, including, without limitation, reasonable fees and expenses of Lender’s legal counsel as applicable, and of any judicial proceedings wherein the same may be made, and of all expenses, liabilities and advances reasonably made or incurred by Lender under this Security Instrument, together with interest as provided herein on all such advances made by Lender, and all Impositions, except any Impositions or other charges subject to which the Property shall have been sold;

Second: To the payment of the whole amount then due, owing and unpaid under the Note for principal and interest thereon, with interest on such unpaid principal at the Default Rate from the date of the occurrence of the earliest Event of Default that formed a basis for such sale until the same is paid;

Third: To the payment of any other portion of the Debt required to be paid by Borrower pursuant to any provision of this Security Instrument, the Note, or any of the other Loan Documents; and

Fourth: The surplus, if any, to Borrower unless otherwise required by Legal Requirements.

Lender and any receiver or custodian of the Property or any part thereof shall be liable to account for only those rents, issues, proceeds and profits actually received by it.

     (c) Lender may adjourn from time to time any sale by it to be made under or by virtue of this Security Instrument by announcement at the time and place appointed for such sale or for such adjourned sale or sales and, except as otherwise provided by any applicable provision of Legal Requirements, Lender, without further notice or publication, may make such sale at the time and place to which the same shall be so adjourned.

     (d) Upon the completion of any sale or sales made by Lender under or by virtue of this Section 13.02, Lender, or any officer of any court empowered to do so, shall execute and deliver to the accepted purchaser or purchasers a good and sufficient instrument, or good and sufficient instruments, granting, conveying, assigning and transferring all estate, right, title and interest in and to the property and rights sold. Lender is hereby irrevocably appointed the true and lawful attorney-in-fact of Borrower (coupled with an interest), in its name and stead, to make all necessary conveyances, assignments, transfers and deliveries of the property and rights so sold and for that purpose Lender may execute all necessary instruments of conveyance, assignment, transfer and delivery, and may substitute one or more Persons with like power, Borrower hereby ratifying and confirming all that its said attorney-in-fact or such substitute or substitutes shall lawfully do by virtue hereof. Nevertheless, Borrower, if so requested by Lender, shall ratify and confirm any such sale or sales by executing and delivering to Lender, or to such purchaser or purchasers all such instruments as may be advisable, in the sole judgement of Lender, for such purpose, and as may be designated in such request. Any such sale or sales made under or by virtue of this Section 13.02, whether made under the power of sale herein granted or under or by virtue of judicial proceedings or a judgment or decree of foreclosure and sale, shall operate to divest all the estate, right, title, interest, claim and

65

demand whatsoever, whether at law or in equity, of Borrower in and to the property and rights so sold, and shall, to the fullest extent permitted under Legal Requirements, be a perpetual bar, both at law and in equity against Borrower and against any and all Persons claiming or who may claim the same, or any part thereof, from, through or under Borrower.

     (e) In the event of any sale made under or by virtue of this Section 13.02 (whether made under the power of sale herein granted or under or by virtue of judicial proceedings or a judgment or decree of foreclosure and sale), the entire Debt immediately thereupon shall, anything in the Loan Documents to the contrary notwithstanding, become due and payable.

     (f) Upon any sale made under or by virtue of this Section 13.02 (whether made under the power of sale herein granted or under or by virtue of judicial proceedings or a judgment or decree of foreclosure and sale), Lender may bid for and acquire the Property or any part thereof and in lieu of paying cash therefor may make settlement for the purchase price by crediting upon the Debt the net sales price after deducting therefrom the expenses of the sale and the costs of the action.

     (g) No recovery of any judgment by Lender and no levy of an execution under any judgment upon the Property or any part thereof or upon any other property of Borrower shall release the lien of this Security Instrument upon the Property or any part thereof, or any liens, rights, powers or remedies of Lender hereunder, but such liens, rights, powers and remedies of Lender shall continue unimpaired until all amounts due under the Note, this Security Instrument and the other Loan Documents are paid in full.

     (h) Upon the exercise by Lender of any power, right, privilege, or remedy pursuant to this Security Instrument which requires any consent, approval, registration, qualification, or authorization of any Governmental Authority, Borrower agrees to execute and deliver, or will cause the execution and delivery of, all applications, certificates, instruments, assignments and other documents and papers that Lender or any purchaser of the Property may be required to obtain for such governmental consent, approval, registration, qualification, or authorization and Lender is hereby irrevocably appointed the true and lawful attorney-in-fact of Borrower (coupled with an interest), in its name and stead, to execute all such applications, certificates, instruments, assignments and other documents and papers.

     Section 13.03. Payment of Debt After Default. If, following the occurrence of any Event of Default, Borrower shall tender payment of an amount sufficient to satisfy the Debt in whole or in part at any time prior to a foreclosure sale of the Property, and if at the time of such tender prepayment of the principal balance of the Note is not permitted by the Note or this Security Instrument, Borrower shall, in addition to the entire Debt, also pay to Lender a sum equal to (a) all accrued interest on the Note and all other fees, charges and sums due and payable hereunder, (b) all costs and expenses in connection with the enforcement of Lender’s rights hereunder, and (c) a prepayment charge (the “Prepayment Charge”) equal to the greater of (i) 1% of the Principal Amount and (ii) the present value of a series of payments each equal to the Payment Differential (as hereinafter defined) and payable on each Payment Date over the remaining original term of the Note and on the Payment Date occurring two months prior to the Maturity Date, discounted at the Reinvestment Yield (as hereinafter defined) for the number of months remaining as of the date of such prepayment to each such Payment Date and the Payment Date occurring two months prior to the Maturity Date. The term “Payment Differential” shall mean an amount equal to (i) the Interest Rate less the Reinvestment Yield, divided by (ii) twelve (12) and multiplied by (iii) the Principal Amount after application of the constant monthly payment due under the Note on the date of such prepayment, provided that the Payment Differential shall in no event be less than zero. The term “Reinvestment Yield” shall mean an amount equal to the lesser of (i) the yield on the U.S. Treasury issue (primary issue) with a maturity date closest to the Payment Date occurring two months prior to the Maturity Date, or (ii) the yield on the U.S. Treasury issue (primary issue) with a term equal to the remaining average life of the indebtedness evidenced by the Note, with each such yield being based on the bid price for such issue as published in the Wall Street Journal on the date that is fourteen (14) days prior to the date of such prepayment set forth in the notice of prepayment (or, if such bid price is not published on that date, the next preceding date on which such bid price is so published) and converted to a monthly compounded nominal yield. In addition to the amounts described above, if, during the first (1st) Loan Year, Borrower shall tender payment of an amount sufficient to satisfy the Debt in whole or in part following the

66

occurrence of any Event of Default, Borrower shall, in addition to the entire Debt, also pay to Lender a sum equal to three percent (3%) of the Principal Amount. Failure of Lender to require any of these payments shall not constitute a waiver of the right to require the same in the event of any subsequent default or to exercise any other remedy available to Lender hereunder, under any other Loan Document or at law or in equity. In the event that any prepayment charge is due hereunder, Lender shall deliver to Borrower a statement setting forth the amount and determination of the prepayment fee, and, provided that Lender shall have in good faith applied the formula described above, Borrower shall not have the right to challenge the calculation or the method of calculation set forth in any such statement in the absence of manifest error, which calculation may be made by Lender on any day during the fifteen (15) day period preceding the date of such prepayment. Lender shall not be obligated or required to have actually reinvested the prepaid principal balance at the Reinvestment Yield or otherwise as a condition to receiving the prepayment charge. If at the time of such tender, prepayment of the principal balance of the Note is permitted, such tender by Borrower shall be deemed to be a voluntary prepayment of the principal balance of the Note, and Borrower shall, in addition to the entire Debt, also pay to Lender the applicable prepayment consideration specified in the Note and this Security Instrument.

     Section 13.04. Possession of the Property. Upon the occurrence of any Event of Default and the acceleration of the Debt or any portion thereof, Borrower, if an occupant of the Property or any part thereof, upon demand of Lender, shall immediately surrender possession of the Property (or the portion thereof so occupied) to Lender, and if Borrower is permitted to remain in possession, the possession shall be as a month-to-month tenant of Lender and, on demand, Borrower shall pay to Lender monthly, in advance, a reasonable rental for the space so occupied and in default thereof Borrower may be dispossessed. The covenants herein contained may be enforced by a receiver of the Property or any part thereof. Nothing in this Section 13.04 shall be deemed to be a waiver of the provisions of this Security Instrument making the Transfer of the Property or any part thereof without Lender’s prior written consent an Event of Default.

     Section 13.05. Interest After Default. If any amount due under the Note, this Security Instrument or any of the other Loan Documents is not paid within any applicable notice and grace period after same is due, whether such date is the stated due date, any accelerated due date or any other date or at any other time specified under any of the terms hereof or thereof, then, in such event, Borrower shall pay interest on the amount not so paid from and after the date on which such amount first becomes due at the Default Rate; and such interest shall be due and payable at such rate until the earlier of the cure of all Events of Default or the payment of the entire amount due to Lender, whether or not any action shall have been taken or proceeding commenced to recover the same or to foreclose this Security Instrument. All unpaid and accrued interest shall be secured by this Security Instrument as part of the Debt. Nothing in this Section 13.05 or in any other provision of this Security Instrument shall constitute an extension of the time for payment of the Debt.

     Section 13.06. Borrower’s Actions After Default. After the happening of any Event of Default and immediately upon the commencement of any action, suit or other legal proceedings by Lender to obtain judgment for the Debt, or of any other nature in aid of the enforcement of the Loan Documents, Borrower will (a) after receipt of notice of the institution of any such action, waive the issuance and service of process and enter its voluntary appearance in such action, suit or proceeding, and (b) if required by Lender, consent to the appointment of a receiver or receivers of the Property or any part thereof and of all the earnings, revenues, rents, issues, profits and income thereof.

     Section 13.07. Control by Lender After Default. Notwithstanding the appointment of any custodian, receiver, liquidator or trustee of Borrower, or of any of its property, or of the Property or any part thereof, to the extent permitted by Legal Requirements, Lender shall be entitled to obtain possession and control of all property now and hereafter covered by this Security Instrument and the Assignment in accordance with the terms hereof.

     Section 13.08. Right to Cure Defaults. (a) Upon the occurrence of any Event of Default, Lender or its agents may, but without any obligation to do so and without notice to or demand on Borrower and without releasing Borrower from any obligation hereunder, make or do the same in such manner and to such extent as Lender may deem necessary to protect the security hereof. Lender and its agents are authorized to enter upon the Property or any part thereof for such purposes, or appear in, defend, or bring any action or proceedings to protect Lender’s interest in

67

the Property or any part thereof or to foreclose this Security Instrument or collect the Debt, and the cost and expense thereof (including reasonable attorneys’ fees to the extent permitted by law), with interest as provided in this Section 13.08, shall constitute a portion of the Debt and shall be immediately due and payable to Lender upon demand. All such costs and expenses incurred by Lender or its agents in remedying such Event of Default or in appearing in, defending, or bringing any such action or proceeding shall bear interest at the Default Rate, for the period from the date so demanded to the date of payment to Lender. All such costs and expenses incurred by Lender or its agents together with interest thereon calculated at the above rate shall be deemed to constitute a portion of the Debt and be secured by this Security Instrument.

     (b) If Lender makes any payment or advance that Lender is authorized by this Security Instrument to make in the place and stead of Borrower (i) relating to the Impositions or tax liens asserted against the Property, Lender may do so according to any bill, statement or estimate procured from the appropriate public office without inquiry into the accuracy of the bill, statement or estimate or into the validity of any of the Impositions or the tax liens or claims thereof; (ii) relating to any apparent or threatened adverse title, lien, claim of lien, encumbrance, claim or charge, Lender will be the sole judge of the legality or validity of same; or (iii) relating to any other purpose authorized by this Security Instrument but not enumerated in this Section 13.08, Lender may do so whenever, in its judgment and discretion, the payment or advance seems necessary or desirable to protect the Property and the full security interest intended to be created by this Security Instrument. In connection with any payment or advance made pursuant to this Section 13.08, Lender has the option and is authorized, but in no event shall be obligated, to obtain a continuation report of title prepared by a title insurance company. The payments and the advances made by Lender pursuant to this Section 13.08 and the cost and expenses of said title report will be due and payable by Borrower on demand, together with interest at the Default Rate, and will be secured by this Security Instrument.

     Section 13.09. Late Payment Charge. If any portion of the Debt (other than the principal portion of the Debt due on Maturity) is not paid in full on or before the day on which it is due and payable hereunder, Borrower shall pay to Lender an amount equal to five percent (5%) of such unpaid portion of the Debt (“Late Charge”) to defray the expense incurred by Lender in handling and processing such delinquent payment, and such amount shall constitute a part of the Debt.

     Section 13.10. Recovery of Sums Required to Be Paid. Lender shall have the right from time to time to take action to recover any sum or sums which constitute a part of the Debt as the same become due and payable hereunder (after the expiration of any grace period or the giving of any notice herein provided, if any), without regard to whether or not the balance of the Debt shall be due, and without prejudice to the right of Lender thereafter to bring an action of foreclosure, or any other action, for a default or defaults by Borrower existing at the time such earlier action was commenced.

     Section 13.11. Marshalling and Other Matters. Borrower hereby waives, to the fullest extent permitted by law, the benefit of all appraisement, valuation, stay, extension, reinstatement, redemption (both equitable and statutory) and homestead laws now or hereafter in force and all rights of marshalling in the event of any sale hereunder of the Property or any part thereof or any interest therein. Nothing herein or in any other Loan Document shall be construed as requiring Lender to resort to any particular Cross-collateralized Property for the satisfaction of the Debt in preference or priority to any other Cross-collateralized Property but Lender may seek satisfaction out of all the Cross-collateralized Properties or any part thereof in its absolute discretion. Further, Borrower hereby expressly waives any and all rights of redemption from sale under any order or decree of foreclosure of this Security Instrument on behalf of Borrower, whether equitable or statutory and on behalf of each and every Person acquiring any interest in or title to the Property or any part thereof subsequent to the date of this Security Instrument and on behalf of all Persons to the fullest extent permitted by applicable law.

     Section 13.12. Tax Reduction Proceedings. After an Event of Default, Borrower shall be deemed to have appointed Lender as its attorney-in-fact to seek a reduction or reductions in the assessed valuation of the Property for real property tax purposes or for any other purpose and to prosecute any action or proceeding in connection therewith. This power, being coupled with an interest, shall be irrevocable for so long as any part of the Debt remains unpaid and any Event of Default shall be continuing.

68

     Section 13.13. General Provisions Regarding Remedies.

     (a) Right to Terminate Proceedings. Lender may terminate or rescind any proceeding or other action brought in connection with its exercise of the remedies provided in Section 13.02 at any time before the conclusion thereof, as determined in Lender’s sole discretion and without prejudice to Lender.

     (b) No Waiver or Release. The failure of Lender to exercise any right, remedy or option provided in the Loan Documents shall not be deemed a waiver of such right, remedy or option or of any covenant or obligation contained in the Loan Documents. No acceptance by Lender of any payment after the occurrence of an Event of Default and no payment by Lender of any payment or obligation for which Borrower is liable hereunder shall be deemed to waive or cure any Event of Default. No sale of all or any portion of the Property, no forbearance on the part of Lender, and no extension of time for the payment of the whole or any portion of the Debt or any other indulgence given by Lender to Borrower or any other Person, shall operate to release or in any manner affect the interest of Lender in the Property or the liability of Borrower to pay the Debt. No waiver by Lender shall be effective unless it is in writing and then only to the extent specifically stated.

     (c) No Impairment; No Releases. The interests and rights of Lender under the Loan Documents shall not be impaired by any indulgence, including (i) any renewal, extension or modification which Lender may grant with respect to any of the Debt; (ii) any surrender, compromise, release, renewal, extension, exchange or substitution which Lender may grant with respect to the Property or any portion thereof; or (iii) any release or indulgence granted to any maker, endorser, guarantor or surety of any of the Debt.

     (d) Effect on Judgment. No recovery of any judgment by Lender and no levy of an execution under any judgment upon any Property or any portion thereof shall affect in any manner or to any extent the lien of the other Cross-collateralized Mortgages upon the remaining Cross-collateralized Properties or any portion thereof, or any rights, powers or remedies of Lender hereunder or thereunder. Such lien, rights, powers and remedies of Lender shall continue unimpaired as before.

ARTICLE XIV: COMPLIANCE WITH REQUIREMENTS

     Section 14.01. Compliance with Legal Requirements. (a) Borrower shall promptly comply with all present and future Legal Requirements, foreseen and unforeseen, ordinary and extraordinary, whether requiring structural or nonstructural repairs or alterations including, without limitation, all zoning, subdivision, building, safety and environmental protection, land use and development Legal Requirements, all Legal Requirements which may be applicable to the curbs adjoining the Property or to the use or manner of use thereof, and all rent control, rent stabilization and all other similar Legal Requirements relating to rents charged and/or collected in connection with the Leases. Borrower represents and warrants that the Property is in compliance in all respects with all Legal Requirements as of the date hereof, no notes or notices of violations of any Legal Requirements have been entered or received by Borrower and there is no basis for the entering of such notes or notices.

     (b) Borrower shall have the right to contest by appropriate legal proceedings diligently conducted in good faith, without cost or expense to Lender, the validity or application of any Legal Requirement and to suspend compliance therewith if permitted under applicable Legal Requirements, provided (i) failure to comply therewith may not subject Lender to any civil or criminal liability, (ii) prior to and during such contest, Borrower shall furnish to Lender security reasonably satisfactory to Lender, in its reasonable discretion, against loss or injury by reason of such contest or non-compliance with such Legal Requirement, (iii) no Event of Default shall exist during such proceedings and such contest shall not otherwise violate any of the provisions of any of the Loan Documents, (iv) such contest shall not (unless Borrower shall comply with the provisions of clause (ii) of this Section 14.01(b)) subject the Property to any lien or encumbrance the enforcement of which is not suspended or otherwise affect the priority of the lien of this Security Instrument; (v) such contest shall not affect the ownership, use or occupancy of the Property; (vi) the Property or any part thereof or any interest therein shall not be in any immediate danger of being sold, forfeited or lost by reason of such contest by Borrower; (vii) Borrower shall give Lender prompt notice of the commencement of such proceedings and, upon request by Lender, notice of the status of such proceedings and/or confirmation of the continuing satisfaction of the conditions set forth in clauses (i) — (vi) of this Section

69

14.01(b); and (viii) upon a final determination of such proceeding, Borrower shall take all steps necessary to comply with any requirements arising therefrom.

     (c) Borrower shall at all times comply with all applicable Legal Requirements with respect to the construction, use and maintenance of any vaults adjacent to the Property. If by reason of the failure to pay taxes, assessments, charges, permit fees, franchise taxes or levies of any kind or nature, the continued use of the vaults adjacent to Property or any part thereof is discontinued, Borrower nevertheless shall, with respect to any vaults which may be necessary for the continued use of the Property, take such steps (including the making of any payment) to ensure the continued use of vaults or replacements.

     Section 14.02. Compliance with Recorded Documents; No Future Grants. Borrower shall promptly perform and observe or cause to be performed and observed, all of the terms, covenants and conditions of all Property Agreements and all things necessary to preserve intact and unimpaired any and all appurtenances or other interests or rights affecting the Property.

ARTICLE XV: DEFEASANCE; PREPAYMENT

     Section 15.01. Defeasance; Prepayment. (a) Except as set forth in this Section 15.01, no prepayment or defeasance of the Debt may be made by or on behalf of Borrower in whole or in part.

     (b) Borrower may defease the Loan at any time subsequent to the earlier to occur of (x) the second (2nd) anniversary of a Securitization or (y) the third (3rd) anniversary of the date hereof and prior to the calendar month immediately preceding the Maturity Date, in whole or, from time to time, in part, as of the last day of an Interest Accrual Period, it being acknowledged that Borrower may defease the Loan on a day other than the last day of an Interest Accrual Period, provided that Borrower pays all interest which would otherwise be due to Lender through the end of such Interest Accrual Period, in accordance with the following provisions:

     (i) Lender shall have received from Borrower, not less than thirty (30) days’, nor more than ninety (90) days’, prior written notice specifying the date proposed for such defeasance and the amount which is to be defeased, which proposed date shall be as of a Payment Date (which notice shall be revocable by Borrower three (3) times during the term of the Loan by giving Lender not less than two (2) Business Days prior written notice of such revocation, provided that Borrower shall remain obligated to pay Lender’s costs and expenses including, without limitation, breakage costs incurred by Lender in connection with such revocation).

     (ii) Borrower shall also pay to Lender all interest due through and including the last day of the Interest Accrual Period ending on the day prior to the Payment Date in which such defeasance is being made, together with any and all other amounts due and owing pursuant to the terms of the Note, this Security Instrument or the other Loan Documents, including, without limitation, any costs incurred in connection with a defeasance.

     (iii) No Event of Default shall have occurred and be continuing.

     (iv) Borrower shall (A) either pay the Defeasance Deposit, or if Borrower shall elect, purchase the Federal Obligations and (B) deliver to Lender (1) a security agreement, in form and substance reasonably satisfactory to Lender, creating a first priority lien on the Defeasance Deposit (if applicable) and the Federal Obligations purchased by or on behalf of Borrower in accordance with the terms of this Section 15.01(b)(iv) (the “Security Agreement”); (2) an Officer’s Certificate certifying that the requirements set forth in this Section 15.01(b)(iv) have been satisfied; (3) an opinion of counsel for Borrower in form and substance reasonably satisfactory to Lender stating, among other things, that (x) Lender has a perfected security interest in the Defeasance Deposit (if applicable) and a first priority perfected security interest in the Federal Obligations purchased by Lender on behalf of Borrower or by Borrower, as applicable, (y) the contemplated defeasance will not result in any deemed exchange pursuant to Section 1001 of the Code of

70

the Note and will not adversely affect the Note’s or, if applicable, the undefeased Note’s status as indebtedness for Federal income tax purposes and (z) any trust formed as a “real estate mortgage investment conduit” within the meaning of Section 860D of the Code (“REMIC”) in connection with a Securitization will not fail to maintain its status as a REMIC as a result of such defeasance; (4) in the event that only a portion of the Loan is being defeased, Borrower shall execute and deliver all necessary documents to split the Note into two substitute notes, one having a principal balance equal to the defeased portion of the Note (the “Defeased Note”) and one note having a principal balance equal to the undefeased portion of the Note (the “Undefeased Note”), the amortization schedule for which notes shall be calculated, in the case of a Defeased Note, or recalculated, in the case of an Undefeased Note, to amortize the respective principal balances of each on the same schedule as the Note (including, without limitation, the payment of the Principal Amount due on the Maturity Date); (5) a certificate, in form and substance reasonably satisfactory to Lender from a nationally recognized Independent certified public accountant confirming that the requirements of this Section 15.01(b) have been satisfied; and (6) such other certificates, documents, opinions or instruments as Lender may reasonably request. Borrower reserves the right to purchase Federal Obligations with and in lieu of making the Defeasance Deposit which provide Scheduled Defeasance Payments, and, if Borrower shall deliver the Defeasance Deposit to Lender, appoints Lender as its agent and attorney-in-fact, coupled with an interest (which appointment will not be exercised if Borrower notifies Lender in writing in the notice provided for in Section 15.01(b)(i) that Borrower will purchase the Federal Obligations), for the purpose of using the Defeasance Deposit to purchase Federal Obligations which provide Scheduled Defeasance Payments, and Lender shall, upon receipt of the Defeasance Deposit, purchase such Federal Obligations on behalf of Borrower. Borrower, pursuant to the Security Agreement or other appropriate document, shall authorize and direct that the payments received from the Federal Obligations shall be made directly to Lender and applied to satisfy the obligations of Borrower under the Defeased Note. The Defeased Note and the Undefeased Note shall have identical terms as the Note, except for the principal balance. A Defeased Note cannot be the subject of a further defeasance.

     (v) The Rating Agencies shall have confirmed in writing that any rating issued by the Rating Agencies in connection with the Securitization will not, as a result of the proposed defeasance, be downgraded, from the then current ratings thereof, qualified or withdrawn.

     (vi) If the Loan is to be defeased and Borrower is requesting a release of the Property in connection with such defeasance, such defeasance shall be to facilitate the disposition or refinancing of the Property or in connection with any other customary transaction within the meaning of Treas. Reg. 1.860G-(2)(a)(8)(iii).

     (vii) If Borrower shall continue to own any assets other than the Defeasance Deposit, Borrower shall establish or designate a special-purpose bankruptcy-remote successor entity reasonably acceptable to Lender (the “Successor Borrower”), with respect to which a substantive nonconsolidation opinion satisfactory in form and substance reasonably satisfactory to Lender has been delivered to Lender and Borrower shall transfer and assign to the Successor Borrower all obligations, rights and duties under the Note and the Security Agreement, together with the pledged Defeasance Deposit. The Successor Borrower shall assume the obligations of Borrower under the Note and the Security Agreement and Borrower shall be relieved of its obligations hereunder and thereunder. Borrower shall pay Ten and No/100 Dollars ($10.00) to the Successor Borrower as consideration for assuming such Borrower obligations.

     (viii) In the event the Loan is defeased in full in accordance with the terms hereof, Lender shall release all reserves, escrows and guaranties relating to the Loan to Borrower and in the event the Loan is defeased in part in connection with a Release in accordance with the terms hereof, Lender shall release to Borrower all reserves and escrows relating to the Property subject to the Release.

     (c) At any time subsequent to the Payment Date occurring in February, 2017 (the “Lockout Expiration Date”), Borrower may prepay the Loan, in whole, but not in part, as of the last day of an Interest Accrual

71

Period, it being acknowledged that Borrower may prepay the Loan on a day other than the last day of an Interest Accrual Period, provided that Borrower pays all interest which would otherwise be due to Lender through the end of such Interest Accrual Period, in accordance with the following provisions:

     (i) Lender shall have received from Borrower not less than thirty (30) days , nor more than ninety (90) days, prior written notice specifying the date proposed for such prepayment and the amount which is to be prepaid (which notice shall be revocable by Borrower up to two (2) times during the term of the Loan by giving Lender not less than one (1) Business Day prior written notice of such revocation, provided that Borrower shall remain obligated to pay Lender’s costs and expenses including, without limitation, breakage costs incurred by Lender in connection with such revocation).

     (ii) Borrower shall also pay to Lender all interest due through and including the last day of the Interest Accrual Period in which such prepayment is being made, together with any and all other amounts due and owing pursuant to the terms of the Note, this Security Instrument or the other Loan Documents.

     (iii) Any partial prepayment shall be in a minimum amount not less than $25,000 and shall be in whole multiples of $1,000 in excess thereof.

     (iv) No Event of Default shall have occurred and be continuing.

     (v) Any partial prepayment of the Principal Amount, including, without limitation, Unscheduled Payments, shall be applied to the installments of principal last due hereunder and shall not release or relieve Borrower from the obligation to pay the regularly scheduled installments of principal and interest becoming due under the Note.

     Section 15.02. Release of Property. If Borrower prepays or defeases all or a portion of the Loan pursuant to Section 15.01 hereof or if Lender applies Loss Proceeds from the Property towards the repayment of the Debt or towards a defeasance, Lender shall, promptly upon satisfaction of all the following terms and conditions execute, acknowledge and deliver to Borrower a release of this Security Instrument (a “Release”) in recordable form with respect to the Property:

     (a) If such prepayment or defeasance, as applicable, is a prepayment or defeasance, as applicable, in part, but not in whole, Lender shall have received on the date proposed for such prepayment or defeasance, as applicable, an amount equal to the greater of (i) the amount which is necessary to defease a portion of the Loan Amount equal to the Release Price Percentage multiplied by the Allocated Loan Amount with respect to the Cross-collateralized Property which is the subject of the Release, (ii) such amount as would cause the Debt Yield subsequent to the contemplated Release to be equal to or greater than the Debt Yield prior to the contemplated Release and (iii) such amount as would cause the Debt Yield subsequent to the contemplated Release to be no less than the Debt Yield as of the Closing Date (the “Release Price”).

     (b) Borrower shall, at its sole expense, prepare any and all documents and instruments necessary to effect the Release, all of which shall be subject to the reasonable approval of Lender, and Borrower shall pay all costs reasonably incurred by Lender (including, but not limited to, reasonable attorneys’ fees and disbursements, title search costs or endorsement premiums) in connection with the review, execution and delivery of the Release.

     (c) No Event of Default has occurred and is continuing.

ARTICLE XVI: ENVIRONMENTAL COMPLIANCE

     Section 16.01. Covenants, Representations and Warranties. (a) Borrower has not, at any time, and, to Borrower’s best knowledge after due inquiry and investigation, except as set forth in the Environmental Report, no other Person has at any time, handled, buried, stored, retained, refined, transported, processed, manufactured,

72

generated, produced, spilled, allowed to seep, leak, escape or leach, or pumped, poured, emitted, emptied, discharged, injected, dumped, transferred or otherwise disposed of or dealt with Hazardous Materials on, to or from the Premises or any other real property owned and/or occupied by Borrower, and Borrower does not intend to and shall not use the Property or any part thereof or any such other real property for the purpose of handling, burying, storing, retaining, refining, transporting, processing, manufacturing, generating, producing, spilling, seeping, leaking, escaping, leaching, pumping, pouring, emitting, emptying, discharging, injecting, dumping, transferring or otherwise disposing of or dealing with Hazardous Materials, except for use and storage for use of heating oil, cleaning fluids, pesticides and other substances customarily used in the operation of properties that are being used for the same purposes as the Property is presently being used, provided such use and/or storage for use is in compliance with the requirements hereof and the other Loan Documents and does not give rise to liability under applicable Legal Requirements or Environmental Statutes or be the basis for a lien against the Property or any part thereof. In addition, without limitation to the foregoing provisions, Borrower represents and warrants that, to the best of its knowledge, after due inquiry and investigation, except as previously disclosed in writing to Lender or in the Environmental Report, there is no asbestos in, on, over, or under all or any portion of the fire-proofing or any other portion of the Property.

     (b) Borrower, after due inquiry and investigation, knows of no seepage, leak, escape, leach, discharge, injection, release, emission, spill, pumping, pouring, emptying or dumping of Hazardous Materials into waters on, under or adjacent to the Property or any part thereof or any other real property owned and/or occupied by Borrower, or onto lands from which such Hazardous Materials might seep, flow or drain into such waters, except as disclosed in the Environmental Report or as permitted by applicable Legal Requirements.

     (c) Borrower shall not permit any Hazardous Materials to be handled, buried, stored, retained, refined, transported, processed, manufactured, generated, produced, spilled, allowed to seep, leak, escape or leach, or to be pumped, poured, emitted, emptied, discharged, injected, dumped, transferred or otherwise disposed of or dealt with on, under, to or from the Property or any portion thereof at any time, except for use and storage for use of heating oil, ordinary cleaning fluids, pesticides and other substances customarily used in the operation of properties that are being used for the same purposes as the Property is presently being used, provided such use and/or storage for use is in compliance with the requirements hereof and the other Loan Documents and does not give rise to liability under applicable Legal Requirements or be the basis for a lien against the Property or any part thereof.

     (d) Borrower represents and warrants that no actions, suits, or proceedings have been commenced, or are pending, or to the best knowledge of Borrower, are threatened with respect to any Legal Requirement governing the use, manufacture, storage, treatment, transportation, or processing of Hazardous Materials with respect to the Property or any part thereof. Borrower has received no notice of, and, except as disclosed in the Environmental Report, after due inquiry, has no knowledge of any fact, condition, occurrence or circumstance which with notice or passage of time or both would give rise to a claim under or pursuant to any Environmental Statute pertaining to Hazardous Materials on, in, under or originating from the Property or any part thereof or any other real property owned or occupied by Borrower or arising out of the conduct of Borrower, including, without limitation, pursuant to any Environmental Statute.

     (e) Borrower has not waived any Person’s liability with regard to Hazardous Materials in, on, under or around the Property, nor has Borrower retained or assumed, contractually or by operation of law, any other Person’s liability relative to Hazardous Materials or any claim, action or proceeding relating thereto.

     (f) In the event that there shall be filed a lien against the Property or any part thereof pursuant to any Environmental Statute pertaining to Hazardous Materials, Borrower shall, within sixty (60) days or, in the event that the applicable Governmental Authority has commenced steps to cause the Premises or any part thereof to be sold pursuant to the lien, within fifteen (15) days, from the date that Borrower receives notice of such lien, either (i) pay the claim and remove the lien from the Property, or (ii) furnish (A) a bond reasonably satisfactory to Lender in the amount of the claim out of which the lien arises, (B) a cash deposit in the amount of the claim out of which the lien arises, or (C) other security reasonably satisfactory to Lender in an amount sufficient to discharge the claim out of which the lien arises.

73

     (g) Borrower represents and warrants that (i) except as disclosed in the Environmental Report, Borrower has no knowledge of any violation of any Environmental Statute or any Environmental Problem in connection with the Property, nor has Borrower been requested or required by any Governmental Authority to perform any remedial activity or other responsive action in connection with any Environmental Problem and (ii) to Borrower’s knowledge and except as disclosed in the Environmental Report neither the Property nor any other property owned by Borrower is included or, to Borrower’s best knowledge, after due inquiry and investigation, proposed for inclusion on the National Priorities List issued pursuant to CERCLA by the United States Environmental Protection Agency (the “EPA”) or on the inventory of other potential “Problem” sites issued by the EPA or has been identified by the EPA as a potential CERCLA site or included or, to Borrower’s knowledge, after due inquiry and investigation, proposed for inclusion on any list or inventory issued pursuant to any other Environmental Statute, if any, or issued by any other Governmental Authority. Borrower covenants that Borrower will comply with all Environmental Statutes affecting or imposed upon Borrower or the Property.

     (h) Borrower covenants that it shall promptly notify Lender of the presence and/or release of any Hazardous Materials in amounts which are required by applicable Legal Requirements to be reported to and Governmental Authority and of any request for information or any inspection of the Property or any part thereof by any Governmental Authority with respect to any Hazardous Materials and provide Lender with copies of such request and any response to any such request or inspection. Borrower covenants that it shall, in compliance with applicable Legal Requirements, conduct and complete all investigations, studies, sampling and testing (and promptly shall provide Lender with copies of any such studies and the results of any such test) and all remedial, removal and other actions necessary to clean up and remove all Hazardous Materials in, on, over, under, from or affecting the Property or any part thereof in accordance with all such Legal Requirements applicable to the Property or any part thereof to the satisfaction of Lender.

     (i) Following the occurrence of an Event of Default hereunder, and without regard to whether Lender shall have taken possession of the Property or a receiver has been requested or appointed or any other right or remedy of Lender has or may be exercised hereunder or under any other Loan Document, Lender shall have the right (but no obligation) to conduct such investigations, studies, sampling and/or testing of the Property or any part thereof as Lender may, in its discretion, determine to conduct, relative to Hazardous Materials. All costs and expenses incurred in connection therewith including, without limitation, consultants’ fees and disbursements and laboratory fees, shall constitute a part of the Debt and shall, upon demand by Lender, be immediately due and payable and shall bear interest at the Default Rate from the date so demanded by Lender until reimbursed. Borrower shall, at its sole cost and expense, fully and expeditiously cooperate in all such investigations, studies, samplings and/or testings including, without limitation, providing all relevant information and making knowledgeable people available for interviews.

     (j) Borrower represents and warrants that except in accordance with all applicable Environmental Statutes and as disclosed in the Environmental Report, (i) no underground treatment or storage tanks or pumps or water, gas, or oil wells are or, to Borrower’s knowledge, have been located about the Property, (ii) no PCBs or transformers, capacitors, ballasts or other equipment that contain dielectric fluid containing PCBs are located about the Property, (iii) no insulating material containing urea formaldehyde is located about the Property and (iv) no asbestos-containing material is located about the Property.

     Section 16.02. Environmental Indemnification. Borrower shall defend, indemnify and hold harmless the Indemnified Parties for, from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature, known or unknown, contingent or otherwise, whether incurred or imposed within or outside the judicial process, including, without limitation, reasonable attorneys’ and consultants’ fees and disbursements and investigations and laboratory fees arising out of, or in any way related to any Environmental Problem, including without limitation:

     (a) the presence, disposal, escape, seepage, leakage, spillage, discharge, emission, release or threat of release of any Hazardous Materials in, on, over, under, from or affecting the Property or any part thereof whether or not disclosed by the Environmental Report;

74

     (b) any personal injury (including wrongful death, disease or other health condition related to or caused by, in whole or in part, any Hazardous Materials) or property damage (real or personal) arising out of or related to any Hazardous Materials in, on, over, under, from or affecting the Property or any part thereof whether or not disclosed by the Environmental Report;

     (c) any action, suit or proceeding brought or threatened, settlement reached, or order of any Governmental Authority relating to such Hazardous Material whether or not disclosed by the Environmental Report; and/or

     (d) any violation of the provisions, covenants, representations or warranties of Section 16.01 hereof or of any Legal Requirement which is based on or in any way related to any Hazardous Materials in, on, over, under, from or affecting the Property or any part thereof including, without limitation, the cost of any work performed and materials furnished in order to comply therewith whether or not disclosed by the Environmental Report.

     Notwithstanding the foregoing provisions of this Section 16.02 to the contrary, Borrower shall have no obligation to indemnify Lender for liabilities, claims, damages, penalties, causes of action, costs and expenses relative to the foregoing which result directly from (A) Lender’s willful misconduct or gross negligence, or (B) Hazardous Materials initially placed in, on or under the Property after Lender takes title to the Property after foreclosure or delivery of a deed in lieu thereof. Any amounts payable to Lender by reason of the application of this Section 16.02 shall be secured by this Security Instrument and shall, upon demand by Lender, become immediately due and payable and shall bear interest at the Default Rate from the date so demanded by Lender until paid.

     This indemnification shall survive the termination of this Security Instrument whether by repayment of the Debt, foreclosure or deed in lieu thereof, assignment, or otherwise. The indemnity provided for in this Section 16.02 shall not be included in any exculpation of Borrower from personal liability provided for in this Security Instrument or in any of the other Loan Documents. Nothing in this Section 16.02 shall be deemed to deprive Lender of any rights or remedies otherwise available to Lender, including, without limitation, those rights and remedies provided elsewhere in this Security Instrument or the other Loan Documents.

ARTICLE XVII: ASSIGNMENTS

     Section 17.01. Participations and Assignments. Lender shall have the right to assign this Security Instrument and/or any of the Loan Documents, and to transfer, assign or sell participations and subparticipations (including blind or undisclosed participations and subparticipations) in the Loan Documents and the obligations hereunder to any Person; provided, however, that no such participation shall increase, decrease or otherwise affect either Borrower’s or Lender’s obligations under this Security Instrument or the other Loan Documents.

ARTICLE XVIII: MISCELLANEOUS

     Section 18.01. Right of Entry. Lender and its agents shall have the right to enter and inspect the Property or any part thereof at all reasonable times, and, except in the event of an emergency, upon reasonable notice and to inspect Borrower’s books and records and to make abstracts and reproductions thereof.

     Section 18.02. Cumulative Rights. The rights of Lender under this Security Instrument shall be separate, distinct and cumulative and none shall be given effect to the exclusion of the others. No act of Lender shall be construed as an election to proceed under any one provision herein to the exclusion of any other provision. Lender shall not be limited exclusively to the rights and remedies herein stated but shall be entitled, subject to the terms of this Security Instrument, to every right and remedy now or hereafter afforded by law.

     Section 18.03. Liability. If Borrower consists of more than one Person, the obligations and liabilities of each such Person hereunder shall be joint and several.

75

     Section 18.04. Exhibits Incorporated. The information set forth on the cover hereof, and the Exhibits annexed hereto, are hereby incorporated herein as a part of this Security Instrument with the same effect as if set forth in the body hereof.

     Section 18.05. Severable Provisions. If any term, covenant or condition of the Loan Documents including, without limitation, the Note or this Security Instrument, is held to be invalid, illegal or unenforceable in any respect, such Loan Document shall be construed without such provision.

     Section 18.06. Duplicate Originals. This Security Instrument may be executed in any number of duplicate originals and each such duplicate original shall be deemed to constitute but one and the same instrument.

     Section 18.07. No Oral Change. The terms of this Security Instrument, together with the terms of the Note and the other Loan Documents, constitute the entire understanding and agreement of the parties hereto and supersede all prior agreements, understandings and negotiations between Borrower and Lender with respect to the Loan. This Security Instrument, and any provisions hereof, may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act on the part of Borrower or Lender, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought.

     Section 18.08. Waiver of Counterclaim, Etc. BORROWER HEREBY WAIVES THE RIGHT TO ASSERT A COUNTERCLAIM, OTHER THAN A COMPULSORY COUNTERCLAIM, IN ANY ACTION OR PROCEEDING BROUGHT AGAINST IT BY LENDER OR ITS AGENTS, AND WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING BROUGHT BY EITHER PARTY HERETO AGAINST THE OTHER OR IN ANY COUNTERCLAIM BORROWER MAY BE PERMITTED TO ASSERT HEREUNDER OR WHICH MAY BE ASSERTED BY LENDER OR ITS AGENTS, AGAINST BORROWER, OR IN ANY MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS SECURITY INSTRUMENT OR THE DEBT.

     Section 18.09. Headings; Construction of Documents; etc. The table of contents, headings and captions of various paragraphs of this Security Instrument are for convenience of reference only and are not to be construed as defining or limiting, in any way, the scope or intent of the provisions hereof. Borrower acknowledges that it was represented by competent counsel in connection with the negotiation and drafting of this Security Instrument and the other Loan Documents and that neither this Security Instrument nor the other Loan Documents shall be subject to the principle of construing the meaning against the Person who drafted same.

     Section 18.10. Sole Discretion of Lender. Whenever Lender exercises any right given to it to approve or disapprove, or any arrangement or term is to be satisfactory to Lender, the decision of Lender to approve or disapprove or to decide that arrangements or terms are satisfactory or not satisfactory shall be in the sole discretion of Lender and shall be final and conclusive, except as may be otherwise specifically provided herein.

     Section 18.11. Waiver of Notice. Borrower shall not be entitled to any notices of any nature whatsoever from Lender except with respect to matters for which the Loan Documents specifically and expressly provide for the giving of notice by Lender to Borrower and except with respect to matters for which Borrower is not, pursuant to applicable Legal Requirements, permitted to waive the giving of notice.

     Section 18.12. Covenants Run with the Land. All of the grants, covenants, terms, provisions and conditions herein shall run with the Premises, shall be binding upon Borrower and shall inure to the benefit of Lender, subsequent holders of this Security Instrument and their successors and assigns. Without limitation to any provision hereof, the term “Borrower” shall include and refer to the borrower named herein, any subsequent owner of the Property, and its respective heirs, executors, legal representatives, successors and assigns. The representations, warranties and agreements contained in this Security Instrument and the other Loan Documents are intended solely for the benefit of the parties hereto, shall confer no rights hereunder, whether legal or equitable, in any other Person and no other Person shall be entitled to rely thereon.

76

     Section 18.13. Applicable Law. THIS SECURITY INSTRUMENT WAS NEGOTIATED IN NEW YORK, AND MADE BY BORROWER AND ACCEPTED BY LENDER IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THE NOTE WERE DISBURSED FROM NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. THIS SECURITY INSTRUMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA, EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION, PRIORITY, ENFORCEMENT AND FORECLOSURE OF THE LIENS AND SECURITY INTERESTS CREATED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH THE PREMISES ARE LOCATED, IT BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE VALIDITY AND ENFORCEABILITY OF ALL LOAN DOCUMENTS, AND THE DEBT OR OBLIGATIONS ARISING HEREUNDER.

     Section 18.14. Security Agreement. (a) (i) This Security Instrument is both a real property mortgage, deed to secure debt or deed of trust, as applicable, and a “security agreement” within the meaning of the UCC. The Property includes both real and personal property and all other rights and interests, whether tangible or intangible in nature, of Borrower in the Property. This Security Instrument is filed as a fixture filing and covers goods which are or are to become fixtures on the Property. Borrower by executing and delivering this Security Instrument has granted to Lender, as security for the Debt, a security interest in the Property to the full extent that the Property may be subject to the UCC (said portion of the Property so subject to the UCC being called in this Section 18.14 the “Collateral”). If an Event of Default shall occur, Lender, in addition to any other rights and remedies which it may have, shall have and may exercise immediately and without demand, any and all rights and remedies granted to a secured party upon default under the UCC, including, without limiting the generality of the foregoing, the right to take possession of the Collateral or any part thereof, and to take such other measures as Lender may deem necessary for the care, protection and preservation of the Collateral. Upon request or demand of Lender following an Event of Default, Borrower shall, at its expense, assemble the Collateral and make it available to Lender at a convenient place acceptable to Lender. Borrower shall pay to Lender on demand any and all expenses, including reasonable legal expenses and attorneys’ fees, incurred or paid by Lender in protecting its interest in the Collateral and in enforcing its rights hereunder with respect to the Collateral. Any disposition pursuant to the UCC of so much of the Collateral as may constitute personal property shall be considered commercially reasonable if made pursuant to a public sale which is advertised at least twice in a newspaper in which sheriff’s sales are advertised in the county where the Premises is located. Any notice of sale, disposition or other intended action by Lender with respect to the Collateral given to Borrower in accordance with the provisions hereof at least ten (10) days prior to such action, shall constitute reasonable notice to Borrower. The proceeds of any disposition of the Collateral, or any part thereof, may be applied by Lender to the payment of the Debt in such priority and proportions as Lender in its discretion shall deem proper. It is not necessary that the Collateral be present at any disposition thereof. Lender shall have no obligation to clean-up or otherwise prepare the Collateral for disposition.

     (ii) The mention in a financing statement filed in the records normally pertaining to personal property of any portion of the Property shall not derogate from or impair in any manner the intention of this Security Instrument. Lender hereby declares that all items of Collateral are part of the real property encumbered hereby to the fullest extent permitted by law, regardless of whether any such item is physically attached to the Improvements or whether serial numbers are used for the better identification of certain items. Specifically, the mention in any such financing statement of any items included in the Property shall not be construed to alter, impair or impugn any rights of Lender as determined by this Security Instrument or the priority of Lender’s lien upon and security interest in the Property in the event that notice of Lender’s priority of interest as to any portion of the Property is required to be filed in accordance with the UCC to be effective against or take priority over the interest of any particular class of persons, including the federal government or any subdivision or instrumentality thereof. No portion of the Collateral constitutes or is the proceeds of “Farm Products”, as defined in the UCC.

77

     (iii) If Borrower is at any time a beneficiary under a letter of credit now or hereafter issued in favor of Borrower, Borrower shall promptly notify Lender thereof and, at the request and option of Lender, Borrower shall, pursuant to an agreement in form and substance satisfactory to Lender, either (A) arrange for the issuer and any confirmer of such letter of credit to consent to an assignment to Lender of the proceeds of any drawing under the letter of credit or (B) arrange for Lender to become the transferee beneficiary of the letter of credit, with Lender agreeing, in each case, that the proceeds of any drawing under the letter to credit are to be applied as provided in this Security Instrument.

     (iv) Borrower and Lender acknowledge that for the purposes of Article 9 of the UCC, the law of the State of New York shall be the law of the jurisdiction of the bank in which the Central Account is located.

     (v) Lender may comply with any applicable Legal Requirements in connection with the disposition of the Collateral, and Lender’s compliance therewith will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral.

     (vi) Lender may sell the Collateral without giving any warranties as to the Collateral. Lender may specifically disclaim any warranties of title, possession, quiet enjoyment or the like. This procedure will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral.

     (vii) If Lender sells any of the Collateral upon credit, Borrower will be credited only with payments actually made by the purchaser, received by Lender and applied to the indebtedness of Borrower. In the event the purchaser of the Collateral fails to fully pay for the Collateral, Lender may resell the Collateral and Borrower will be credited with the proceeds of such sale.

     (b) Borrower hereby irrevocably appoints Lender as its attorney-in-fact, coupled with an interest, to file with the appropriate public office on its behalf any financing or other statements signed only by Lender, as secured party, or, to the extent permitted under the UCC, unsigned, in connection with the Collateral covered by this Security Instrument.

     Section 18.15. Actions and Proceedings. Lender has the right to appear in and defend any action or proceeding brought with respect to the Property in its own name or, if required by Legal Requirements or, if in Lender’s reasonable judgment, it is necessary, in the name and on behalf of Borrower, which Lender believes will adversely affect the Property or this Security Instrument and to bring any action or proceedings, in its name or in the name and on behalf of Borrower, which Lender, in its discretion, decides should be brought to protect its interest in the Property.

     Section 18.16. Usury Laws. This Security Instrument and the Note are subject to the express condition, and it is the expressed intent of the parties, that at no time shall Borrower be obligated or required to pay interest on the principal balance due under the Note at a rate which could subject the holder of the Note to either civil or criminal liability as a result of being in excess of the maximum interest rate which Borrower is permitted by law to contract or agree to pay. If by the terms of this Security Instrument or the Note, Borrower is at any time required or obligated to pay interest on the principal balance due under the Note at a rate in excess of such maximum rate, such rate of interest shall be deemed to be immediately reduced to such maximum rate and the interest payable shall be computed at such maximum rate and all prior interest payments in excess of such maximum rate shall be applied and shall be deemed to have been payments in reduction of the principal balance of the Note. No application to the principal balance of the Note pursuant to this Section 18.16 shall give rise to any requirement to pay any prepayment fee or charge of any kind due hereunder, if any.

     Section 18.17. Remedies of Borrower. In the event that a claim or adjudication is made that Lender has acted unreasonably or unreasonably delayed acting in any case where by law or under the Note, this Security Instrument or the Loan Documents, it has an obligation to act reasonably or promptly, Lender shall not be liable for any monetary damages, and Borrower’s remedies shall be limited to injunctive relief or declaratory judgment.

78

     Section 18.18. Offsets, Counterclaims and Defenses. Any assignee of this Security Instrument, the Assignment and the Note shall take the same free and clear of all offsets, counterclaims or defenses which are unrelated to the Note, the Assignment or this Security Instrument which Borrower may otherwise have against any assignor of this Security Instrument, the Assignment and the Note and no such unrelated counterclaim or defense shall be interposed or asserted by Borrower in any action or proceeding brought by any such assignee upon this Security Instrument, the Assignment or the Note and any such right to interpose or assert any such unrelated offset, counterclaim or defense in any such action or proceeding is hereby expressly waived by Borrower.

     Section 18.19. No Merger. If Borrower’s and Lender’s estates become the same including, without limitation, upon the delivery of a deed by Borrower in lieu of a foreclosure sale, or upon a purchase of the Property by Lender in a foreclosure sale, this Security Instrument and the lien created hereby shall not be destroyed or terminated by the application of the doctrine of merger and in such event Lender shall continue to have and enjoy all of the rights and privileges of Lender as to the separate estates; and, as a consequence thereof, upon the foreclosure of the lien created by this Security Instrument, any Leases or subleases then existing and created by Borrower shall not be destroyed or terminated by application of the law of merger or as a result of such foreclosure unless Lender or any purchaser at any such foreclosure sale shall so elect. No act by or on behalf of Lender or any such purchaser shall constitute a termination of any Lease or sublease unless Lender or such purchaser shall give written notice thereof to such lessee or sublessee.

     Section 18.20. Restoration of Rights. In case Lender shall have proceeded to enforce any right under this Security Instrument by foreclosure sale, entry or otherwise, and such proceedings shall have been discontinued or abandoned for any reason or shall have been determined adversely, then, in every such case, Borrower and Lender shall be restored to their former positions and rights hereunder with respect to the Property subject to the lien hereof.

     Section 18.21. Waiver of Statute of Limitations. The pleadings of any statute of limitations as a defense to any and all obligations secured by this Security Instrument are hereby waived to the full extent permitted by Legal Requirements.

     Section 18.22. Advances. This Security Instrument shall cover any and all advances made pursuant to the Loan Documents, rearrangements and renewals of the Debt and all extensions in the time of payment thereof, even though such advances, extensions or renewals be evidenced by new promissory notes or other instruments hereafter executed and irrespective of whether filed or recorded. Likewise, the execution of this Security Instrument shall not impair or affect any other security which may be given to secure the payment of the Debt, and all such additional security shall be considered as cumulative. The taking of additional security, execution of partial releases of the security, or any extension of time of payment of the Debt shall not diminish the force, effect or lien of this Security Instrument and shall not affect or impair the liability of Borrower and shall not affect or impair the liability of any maker, surety, or endorser for the payment of the Debt.

     Section 18.23. Application of Default Rate Not a Waiver. Application of the Default Rate shall not be deemed to constitute a waiver of any Default or Event of Default or any rights or remedies of Lender under this Security Instrument, any other Loan Document or applicable Legal Requirements, or a consent to any extension of time for the payment or performance of any obligation with respect to which the Default Rate may be invoked.

     Section 18.24. Intervening Lien. To the fullest extent permitted by law, any agreement hereafter made pursuant to this Security Instrument shall be superior to the rights of the holder of any intervening lien.

     Section 18.25. No Joint Venture or Partnership. Borrower and Lender intend that the relationship created hereunder be solely that of mortgagor and mortgagee or grantor and beneficiary or borrower and lender, as the case may be. Nothing herein is intended to create a joint venture, partnership, tenancy-in-common, or joint tenancy relationship between Borrower and Lender nor to grant Lender any interest in the Property other than that of mortgagee, beneficiary or lender.

79

     Section 18.26. Time of the Essence. Time shall be of the essence in the performance of all obligations of Borrower hereunder.

     Section 18.27. Borrower’s Obligations Absolute. Borrower acknowledges that Lender and/or certain Affiliates of Lender are engaged in the business of financing, owning, operating, leasing, managing, and brokering real estate and in other business ventures which may be viewed as adverse to or competitive with the business, prospect, profits, operations or condition (financial or otherwise) of Borrower. Except as set forth to the contrary in the Loan Documents, all sums payable by Borrower hereunder shall be paid without notice or demand, counterclaim, set-off, deduction or defense and without abatement, suspension, deferment, diminution or reduction, and the obligations and liabilities of Borrower hereunder shall in no way be released, discharged, or otherwise affected (except as expressly provided herein) by reason of: (a) any damage to or destruction of or any Taking of the Property or any portion thereof or any other Cross-collateralized Property; (b) any restriction or prevention of or interference with any use of the Property or any portion thereof or any other Cross-collateralized Property; (c) any title defect or encumbrance or any eviction from the Premises or any portion thereof by title paramount or otherwise; (d) any bankruptcy proceeding relating to Borrower, any General Partner, or any guarantor or indemnitor, or any action taken with respect to this Security Instrument or any other Loan Document by any trustee or receiver of Borrower or any other Cross-collateralized Borrower or any such General Partner, guarantor or indemnitor, or by any court, in any such proceeding; (e) any claim which Borrower has or might have against Lender; (f) any default or failure on the part of Lender to perform or comply with any of the terms hereof or of any other agreement with Borrower or any other Cross-collateralized Borrower; or (g) any other occurrence whatsoever, whether similar or dissimilar to the foregoing, whether or not Borrower shall have notice or knowledge of any of the foregoing.

     Section 18.28. Publicity. All promotional news releases, publicity or advertising by Manager, Borrower or their respective Affiliates through any media intended to reach the general public shall not refer to the Loan Documents or the financing evidenced by the Loan Documents, or to Lender or to any of its Affiliates without the prior written approval of Lender or such Affiliate, as applicable, in each instance, such approval not to be unreasonably withheld or delayed. Notwithstanding anything herein to the contrary, Borrower shall be authorized to provide information relating to the Loan Documents or the financing evidenced by the Loan Documents, or to Lender or to any of its Affiliates, to rating agencies, underwriters, potential securities investors, auditors, regulatory authorities and to any Persons which may be entitled to such information by operation of law and without limiting the foregoing to issue press releases and make Form 8-K and other securities filings containing the above-described information as it or its counsel reasonably deems required by law. Lender shall be authorized to provide information relating to the Property, the Loan and matters relating thereto to rating agencies, underwriters, potential securities investors, auditors, regulatory authorities and to any Persons which may be entitled to such information by operation of law and may use basic transaction information (including, without limitation, the name of Borrower, the name and address of the Property and the Loan Amount) in press releases or other marketing materials.

     Section 18.29. Securitization Opinions. In the event the Loan is included as an asset of a Securitization by Lender or any of its Affiliates, Borrower shall, within ten (10) Business Days after Lender’s written request therefor, at Lender’s sole cost and expense, deliver opinions in form and substance and delivered by counsel reasonably acceptable to Lender and each Rating Agency, as may be reasonably required by Lender and/or the Rating Agency in connection with such securitization. Borrower’s failure to deliver the opinions required hereby within such ten (10) Business Day period shall constitute an “Event of Default” hereunder.

     Section 18.30. Cooperation with Rating Agencies; etc. Borrower covenants and agrees that in the event the Loan is to be included as an asset of a Securitization, Borrower shall, at the sole cost and expense of Lender, (a) gather any information reasonably required by each Rating Agency in connection with such a Securitization, (b) at Lender’s request, meet with representatives of each Rating Agency to discuss the business and operations of the Property, and (c) cooperate with the reasonable requests of each Rating Agency and Lender in connection with all of the foregoing as well as in connection with all other matters and the preparation of any offering documents with respect thereto, including, without limitation, entering into any amendments or modifications to this Security Instrument or to any other Loan Document which may be requested by Lender to conform to Rating Agency or market standards for a Securitization provided that no such modification shall modify (a) the interest rate payable under the Note, (b) the stated maturity of the Note, (c) the amortization of principal under the Note, (d) Section

80

18.32 hereof, (e) any other material economic term of the Loan or (f) any provision, the effect of which would materially increase Borrower’s obligations or materially decrease Borrower’s rights under the Loan Documents. Borrower acknowledges that the information provided by Borrower to Lender may be incorporated into the offering documents for a Securitization and to the fullest extent permitted, Borrower irrevocably waives all rights, if any, to prohibit such disclosures including, without limitation, any right of privacy. Lender and each Rating Agency shall be entitled to rely on the information supplied by, or on behalf of, Borrower and Borrower indemnifies and holds harmless the Indemnified Parties, their Affiliates and each Person who controls such Persons within the meaning of Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of 1934, as same may be amended from time to time, for, from and against any claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature, known or unknown, contingent or otherwise, whether incurred or imposed within or outside the judicial process, including, without limitation, reasonable attorneys’ fees and disbursements that arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in such information supplied by or on behalf of Borrower or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated in such information supplied by or on behalf of Borrower or necessary in order to make the statements in such information, or in light of the circumstances under which they were made, not misleading.

     Section 18.31. Securitization Financials. Borrower covenants and agrees that, upon Lender’s written request therefor in connection with a Securitization, Borrower shall, at Lender’s sole cost and expense, deliver as soon as is reasonably practicable (a) audited financial statements and related documentation prepared by an Independent certified public accountant that satisfy securities laws and requirements for use in a public registration statement (which may include up to three (3) years of historical audited financial statements) and (b) if, at the time one or more Disclosure Documents are being prepared in connection with a Securitization, Lender expects that Borrower alone or Borrower and one or more of its Affiliates collectively, or the Property alone or the Property and any other parcel(s) of real property, together with improvements thereon and personal property related thereto, that is “related”, within the meaning of the definition of Significant Obligor, to the Property (a “Related Property”) collectively, will be a Significant Obligor, Borrower shall furnish to Lender upon request (i) the selected financial data or, if applicable, net operating income, required under Item 1112(b)(1) of Regulation AB and meeting the requirements thereof, if Lender expects that the principal amount of the Loan, together with any loans made to an Affiliate of Borrower or secured by a Related Property that is included in a Securitization with the Loan (a “Related Loan”), as of the cut-off date for such Securitization may, or if the principal amount of the Loan together with any Related Loans as of the cut-off date for such Securitization and at any time during which the Loan and any Related Loans are included in a Securitization does, equal or exceed ten percent (10%) (but less than twenty percent (20%)) of the aggregate principal amount of all mortgage loans included or expected to be included, as applicable, in the Securitization or (ii) the financial statements required under Item 1112(b)(2) of Regulation AB and meeting the requirements thereof, if Lender expects that the principal amount of the Loan together with any Related Loans as of the cut-off date for such Securitization may, or if the principal amount of the Loan together with any Related Loans as of the cut-off date for such Securitization and at any time during which the Loan and any Related Loans are included in a Securitization does, equal or exceed twenty percent (20%) of the aggregate principal amount of all mortgage loans included or expected to be included, as applicable, in the Securitization. Such financial data or financial statements shall be furnished to Lender as soon as reasonably practicable but in all events within twenty(20) Business Days after notice from Lender in connection with the preparation of Disclosure Documents for the Securitization and, with respect to the data or financial statements required pursuant to clause (b) hereof, (A) not later than thirty (30) days after the end of each fiscal quarter of Borrower and (B) not later than seventy-five (75) days after the end of each Fiscal Year; provided, however, that Borrower shall not be obligated to furnish financial data or financial statements pursuant to clauses (A) or (B) of this sentence with respect to any period for which a filing pursuant to the Securities Exchange Act of 1934 in connection with or relating to the Securitization is not required.

     Section 18.32. Exculpation. Notwithstanding anything in this Security Instrument or in any other Loan Document to the contrary, except as otherwise set forth in this Section 18.32 to the contrary, Lender shall not enforce the liability and obligation of Borrower or any Person holding a direct or indirect interest in Borrower or (a) if Borrower or any of its direct or indirect owners is a partnership, its or their direct or indirect constituent partners or any of their respective partners, (b) if Borrower or any of its direct or indirect owners is a trust, its or their beneficiaries or any of their respective Partners (as hereinafter defined), (c) if Borrower or any of its direct or

81

indirect owners is a corporation, any of its or their direct or indirect shareholders, directors, principals, officers or employees, or (d) if Borrower or any of its direct or indirect owners is a limited liability company, any of its or their direct or indirect members (the Persons described in the foregoing clauses (a) — (d), as the case may be, are hereinafter referred to as the “Partners”) to perform and observe the obligations contained in this Security Instrument or any of the other Loan Documents by any action or proceeding, including, without limitation, any action or proceeding wherein a money judgment shall be sought against Borrower or the Partners, except that Lender may bring a foreclosure action, action for specific performance, or other appropriate action or proceeding (including, without limitation, an action to obtain a deficiency judgment) against Borrower solely for the purpose of enabling Lender to realize upon (i) Borrower’s interest in the Property, (ii) the Rent to the extent received by Borrower during the existence of an Event of Default (all Rent covered by this clause (ii) being hereinafter referred to as the “Recourse Distributions”) and not applied towards Debt Service or the operation or maintenance of the Property and (iii) any other collateral then subject to the Loan Documents (the collateral described in the foregoing clauses (i) — (iii) is hereinafter referred to as the “Default Collateral”); provided, however, that any judgment in any such action or proceeding shall be enforceable against Borrower and the Partners only to the extent of any such Default Collateral. The provisions of this Section shall not, however, (a) impair the validity of the Debt evidenced by the Note or in any way affect or impair the lien of this Security Instrument or any of the other Loan Documents or the right of Lender to foreclose this Security Instrument during the existence of an Event of Default the cure of which has not been accepted by Lender; (b) impair the right of Lender to name Borrower as a party defendant in any action or suit for judicial foreclosure and sale under this Security Instrument; (c) affect the validity or enforceability of the Note, this Security Instrument, or any of the other Loan Documents, or impair the right of Lender to seek a personal judgment against Guarantor to the extent and for the obligations guaranteed in the Guaranty; (d) impair the right of Lender to obtain the appointment of a receiver; (e) impair the enforcement of the Assignment; (f) impair the right of Lender to bring suit for a monetary judgment against Borrower with respect to fraud or material misrepresentation by Borrower, or any Affiliate of Borrower in connection with this Security Instrument, the Note or the other Loan Documents, and the foregoing provisions shall not modify, diminish or discharge the liability of Borrower or Guarantor to the extent of Guarantor’s liability under the Guaranty delivered by Guarantor with respect to same; (g) impair the right of Lender to bring suit for a monetary judgment to obtain the Recourse Distributions received by Borrower including, without limitation, the right to bring suit for a monetary judgement to proceed against any Guarantor to the extent of Guarantor’s liability under any guaranty delivered by Guarantor and the foregoing provisions shall not modify, diminish or discharge the liability of Borrower or Guarantor with respect to same; (h) impair the right of Lender to bring suit for a monetary judgment against Borrower with respect to Borrower’s misappropriation of tenant security deposits or Rent, and the foregoing provisions shall not modify, diminish or discharge the liability of Borrower or Guarantor to the extent of Guarantor’s liability under any guaranty delivered by Guarantor with respect to same; (i) impair the right of Lender to obtain Loss Proceeds due to Lender pursuant to this Security Instrument; (j) impair the right of Lender to enforce the provisions of Sections 2.02(g) (other than the provisions of clause (vii) thereof), 12.01, 16.01 or 16.02, 18.29, 18.30 or 18.31, inclusive of this Security Instrument, even after repayment in full by Borrower of the Debt or to bring suit for a monetary judgment against Borrower with respect to any obligation set forth in said Sections; (k) prevent or in any way hinder Lender from exercising, or constitute a defense, or counterclaim, or other basis for relief in respect of the exercise of, any other remedy against any or all of the collateral securing the Note as provided in the Loan Documents; (l) impair the right of Lender to bring suit for a monetary judgment against Borrower with respect to any misapplication or conversion of Loss Proceeds, and the foregoing provisions shall not modify, diminish or discharge the liability of Borrower or Guarantor to the extent of Guarantor’s liability under any guaranty delivered by Guarantor with respect to same; (m) impair the right of Lender to sue for, seek or demand a deficiency judgment against Borrower solely for the purpose of foreclosing the Property or any part thereof, or realizing upon the Default Collateral; provided, however, that any such deficiency judgment referred to in this clause (m) shall be enforceable against Borrower and Guarantor only to the extent of any of the Default Collateral; (n) impair the ability of Lender to bring suit for a monetary judgment against Borrower with respect to arson or physical waste to or of the Property or damage to the Property resulting from the gross negligence or willful misconduct of Borrower or, to the extent that there is sufficient cash flow, failure to pay any Imposition, or in lieu thereof, deposit a sum equal to any Impositions into the Basic Carrying Costs Sub-Account; (o) impair the right of Lender to bring a suit for a monetary judgment against Borrower in the event of the exercise of any right or remedy under any federal, state or local forfeiture laws resulting in the loss of the lien of this Security Instrument, or the priority thereof, against the Property; (p) be deemed a waiver of any right which Lender may have under Sections 506(a), 506(b), 1111(b) or any other provision of the Bankruptcy Code to file a claim for the full amount of the Debt or to require that all collateral shall continue to

82

secure all of the Debt; (q) impair the right of Lender to bring suit for monetary judgment against Borrower with respect to any losses resulting from any claims, actions or proceedings initiated by Borrower (or any Affiliate of Borrower) alleging that the relationship of Borrower and Lender is that of joint venturers, partners, tenants in common, joint tenants or any relationship other than that of debtor and creditor; (r) impair the right of Lender to bring suit for a monetary judgment against Borrower in the event of a Transfer in violation of the provisions of Article IX hereof; (s) impair the right of Lender to bring suit for a monetary judgment in the event that Borrower moves its principal place of business or its books and records relating to the Property which are governed by the UCC, or changes its name, its jurisdiction of organization, type of organization or other legal structure or, if it has one, organizational identification number, without first giving Lender thirty (30) days prior written notice; (t) in the event Borrower is a tenancy-in-common, impair the right of Lender to bring suit for monetary judgment against any TIC which commences a partition action; (u) in the event Borrower is a tenancy-in-common, impair the right of Lender to bring suit for monetary judgment against any TIC or Guarantor in the event the TIC Agreement is modified or amended without obtaining the prior written consent of Lender or if the Person appointed in the TIC Agreement as manager is replaced or removed without the prior written consent of Lender; or (v) impair the right of Lender to bring suit for a monetary judgment in the event that Borrower changes its name or otherwise does anything which would make the information set forth in any UCC Financing Statements relating to the Property materially misleading without giving Lender thirty (30) days prior written notice thereof. The provisions of this Section 18.32 shall be inapplicable to Borrower if (a) any proceeding, action, petition or filing under the Bankruptcy Code, or any similar state or federal law now or hereafter in effect relating to bankruptcy, reorganization or insolvency, or the arrangement or adjustment of debts, shall be (A) filed by Borrower or Guarantor or (B) filed against Borrower or Guarantor and consented to or acquiesced in by Borrower or Guarantor or if any Affiliate of Borrower or Guarantor, or if Borrower or Guarantor or any Affiliate of either of them shall institute any proceeding for Borrower’s dissolution or liquidation, or Borrower or Guarantor shall make an assignment for the benefit of creditors, or (b) Borrower or any Affiliate contests in bad faith or in any material way interferes with in bad faith, directly or indirectly (collectively, a “Contest”), any foreclosure action, UCC sale or other material remedy exercised by Lender upon the occurrence of an Event of Default whether by making any motion, bringing any counterclaim (other than a compulsory counterclaim), claiming any defense, seeking any injunction or other restraint, commencing any action, or otherwise in bad faith (provided that if any such Person obtains a non-appealable order successfully asserting a Contest, Borrower shall have no liability under this clause (b)), in which event Lender shall have recourse against all of the assets of Borrower including, without limitation, any right, title and interest of Borrower in and to the Property.

     Section 18.33. Intentionally Omitted.

     Section 18.34. Intentionally Omitted.

     Section 18.35. Mezzanine Loan Option. (a) Lender shall have the right at any time to divide the Loan into two or more parts (the “Mezzanine Option”): a “mortgage loan” and one or more “mezzanine loans.” The principal amount of the mortgage loan plus the principal amount of the mezzanine loan(s) shall equal the outstanding principal balance of the Loan immediately prior to the creation of the mortgage loan and the mezzanine loan(s). In effectuating the foregoing, Lender will make one or more loans to one or more entities that will be the direct or indirect equity owner(s) of Borrower as described in Section 18.35(b) (collectively, the “Mezzanine Borrower”). The Mezzanine Borrower will contribute the amount of the mezzanine loan(s) to Borrower (in its capacity as borrower under the mortgage loan, “mortgage borrower”) and the mortgage borrower will apply the contribution to pay down the Loan to the mortgage loan amount. The mortgage loan and the mezzanine loan(s) will be on the same terms and subject to the same conditions set forth in the Loan Documents except as follows. The mezzanine loan(s) shall be made pursuant to Lender’s standard mezzanine loan documents.

     (b) Lender shall have the right to establish different interest rates and debt service payments for the mortgage loan and the mezzanine loan(s) and to require the payment of the mortgage loan and the mezzanine loan(s) in such order of priority as may be designated by Lender; provided, that (i) the total loan amounts for the mortgage loan and the mezzanine loan(s) shall equal the amount of the Loan immediately prior to the creation of the mortgage loan and the mezzanine loan(s), (ii) the weighted average interest rate of the mortgage loan and the mezzanine loan(s) shall on the date created equal the interest rate which was applicable to the Loan immediately prior to

83

creation of the mortgage loan and mezzanine loan(s) and (iii) the debt service payments on the mortgage loan note and the mezzanine loan note(s) shall on the date created equal the debt service payment which was due under the Loan immediately prior to creation of a mortgage loan and a mezzanine loan(s).

     (c) The Mezzanine Borrower shall be a special purpose, bankruptcy remote entity pursuant to applicable Rating Agency criteria and shall own directly or indirectly one hundred percent (100%) of the mortgage borrower. The security for the mezzanine loan(s) shall be a pledge of one hundred percent (100%) of the direct and indirect ownership interests in the mortgage borrower.

     (d) Borrower shall cooperate with all reasonable requests of Lender in order to convert the Loan into a mortgage loan and one or more mezzanine loans and shall execute and deliver such documents as shall reasonably be required by Lender in connection therewith, including, without limitation, the delivery of non-consolidation, enforceability, authorization and execution opinions and an “Eagle 9” or “UCC plus” (or equivalent) UCC insurance policy and the modification of organizational documents and loan documents and the transfer of the membership interest in Borrower to the Mezzanine Borrower.

     It shall be an Event of Default if Borrower fails to cooperate in all reasonable respects in effectuating any of the terms, covenants or conditions of this Section 18.35 after expiration of ten (10) Business Days notice of non-cooperation.

     Section 18.36. Component Notes. Lender, without in any way limiting Lender’s other rights hereunder, in its sole and absolute discretion, shall have the right at any time to require Borrower to execute and deliver “component” notes (including senior and junior notes), which notes may be paid in such order of priority as may be designated by Lender, provided that (a) the aggregate principal amount of such “component” notes shall equal the outstanding principal balance of the Loan immediately prior to the creation of such “component” notes, (b) the weighted average interest rate of all such “component” notes shall on the date created equal the interest rate which was applicable to the Loan immediately prior to the creation of such “component” notes (it being acknowledged by Borrower that if an Event of Default occurs during the term of the Loan, whether or not it is subsequently cured, the weighted average interest rates of the “component” notes may increase (i.e. the Loan may have “rate creep”)), (c) the debt service payments on all such “component” notes shall on the date created equal the debt service payment which was and would be due under the Loan immediately prior to the creation of such component notes (it being acknowledged by Borrower that if an Event of Default occurs during the term of the Loan, whether or not it is subsequently cured, the weighted average interest rates of the “component” notes may increase (i.e. the Loan may have “rate creep”)) and (d) the other terms and provisions of each of the “component” notes shall be identical in substance and substantially similar in form to the Loan Documents. Borrower shall cooperate with all reasonable requests of Lender in order to establish the “component” notes and shall execute and deliver such documents as shall reasonably be required by Lender in connection therewith, all in form and substance reasonably satisfactory to Lender, including, without limitation, the severance of security documents if requested. It shall be an Event of Default if Borrower fails to comply with any of the terms, covenants or conditions of this Section 18.36 after the expiration of ten (10) Business Days after notice thereof.

     Section 18.37. Intentionally Omitted.

     Section 18.38. Certain Matters Relating to Property located in the State of Florida. With respect to the Property which is located in the State of Florida, notwithstanding anything contained herein to the contrary:

     (a) It is agreed that, in addition to existing indebtedness, any future advances made by the then holder of the Note to or for the benefit of Borrower or Borrower’s permitted assignees, whether such advances are obligatory or are made at the option of Lender, or otherwise, at any time within twenty (20) years from the date of this Security Instrument, with interest thereon at the rate agreed upon at the time of each additional loan or advance, shall be equally secured with and have the same priority as the Debt and be subject to all of the terms and provisions of this Security Instrument, whether or not such additional loan or advance is evidenced by a promissory note of Borrower and whether or not identified by a recital that it is secured by this Security Instrument; provided that, although the total amount of the indebtedness that may be secured may decrease to zero from time to time or may

84

increase from time to time, the aggregate amount of outstanding Debt so secured at any one time shall not exceed the sum of the Loan Amount multiplied by two (2), plus interest and disbursements made for the payment of taxes, levies or insurance on the Property with interest on such disbursements. It is understood and agreed that this future advance provision shall not be construed to obligate Lender to make any such additional loans or advances. It is further agreed that any additional note or notes executed and delivered under this future advance provision shall be included in the words “Note” or “Debt” wherever either appears in the context of this Security Instrument. Borrower, for itself and its successors in title and its successors and permitted assigns, hereby expressly waives and relinquishes any rights granted under Section 697.04 of the Florida Statutes, or otherwise, to limit the amount of indebtedness that may be secured by this Security Instrument at any time during the term of this Security Instrument. Borrower further covenants not to file for record any notice limiting the maximum principal amount that may be secured by this Security Instrument and agrees that any such notice, if filed, shall be null and void; and except as hereinafter provided, of no effect. In the event that, notwithstanding the foregoing covenant, Borrower or its successor in title files for record any notice limiting the maximum principal amount that may be secured by this Security Instrument in violation of the foregoing covenant, the Debt shall, at the option of Lender, become immediately due and payable.

     (b) Notwithstanding anything to the contrary contained in this Security Instrument, Lender shall comply with the requirements of Section 501.137. Florida Statutes, as applicable, with respect to the payment of Impositions and insurance premiums from the Basic Carrying Costs Sub-Account so that the maximum tax discount available may be obtained with regard to the Premises and so that insurance coverage on the Property does not lapse.

     (c) The assignment of leases and rents contained in this Security Instrument is intended to provide Lender with all the rights and remedies of lenders pursuant to Section 697.07 of the Florida Statutes (hereinafter “Section 697.07”), as may be amended from time to time. However, in no event shall this reference diminish, alter, impair, or affect any other rights and remedies of Lender, including but not limited to, the appointment of a receiver as provided herein, nor shall any provision in this Section diminish, alter, impair or affect any rights or powers of the receiver in law or equity or as set forth herein. In addition, this assignment shall be fully operative without regard to value of the Property or without regard to the adequacy of the Property to serve as security for the obligations owed by Borrower to Lender, and shall be in addition to any rights arising under Section 697.07. Further, except for the notices required hereunder, if any, Borrower waives any notice of default or demand for turnover of rents by Lender, together with any rights under Section 697.07 to apply to a court to deposit the Rents into the registry of the court or such other depository as the court may designate.

     Section 18.39. Certain Matters Relating to Property Located in the State of Georgia. With respect to the Property which is located in the State of Georgia, notwithstanding anything contained herein to the contrary:

     (a) The terms “mortgage” and “hypothecate” which are contained in the “NOW THEREFORE” paragraph of the first page hereof and in Sections 2.02(q), 2.03, 2.05(b), 2.05(f), 8.01(d), 15.02 and 18.14 hereof shall be deleted.

     (b) The terms “Borrower” and “Lender” contained in this Security Instrument shall be deemed to be “Grantor” and “Grantee”, respectively.

     (c) The “PROVIDED ALWAYS” paragraph on page 5 hereof shall be deleted in its entirety and the following provisions shall be inserted in its place:

     Grantor covenants that Grantor is lawfully seized and possessed of the Premises as aforesaid, has good right to convey the same, and that the same are unencumbered except for the Permitted Encumbrances. Grantor warrants and will forever defend the title to the Premises against the claims of all persons whomsoever, except as to the Permitted Encumbrances.

     This Deed is intended to operate and is to be construed as a deed passing the title to the Premises to Lender and is made under those provisions of the existing laws of the State of Georgia relating to deeds to secure debt, and not as a mortgage, and is given to secure the payment of the Note, the final payment on

85

which is due on Maturity, unless otherwise extended pursuant to the terms of the Note, together with any and all renewals, modifications, consolidations and extensions of the indebtedness evidenced thereby, together with the Debt, and together with any and all additional advances made by Lender to protect or preserve the Property or the security interests created hereby on the Property, or for taxes, assessments or insurance premiums as hereinafter provided or for the performance of any of Grantor’s obligations hereunder or for any other purpose provided herein (whether or not the original Grantor remains the owner of the Property at the time of such advances).

     Should the Debt be paid according to the tenor and effect thereof when the same become due and payable, and should Grantor perform all covenants contained in this Deed in a timely manner, then Grantee shall cancel and surrender this Deed of record.

     (d) The definition of “Security Instrument” in Section 1.01 hereof shall be deleted in its entirety and the following shall be inserted in its place:

     “Security Instrument” means this Deed to Secure Debt, Security Instrument and Assignment of Rents as originally executed or as it may hereafter from time to time be supplemented, amended, modified or extended by one or more indentures supplemental hereto.

     (e) The phrase “first mortgage” found in Section 2.06 hereof shall be deleted and the phrase “first deed to secure debt” shall be inserted in its place.

     (f) Subsection 13.02(a)(vi) shall be deleted in its entirety and the following shall be inserted in its place:

     (vi) sell the Property or any part of the Property at one or more public sale or sales before the door of the courthouse of the county in which the Property or any part of the Property is situated, to the highest bidder for cash, in order to pay the Debt, and all expenses of sale and of all proceedings in connection therewith, including reasonable attorney’s fees, after advertising the time, place and terms of sale once a week for four (4) weeks immediately preceding such sale (but without regard to the number of days) in a newspaper in which Sheriff’s sales are advertised in said county. At any such public sale, Grantee may execute and deliver to the purchaser a conveyance of the Premises or any part of the Premises in fee simple, with full warranties of title and, to this end, Grantor hereby constitutes and appoints Grantee the agent and attorney-in-fact of Grantor to make such sale and conveyance, and thereby to divest Grantor of all right, title and equity that Grantor may have in and to the Premises and to vest the same in the purchaser of purchasers at such sale or sales, and all the acts and doings of said agent and attorney-in-fact are hereby ratified and confirmed and any recitals in said conveyance or conveyances as to facts essential to a valid sale shall be binding upon Grantor. The aforesaid power of sale and agency hereby granted are coupled with an interest and are irrevocable by death or otherwise, are granted as cumulative of the other remedies provided hereby or by law for the collection of the Debt, and shall not be exhausted by one exercise thereof, but may be exercised until full payment of all of the Debt. In the event of any sale under this Security Instrument by virtue of the exercise of the powers herein granted, or pursuant to any order in any judicial proceedings or otherwise, the Premises may be sold as an entirety or in separate parcels and in such manner or order as Lender, in its sole discretion, may elect, and if Grantee so elects, Grantee may sell the personal property covered by this Security Instrument at one or more separate sales in any manner permitted by the Uniform Commercial Code, and one or more exercises of the powers herein granted shall not extinguish nor exhaust such powers, until the entire Property are sold or the Debt is paid in full.

     (g) As this instrument is a deed passing legal title pursuant to the laws of the State of Georgia, and is not a mortgage, whenever reference herein is made to the “lien of this Security Instrument”, or words of similar import, such words shall be construed as meaning the security title and interest created and conveyed by this Deed.

86

     (h) Whenever reference is made herein to “reasonable attorney’s fees” or similar words, such reference shall mean attorney’s fees computed based upon the attorney’s normal hourly rates and the amount of time expended, and not the statutory attorney’s fees provided by Official Code of Georgia Annotated § 13-1-11.

     (i) GRANTOR EXPRESSLY WAIVES THE FOLLOWING: (A) ANY RIGHT GRANTOR MAY HAVE UNDER THE CONSTITUTION OF THE STATE OF GEORGIA OR THE CONSTITUTION OF THE UNITED STATES OF AMERICA TO NOTICE OR TO A JUDICIAL HEARING PRIOR TO THE EXERCISE OF ANY RIGHT OR REMEDY PROVIDED TO GRANTEE BY THIS “SECURITY INSTRUMENT” AND GRANTOR WAIVES GRANTOR’S RIGHTS, IF ANY, TO SET ASIDE OR INVALIDATE ANY SALE UNDER POWER DULY CONSUMMATED IN ACCORDANCE WITH THE PROVISIONS OF THIS SECURITY INSTRUMENT ON THE GROUND (IF SUCH BE THE CASE) THAT THE SALE WAS CONSUMMATED WITHOUT PRIOR NOTICE OR JUDICIAL HEARING OR BOTH. ALL WAIVERS BY GRANTOR HEREIN HAVE BEEN MADE VOLUNTARILY, INTELLIGENTLY AND KNOWINGLY BY GRANTOR, AFTER GRANTOR HAS BEEN AFFORDED THE OPPORTUNITY TO BE INFORMED BY COUNSEL OF GRANTOR’S CHOICE AS TO POSSIBLE ALTERNATIVE RIGHTS AND THE EFFECT OF SAID WAIVERS. GRANTOR’S EXECUTION OF THIS SECURITY INSTRUMENT SHALL BE CONCLUSIVE EVIDENCE OF THE MAKING OF SUCH WAIVERS AND THAT SUCH WAIVERS HAVE BEEN VOLUNTARILY, INTELLIGENTLY AND KNOWINGLY MADE.

     (j) The Maturity Date is the Payment Date occurring in April, 2017.

     Section 18.40. Intentionally Omitted.

     Section 18.41. Intentionally Omitted.

     Section 18.42. Certain Matters Relating to Property Located in the State of New Jersey. With respect to the Property which is located in the State of New Jersey, notwithstanding anything contained herein to the Contrary:

     (a) Borrower represents and warrants that (i) all filings and submissions or other action required pursuant to the New Jersey Industrial Site Recovery Act, N.J.S.A. 13:1K-6, et seq., as modified (“ISRA”), if any, in connection with the Loan, have been made or taken and (ii) the Property is not located within a “freshwater wetlands” or a “transition area,” each as defined by N.J.S.A. 13:9B-3, and is not subject to the terms of the New Jersey Freshwater Wetlands Protection Act, as amended, N.J.S.A. 13:9B-1 et. seq., or the rules and regulations promulgated thereunder.

     (b) This Security Instrument shall be governed by and construed in accordance with the laws of the State of New York, provided, however, that (i) matters of title to the Property located in New Jersey, (ii) matters of creation, perfection and priority of the lien of this Security Instrument and (iii) those procedural issues of foreclosure, deed in lieu of foreclosure or sale, which are required to be governed by the laws of the State of New Jersey shall be governed by the laws of New Jersey and construed in accordance therewith.

     (c) Borrower shall not conduct or cause or permit to be conducted on the Property any activity which constitutes an Industrial Establishment (as such term is defined in ISRA) without the prior written consent of Lender. In the event that the provisions of ISRA become applicable to the Property subsequent to the date hereof, Borrower shall give prompt written notice thereof to Lender and shall take immediate requisite action to insure full compliance therewith. Borrower shall deliver to Lender copies of all correspondence, notices and submissions that it sends to or receives from the New Jersey Department of Environmental Protection in connection with such ISRA compliance. Borrower’s obligation to comply with ISRA shall, notwithstanding its general applicability, also specifically apply to sale, transfer, closure or termination of operations associated with any foreclosure action, including, without limitation, a foreclosure action brought with respect to this Security Instrument. In connection with the purchase of the Property, Borrower required that the seller of the Property comply with the provisions of ISRA and the seller did comply therewith.

87

     (d) The Property has not been and is not now being used as a Major Facility (as defined in the Environmental Statutes), and Borrower shall not use the Property as a Major Facility in the future without the prior written consent of Lender. If Borrower ever becomes an owner or operator of a Major Facility, then Borrower shall furnish the New Jersey Department of Environmental Protection with all the information required by N.J.S.A. 58:10-23.11d, and shall duly file with the Director of the Division of Taxation in the New Jersey Department of the Treasury a tax report or return, and shall pay all taxes due therewith, in accordance with N.J.S.A. 58:10-23, 11b.

     (e) This Security Instrument is subject to “modification” as such term is defined in P.L. 1985 c.353 (N.J.S.A. 46:9-8.1 et seq.) (the “Mortgage Modification Act”) and shall be subject to the priority provisions of the Mortgage Modification Act.

     (f) Borrower represents and warrants that the loans or other financial accommodations included as obligations secured by this Security Instrument were obtained solely for the purpose of carrying on or acquiring a business or commercial investment and not for residential, consumer or household purposes.

     Section 18.43. Intentionally Omitted.

     Section 18.44. Intentionally Omitted.

     Section 18.45. Certain Matters Relating to Property Located in the Commonwealth of Pennsylvania. With respect to the Property which is located in the Commonwealth of Pennsylvania, notwithstanding anything contained herein to the contrary:

     (a) FOR THE PURPOSE OF OBTAINING POSSESSION OF THE PROPERTY AND EXERCISING THE OTHER REMEDIES PROVIDED IN THIS SECTION, IN THE EVENT OF ANY DEFAULT HEREUNDER OR UNDER THE NOTE, BORROWER HEREBY AUTHORIZES THE PROTHONOTARY OR ANY ATTORNEY OF THE COURT OF RECORD WITHIN THE COMMONWEALTH OF PENNSYLVANIA TO APPEAR FOR BORROWER TO FILE AN AGREEMENT FOR ENTERING IN ANY COURT OF COMPETENT JURISDICTION ACTION FOR CONFESSION OF JUDGMENT IN EJECTMENT AGAINST BORROWER AND ALL PERSONS CLAIMING UNDER BORROWER FOR POSSESSION OF THE PROPERTY, FOR WHICH THIS SECURITY INSTRUMENT OR A TRUE CORRECT COPY THEREOF SHALL BE A SUFFICIENT WARRANT, WHEREUPON, IF LENDER SO DESIRES, A WRIT OF POSSESSION MAY ISSUE FORTHWITH, WITHOUT ANY PRIOR WRIT OR PROCEEDINGS WHATSOEVER, AND PROVIDED THAT IF FOR ANY REASON AFTER SUCH ACTION SHALL HAVE BEEN COMMENCED THE SAME SHALL BE TERMINATED AND POSSESSION REMAIN IN OR BE RESTORED TO BORROWER, LENDER SHALL HAVE THE RIGHT UPON ANY SUBSEQUENT DEFAULT OR DEFAULTS TO BRING ONE OR MORE ACTION OR ACTIONS AS HEREINBEFORE SET FORTH TO RECOVER POSSESSION BY CONFESSION OF JUDGMENT AS AFORESAID. THE AUTHORITY AND POWER TO APPEAR AND CONFESS JUDGMENT IN EJECTMENT AGAINST BORROWER SHALL NOT BE EXHAUSTED BY THE INITIAL EXERCISE THEREOF AND MAY BE EXERCISED AS OFTEN AS LENDER SHALL FIND IT NECESSARY AND DESIRABLE AND THIS SECURITY INSTRUMENT SHALL BE A SUFFICIENT WARRANT THEREFORE. IN THE EVENT OF ANY JUDGMENT CONFESSED AGAINST BORROWER HEREUNDER IS STRICKEN OR OPENED UPON APPLICATION BY OR ON THE COMPANY’S BEHALF FOR ANY REASON, LENDER IS HEREBY AUTHORIZED AND EMPOWERED TO AGAIN APPEAR FOR AND CONFESS JUDGMENT IN EJECTMENT AGAINST BORROWER, AS PROVIDED FOR HEREIN, IF DOING SO WILL CURE ANY ERRORS OR DEFECTS IN SUCH PRIOR PROCEDURES.

     BY SIGNING THIS INSTRUMENT, BORROWER HEREBY ACKNOWLEDGES THAT BORROWER HAS READ THIS SECURITY INSTRUMENT (INCLUDING WITHOUT LIMITATION THE CONFESSION SET FORTH HEREIN), HAS HAD THE OPPORTUNITY TO HAVE THE SAME REVIEWED BY LEGAL COUNSEL, UNDERSTANDS THE SAME, AND AGREES TO THE PROVISIONS CONTAINED HEREIN, INCLUDING, WITHOUT LIMITATION, THE CONFESSION OF JUDGMENT PROVISIONS AND UNDERSTANDS THAT A CONFESSION OF JUDGMENT CONSTITUTES A WAIVER OR RIGHTS

88

BORROWER OTHERWISE WOULD HAVE TO PRIOR NOTICE AND A HEARING BEFORE A JUDGMENT IS ENTERED AGAINST BORROWER AND WHICH MAY RESULT IN A COURT JUDGMENT AGAINST BORROWER WITHOUT PRIOR NOTICE OR HEARING.

     BORROWER HEREBY AUTHORIZES AND EMPOWERS THE PROTHONOTARY OR ANY ATTORNEY OR ANY COURT OF RECORDS OR THE SHERIFF (OR THE LAWFUL DESIGNEE OF THE SHERIFF) WITHIN ANY COUNTY OF THE COMMONWEALTH OF PENNSYLVANIA OR ELSEWHERE, TO TAKE ALL ACTION ALLOWED BY OR PROVIDED FOR IN THE PENNSYLVANIA RULES OF CIVIL PROCEDURE OR OTHER APPLICABLE RULES OF CIVIL PROCEDURE TO EXECUTE ON ANY JUDGMENT ENTERED AGAINST BORROWER PURSUANT TO THE CONFESSION OF JUDGMENT SET FORTH ABOVE WITHOUT PRIOR NOTICE OR HEARING OF ANY NATURE WHATSOEVER, WAIVING ALL LAWS EXEMPTING REAL OR PERSONAL PROPERTY FROM EXECUTION TO THE EXTENT THAT SUCH LAWS MAY LAWFULLY BE WAIVED. NO SINGLE EXERCISE OF THE FOREGOING POWER TO EXECUTE ON JUDGMENTS WITHOUT A HEARING SHALL BE DEEMED TO EXHAUST THE POWER, WHETHER OR NOT ANY SUCH EXERCISE SHALL BE HELD BY ANY COURT TO BE VALID, VOIDABLE OR VOID, BUT THE POWER SHALL CONTINUE UNDIMINISHED AND IT MAY BE EXERCISED FROM TIME TO TIME AS OFTEN AS THE AGENT SHALL ELECT.

DAB

[Borrower’s Initials]                      

     (b) This Security Instrument is an Open-End Mortgage. This Security Instrument secures, and the Debt include, future advances. All advances and indebtedness arising and occurring from time to time under this Security Instrument shall be secured hereby. The maximum amount of indebtedness (as defined in 42 Pa. Stat. §8143, which term excludes interest and excludes advances and expenses made by Lender to protect its interest in the Property) outstanding at any time which is secured by this Security Instrument is the Loan Amount multiplied by two (2). Borrower hereby covenants and agrees that it will not exercise, and hereby waives, its right under 42 Pa. Stat. §8143(c) to limit the indebtedness secured by this Security Instrument.

     (c) This Security Instrument secures, and the Debt include, (i) all advances made by Lender with respect to any of the Property for the payment of Basic Carrying Costs or other costs incurred for the protection of any of the Property or the lien of this Security Instrument, (ii) all expenses incurred by Lender by reason of an Event of Default hereunder and (iii) all advances made by Lender to enable completion of construction of the Property. As provided in 42 Pa. Stat. §8144, this Security Instrument shall constitute a lien on the Property from the time this Security Instrument is left of record (or, if this is a purchase money mortgage, from the time of delivery hereof to Lender) for, among other things, all such advances and expenses, plus interest thereon, regardless of the time when such advances are made or such expenses are incurred. All notices to be given to Lender pursuant to 42 Pa. Stat. §8143 shall be given as set forth in Section 11.01 hereof.

     (d) Borrower further waives the right of inquisition on all Property levied upon to collect the indebtedness hereby secured and does voluntarily condemn the same and authorizes a Prothonotary of the Commonwealth of Pennsylvania to enter into such condemnation.

* * * * *

89

     IN WITNESS WHEREOF, Borrower has duly executed this Security Instrument the day and year first above written.

Borrower’s Organizational Identification Number: 4306910	BORROWER:
	ASHFORD EDISON LP, a Delaware limited partnership
	By:	Ashford Sapphire V GP LLC, a Delaware limited liability company, its general partner
		By:	/s/ David A. Brooks
			Name: David A. Brooks
			Title: Vice President

90

EXHIBIT A

LEGAL DESCRIPTION OF PREMISES

EXHIBIT B

SUMMARY OF RESERVES

See Cross-collateralization Agreement between Borrower and Lender of even date herewith.

EXHIBIT C

CROSS-COLLATERALIZED PROPERTIES, INITIAL ALLOCATED LOAN AMOUNTS AND RELEASE
PRICE PERCENTAGE

See Cross-collateralization Agreement between Borrower and Lender of even date herewith.

EXHIBIT D

REQUIRED ENGINEERING WORK

See Cross-collateralization Agreement between Borrower and Lender of even date herewith.

EXHIBIT E

Intentionally Omitted.

EXHIBIT F

APPROVED MANAGERS

Starwood Hotels and Resorts Worldwide Inc.

Marriott International, Inc.

Hilton Hotels Corporation

Hyatt

Interstate Hotels and Resorts

Remington

APPROVED FRANCHISERS

Starwood Hotels and Resorts Worldwide Inc.

Marriott International, Inc.

Hilton Hotels Corporation

Hyatt

EX-10.25.4.4A

Exhibit 10.25.4.4a

Schedule of Omitted Mortgage Agreements
(Fixed Rate Pools)

The agreements listed below are substantially identical in all material respects to the Mortgage Security Agreement, Assignment of Rents and Fixture Filing from Ashford Edison LP, as Borrower to Wachovia Bank, National Association, as Lender, filed as Exhibit 10.25.4.4, except as to the name of the borrower, the name and legal description of the property and certain state-specific requirements or conventions related to the name of the document, the mechanics of perfection of a security interest in real property in the applicable state and state-specific remedies available to lender. These agreements are not being filed as exhibits in reliance on Instruction 2 to Item 601 of Regulation S-K.

• Deed to Secure Debt, Security Agreement and Assignment of Rents from Ashford Atlanta Buckhead LP, as Borrower to Wachovia Bank, National Association, as Lender dated April 11, 2007

• Mortgage, Security Agreement, Assignment of Rents and Fixture Filing from Ashford Basking Ridge LP, as Borrower to Wachovia Bank, National Association, as Lender dated April 11, 2007

• Mortgage, Security Agreement, Assignment of Rents and Fixture Filing from Ashford Bridgewater Hotel Partnership LP, as Borrower to Wachovia Bank, National Association, as Lender dated April 11, 2007

• Open-End Mortgage, Security Agreement, Financing Statement and Assignment of Rents from Ashford Bucks County LLC, as Borrower to Wachovia Bank, National Association, as Lender dated April 11, 2007

• Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing from Ashford Market Center LP, as Borrower to William D. Cleveland, as Trustee and Wachovia Bank, National Association, as Lender dated April 11, 2007

• Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing from Ashford Flagstaff LP, as Borrower to Wachovia Bank, National Association, as Lender dated April 11, 2007

• Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing from Ashford Richmond LP, as Borrower to Alexander Title Agency Incorporated, as Trustee and Wachovia Bank, National Association, as Lender dated April 11, 2007

• Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing from Ashford Manhattan Beach LP, as Borrower to Chicago Title Insurance Company, as Trustee for the benefit of Wachovia Bank, National Association, as Lender dated April 11, 2007

• Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing from Ashford Hawthorne LP, as Borrower to Chicago Title Insurance Company, as Trustee

	for the benefit of Wachovia Bank, National Association, as Lender dated April 11, 2007
•	Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing from Ashford Newark LP, as Borrower to Chicago Title Insurance Company, as Trustee for the benefit of Wachovia Bank, National Association, as Lender dated April 11, 2007
•	Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing from Ashford San Jose LP, as Borrower to Chicago Title Insurance Company, as Trustee for the benefit of Wachovia Bank, National Association, as Lender dated April 11, 2007
•	Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing from Ashford Oakland LP, as Borrower to Chicago Title Insurance Company, as Trustee for the benefit of Wachovia Bank, National Association, as Lender dated April 11, 2007
•	Mortgage, Security Agreement, Assignment of Rents and Fixture Filing from Ashford LLB C-Hotel Management, LP, as Borrower to Wachovia Bank, National Association, as Lender dated April 11, 2007
•	Mortgage, Security Agreement, Assignment of Rents and Fixture Filing from Ashford LLB F-Inn Management, LP, as Borrower to Wachovia Bank, National Association, as Lender dated April 11, 2007
•	Mortgage, Security Agreement, Assignment of Rents and Fixture Filing from Ashford LLB SHS Management, LP, as Borrower to Wachovia Bank, National Association, as Lender dated April 11, 2007
•	Open-End Mortgage, Security Agreement, Financing Statement and Assignment of Rents from Ashford Philadelphia Annex, LLC, as Borrower to Wachovia Bank, National Association, as Lender dated April 11, 2007
•	Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing from Ashford Phoenix Airport LP, as Borrower to Chicago Title Insurance Company as Trustee and Wachovia Bank, National Association, as Lender dated April 11, 2007
•	Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing from Ashford Plano-C LP, as Borrower to William D. Cleveland, as Trustee and Wachovia Bank, National Association, as Lender dated April 11, 2007
•	Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing from Ashford Plano-M LP, as Borrower to William D. Cleveland, as Trustee and Wachovia Bank, National Association, as Lender dated April 11, 2007

• Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing from Ashford Plano-R LP, as Borrower to William D. Cleveland, as Trustee and Wachovia Bank, National Association, as Lender dated April 11, 2007

• Open-End Mortgage, Security Agreement, Financing Statement and Assignment of Rents from Ashford Plymouth Meeting LP, as Borrower to Wachovia Bank, National Association, as Lender dated April 11, 2007

• Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing from Ashford Durham I LLC and Ashford Durham II LLC, as tenants-in-common collectively, as Borrower to Chicago Title Insurance Company as Trustee and Wachovia Bank, National Association, as Lender dated April 11, 2007

• Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing from Ashford San Francisco II LP, as Borrower to Chicago Title Insurance Company, as Trustee for the benefit of Wachovia Bank, National Association, as Lender dated April 11, 2007

• Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing from Ashford Scottsdale LP, as Borrower to Chicago Title Insurance Company, as Trustee and Wachovia Bank, National Association, as Lender dated April 11, 2007

• Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing from Ashford Seattle Downtown LP, as Borrower to Chicago Title Insurance Company, as Trustee and Wachovia Bank, National Association, as Lender dated April 11, 2007

• Deed of Trust, Security Agreement, Assignment of Rents and Fixture Filing from Ashford Seattle Waterfront LP, as Borrower to Chicago Title Insurance Company, as Trustee and Wachovia Bank, National Association, as Lender dated April 11, 2007

• Mortgage, Security Agreement, Assignment of Rents and Fixture Filing from Ashford Tampa International Hotel, LP, as Borrower to Wachovia Bank, National Association, as Lender dated April 11, 2007

EX-10.25.4.6

Exhibit 10.25.4.6

Ashford
Loan No. 502860049	Pool 1

GUARANTY

          THIS GUARANTY (“Guaranty”) is executed as of April 11, 2007, by ASHFORD HOSPITALITY LIMITED PARTNERSHIP and ASHFORD HOSPITALITY TRUST INC. (hereinafter collectively referred to as “Guarantor”), for the benefit of WACHOVIA BANK, NATIONAL ASSOCIATION (“Lender”).

     A. The Persons set forth on Exhibit A (collectively “Borrower”) is indebted to Lender with respect to a loan (“Loan”) pursuant to a certain promissory note dated of even date herewith, payable to the order of Lender in the aggregate original principal amount of ONE HUNDRED FIFTEEN MILLION SIX HUNDRED THOUSAND and NO/100 DOLLARS ($115,600,000.00) (together with all renewals, modifications, increases and extensions thereof, the “Note”), which is secured by the liens and security interests created by certain deed of trusts, security agreements, assignments of rents and fixture filings, and/or mortgages, security agreements, assignments of rents and fixture filings and/or deeds to secure debt, security agreements, assignments of rents and fixture filings (collectively, the “Security Instrument”), between Lender and Borrower, dated of even date herewith and further evidenced, secured or governed by the other Loan Documents (as defined in the Security Instrument); and

     B. Lender is not willing to make the Loan, or otherwise extend credit, to Borrower unless Guarantor unconditionally guarantees payment and performance to Lender of the Guaranteed Obligations (as hereinafter defined); and

     C. Guarantor is the owner of a direct or indirect interest in Borrower, and Guarantor will directly benefit from Lender’s making the Loan to Borrower.

          NOW, THEREFORE, as an inducement to Lender to make the Loan to Borrower thereunder, and to extend such additional credit as Lender may from time to time agree to extend under the Loan Documents, and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, the parties do hereby agree as follows:

ARTICLE I.
NATURE AND SCOPE OF GUARANTY

     Section 1.1. Guaranty of Obligation. Guarantor hereby absolutely, irrevocably and unconditionally guarantees to Lender (and its successors and assigns), jointly and severally, the payment and performance of the Guaranteed Obligations as and when the same shall be due and payable, whether upon demand by Lender or by lapse of time, by acceleration of maturity or otherwise. Guarantor hereby absolutely, irrevocably and unconditionally covenants and agrees that it is liable, jointly and severally, for the Guaranteed Obligations as a primary obligor, and that each Guarantor shall fully perform, jointly and severally, each and every term and provision hereof.

     Section 1.2. Definition of Guaranteed Obligations. As used herein, the term “Guaranteed Obligations” shall mean, and Guarantor shall be liable for, and shall indemnify, defend and hold Lender and each other Indemnified Party harmless from and against, any and all

Losses (as hereinafter defined) incurred or suffered by Lender or any other Indemnified Party arising out of or in connection with the matters listed below:

          (a) fraud or intentional misrepresentation by Borrower, Guarantor or any Affiliate of Borrower or Guarantor or the failure to state a material fact in the written information provided to Lender by or on behalf of Borrower or any of its Affiliates in connection with the Security Instrument, the Note or the other Loan Documents;

          (b) the misappropriation by Borrower, Guarantor or any Affiliate of Borrower or Guarantor of any tenant security deposits or Rent;

          (c) the misapplication or conversion of Loss Proceeds;

          (d) any act of arson, intentional physical damage or waste of or to the Property by Borrower, Guarantor or any Affiliate of Borrower or Guarantor;

          (e) Borrower’s failure to comply with the provisions of Sections 2.02(g) 12.01, 16.01, 16.02, 18.29, 18.30 or 18.31, inclusive, of the Security Instrument;

          (f) the exercise of any right or remedy under any federal, state or local forfeiture laws resulting in the loss or impairment of the lien of the Security Instrument, or the priority thereof, against the Property;

          (g) any modification, termination or amendment to a Ground Lease which was not consented to by Lender;

          (h) any claims, actions or proceedings initiated by Borrower or any Affiliate of Borrower alleging that the relationship of Borrower and Lender is that of joint venturers, partners, tenants in common, joint tenants or any relationship other than that of debtor and creditor; or

          (i) any Transfer in violation of the provisions of Article XI of the Security Instrument.

          In addition, in the event any proceeding, action, petition or filing under the Bankruptcy Code, or any similar state or federal law now or hereafter in effect relating to bankruptcy, reorganization or insolvency, or the arrangement or adjustment of debts of Borrower, Operating Tenant or Guarantor, shall be filed by, consented to or acquiesced in by Borrower, Operating Tenant or Guarantor or any of their Affiliates commences any proceeding, action, petition or filing under the Bankruptcy Code or any similar state or federal law now or hereafter in effect relating to bankruptcy, reorganization or insolvency, or the arrangement or adjustment of debts with respect to Borrower, Operating Tenant or Guarantor, or if Borrower, Operating Tenant or Guarantor or any Affiliates of Borrower, Operating Tenant or Guarantor shall institute any proceeding for Borrower’s, Guarantor’s or Operating Tenant’s dissolution or liquidation, or shall make an assignment for the benefit of creditors (provided the Guarantor’s liability under this sentence shall in no event exceed the Cap Amount (as set forth on Exhibit B attached hereto)), then the Guaranteed Obligations shall also include the unpaid balance of the Debt.

2

          For purposes of this Guaranty, the term “Losses” includes any and all claims, suits, liabilities (including, without limitation, strict liabilities), actions, proceedings, obligations, debts, damages, losses, costs, expenses, diminutions in value, fines, penalties, charges, fees, expenses, judgments, awards, amounts paid in settlement, punitive damages, foreseeable and unforeseeable consequential damages, of whatever kind or nature (including but not limited to reasonable attorneys’ fees and other costs of defense).

     Section 1.3. Nature of Guaranty. This Guaranty is an irrevocable, absolute, continuing guaranty of payment and performance, is joint and several and is not a guaranty of collection. This Guaranty shall continue to be effective with respect to any Guaranteed Obligations arising or created after any attempted revocation by Guarantor and after (if Guarantor is a natural Person) Guarantor’s death (in which event this Guaranty shall be binding upon Guarantor’s estate and Guarantor’s legal representatives and heirs). The obligations of Guarantor under this Guaranty shall survive any foreclosure proceeding, any foreclosure sale and delivery of any deed in lieu of foreclosure, and any release of record of the Security Instrument. The fact that at any time or from time to time the Guaranteed Obligations may be increased or reduced shall not release or discharge the obligation of Guarantor to Lender with respect to the Guaranteed Obligations. This Guaranty may be enforced by Lender and any subsequent holder of the Note and shall not be discharged by the assignment or negotiation of all or part of the Note.

     Section 1.4. Guaranteed Obligations Not Reduced by Offset. The Guaranteed Obligations and the liabilities and obligations of Guarantor to Lender hereunder shall not be reduced, discharged or released because or by reason of any existing or future offset, claim or defense of Borrower, or any other Person, against Lender or against payment of the Guaranteed Obligations, whether such offset, claim or defense arises in connection with the Guaranteed Obligations (or the transactions creating the Guaranteed Obligations) or otherwise.

     Section 1.5. Payment by Guarantor. If all or any part of the Guaranteed Obligations shall not be punctually paid when due, whether at maturity or earlier by acceleration or otherwise, Guarantor shall, immediately upon demand by Lender, and without presentment, protest, notice of protest, notice of non-payment, notice of intention to accelerate the maturity, notice of acceleration of the maturity, or any other notice whatsoever, pay in lawful money of the United States of America, the amount due on the Guaranteed Obligations to Lender at Lender’s address as set forth herein. Such demand(s) may be made at any time coincident with or after the time for payment of all or part of the Guaranteed Obligations, and may be made from time to time with respect to the same or different items of Guaranteed Obligations. Such demand shall be deemed made, given and received in accordance with the notice provisions hereof.

     Section 1.6. No Duty to Pursue Others. It shall not be necessary for Lender (and Guarantor hereby waives any rights which Guarantor may have to require Lender), in order to enforce this Guaranty against Guarantor, first to (i) institute suit or exhaust its remedies against Borrower or others liable on the Loan or the Guaranteed Obligations or any other Person, (ii) enforce Lender’s rights against any collateral which shall ever have been given to secure the Loan, (iii) enforce Lender’s rights against any other guarantors of the Guaranteed Obligations, (iv) join Borrower or any others liable on the Guaranteed Obligations in any action seeking to enforce this Guaranty, (v) exhaust any remedies available to Lender against any collateral which shall ever have been given to secure the Loan, or (vi) resort to any other means of obtaining

3

payment of the Guaranteed Obligations. Lender shall not be required to mitigate damages or take any other action to reduce, collect or enforce the Guaranteed Obligations.

     Section 1.7. Waivers. Guarantor agrees to the provisions of the Loan Documents, and hereby waives notice of (i) any loans or advances made by Lender to Borrower, (ii) acceptance of this Guaranty, (iii) any amendment or extension of the Note or of any other Loan Documents, (iv) the execution and delivery by Borrower and Lender of any other loan or credit agreement or of Borrower’s execution and delivery of any promissory notes or other documents arising under the Loan Documents or in connection with the Property, (v) the occurrence of any breach by Borrower or Event of Default, (vi) Lender’s transfer or disposition of the Guaranteed Obligations, or any part thereof, (vii) sale or foreclosure (or posting or advertising for sale or foreclosure) of any collateral for the Guaranteed Obligations, (viii) protest, proof of non-payment or default by Borrower, or (ix) any other action at any time taken or omitted by Lender, and, generally, all demands and notices of every kind in connection with this Guaranty, the Loan Documents, any documents or agreements evidencing, securing or relating to any of the Guaranteed Obligations and the obligations hereby guaranteed.

     Section 1.8. Payment of Expenses. In the event that Guarantor should breach or fail to timely perform any provisions of this Guaranty, Guarantor shall, immediately upon demand by Lender, pay Lender all costs and expenses (including court costs and reasonable attorneys’ fees) incurred by Lender in the enforcement hereof or the preservation of Lender’s rights hereunder. The covenant contained in this section shall survive the payment and performance of the Guaranteed Obligations.

     Section 1.9. Effect of Bankruptcy. In the event that, pursuant to any insolvency, . bankruptcy, reorganization, receivership or other debtor relief law, or any judgment, order or decision thereunder, Lender must rescind or restore any payment, or any part thereof, received by Lender in satisfaction of the Guaranteed Obligations, as set forth herein, any prior release or discharge from the terms of this Guaranty given to Guarantor by Lender shall be without effect, and this Guaranty shall remain in full force and effect. It is the intention of Borrower and Guarantor that Guarantor’s obligations hereunder shall not be discharged except by Guarantor’s performance of such obligations and then only to the extent of such performance.

     Section 1.10. Deferral of Rights of Subrogation, Reimbursement and Contribution.

          (a) Notwithstanding any payment or payments made by any Guarantor hereunder, unless and until payment in full of the Debt (and including interest accruing on the Note after the commencement of a proceeding by or against Borrower under the Bankruptcy Code which interest the parties agree shall remain a claim that is prior and superior to any claim of Guarantor notwithstanding any contrary practice, custom or ruling in cases under the Bankruptcy Code) (i) no Guarantor will assert or exercise any right of Lender or of such Guarantor against Borrower to recover the amount of any payment made by such Guarantor to Lender by way of subrogation, reimbursement, contribution, indemnity, or otherwise arising by contract or operation of law, and such Guarantor shall not have any right of recourse to or any claim against assets or property of Borrower; and (ii) each Guarantor agrees not to seek contribution or indemnity or other recourse from any other Guarantor.

4

          (b) Until payment in full of the Debt (and including interest accruing on the Note after the commencement of a proceeding by or against Borrower under the Bankruptcy Code which interest the parties agree shall remain a claim that is prior and superior to any claim of Guarantor notwithstanding any contrary practice, custom or ruling in cases under the Bankruptcy Code), Guarantor agrees not to accept any payment or satisfaction of any kind of indebtedness of Borrower to Guarantor and hereby assigns such indebtedness to Lender, including the right to file proof of claim and to vote thereon in connection with any such proceeding under the Bankruptcy Code, including the right to vote on any plan of reorganization. If any amount of the type more particularly described in the first sentence of this Section 1.10(b) shall nevertheless be paid to a Guarantor by Borrower or another Guarantor prior to payment in full of all sums owed to Lender under the Loan Documents (the “Obligations”), such amount shall be held in trust for the benefit of Lender and shall forthwith be paid to Lender to be credited and applied to the Guaranteed Obligations, whether matured or unmatured.

          (c) The provisions of this Section 1.10 shall survive the termination of this Guaranty, and any satisfaction and discharge of Borrower by virtue of any payment, court order or any applicable law.

     Section 1.11. “Borrower". The term “Borrower” as used herein shall include any new or successor corporation, association, partnership (general or limited), joint venture, limited liability company, trust or other individual or organization formed as a result of any merger, reorganization, sale, transfer, devise, gift or bequest of Borrower or any interest in Borrower.

ARTICLE II.
EVENTS AND CIRCUMSTANCES NOT REDUCING OR DISCHARGING
GUARANTOR’S OBLIGATIONS

Guarantor hereby consents and agrees to each of the following, and agrees that Guarantor’s obligations under this Guaranty shall not be released, diminished, impaired, reduced or adversely affected by any of the following, and waives any common law, equitable, statutory or other rights (including without limitation rights to notice) which Guarantor might otherwise have as a result of or in connection with any of the following:

     Section 2.1. Modifications. Any renewal, extension, increase, modification, alteration or rearrangement of all or any part of the Guaranteed Obligations, Note, Loan Documents, or other document, instrument, contract or understanding between Borrower and Lender, or any other parties, pertaining to the Guaranteed Obligations or any failure of Lender to notify Guarantor of any such action.

     Section 2.2. Adjustment. Any adjustment, indulgence, forbearance or compromise that might be granted or given by Lender to Borrower or any Guarantor.

     Section 2.3. Condition of Borrower or Guarantor. The insolvency, bankruptcy, arrangement, adjustment, composition, liquidation, disability, dissolution or lack of power of Borrower, Guarantor or any other Person at any time liable for the payment of all or part of the Guaranteed Obligations; or any dissolution of Borrower or Guarantor, or any sale, lease or transfer of any or all of the assets of Borrower or Guarantor, or any changes in the shareholders, partners or members of Borrower or Guarantor; or any reorganization of Borrower or Guarantor.

5

     Section 2.4. Invalidity of Guaranteed Obligations. The invalidity, illegality or unenforceability of all or any part of the Guaranteed Obligations, or any document or agreement executed in connection with the Guaranteed Obligations, for any reason whatsoever, including without limitation the fact that (i) the Guaranteed Obligations, or any part thereof, exceed the amount permitted by law, (ii) the act of creating the Guaranteed Obligations or any part thereof, is ultra vires, (iii) the officers or representatives executing the Note or the other Loan Documents or otherwise creating the Guaranteed Obligations acted in excess of their authority, (iv) the Guaranteed Obligations violate applicable usury laws, (v) Borrower has valid defenses, claims or offsets (whether at law, in equity or by agreement) which render the Guaranteed Obligations wholly or partially uncollectible from Borrower, (vi) the creation, performance or repayment of the Guaranteed Obligations (or the execution, delivery and performance of any document or instrument representing part of the Guaranteed Obligations or executed in connection with the Guaranteed Obligations, or given to secure the repayment of the Guaranteed Obligations) is illegal, uncollectible or unenforceable, or (vii) the Note or any of the other Loan Documents has been forged or otherwise is irregular or not genuine or authentic, it being agreed that Guarantor shall remain liable hereon regardless of whether Borrower or any other Person be found not liable on the Guaranteed Obligations or any part thereof for any reason.

     Section 2.5. Release of Obligors. Any full or partial release of the liability of Borrower on the Guaranteed Obligations, or any part thereof, or of any co-guarantors, or any other Person or entity now or hereafter liable, whether directly or indirectly, jointly, severally, or jointly and severally, to pay, perform, guarantee or assure the payment of the Guaranteed Obligations, or any part thereof, it being recognized, acknowledged and agreed by Guarantor that Guarantor may be required to pay the Guaranteed Obligations in full without assistance or support of any other Person, and Guarantor has not been induced to enter into this Guaranty on the basis of a contemplation, belief, understanding or agreement that other parties will be liable to pay or perform the Guaranteed Obligations, or that Lender will look to other parties to pay or perform the Guaranteed Obligations.

     Section 2.6. Other Collateral. The taking or accepting of any other security, collateral or guaranty, or other assurance of payment, for all or any part of the Guaranteed Obligations.

     Section 2.7. Release of Collateral. Any release, surrender, exchange, subordination, deterioration, waste, loss or impairment (including without limitation negligent, willful, unreasonable or unjustifiable impairment) of any collateral, property or security, at any time existing in connection with, or assuring or securing payment of, all or any part of the Guaranteed Obligations.

     Section 2.8. Care and Diligence. The failure of Lender or any other Person to exercise diligence or reasonable care in the preservation, protection, enforcement, sale or other handling or treatment of all or any part of such collateral, property or security, including but not limited to any neglect, delay, omission, failure or refusal of Lender (i) to take or prosecute any action for the collection of any of the Guaranteed Obligations, (ii) to foreclose, or initiate any action to foreclose, or, once commenced, prosecute to completion any action to foreclose upon any security therefor, or (iii) to take or prosecute any action in connection with any instrument or agreement evidencing or securing all or any part of the Guaranteed Obligations.

6

     Section 2.9. Unenforeceability. The fact that any collateral, security, security interest or lien contemplated or intended to be given, created or granted as security for the repayment of the Guaranteed Obligations, or any part thereof, shall not be properly perfected or created, or shall prove to be unenforceable or subordinate to any other security interest or lien, it being recognized and agreed by Guarantor that Guarantor is not entering into this Guaranty in reliance on, or in contemplation of the benefits of, the validity, enforceability, collectibility or value of any of the collateral for the Guaranteed Obligations.

     Section 2.10. Merger. The reorganization, merger or consolidation of Borrower into or with any other corporation or entity.

     Section 2.11. Preference. Any payment by Borrower to Lender is held to constitute a preference under bankruptcy laws, or for any reason Lender is required to refund such payment or pay such amount to Borrower or someone else.

     Section 2.12. Other Actions Taken or Omitted. Any other action taken or omitted to be taken with respect to the Loan Documents, the Guaranteed Obligations, or the security and collateral therefor, whether or not such action or omission prejudices Guarantor or increases the likelihood that Guarantor will be required to pay the Guaranteed Obligations pursuant to the terms hereof, it is the unambiguous and unequivocal intention of Guarantor that Guarantor shall be obligated to pay the Guaranteed Obligations when due, notwithstanding any occurrence, circumstance, event, action, or omission whatsoever, whether or not contemplated, and whether or not otherwise or particularly described herein, which obligation shall be deemed satisfied only upon the full and final payment and satisfaction of the Guaranteed Obligations.

ARTICLE III.
REPRESENTATIONS AND WARRANTIES

          To induce Lender to enter into the Loan Documents and extend credit to Borrower, Guarantor represents and warrants to Lender as follows:

     Section 3.1. Benefit. Guarantor is an Affiliate of Borrower, is the owner of a direct or indirect interest in Borrower, and has received, or will receive, direct or indirect benefit from the making of this Guaranty with respect to the Guaranteed Obligations.

     Section 3.2. Familiarity and Reliance. Guarantor is familiar with, and has independently reviewed books and records regarding, the financial condition of Borrower and is familiar with the value of any and all collateral intended to be created as security for the payment of the Note or Guaranteed Obligations; provided, however, Guarantor is not relying on such financial condition or the collateral as an inducement to enter into this Guaranty.

     Section 3.3. No Representation by Lender. Neither Lender nor any other Person has made any representation, warranty or statement to Guarantor in order to induce Guarantor to execute this Guaranty.

     Section 3.4. Guarantor’s Financial Condition. As of the date hereof, and after giving effect to this Guaranty and the contingent obligation evidenced hereby, Guarantor is, and will be, Solvent.

7

     Section 3.5. Legality. The execution, delivery and performance by Guarantor of this Guaranty and the consummation of the transactions contemplated hereunder do not, and will not, contravene or conflict with any law, statute or regulation whatsoever to which Guarantor is subject or constitute a default (or an event which with notice or lapse of time or both would constitute a default) under, or result in the breach of, any indenture, mortgage, deed of trust, charge, lien, or any contract, agreement or other instrument to which Guarantor is a party or which may be applicable to Guarantor. This Guaranty is a legal and binding obligation of Guarantor and is enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or other laws of general application relating to the enforcement of creditors’ rights.

     Section 3.6. Survival. All representations and warranties made by Guarantor herein shall survive the execution hereof.

     Section 3.7. Review of Documents. Guarantor has examined the Note and all of the Loan Documents.

     Section 3.8. Litigation. Except as otherwise disclosed to Lender, there are no proceedings pending or, so far as Guarantor knows, threatened before any court or administrative agency which, if decided adversely to Guarantor, would materially adversely affect the financial condition of Guarantor or the authority of Guarantor to enter into, or the validity or enforceability of this Guaranty.

     Section 3.9. Tax Returns. Guarantor has filed all required federal, state and local tax returns and has paid all taxes as shown on such returns as they have become due. No claims have been assessed and are unpaid with respect to such taxes.

ARTICLE IV.
SUBORDINATION OF CERTAIN INDEBTEDNESS

     Section 4.1. Subordination of All Guarantor Claims. As used herein, the term “Guarantor Claims” shall mean all debts and liabilities of Borrower to Guarantor, whether such debts and liabilities now exist or are hereafter incurred or arise, or whether the obligations of Borrower thereon are direct, contingent, primary, secondary, several, joint and several, or otherwise, and irrespective of whether such debts or liabilities be evidenced by note, contract, open account, or otherwise, and irrespective of the Person or Persons in whose favor such debts or liabilities may, at their inception, have been, or may hereafter be created, or the manner in which they have been or may hereafter be acquired by Guarantor. The Guarantor Claims shall include, without limitation, all rights and claims of Guarantor against Borrower (arising as a result of subrogation or otherwise) as a result of Guarantor’s payment of all or a portion of the Guaranteed Obligations to the extent the provisions of Section 1.10 hereof are unenforceable. Upon the occurrence of an Event of Default or the occurrence of an event which would, with the giving of notice or the passage of time, or both, constitute an Event of Default, Guarantor shall not receive or collect, directly or indirectly, from Borrower or any other Person any amount upon the Guarantor Claims.

     Section 4.2. Claims in Bankruptcy. In the event of receivership, bankruptcy, reorganization, arrangement, debtor’s relief, or other insolvency proceedings involving Guarantor as debtor, Lender shall have the right to prove its claim in any such proceeding so as

8

to establish its rights hereunder and receive directly from the receiver, trustee or other court custodian dividends and payments which would otherwise be payable upon Guarantor Claims. Guarantor hereby assigns such dividends and payments to Lender. Should Lender receive, for application upon the Guaranteed Obligations, any such dividend or payment which is otherwise payable to Guarantor, and which, as between Borrower and Guarantor, shall constitute a credit upon the Guarantor Claims, then upon payment to Lender in full of the Guaranteed Obligations, Guarantor shall become subrogated to the rights of Lender to the extent that such payments to Lender on the Guarantor Claims have contributed toward the liquidation of the Guaranteed Obligations, and such subrogation shall be with respect to that portion of the Guaranteed Obligations which would have been unpaid if Lender had not received dividends or payments upon the Guarantor Claims.

     Section 4.3. Payments Held in Trust. In the event that, notwithstanding anything to the contrary in this Guaranty, Guarantor should receive any funds, payment, claim or distribution which is prohibited by this Guaranty, Guarantor agrees to hold in trust for Lender an amount equal to the amount of all funds, payments, claims or distributions so received, and agrees that it shall have absolutely no dominion over the amount of such funds, payments, claims or distributions so received except to pay them promptly to Lender, and Guarantor covenants promptly to pay the same to Lender.

     Section 4.4. Liens Subordinate. Guarantor agrees that any liens, security interests, judgment liens, charges or other encumbrances upon Borrower’s assets securing payment of the Guarantor Claims shall be and remain inferior and subordinate to any liens, security interests, judgment liens, charges or other encumbrances upon Borrower’s assets securing payment of the Guaranteed Obligations, regardless of whether such encumbrances in favor of Guarantor or Lender presently exist or are hereafter created or attach. Without the prior written consent of Lender, Guarantor shall not (i) exercise or enforce any creditor’s right it may have against Borrower, or (ii) foreclose, repossess, sequester or otherwise take steps or institute any action or proceedings (judicial or otherwise, including without limitation the commencement of, or joinder in, any liquidation, bankruptcy, rearrangement, debtor’s relief or insolvency proceeding) to enforce any liens, mortgages, deeds of trust, security interests, collateral rights, judgments or other encumbrances on assets of Borrower held by Guarantor.

ARTICLE V.
MISCELLANEOUS

     Section 5.1. No Waiver; Remedies Cumulative. No failure or delay on the part of Lender in exercising any right, remedy, power or privilege hereunder or under the other Loan Documents and no course of dealing between Guarantor and Lender shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege hereunder or under the other Loan Documents preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege hereunder or thereunder. The rights and remedies provided herein and in the other Loan Documents are cumulative and not exclusive of any rights or remedies provided by law. The giving of notice to or demand on Guarantor which notice or demand is not required hereunder or under the other Loan Documents shall not entitle Guarantor to any other or further notice or demand in similar or other circumstances or

9

constitute a waiver of the rights, remedies, powers or privileges of Lender in any circumstances not requiring notice or demand.

     Section 5.2. Notices. All notices, requests and other communications to any party hereunder or under the Note shall be given in the manner set forth in Article XI of the Security Instrument, and to each addressee at the address set forth below:

Guarantor:	c/o Ashford Hospitality Trust, Inc.
	14185 Dallas Parkway, Suite 1100
	Dallas, Texas 75254-4308
	Attn: David Brooks
	Facsimile: (972) 778-9270
With a copy to:	Akin Gump Strauss Hauer & Feld LLP
	590 Madison Avenue
	New York, New York 10022-2524
	Attn: Peter Miller, Esq.
	Facsimile: (212) 872-1002
	E-mail: pamiller@akingump.com
Lender:	Wachovia Bank, National Association
	Commercial Real Estate Services
	8739 Research Drive URP 4
	NC 1075
	Charlotte, North Carolina 28262
	Facsimile No,: (704) 715-0056
With a copy to:	Proskauer Rose LLP
	1585 Broadway
	New York, New York 10036
	Attn: David J. Weinberger, Esq.
	Facsimile No.: (212)969-2900

or such other address as Guarantor or Lender shall hereafter specify by not less than ten (10) days prior written notice as provided herein; provided, however, that notwithstanding any provision of this Section to the contrary, such notice of change of address shall be deemed given only upon actual receipt thereof. Rejection or other refusal to accept or the inability to deliver because of changed addresses of which no notice was given as herein required shall be deemed to be receipt of the notice, demand, statement, request or consent.

     Section 5.3. Governing Law; Jurisdiction. This Guaranty shall be governed by and construed in accordance with the laws of the State of New York and the applicable laws of the United States of America. Guarantor hereby irrevocably submits to the jurisdiction of any court of competent jurisdiction located in the State of New York in connection with any proceeding out of or relating to this Guaranty.

10

     Section 5.4. Invalid Provisions. If any provision of this Guaranty is held to be invalid, illegal or unenforceable in any respect, this Guaranty shall be construed without such provision.

     Section 5.5. Amendments. The terms of this Guaranty, together with the terms of the other Loan Documents, constitute the entire understanding and agreement of the parties hereto and supersede all prior agreements, understandings and negotiations between Guarantor and Lender with respect to the Guaranteed Obligations. This Guaranty, and any provisions hereof, may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act on the part of Guarantor or Lender, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought.

     Section 5.6. Parties Bound; Assignment. This Guaranty shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns and legal representatives; provided, however, that Guarantor may not, without the prior written consent of Lender, assign any of its rights, powers, duties or obligations hereunder.

     Section 5.7. Headings: Construction of Documents, Definitions. The headings and captions of various sections of this Guaranty are for convenience of reference only and are not to be construed as defining or limiting, in any way, the scope or intent of the provisions hereof. Guarantor acknowledges that it was represented by competent counsel in connection with the negotiation and drafting of this Guaranty and the other Loan Documents and that neither this Guaranty nor the other Loan Documents shall be subject to the principle of construing the meaning against the Person who drafted same. All capitalized terms not otherwise defined herein shall have the meanings set forth in the Security Instrument.

     Section 5.8. Recitals. The recital and introductory paragraphs hereof are a part hereof, form a basis for this Guaranty and shall be considered prima facie evidence of the facts and documents referred to therein.

     Section 5.9. Counterparts. To facilitate execution, this Guaranty may be executed in as many counterparts as may be convenient or required. It shall not be necessary that the signature or acknowledgment of, or on behalf of, each party, or that the signature of all Persons required to bind any party, or the acknowledgment of such party, appear on each counterpart. All counterparts shall collectively constitute a single instrument. It shall not be necessary in making proof of this Guaranty to produce or account for more than a single counterpart containing the respective signatures of, or on behalf of, and the respective acknowledgments of, each of the parties hereto. Any signature or acknowledgment page to any counterpart may be detached from such counterpart without impairing the legal effect of the signatures or acknowledgments thereon and thereafter attached to another counterpart identical thereto except having attached to it additional signature or acknowledgment pages.

     Section 5.10. Cumulative Rights. The rights of Lender under this Guaranty shall be separate, distinct and cumulative and none shall be given effect to the exclusion of the others. No act of Lender shall be construed as an election to proceed under any one provision herein to the exclusion of any other provision. Lender shall not be limited exclusively to the rights and

11

remedies herein stated but shall be entitled, subject to the terms of this Guaranty, to every right and remedy now or hereafter afforded by law.

     Section 5.11. Waiver of Counterclaim and Right To Trial By Jury. GUARANTOR HEREBY WAIVES THE RIGHT TO ASSERT A COUNTERCLAIM, OTHER THAN A COMPULSORY COUNTERCLAIM, IN ANY ACTION OR PROCEEDING BROUGHT AGAINST IT BY LENDER OR ITS AGENTS, AND WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING BROUGHT BY EITHER PARTY HERETO AGAINST THE OTHER OR IN ANY COUNTERCLAIM GUARANTOR MAY BE PERMITTED TO ASSERT HEREUNDER OR WHICH MAY BE ASSERTED BY LENDER OR ITS AGENTS AGAINST GUARANTOR, OR IN ANY MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS GUARANTY, THE DEBT OR THE GUARANTEED OBLIGATIONS.

* * * * *

12

     IN WITNESS WHEREOF, Guarantor has duly executed this Guaranty as of the day and year first above written.

GUARANTOR:
ASHFORD HOSPITALITY LIMITED PARTNERSHIP, a Delaware limited partnership
By:	Ashford OP General Partner LLC, a Delaware
	limited liability company, its general partner
	By:	/s/ David A. Brooks
		Name: David A. Brooks
		Title: Vice President

ASHFORD HOSPITALITY TRUST, INC., a Maryland corporation
By:	/s/ David A. Brooks
	Name:	David A. Brooks
	Title:	Vice President

Exhibit A

Borrower

Property	Owner
Courtyard Dallas Plano in Legacy Park	Ashford Plano-C LP
6840 N. Dallas Parkway
Plano, TX 75024-3499
Courtyard Scottsdale Old Town	Ashford Scottsdale LP
3311 N. Scottsdale Road
Scottsdale, AZ 85251-6427
Courtyard Oakland Airport	Ashford Oakland LP
350 Hegenberger Road
Oakland, CA 94621-1445
Courtyard Basking Ridge	Ashford Basking Ridge LP
595 Martinsville Road
Basking Ridge, N7 07920-2800
Courtyard Newark — Silicon Valley	Ashford Newark LP
34905 Newark Bled.
Newark, CA 94560-1215

Exhibit B

Cap Amount: $19,475,000.00

EX-10.25.4.6A

Exhibit 10.25.4.6a

Schedule of Omitted Guaranties
(Fixed Rate Pools)

     The agreements listed below are substantially identical in all material respects to the Guaranty for Fixed Rate Pool 1, executed as of April 11, 2007, by the Registrant for the benefit of Wachovia Bank, National Association (the “Form Guaranty”), except as to the identity of the borrowers of the underlying debt, the principal amount of the underlying debt and the maximum amount payable by the guarantor. The following table specifically identifies each of these differences. There are no other material differences between any of the agreements listed below and the Form Guaranty. These agreements are not being filed as exhibits in reliance on Instruction 2 to Item 601 of Regulation S-K.

		Principal
		Balance of		Maximum
		Borrowers’		Guaranteed
Omitted Agreement	Borrowers	Debt		Amount
Guaranty for Fixed Rate Pool 2, executed as of April 11, 2007, by the Registrant for the benefit of Wachovia Bank, National Association	Ashford Phoenix Airport LP Ashford Plano-R LP Ashford San Jose LP Ashford Richmond LP Ashford Plymouth Meeting LP Ashford Hawthorne LP Ashford Manhattan Beach LP	$	126,466,000	$	21,300,000
Guaranty for Fixed Rate Pool 3, executed as of April 11, 2007, by the Registrant for the benefit of Wachovia Bank, National Association	Ashford San Francisco II LP Ashford Seattle Downtown LP	$	128,408,000	$	21,650,000
Guaranty for Fixed Rate Pool 4, executed as of April 11, 2007, by the Registrant for the benefit of Wachovia Bank, National Association	Ashford LLB C-Hotel Management, LP Ashford LLB SHS Management, LP Ashford LLB F-Inn Management, LP Ashford Edison LP Ashford Atlanta Buckhead LP	$	103,906,000	$	17,500,000

		Principal
		Balance of		Maximum
		Borrowers’		Guaranteed
Omitted Agreement	Borrowers	Debt		Amount
Guaranty for Fixed Rate Pool 5, executed as of April 11, 2007, by the Registrant for the benefit of Wachovia Bank, National Association	Ashford Durham I LLC Ashford Durham II LLC Ashford Bucks County LLC Ashford Flagstaff LP Ashford Market Center LP Ashford Bridgewater Hotel Partnership, LP	$	158,105,000	$	26,650,000
Guaranty for Fixed Rate Pool 6, executed as of April 11, 2007, by the Registrant for the benefit of Wachovia Bank, National Association	Ashford Plano-M LP Ashford Seattle Waterfront LP Ashford Tampa International Hotel Partnership, LP	$	260,980,000	$	43,975,000
Guaranty for Courtyard Philadelphia, executed as of April 11, 2007, by the Registrant for the benefit of Wachovia Bank, National Association	Ashford Philadelphia Annex LLC	$	35,000,000	$	5,900,000

EX-10.26.1

Exhibit 10.26.1

LIMITED LIABILITY COMPANY AGREEMENT

OF

PIM ASHFORD VENTURE I, LLC

(a Delaware Limited Liability Company)

as of February 6, 2008

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR REGISTERED OR QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED (1) ABSENT AN EFFECTIVE REGISTRATION THEREOF UNDER THE SECURITIES ACT, OR (2) EXCEPT IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

Table of Contents

			Page
ARTICLE I DEFINITIONS				1
	Section 1.01	Definitions		1
ARTICLE II ORGANIZATION AND PURPOSE				14
	Section 2.01	Formation		14
	Section 2.02	Name		14
	Section 2.03	Places of Business		14
	Section 2.04	Registered Office and Agent		14
	Section 2.05	Term		14
	Section 2.06	Purpose		14
	Section 2.07	Member Information		15
	Section 2.08	Ownership and Waiver of Partition		15
	Section 2.09	Qualifications in Other Jurisdictions		15
	Section 2.10	Management of the Company		15
ARTICLE III MEMBERS				15
	Section 3.01	Members		15
	Section 3.02	Election and Removal of Program Representatives Members		16
	Section 3.03	No Liability to the Members or the Company		16
	Section 3.04	Other Business Activities of the Investor		17
	Section 3.05	Other Business Activities of Ashford		17
ARTICLE IV DISTRIBUTIONS/ALLOCATIONS				17
	Section 4.01	Percentage Interests in Company		17
	Section 4.02	Certain Definitions and Example		18
	Section 4.03	Distributions		19
	Section 4.04	Allocations		21
	Section 4.05	Other Allocations and Profits		23
	Section 4.06	Tax Allocations		23
	Section 4.07	Intentionally Omitted		24
	Section 4.08	Intentionally Omitted		24
	Section 4.09	Withholding		24
	Section 4.10	Section 83(b) Elections		24
ARTICLE V CAPITAL CONTRIBUTIONS				25
	Section 5.01	Members’ Capital Contributions		25

-i-

TABLE OF CONTENTS
(continued)

			Page
	Section 5.02	Capital Calls		25
	Section 5.03	Capital Call Notices		25
	Section 5.04	Failure to Fund Capital Contributions		25
	Section 5.05	Records to Reflect Capital Contributions and Capital Commitments		26
	Section 5.06	Further Capital Contributions		26
	Section 5.07	Resignations; Withdrawals of Capital		26
	Section 5.08	Restoration of Negative Capital Accounts		26
	Section 5.09	Capital Contributions to Cure Loan Defaults		27
	Section 5.10	Capital Contributions to Purchase Debt		27
ARTICLE VI MANAGEMENT; INDEMNIFICATION				27
	Section 6.01	Management by the Program Representatives		27
	Section 6.02	No Assignment of Rights		28
	Section 6.03	Program Representatives		28
	Section 6.04	Removal of Program Representatives		28
	Section 6.05	Affiliate Transactions		28
	Section 6.06	Company Expenses and Reserves		28
	Section 6.07	Presentation of Acquisition Opportunities		28
	Section 6.08	Company Acts		29
	Section 6.09	Compensation		29
	Section 6.10	Sourcing Fees		30
	Section 6.11	Indemnification		30
	Section 6.12	Delegation		32
	Section 6.13	Major Decisions		33
	Section 6.14	Real Estate Owned		34
ARTICLE VII TRANSFER RIGHTS OF MEMBERS				35
	Section 7.01	Transfers		35
	Section 7.02	Sales of Company Interests to Third Parties		35
	Section 7.03	Assumption by Assignee		37
	Section 7.04	Amendment of Certificate of Formation		37
	Section 7.05	Resolution of Deadlock		38
ARTICLE VIII COMPANY BOOKS AND RECORDS				39
	Section 8.01	Books, Records, Accounting and Reports		39

-ii-

TABLE OF CONTENTS
(continued)

			Page
	Section 8.02	Tax Returns		39
	Section 8.03	Reports		40
	Section 8.04	Bank Accounts		41
	Section 8.05	Tax Elections		41
	Section 8.06	Tax Matters Member		41
ARTICLE IX COVENANTS				41
	Section 9.01	Preservation of Company’s Existence and Compliance with Laws and Regulations		41
	Section 9.02	Confidentiality		42
ARTICLE X REPRESENTATIONS AND WARRANTIES OF THE MEMBERS				43
	Section 10.01	Member Representations		43
ARTICLE XI DISSOLUTION AND TERMINATION				45
	Section 11.01	Dissolution		45
	Section 11.02	Winding Up, Liquidation and Distribution of Assets		46
	Section 11.03	Certificate of Cancellation		46
	Section 11.04	Return of Contribution Nonrecourse to Other Members		46
ARTICLE XII MISCELLANEOUS				46
	Section 12.01	Specific Performance; Other Rights		46
	Section 12.02	Notices		46
	Section 12.03	Prior Agreements; Construction; Entire Agreement		48
	Section 12.04	No Waiver		48
	Section 12.05	Amendments		48
	Section 12.06	Severability		48
	Section 12.07	Counterparts		49
	Section 12.08	Applicable Law; Jurisdiction		49
	Section 12.09	Waiver Of Jury Trial		49
	Section 12.10	Arbitration		49
	Section 12.11	No Rights of Third Parties		49
	Section 12.12	Further Assurances		49
	Section 12.13	Survival		49
	Section 12.14	Headings		49
	Section 12.15	No Broker		50
	Section 12.16	Services to Members		50

-iii-

TABLE OF CONTENTS
(continued)

			Page
	Section 12.17	Currency		50
	Section 12.18	Attorneys’ Fees		50
	Section 12.19	Compliance with ERISA		50
ARTICLE XIII REIT COMPLIANCE				51
	Section 13.01	REIT Compliance		51
ARTICLE XIV REOC COMPLIANCE				52
	Section 14.01	Application		52
	Section 14.02	REOC Compliance		52

-iv-

TABLE OF CONTENTS
(continued)

SCHEDULES

Schedule A List of Members, Percentage Interests, Capital Commitments and Investments

EXHIBITS
Exhibit A	Form of Program Agreement
Exhibit B	Form of Subsidiary Agreement
Exhibit C	Investment Criteria
Exhibit D	Hypothetical Investment Calculations Example
Exhibit E	Form of Loan Servicing Agreement

-i-

LIMITED LIABILITY COMPANY AGREEMENT

     This LIMITED LIABILITY COMPANY AGREEMENT of PIM ASHFORD VENTURE I, LLC, a Delaware limited liability company (the “Company”), is made and entered into to be effective for all purposes as of February 6, 2008, by and between PRISA III Investments, LLC, a Delaware limited liability company (“Investor”) and Ashford Hospitality Finance, LP, a Delaware limited partnership (“Ashford”) whose signatures appear below as Members of the Company and each Person admitted as a Member of the Company after the date hereof pursuant to the provisions of this Agreement. All capitalized terms used in this Agreement which are not otherwise defined have the meanings set forth in Article I.

WITNESSETH:

     WHEREAS, Ashford and Prudential Investment Management, Inc., a Delaware corporation (“PIM”), are parties to that certain Investment Program Agreement dated as of January 22, 2008 and attached hereto as Exhibit A (the “Program Agreement”) pursuant to which Ashford and PIM have agreed to establish an exclusive investment program (the “Program”) whereby PIM will identify one (1) or more investors (each, a “PIM Investor”) to invest in Master Ventures to make Qualifying Investments through such Master Ventures and Master Venture subsidiaries;

     WHEREAS, pursuant to the Program, PIM has identified the Investor through the Program as a PIM Investor, and PIM has committed to contribute capital to a Master Venture in accordance with the terms of a Master Venture Agreement and the Program Agreement.

     WHEREAS, Ashford, PIM and the Investor agreed to form the Company as a limited liability company to own, hold and invest in Investments through Subsidiaries in accordance with the terms hereof; and

     WHEREAS, this Agreement is being entered into by the Members to govern their affairs as a limited liability company under the Act.

     NOW, THEREFORE, in consideration of the premises and the mutual promises and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

ARTICLE I

DEFINITIONS

     Section 1.01 Definitions. As used in this Agreement, the following terms shall have the following meanings:

     “1933 Act” shall mean the Securities Act of 1933, as amended, or any successor federal statute, and the rules and regulations thereunder, all as the same shall be in effect at the time.

     “1934 Act” shall mean the Securities Exchange Act of 1934, as amended, or any successor federal statute, and the rules and regulations thereunder, all as the same shall be in effect at the time.

     “1940 Act” shall mean the Investment Company Act of 1940, as amended, or any successor federal statute, and the rules and regulations thereunder, all as the same shall be in effect at the time.

     “Accepted Loan Servicing Practices” shall mean the same care, skill, prudence and diligence which Ashford utilizes for servicing mortgage and/or mezzanine loans, which Ashford owns for its own account, in each case, acting in accordance with applicable law, the terms of this Agreement and the Program Agreement solely and in the best interests of each of the Company and each Subsidiary and with a view to the maximization of Investment Yield in respect of Investments.

     “Acquisition Opportunity” shall have the meaning set forth in Section 6.07 herein.

     “Act” shall mean the Delaware Limited Liability Company Act, 6 Del. C. § 18-101 et seq., as amended, and any successor to such statute.

     “Adjusted Capital Account Deficit” shall mean with respect to any Member, the deficit balance, if any, in such Member’s Capital Account as of the end of the relevant Company Year, after giving effect to the following adjustments:

     (i) Credit to such Capital Account any amounts which such Member is deemed to be obligated to restore to the Company pursuant to the second to last sentence of Regulations §§ 1.704-2(g)(l) and 1.704-2(i)(5).

     (ii) Debit to such Capital Account the items described in Regulations §§ 1.704-l(b)(2)(ii)(d)(4), (5) and (6).

     Except as otherwise modified herein, the foregoing definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Regulation § 1.704-l(b)(2)(ii)(d) and shall be interpreted consistently therewith.

     “Affiliate” shall mean, when used with reference to a specified Person, (i) any Person that directly or indirectly, through one or more intermediaries, Controls or is Controlled by or is under common Control with the specified Person; (ii) any Person who, from time to time, is a spouse or immediate relative of a specified Person; (iii) any Person who, directly or indirectly, is the beneficial owner of ten percent (10%) or more of any class of equity securities or other ownership interests of the specified Person, or of which the specified Person is directly or indirectly the owner of ten percent (10%) or more of any class of equity securities or other ownership interests.

     “Agreement” shall mean this Limited Liability Company Agreement as originally executed and as amended, supplemented or restated from time to time.

     “Allocable Acquisition Costs” shall have the meaning set forth in Section 6.06 herein.

2

     “Ashford” shall have the meaning set forth in the introductory paragraph herein.

     “Ashford Election” shall have the meaning set forth in Section 7.05(a) herein.

     “Ashford Election Period” shall have the meaning set forth in Section 7.05(a) herein.

     “Ashford Expenses” shall mean the ordinary day-to-day expenses incidental to the administration of the Company and its Subsidiaries, including, without limitation, costs and expenses incurred prior to Preliminary Approval in respect of an Acquisition Opportunity that is not consummated by the Company, all costs and expenses of providing to the Company the office space, facilities, office equipment, utility service and necessary administrative and clerical functions (including internal costs associated with the preparation of all reports required hereunder) and similar overhead expenses connected with the Company and Ashford’s operation thereof; and all other ordinary operating expenses of Ashford and compensation (including benefits) of Ashford’s employees who are engaged in the operation or management of the business of the Company and each Subsidiary.

     “Ashford Promote” shall have the meaning set forth in Section 4.02(j) herein.

     “Ashford’s Unreturned Capital” shall have the meaning set forth in Section 4.02(j) herein.

     “Ashford Yield” shall have the meaning set forth in Section 4.02(c) herein.

     “Ashford Yield Percentage” shall have the meaning set forth in Section 4.02(d) herein.

     “Business Day” shall mean each day other than a Saturday, Sunday or any other day on which banking institutions in the State of New York are authorized or obligated by law or executive order to be closed.

     “Capital Account” shall mean, with respect to each Member, a book account maintained in accordance with the following provisions:

     (i) To each Member’s Capital Account there shall be credited such Member’s Capital Contributions, such Member’s distributive share of Profits and any items in the nature of income or gain which are allocated to such Member pursuant to Section 4.04, and the amount of any Company liabilities that are assumed by such Member or that are secured by any Company Asset distributed to such Member.

     (ii) To each Member’s Capital Account there shall be debited the amount of cash and the Gross Asset Value of any Company Asset distributed to such Member pursuant to any provision of this Agreement (net of liabilities secured by such distributed property or asset that such Member assumes or takes subject to), such Member’s distributive share of Losses and any items in the nature of expenses and losses which are allocated to such Member pursuant to Section 4.04, and the amount of any liabilities of such Member that are assumed by the Company or which are secured by any property contributed to the Company by such Member (except to the extent already reflected in the amount of such Member’s Capital Contributions).

3

     The foregoing definition and other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Code § 704(b) and the Regulations thereunder, and shall be interpreted and applied in a manner consistent with such Regulations. Notwithstanding anything to the contrary contained in this Agreement, the Program Representatives may modify the manner in which Capital Accounts or any debits or credits thereto are computed in order to comply with such Regulations, provided, that any such modifications do not have a material effect on the amount distributable to any Member pursuant to Section 11.02 upon the liquidation of the Company. Any questions with respect to a Member’s Capital Account shall be reasonably resolved by the Program Representatives, applying principles consistent with this Agreement.

     Any Transferee of Company Interests shall succeed to the Capital Account relating to the Company Interests transferred or the corresponding portion thereof.

     “Capital Call” shall have the meaning set forth in Section 5.02 herein.

     “Capital Call Notice” shall have the meaning set forth in Section 5.03 herein.

     “Capital Commitment” of a Member shall mean the aggregate amount of Capital Contributions committed to be made by such Member to the Company as set forth on Schedule A hereto, upon the terms and subject to the conditions of this Agreement.

     “Capital Contribution” shall mean, with respect to a Member, the amount of cash and the initial Gross Asset Value of any other property contributed (or deemed contributed pursuant to Section 6.07 herein) to the capital of the Company by such Member reduced, in the case of any property contributed or deemed contributed, by the amount of any liability assumed by the Company relating to the property and any liability to which such property is subject.

     “Cash Value” shall have the meaning set forth in Section 7.02 herein.

     “Certificate of Formation” shall mean the Certificate of Formation of the Company as filed with the Secretary of State of Delaware pursuant to the Act and as may be amended from time to time.

     “Change in Control” shall have the meaning set forth in the Program Agreement.

     “Code” shall mean the Internal Revenue Code of 1986, as amended (or any corresponding provision of succeeding law).

     “Commission” means the United States Securities and Exchange Commission and any successor thereto.

     “Commitment Period” means the period commencing as of the date hereof and ending on the earliest of (i) the second anniversary of the date hereof, (ii) the date following a termination of the Program Agreement on which Ashford determines to end the Commitment Period and (iii) the date of termination of the Company.

     “Company” shall have the meaning set forth in the introductory paragraph herein.

4

     “Company Assets” shall mean the assets and property, whether tangible or intangible and whether real, personal, or mixed, at any time owned by or held, directly or indirectly, for the benefit of the Company, and all right, title, and interest, if any, held and owned, directly or indirectly, by the Company in other entities, including any Subsidiaries, but, excluding any and all rights to the name “Ashford,” and all variations thereof and all associated goodwill, which is and shall be the exclusive property of Ashford.

     “Company Expenses” shall mean the following, whenever incurred, to the extent relating to Qualifying Investments that receive Preliminary Approval (as defined in the Program Agreement) and are allocated to the Company by the Program Representatives (i) all reasonable third party costs and expenses, if any, incurred in conducting due diligence investigations into, purchasing, acquiring, negotiating, structuring, and disposing of such Investments, including reasonable third party costs for financial, legal, accounting, consulting or other advisers retained by the Program Representatives on behalf of the Company and other costs and fees provided in the Program Agreement, including Program Reimbursable Expenses (as defined in the Program Agreement) (to the extent not subject to any reimbursement of such costs and expenses by entities in which the Company or any Subsidiary invests or other third parties); (ii) broken deal expenses to the extent Ashford or its Affiliates or the Company are not reimbursed; (iii) the costs of any fidelity bond or similar insurance and the costs of any litigation, D&O liability or other insurance and indemnification or extraordinary expense or liability relating to the affairs of the Company and its Subsidiaries, in each case to the extent approved by the Program Representatives; (iv) subject to the terms of the Program Agreement, costs of organizing the Company and each Subsidiary; (v) expenses of liquidating the Company and each Subsidiary; and (vi) any taxes, fees or other governmental charges levied against the Company or any Subsidiary and all reasonable expenses incurred in connection with any tax audit, investigation, settlement or review of the Company or any Subsidiary in accordance with the terms hereof. Company Expenses shall not include Ashford Expenses.

     “Company Interest” shall mean, to any Member, all of the interest of that Member in the Company including such Member’s (i) right to a distributive share of the Profits and Losses and distributions of Current Income and Disposition Proceeds, (ii) right to a distributive share of Company Assets, (iii) rights, if any, to participate in the management of the Company and (iv) the obligations of such Member to comply with all the terms and provisions of this Agreement and of the Act.

     “Company Minimum Gain” shall mean partnership minimum gain as defined in Regulation § 1.704-2(d).

     “Company Year” shall mean the taxable year of the Company for federal income tax purposes.

     “Control” (including the terms “Controlling” “Controlled by” and “under common Control with”) shall mean the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

     “Cure Capital” shall have the meaning set forth in Section 5.09.

5

     “Current Income” shall mean, except as otherwise provided on Exhibit D, proceeds from an Investment (including the release of previously reserved amounts attributable to Current Income in respect of such Investment) and any Temporary Investment Income, other than Disposition Proceeds, net of Company Expenses and reserves therefor which are allocated to such proceeds in accordance with Section 6.06.

     “Current Yield Percentages” shall have the meaning set forth in Section 4.02(k).

     “Deadlock Notice” shall have the meaning set forth in Section 7.05(a).

     “Deadlock Notice Period” shall have the meaning set forth in Section 7.05(a).

     “Debt Purchase Capital” shall have the meaning set forth in Section 5.10.

     “Default” shall mean, with respect to an Investment, any period during which there exists an uncured default in any payment required pursuant to the terms of such Investment, continuing for a period of at least ninety (90) days; provided that an Investment shall not be considered in Default if any default in payment existed (or was imminent) and was disclosed to PIM prior to the Company acquiring the Investment.

     “Depreciation” shall mean for each Company Year or other period, an amount equal to the depreciation, amortization or other cost recovery deduction allowable for federal income tax purposes with respect to an asset for such Company Year or other period; provided, however, that if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such Company Year or other period, Depreciation shall be an amount which bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation, amortization, or other cost recovery deduction for such Company Year or other period bears to such beginning adjusted tax basis; provided, further, that if the federal income tax depreciation, amortization, or other cost recovery deduction for such Company Year is zero, Depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the Program Representatives.

     “Disposition” means (i) the sale, exchange, redemption, repayment in full, repurchase, refinancing or other disposition by the Company of all or any portion of an Investment for cash and shall include the receipt by the Company of a liquidating dividend or other like distribution of cash on such Investment, including repayment of the outstanding principal balance of any Investment, but excluding (a) any principal payments in respect of regularly scheduled amortization received by the Company or any Subsidiary prior to the full repayment of the Investment, and (b) any partial prepayments of a portion of the outstanding principal balance of the Investment (the principal amounts received in connection with the foregoing clauses (a) and (b) shall be treated as set forth in Exhibit D attached hereto), (ii) placement and funding of any indebtedness of the Company or any Subsidiary secured by some or all of the Investments of the Company or its Subsidiaries with respect to borrowed money, excluding short term borrowing in the ordinary course of business of the Company or any Subsidiary; and (iii) any unrestored loss of Company or Subsidiary property or any part thereof or interest therein by casualty, failure of title or otherwise, including a security becoming worthless within the meaning of Section 165(g) of the Code. For all purposes of this Agreement, whenever a portion of an Investment (but not

6

the entire Investment) is the subject of a Disposition (other than by repayment of a portion of the outstanding principal balance of the Investment as described in clauses (a) and (b) above), that portion shall be treated as having been a separate Investment from the portion of the Investment that is retained by the Company, and prior distributions of Current Income and Capital Contributions for the Investment shall be treated as having been divided between the sold portion and the retained portion on a pro rata basis.

     “Disposition Proceeds” shall mean all amounts received by the Company in respect of the Disposition of an Investment; provided that all or any portion of the amount of principal payments received in respect of an Investment that were not included in originally calculating Investment Yield for such Investment shall be considered Disposition Proceeds (and shall not be taken into account as Current Income). Any payments in respect of an Investment received as non-cash consideration pursuant to a Disposition, including promissory notes or deferred payment obligations, shall be considered Disposition Proceeds when such non-cash consideration is received in cash by the Company to the same extent as provided in the first sentence of this definition; provided, however, if the Program Representatives so determine, such non-cash assets may be distributed in-kind pursuant to Section 4.03(b) as if the fair market value of such non-cash assets at the date of distribution was cash.

     “Duty Breach” shall mean a breach of any material obligation under this Agreement, any other Master Venture Agreement or the Program Agreement (including, but not limited to, Sections 4.09, 4.11, or 4.12 of the Program Agreement), which remains uncured for a period of at least thirty (30) days after receipt of notice of such breach, provided, that if such breach can be cured but is not reasonably capable of being cured within such thirty (30)-day period, such longer period of time as is necessary to cure such breach but in no event in excess of a total of seventy-five (75) days. A failure to make a capital contribution shall not be considered a Duty Breach.

     “Entire Interest” shall have the meaning set forth in Section 7.02 herein.

     “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended (or any corresponding provision of succeeding law).

     “Failing Member” shall have the meaning set forth in Section 5.04 herein.

     “First Member” shall have the meaning set forth in Section 6.11(e) herein.

     “Funding Date” shall have the meaning set forth in Section 5.03 herein.

     “Gross Asset Value” shall mean with respect to any asset, the asset’s adjusted basis for federal income tax purposes, except as follows:

     (i) The initial Gross Asset Value of any asset contributed by a Member to the Company shall be the gross fair market value of such asset at the time of contribution, as reasonably determined by the Program Representatives;

     (ii) The Gross Asset Values of all Company Assets shall be adjusted to equal their respective gross fair market values, as reasonably determined by the Program

7

Representatives as of the following times: (a) the acquisition of an additional Company Interest by any new or existing Member; (b) the distribution by the Company to a Member of more than a de minimis amount of property or assets as consideration for a Company Interest; and (c) the liquidation of the Company within the meaning of Regulation § 1.704-l(b)(2)(ii)(g); provided, however, that adjustments pursuant to clauses (a) and (b) above shall be made only if the Program Representatives reasonably determines that such adjustments are necessary or appropriate to reflect the relative economic interests of the Members in the Company;

     (iii) The Gross Asset Value of any Company Asset distributed to any Member shall be the gross fair market value of such asset on the date of distribution, as reasonably determined by the Program Representatives; and

     (iv) The Gross Asset Values of Company Assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code §§ 734(b) or 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Regulation § 1.704-l(b)(2)(iv)(m).

If the Gross Asset Value of an asset has been determined or adjusted pursuant to this provision, such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Profits and Losses. Any adjustment to the Gross Asset Values of Company Assets shall require an adjustment to the Member’s Capital Account as provided in the definition of Profits and Losses.

     “including” shall mean “including, without limitation,”.

     “Indemnified Person” shall have the meaning set forth in Section 6.11(a).

     “Independent Accountants” shall mean a certified public accounting firm selected by the Program Representatives pursuant to Section 8.02.

     “Initial Capital Contribution” shall have the meaning set forth in Section 5.01.

     “Institutional Investor” shall mean an Affiliate of Investor or Ashford, as the case may be, or:

     (a) one or more of the following:

     (i) an insurance company, bank, savings and loan association, investment bank, trust company, commercial credit corporation, pension plan, pension fund, pension fund advisory firm, mutual fund, real estate investment trust, governmental entity or plan;

     (ii) an investment company, money management firm or a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act of 1933, as amended, or an institutional “accredited investor” within the meaning of Regulation D under the Securities Act of 1933, as amended, which regularly

8

engages in the business of making or owning investments of types similar to the Qualifying Investments;

     (iii) an investment fund, limited liability company, limited partnership or general partnership in which a Permitted Fund Manager which is investing through a fund with committed capital of at least $250,000,000.00, acts as the general partner, managing member, or the fund manager responsible for the day to day management and operation of such investment vehicle; provided that at least fifty percent (50%) of the equity interests in such investment vehicle are owned, directly or indirectly, by one (1) or more entities that are otherwise Institutional Investors; or

     (iv) an institution substantially similar to any of the foregoing;

that has, in the case of entities referred to in clauses (a)(i), (ii) or (iv) of this definition or, except as otherwise provided therein, in the case of entities referred to in clause (iii) of this definition, at least $250,000,000 in capital/statutory surplus or shareholders’ equity (except with respect to a pension advisory firm or similar fiduciary) and at least $600,000,000 in total assets (in name or under management), and is regularly engaged in the business of making or owning commercial real estate loans or commercial loans (or interests therein) similar to the Qualifying Investments; or

     (b) any entity Controlled by, or under common Control with, any of the entities described in clause (b) above.

     “Investment” shall mean any acquisition of a Qualifying Investment by the Company or a Subsidiary thereof during the term of this Agreement. Upon acquisition of a Qualifying Investment by the Company and/or a Subsidiary, such Investment will be listed on Schedule A attached hereto, which exhibit shall be updated from time to time to reflect current Investments.

     “Investment Cost” shall have the meaning set forth in Section 4.02(b) herein.

     “Investment Criteria” has the meaning ascribed to it in Exhibit C herein.

     “Investment Yield” shall have the meaning set forth in Section 4.02(a) herein.

     “Investor” shall have the meaning set forth in the introductory paragraph herein.

     “Investor REIT” means PRISA III REIT, LLC, a Delaware limited liability company, a real estate investment trust, or REIT, that has an ownership interest in Investor.

     “Investor’s Unreturned Capital” shall have the meaning set forth in Section 4.02(h) herein.

     “Investor Yield” shall have the meaning set forth in Section 4.02(f) herein.

     “Investor Yield Percentage” shall have the meaning set forth in Section 4.02(g) herein.

9

     “IRS” shall mean the United States Internal Revenue Service.

     “Loan Servicing Agreement” means a loan servicing agreement substantially in the form attached hereto as Exhibit E to be entered into between Ashford and the Company in connection with Investments.

     “Losses” shall have the meaning set forth in the definition of Profits.

     “Major Decision” shall have the meaning set forth in Section 6.13 herein.

     “Major Uncured Breach” shall mean with respect to Ashford, a Change in Control or Duty Breach.

     “Management Fee” shall have the meaning set forth in the Loan Servicing Agreement.

     “Master Venture” shall have the meaning set forth in the Program Agreement.

     “Master Venture Agreement” shall have the meaning set forth in the Program Agreement.

     “Maximum Spread” shall have the meaning set forth in Section 4.02 herein.

     “Member” shall mean the Investor and Ashford and any Person subsequently admitted as a member of the Company pursuant to the provisions of this Agreement for the period for which such Person shall remain a Member. Schedule A shall be revised from time to time by the Program Representatives to reflect the admission or permitted withdrawal of Members and/or the Transfer of Company Interests by Members pursuant to the provisions of this Agreement.

     “Member Information” shall have the meaning set forth in Section 2.07 herein.

     “Member Minimum Gain” shall mean an amount, with respect to each Member Nonrecourse Debt, equal to the Company Minimum Gain that would result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Regulation § 1.704-2(i)(3).

     “Member Loan” shall mean a loan made by any Member or any Affiliate of a Member to another Member pursuant to Article 5.

     “Member Nonrecourse Debt” shall have the meaning as defined in Regulation § 1.704-2(b)(4).

     “Member Nonrecourse Deductions” shall have the meaning as defined in Regulation § 1.704-2(i)(2). The amount of Member Nonrecourse Deductions with respect to a Member Nonrecourse Debt for a Company Year equals the net increase, if any, in the amount of Member Minimum Gain during such Company Year attributable to such Member Nonrecourse Debt, reduced by any distributions during that Company Year to the Member that bears the economic risk of loss for such Member Nonrecourse Debt to the extent that such distributions are from the proceeds of such Member Nonrecourse Debt and are allocable to an increase in Member

10

Minimum Gain attributable to such Member Nonrecourse Debt, determined according to the provisions of Regulations §§ 1.704-2(h) and 1.704-2(i).

     “Non-Failing Member” shall have the meaning set forth in Section 5.04 herein.

     “Non-Receiving Member” shall have the meaning set forth in Section 7.02 herein.

     “Nonrecourse Deductions” shall have the meaning set forth in Regulations Section 1.704-2(b)(l). The amount of Nonrecourse Deductions for a Company Year equals the net increase, if any, in the amount of Company Minimum Gain during such Company Year reduced by any distributions during such Company Year of proceeds of a Nonrecourse Liability that are allocable to an increase in Company Minimum Gain, determined according to the provisions of Regulations Sections 1.704-2(c) and 1.704-2(h).

     “Nonrecourse Liability” shall have the meaning as defined in Regulation § 1.704-2(b)(3).

     “Notice of Intention” shall have the meaning set forth in Section 5.04 herein.

     “Operating Partner” means PRISA III Operating LP, a Delaware limited partnership, in which Investor REIT is a limited partner.

     “Percentage Interests” shall have the meaning provided in Section 4.01 herein.

     “Person” shall mean any individual, partnership, corporation, limited liability company, joint venture, association, trust, unincorporated organization or other governmental or legal entity.

     “PIM” shall mean Prudential Investment Management, Inc., a Delaware corporation.

     “PIM Investor” shall have the meaning set forth in the recitals herein.

     “Pipeline Transactions” shall have the meaning set forth in the Program Agreement.

     “Plan Assets Regulation” has the meaning given in Section 2.10.

     “Plan Violation” means a transaction, condition or event that would constitute a nonexempt prohibited transaction under ERISA and/or Section 4975 of the Code.

     “Preliminary Approval”, with respect to an Investment, shall have the meaning set forth in the Program Agreement.

     “Prime Rate” shall mean the rate of interest published from time to time by The Wall Street Journal, as the “prime rate.”

     “Profits” and “Losses” shall mean for each Company Year or other period, an amount equal to the Company’s taxable income or loss for such Company Year or period, determined in accordance with Code § 703(a) (for this purpose, all items of income, gain, loss or deduction

11

required to be stated separately pursuant to Code § 703(a)(l) shall be included in taxable income or loss), with the following adjustments:

     (i) Any income of the Company that is exempt from federal income tax or excluded from federal gross income and not otherwise taken into account in computing Profits or Losses pursuant to this definition shall be added to such taxable income or loss;

     (ii) Any expenditures of the Company described in Code § 705(a)(2)(B) or treated as Code § 705(a)(2)(B) expenditures pursuant to Regulation § 1.704-l(b)(2)(iv)(i), and not otherwise taken into account in computing Profits or Losses pursuant to this definition, shall be subtracted from such taxable income or loss;

     (iii) In the event the Gross Asset Value of any Company Asset is adjusted pursuant to any provision of this Agreement in accordance with the definition of Gross Asset Value, the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Profits or Losses;

     (iv) Gain or loss resulting from any disposition of any Company Asset with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of the property disposed of, notwithstanding that the adjusted tax basis of such asset differs from its Gross Asset Value;

     (v) In lieu of the depreciation, amortization, and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such Company Year or other period, computed in accordance with the definition of Depreciation;

     (vi) Notwithstanding any other provision herein, any items which are specially allocated pursuant to Section 4.04(b), (c), (d) and (f) shall not be taken into account in computing Profits or Losses and the allocation of Profits or Losses and specially allocated items to a Member shall be treated as an allocation to such Member of the same share of each item of income, gain, loss, deduction and Code § 705(a)(2)(B) expenditure that has been taken into account in computing Profits and Losses; and

     Profits and Losses shall be further determined and adjusted in accordance with the Regulations issued under § 704 of the Code.

     “Program” shall have the meaning set forth in the recitals herein.

     “Program Agreement” shall have the meaning set forth in the recitals herein.

     “Program Reimbursable Expenses” shall have the meaning set forth in the Program Agreement.

     “Program Representative” shall mean a Person designated as such as provided in Section 6.03 herein.

12

     “Proprietary Information” shall have the meaning set forth in Section 9.02 herein.

     “Put Purchase Price” shall have the meaning set forth in Section 7.05(c) herein.

     “Qualifying Investment” means each (i) Acquisition Opportunity that meets the Investment Criteria set forth on Exhibit C hereto (as agreed to by the PIM Program Representative in good faith pursuant to the Program Agreement) and (ii) other opportunity that fails to meet the Investment Criteria but for which the Investment Criteria have been waived by the PIM Program Representative pursuant to the Program Agreement.

     “Receiving Member” shall have the meaning set forth in Section 7.02 herein.

     “Regulations” shall mean the Income Tax Regulations of the IRS as such Regulations may be amended from time to time (including Temporary Regulations of the IRS). A reference to any Regulation shall be deemed to include any amendatory or successor provision thereto.

     “REO Event” shall have the meaning set forth in Section 6.14 herein.

     “REO Investment” shall have the meaning set forth in Section 6.14 herein.

     “REO Investment Percentages” shall have the meaning set forth in Section 6.14 herein.

     “REO Property” shall have the meaning set forth in Section 6.14 herein.

     “REOC” has the meaning given in Section 2.10.

     “Rescission Notice” shall have the meaning set forth in Section 5.03 herein.

     “Reserve Account” shall have the meaning set forth in Section 6.06 herein.

     “Securities Laws” shall mean collectively the 1933 Act, the 1934 Act and the 1940 Act.

     “Sourcing Fee” shall have the meaning set forth in Section 6.10 herein.

     “Subsidiary” shall mean a wholly-owned limited liability company organized by the Company to acquire, hold and invest in Investments.

     “Subsidiary Agreement” shall mean the limited liability company agreement of a particular Subsidiary, substantially in the form of Exhibit B to this Agreement, subject to such changes as will not adversely affect the economic terms of such form but as may be necessary or desirable for any one (1) or more Investors to address tax or other legal issues applicable to any of them.

     “Tax Matters Member” shall have the meaning set forth in Code § 6231(a)(7) and described in Section 8.06.

     “Temporary Investment Income” shall mean income of the Company or any Subsidiary from sources other than Investments.

13

     “Term” shall have the meaning set forth in Section 2.05 herein

     “Unfunded Capital Commitment” shall have the meaning set forth in Section 5.02 herein.

     “Workout Fee” shall have the meaning set forth in the Loan Serving Agreement.

ARTICLE II

ORGANIZATION AND PURPOSE

     Section 2.01 Formation. The Company was formed as a Delaware limited liability company pursuant to the Act on February 5, 2008 by the filing of the Certificate of Formation for the Company with the Secretary of State of the State of Delaware, and the Members hereby adopt and ratify the Certificate of Formation and all acts taken in connection therewith. The Certificate of Formation shall include all amendments thereto, and additional instruments and amendments thereto, as may from time to time be necessary or appropriate to carry out this Agreement and enable the Company to conduct its business in accordance with applicable laws.

     Section 2.02 Name. The name of the Company is “PIM Ashford Venture I, LLC.” The Company business may be conducted under any other name or names approved by the unanimous approval of the Program Representatives, including the name of any Member or any Affiliate thereof.

     Section 2.03 Places of Business. The Company may locate its place or places of business at any place or places as the Program Representatives may from time to time approve by unanimous approval. The Company’s initial principal place of business shall be at 14185 Dallas Parkway, Suite 1100, Dallas, Texas 75254. The Company may maintain offices at such other place or places as unanimously approved by the Program Representatives trustee.

     Section 2.04 Registered Office and Agent. The name of the Company’s registered agent for service of process shall be The Corporation Trust Company, and the address of the Company’s registered agent and the address of the Company’s registered office in the State of Delaware shall be The Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. The registered agent and the registered office of the Company may be changed from time to time by filing the address of the new registered office and/or the name of the new registered agent with the Secretary of the State of the State of Delaware pursuant to the Act.

     Section 2.05 Term. The term of the Agreement (the “Term”) commenced on the date hereof and shall continue until terminated in accordance with the provisions of this Agreement.

     Section 2.06 Purpose. The principal purposes of the Company shall be to identify Acquisition Opportunities and to acquire, own, administer, service, sell, dispose of or otherwise deal with Investments and to do all the things and to take all actions necessary and desirable in connection therewith. The business and purpose of the Company shall be limited to its principal purposes, unless the Program Representatives otherwise determines by unanimous approval that the Company shall have the authority to engage in any other lawful business purpose or activity permitted under the Act. Subject to the restrictions set forth above, the Company shall possess

14

and may exercise all of the powers and privileges granted by the Act or which may be exercised by any Person, together with any powers incidental thereto, so far as such powers or privileges are desirable, necessary, suitable or convenient to the conduct, promotion or attainment of the purposes of the Company. In furtherance of these purposes, the Company shall have all powers desirable, necessary, suitable or convenient for the accomplishment thereof.

     Section 2.07 Member Information. The name, address, Capital Commitment and Percentage Interest of each Member is set forth on Schedule A attached hereto. Schedule A shall be revised from time to time by the Program Representatives to reflect the withdrawal or admission of Members and the Transfer of Company Interests by Members pursuant to the provisions of this Agreement and to reflect any other change in the name, address, Capital Commitment or Percentage Interest of a Member or description of the Investments (collectively, the “Member Information”).

     Section 2.08 Ownership and Waiver of Partition. All property and interests in property, real or personal, owned by the Company shall be held in the name of the Company and deemed owned by the Company as an entity, and no Member, individually, shall have any ownership of or interest in such property or interests owned by the Company, except as a Member of the Company. Each of the Members irrevocably waives, during the Term and during any period of its liquidation following any dissolution, any right that it may have to seek or maintain any action for partition with respect to any Company assets.

     Section 2.09 Qualifications in Other Jurisdictions. The Program Representatives shall cause the Company to be qualified or registered if and to the extent required under applicable laws of any jurisdiction in which the Company transacts business and shall be authorized to execute, deliver and file or cause the execution, delivery and filing of any certificates and documents necessary to effect such qualification or registration including the appointment of agents for service of process in such jurisdictions.

     Section 2.10 Management of the Company. Notwithstanding anything to the contrary set forth herein, to the extent the underlying Company Assets constitute an investment in real estate that is managed or developed (within the meaning of the Plan Assets Regulation), the Members shall conduct the activities of the Company so as not to disqualify the Operating Partner or any holder of direct or indirect interests in Investor as a “real estate operating company” (“REOC”) within the meaning of U.S. Department of Labor Regulations published at 29 C.F.R. Section 2510.3-101 (the “Plan Assets Regulation”). Any provision of this Agreement that might jeopardize the status of the Operating Partner or the holder of any direct or indirect interests in Investor as a REOC shall be reformed, as necessary, to avoid the failure of the Operating Partner or the holder of direct or indirect interests in Investor to qualify as a REOC, or void and of no effect if such provision is incapable of reform.

ARTICLE III

MEMBERS

     Section 3.01 Members. Each of the parties to this Agreement and each Person admitted as a Member of the Company pursuant to Section 2.07 of this Agreement and in accordance with

15

the Act shall be Members of the Company until they cease to be Members in accordance with the provisions of this Agreement. Each Member shall have the rights, powers, duties, obligations, preferences and privileges set forth in this Agreement. No Member (solely in its capacity as such) shall have any authority to bind the Company except as permitted by this Agreement.

     Section 3.02 Election and Removal of Program Representatives Members. The Members shall elect, remove and replace the Program Representatives in accordance with the provisions of Sections 6.03 and 6.04 herein and shall have no other voting or approval rights as to any other matter except as provided in Sections 2.06 and 6.01 of this Agreement or as otherwise expressly provided by this Agreement.

     Section 3.03 No Liability to the Members or the Company.

(a) Except as otherwise required by law or the provisions of this Agreement, or the Program Agreement, none of Ashford, PIM, the Investor or any Affiliate of any of the foregoing or any Program Representative, nor any of the Company’s current or former Affiliates, officers or agents, if any, shall be liable to the Company, any Subsidiary or to each other for any debts, liabilities or obligations of the Company, whether arising in contract, tort or otherwise, or for any action taken, or omitted to be taken, in good faith and in a manner reasonably believed to be in, or not opposed to, the best interest of the Company and, with respect to any criminal action or proceeding, for any action taken, or omitted to be taken, with no reasonable cause to believe that the conduct was unlawful, in each case except to the extent of the applicable party’s adjudicated fraud, gross negligence, willful misconduct, criminal conduct (unless there was no reasonable cause to believe the criminal action taken or omitted was unlawful) or to the extent such action taken or omitted to be taken constitutes a material breach of any provision of this Agreement or other contract between such party and the Company. Except as expressly set forth herein, none of Ashford, PIM, the Investor or any Affiliate of any of the foregoing shall have to make any contributions or deliver any letters of credit, guaranties or other tangible property to the Company or any Subsidiary. Nothing in this Agreement shall be construed to make Ashford or the Investor liable for any losses or debts of the Company, except to the extent of losses of their respective Capital Contributions to the Company pursuant to the terms of this Agreement.

(b) No Affiliate or member of any of Ashford, PIM or the Investor shall have personal liability for the obligations of such person hereunder or otherwise, except as provided herein or under applicable law or in a written agreement (including this Agreement or the Program Agreement), the parties to which include such Affiliate.

(c) Nothing in this Agreement, and, without limiting the generality of the foregoing, in this Section 3.03, expressed or implied, is intended or shall be construed to give to any creditor of the Company or any Subsidiary or to any creditor of Ashford, PIM or the Investor or any creditor of any other Person whatsoever, other than Ashford, PIM and the Company, any legal or equitable right, remedy or claim under or in respect of this Agreement or any covenant, condition or provisions herein contained, and such provisions are and shall be held to be for the sole and exclusive benefit of Ashford, PIM, the Investor and the Company.

16

(d) In accordance with the Act, a member of a limited liability company may, under certain circumstances, be required to return to the Company for the benefit of Company creditors amounts previously distributed to it as a return of capital. It is the intent of the Members that a distribution to any Member be deemed a compromise within the meaning of Section 18-502(b) of the Act and not a return or withdrawal of capital, even if such distribution represents, for income tax purposes or otherwise (in full or in part), a distribution of capital, and no Member shall be obligated to pay any such amount to or for the account of the Company or any creditor of the Company, except as provided in this Section 3.03. However, if any court of competent jurisdiction holds that, notwithstanding the provisions of this Agreement, any Member is obligated to make any such payment, such obligation shall be the obligation of such Member.

     Section 3.04 Other Business Activities of the Investor. PIM and the Investor and their Affiliates may have other business interests and may engage in other business ventures of any nature or description whatsoever, whether presently existing or hereafter created, including, the acquisition, development, ownership, administration, servicing, leasing, management, operation, franchising, syndication, financing, refinancing and/or sale of real estate or real estate-related investments and may compete, directly or indirectly, with the business of the Program. None of PIM, the Investor or their Affiliates shall incur any liability to the Program, Ashford, PIM or any other Investor as a result of the pursuit by such Investor or its Affiliates of such other business interests and ventures and competitive activity, and neither the Program nor Ashford, PIM or any Investor shall have any right to participate in such other business interests or ventures or to receive or share in any income derived therefrom.

     Section 3.05 Other Business Activities of Ashford. Subject to the provisions of this Agreement, any Master Venture Agreement and Program Agreement, Ashford and its Affiliates may have other business interests and may engage in other business ventures of any nature or description whatsoever, whether presently existing or hereafter created, including, the development, ownership, leasing, management, operation, franchising, syndication, financing, refinancing and/or sale of real estate any of which may compete, directly or indirectly, with the business of the Company or any Subsidiary or any member thereof. Neither Ashford nor its Affiliates shall incur any liability to the Company, PIM, the Investor, any Subsidiary or any of its members or their Affiliates as a result of the pursuit by Ashford or any of its Affiliates of such other real estate, business interests or ventures, except as provided herein or in any Venture Agreement, and neither the Program, PIM, the Investor, any Subsidiary nor any of its members nor their Affiliates shall have any right to participate in such other real estate holdings, business interests or ventures or to receive or share in any income derived therefrom except as provided herein or in any other Master Venture Agreement.

ARTICLE IV

DISTRIBUTIONS/ALLOCATIONS

     Section 4.01 Percentage Interests in Company. The percentage interest of the respective Members in the Company shall be:

     (a) Investor: 75%

17

     (b) Ashford: 25%

     The percentage interest of each Member, which is subject adjustment pursuant to the terms of Section 6.14, shall be set forth on Schedule A, and is hereinafter called such Member’s “Percentage Interest.”

     Section 4.02 Certain Definitions and Example. The following terms shall have the following meanings when used herein:

(a) “Investment Yield” shall mean generally the interest rate payable in respect of a Qualifying Investment, subject to such adjustments and assumptions in respect thereof, as are provided by Ashford in the Preliminary Package for such Qualifying Investment. Where the Investment Yield determined by Ashford in respect of a Qualifying Investment varies from the interest rate provided for by the terms of such Qualifying Investment, the adjustments and assumptions relating to such variation to the extent not addressed on Exhibit D hereto, shall be subject to the agreement of the Program Representatives who shall agree to the Investment Yield in connection with Final Approval (as defined in the Program Agreement) of such Qualifying Investment.

(b) “Investment Cost” means (i) the cost of acquiring or issuing an Investment plus (ii) the remainder of (A) the Sourcing Fee and unreimbursed Company Expenses attributable to acquisition or issuance of such Investment as provided in Section 6.06, less (B) any origination fees, application fees or other similar upfront fees, but in no event less than zero (0), in respect of such Investment.

(c) “Ashford Yield” means for each Investment, the percentage equal to the product of Investment Yield for such Investment and 1.30; provided that if Ashford Yield in respect of an Investment as so determined exceeds Investor Yield by more than the Maximum Spread (as defined below) applicable to such Investment, Ashford Yield and Investor Yield in respect of such Investment shall be adjusted by reducing Ashford Yield and increasing Investor Yield so that the difference for such Investment in such yields equals the Maximum Spread applicable to such Investment

(d) “Ashford Yield Percentage” means, with respect to each Investment, the percentage determined by dividing (i) the product of (a) Ashford Yield in respect of such Investment and (b) Ashford’s Percentage Interest, by (ii) the Investment Yield for such Investment.

(e) “Maximum Spread” shall mean,

     (i) 4.50% in respect of an Investment with an Investment Yield of less than 14.0%, and

     (ii) 4.75% in respect of an Investment with an Investment Yield of 14.0% or more, plus an additional 0.25% for each full percentage point that Investment Yield exceeds 14.0%.

18

(f) “Investor Yield” means, for each Investment, the percentage equal to the quotient determined by dividing (i) the difference between (a) the product of Investor’s Percentage Interest and Investment Yield for such Investment, and (b) the product of (x) the difference between the Ashford Yield and Investment Yield for such Investment, and (y) Ashford’s Percentage Interest, by (ii) Investor’s Percentage Interest.

(g) “Investor Yield Percentage” means, with respect to each Investment, the percentage determined by dividing (i) the product of (a) Investor Yield in respect of such Investment and (b) Investor’s Percentage Interest, by (ii) the Investment Yield for such Investment.

(h) “Investor’s Unreturned Capital” shall mean, for Investor, its Capital Contributions attributable to an Investment, reduced by any distributions to Investor attributable to such Investment pursuant to Section 4.03 (iii) herein.

(i) “Ashford’s Unretnrned Capital” shall mean, for Ashford, its Capital Contributions attributable to an Investment, reduced by any distributions to Ashford attributable to such Investment pursuant to Section 4.03 (b)(iv) herein.

(j) “Ashford Promote” shall mean, in respect of each Investment, an amount determined annually in respect of such Investment equal to 5% of the annual Investment Yield for such Investment determined as provided herein, and payable only as provided in Section 4.03(c) herein.

(k) “Current Yield Percentages” means, with respect to an Investment, for Ashford, the Ashford Yield Percentage for such Investment, and for Investor, the Investor Yield Percentage for such Investment.

(1) Example. Attached hereto as Exhibit D is an example approved by the Members illustrating the calculation of terms defined in this Section 4.02 and their application under Section 4.03. In the event of any conflict between any term of this Agreement and Exhibit D hereto, Exhibit D shall control.

     Section 4.03 Distributions.

(a) Current Income. Subject to Sections 4.03(c) and 5.04 herein, the Company shall distribute Current Income for each Investment in each month during the term of the Company within ten (10) days after the end of each such month to the Members:

     (i) During the existence of a Default in respect of such Investment, or if such Investment was acquired by the Company or a Subsidiary with Debt Purchase Capital (subject to the terms of Section 5.10), in proportion to their Percentage Interests in respect of such Investment; provided, however, that once such Default is cured and provided there exists no Major Uncured Breach or another Default in respect of such Investment, then distributions pursuant to this Section 4.03(a) and, to the extent necessary, Section 4.03(b). shall be adjusted among Investor and Ashford so that distributions in respect of such Investment equal the amounts that would have distributed if no Default had existed; and

19

     (ii) If no Default exists in respect of such Investment, in proportion to their respective Current Yield Percentages.

(b) Disposition Proceeds. Subject to Sections 4.03(c) and 5.04. with respect to each Investment, the Company shall distribute Disposition Proceeds in respect of such Investment within three (3) business days following a Disposition thereof, or as soon as practicable thereafter, to the Members as follows:

     (i) First, to Investor to the extent of any unreturned Cure Capital attributable to such Investment contributed by Investor pursuant to Section 5.09;

     (ii) Second, to Ashford to the extent of any unreturned Cure Capital attributable to such Investment contributed by Ashford pursuant to Section 5.09;

     (iii) Third, to Investor to the extent of Investor’s Unreturned Capital attributable to such Investment (excluding any Investor’s Unreturned Capital represented by the payment of the Sourcing Fee or Company Expenses attributable to such Investment);

     (iv) Fourth, to Ashford to the extent of Ashford’s Unreturned Capital attributable to such Investment (excluding any Ashford’s Unreturned Capital represented by the payment of the Sourcing Fee or Company Expenses attributable to such Investment);

     (v) Fifth, to Investor to the extent of Investor’s accrued and unpaid Investor Yield attributable to such Investment;

     (vi) Sixth, to Ashford to the extent of Ashford’s accrued and unpaid Ashford Yield attributable to such Investment;

     (vii) Seventh, to Investor and Ashford in proportion to their respective Percentage Interests until Investor’s Unreturned Capital and Ashford’s Unreturned Capital represented by the payment of the Sourcing Fee or Company Expenses attributable to such Investment is recovered by the parties; and

     (viii) Thereafter, any remaining balance to Investor and Ashford in proportion to their respective Current Yield Percentages; provided that in respect of a partial Disposition of an Investment then in Default, such remaining balance shall be distributed in accordance with Percentage Interests until Investor shall have received its Unreturned Capital attributable to the entire Investment plus an amount equal to the Investor Yield thereon.

     Notwithstanding the foregoing, any Distribution Proceeds from any Investment acquired by Debt Purchase Capital pursuant to Section 5.10 herein shall be distributed to the Members pari passu in accordance with their Percentage Interests (as further described in Section 5.10 herein) and shall not be subject to the provisions of Section 4.03(b)(i) through (viii) above.

20

(c) Promote to Ashford. Following the second (2^nd) anniversary of the date of this Agreement, if average Investor Yield on Investments is at least nine percent (9%) (determined for this purposes by calculating Investment Yield in respect of Investments providing for variable or floating rates of returns, at no lower than the rate applicable when acquired or issued by the Company, assuming in respect of any Investment that is then in Default, that such Investment is worthless and taking into account such adjustments as may be required in respect of REO Properties pursuant to Section 6.14) in respect of Investments held by the Company, then, Ashford shall be distributed the Ashford Promote in respect of each Investment. The Ashford Promote shall be distributable following the annual period for which a determination in made, provided that any Ashford Promote distributable in respect of the first two (2) years following the date of this Agreement, shall be payable following such initial two (2) year period. Ashford Promote shall be distributed from amounts otherwise distributable to Investor pursuant to Section 4.03(a) and 4.03(b).

     Section 4.04 Allocations.

(a) Profits and Losses. Except as otherwise provided in this Agreement, Profits and Losses and to the extent necessary, individual items of income, gain or loss or deduction of the Company shall be allocated in a manner such that the Capital Account of each Member after giving effect to the special allocations set forth in Sections 4.04(b) through 4.04(h) is, as nearly as possible, equal (proportionately) to (i) the distributions that would be made pursuant to Section 4.03(b) if the Company were dissolved, its affairs wound up and its assets sold for cash equal to their Gross Asset Value, all Company liabilities were satisfied (limited with respect to each non-recourse liability to the Gross Asset Value of the assets securing such liability) and the net assets of the Company were distributed in accordance with Section 4.03(b) to the Members immediately after making such allocation, minus (ii) such Member’s share of Company Minimum Gain (defined below) and Member Minimum Gain (defined below), computed immediately prior to the hypothetical sale of assets

(b) Minimum Gain Chargeback. Notwithstanding any other provision of this Article IV, if there is a net decrease in Company Minimum Gain during any Company Year or other applicable period, then, subject to the exceptions set forth in Regulations § 1.704-2(f)(2), (3), (4) and (5), each Member shall be specially allocated items of Company income and gain for such Company Year (and, if necessary, subsequent Company Years) in an amount equal to such Member’s share of the net decrease in Company Minimum Gain, as determined in accordance with Regulation § 1.704-2(g). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance with Regulation § 1.704-2(f). This Section 4.04(b) is intended to comply with the minimum gain chargeback requirement in Regulation § 1.704-2(f) and shall be interpreted consistently therewith.

(c) Member Minimum Gain Chargeback. Notwithstanding any other provision of this Article IV, except Section 4.04(b), if there is a net decrease in Member Minimum Gain attributable to a Member Nonrecourse Debt during any Company Year or

21

other applicable period, then, subject to the exceptions set forth in Regulation § 1.704-2(i)(4), each Member who has a share of the Member Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Regulation § 1.704-2(i)(5) shall be specially allocated items of Company income and gain for such Company Year (and, if necessary, subsequent Company Years) in an amount equal to such Member’s share of the net decrease in Member Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Regulation § 1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance with Regulation § 1.704-2(i)(4). This Section 4.04(c) is intended to comply with the minimum gain chargeback requirement in Regulation § 1.704-2(i)(4) and shall be interpreted consistently therewith.

(d) Qualified Income Offset. Notwithstanding any provision of this Article IV, except Sections 4.04(b) and 4.04(c), in the event any Member receives any adjustments, allocations or distributions described in Regulations §§ 1.704-l(b)(2)(ii)(d)(4), (5) or (6), that cause or increase an Adjusted Capital Account Deficit of such Member, items of Company income and gain shall be specially allocated to such Member in an amount and manner sufficient to eliminate, to the extent required by the Regulations, the Adjusted Capital Account Deficit of such Member as quickly as possible. This Section 4.04(d) is intended to comply with the qualified income offset provision of Regulation § 1.704- l(b)(2)(ii)(d) and shall be interpreted consistently therewith.

(e) No Excess Deficit. To the extent that any Member has or would have, as a result of an allocation of Loss (or item thereof), an Adjusted Capital Account Deficit, such amount of Loss (or item thereof) shall be allocated to the other Members in accordance with Section 4.04(a). but in a manner which will not produce an Adjusted Capital Account Deficit as to such Members. To the extent such allocation would result in all Members having Adjusted Capital Account Deficits, such Losses shall be allocated in accordance with Section 4.04(a). Any allocations of Loss pursuant to this Section 4.04(e) shall be reversed with a corresponding allocation of Profits in subsequent years.

(f) Member Nonrecourse Deductions. Any Member Nonrecourse Deductions for any Company Year or other applicable period shall be specially allocated to the Member who bears the economic risk of loss with respect to the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in accordance with Regulation § 1.704-2(i)(l).

(g) Code §754 Adjustments. To the extent an adjustment to the adjusted tax basis of any Company Asset pursuant to Code §§ 734(b) or 743(b) is required, pursuant to Regulation § 1.704-l(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to the Members in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to such section of the Regulations.

22

(h) Curative Allocations. Any mandatory allocations of items of income, gain, loss or deduction pursuant to Sections 4.04(b) through 4.04(f) above shall be taken into account for the purpose of equitably adjusting subsequent allocations of Profits and Losses and items of income, gain, loss or deduction among the Members so that, to the extent possible, the net allocations, in the aggregate, allocated to each Member pursuant to this Article IV, and the Capital Accounts of each Member, shall as quickly as possible and to the extent possible, be the same as if no mandatory allocations had been made.

     Section 4.05 Other Allocations and Profits.

(a) For purposes of determining the Profits, Losses or any other items allocable to any period, Profits, Losses and any such other items shall be determined on a daily, monthly or other basis, as determined by the Program Representatives using any permissible method under Code § 706 and the Regulations thereunder.

(b) Except as otherwise provided in this Agreement, all items of Member income, gain, loss, deduction, and any other allocations not otherwise provided for shall be divided among the Members in the same proportions as they share Profits and Losses, as the case may be, for the Company Year.

(c) The Members are aware of the income tax consequences of the allocations made by this Article IV and hereby agree to be bound by the provisions thereof in reporting their shares of Company income and loss for income tax purposes.

(d) To the extent permitted under Regulations § 1.704-2(h)(3), the Company shall treat a distribution of proceeds of a Nonrecourse Liability as a distribution that is not allocable to an increase in Company Minimum Gain.

     Section 4.06 Tax Allocations.

(a) Except as otherwise provided for in this Section 4.06, for federal income tax purposes, each item of income, gain, loss and deduction shall be allocated among the Members in the same manner as its correlative item of “book” income, gain, loss or deduction is allocated pursuant to Sections 4.03, 4.04 and 4.05 above.

(b) In accordance with Code §§ 704(b) and 704(c) and the Regulations thereunder, income, gain, loss and deduction with respect to any property contributed to the Company shall, solely for federal income tax purposes, be allocated among the Members so as to take into account any variation between the adjusted basis of such property to the Company for federal income tax purposes and the initial Gross Asset Value. If the Gross Asset Value of any Company asset is adjusted as described in the definition of Gross Asset Value, subsequent allocations of income, gain, loss and deduction with respect to such Company asset shall take into account any variation between the adjusted basis of such Company asset for federal income tax purposes and its Gross Asset Value in the same manner as under Code § 704(c) and the Regulations thereunder. Allocations pursuant to this Section 4.06(b) are solely for purposes of federal, state and local taxes and shall not affect, or in any way be taken into account in

23

computing, any Member’s Capital Account or share of Profits, Losses, other items or distributions pursuant to any provision of this Agreement.

(c) Profits and Losses allocable to a Company Interest assigned or reissued during a Company Year shall be allocated to each Person who was the holder of such Company Interest during such Company Year, in proportion to the number of days that each such holder was recognized as the owner of such Company Interest during such Company Year or by an interim closing of the books or in any other proportion permitted by the Code and selected by the Program Representatives in accordance with this Agreement, without regard to the results of the Company operations or the date, amount or recipient of any distributions which may have been made with respect to such Company Interest.

     Section 4.07 Intentionally Omitted.

     Section 4.08 Intentionally Omitted.

     Section 4.09 Withholding. Each Member hereby authorizes the Company to withhold from or pay on behalf of or with respect to such Member any amount of federal, state, local, or foreign taxes that the Program Representatives reasonably determines the Company is or may be required to withhold or pay with respect to any amount distributable or allocable to such Member pursuant to this Agreement, including any taxes required to be withheld or paid by the Company pursuant to Code § 1441, 1442, 1445, or 1446. Any amount paid on behalf of or with respect to a Member shall constitute a loan by the Company to such Member, which loan shall be repaid through withholding of subsequent distributions to such Member. Any amounts withheld pursuant to this Section 4.09 shall be treated as a distribution to such Member. In the event that a Member fails to pay any amounts owed to the Company pursuant to this Section 4.09 when due, the Program Representatives may, in its sole and absolute discretion, elect to cause the Company to make the payment on behalf of such defaulting Member, and in such event the Company shall be deemed to have loaned such amount to such defaulting Member and shall succeed to all rights and remedies of the Company as against such defaulting Member. Without limitation, in such event the Company shall have the right to retain distributions that would otherwise be distributable to such defaulting Member until such time as such loan, together with all interest thereon, has been paid in full; and any such distributions so retained by the Company shall be treated as having been distributed to the defaulting Member and immediately paid by the defaulting Member to Company in repayment of such loan. Any amounts payable by a Member hereunder shall bear interest at the lesser of (i) the Prime Rate plus five percent (5%) or (ii) the maximum lawful rate of interest on such obligation, such interest to accrue from the date such amount is due (which shall be fifteen (15) Business Days after written demand) until such amount is paid in full.

     Section 4.10 Section 83(b) Elections. Upon the request of Ashford, the Company and the Members will all consent to and execute an election under Section 83(b) of the Code and provide any required information and filings relating to such election or any new rules or regulations promulgated by the IRS relating to “carried interests” or any other provisions of Article IV hereof.

24

ARTICLE V

CAPITAL CONTRIBUTIONS

     Section 5.01 Members’ Capital Contributions, During the Term hereof, Investor and Ashford shall make Capital Contributions up to the amounts for each as set forth on Schedule A. The aggregate initial Capital Contribution of each Member as of the date of this Agreement shall equal the amount set forth as such for such Member in Schedule A (an “Initial Capital Contribution”) with any additional Capital Contributions to be funded in accordance with the provisions of Sections 5.02 and 5.03.

     Section 5.02 Capital Calls. The Program Representatives may, from time to time and at any time, make one or more capital calls to each of PIM, on behalf of Investor, and Ashford (each, a “Capital Call”) from their respective unfunded remaining Capital Commitments (such amount remaining from time to time, collectively, the “Unfunded Capital Commitments”) to acquire Investments or otherwise as additional capital contributions to fund additional cash investments for any reason in any Investment, Company Expenses or repayment of any outstanding financing of the Company or any Subsidiary; provided, that all Capital Calls to PIM, on behalf of Investor, on the one hand, and Ashford, on the other hand, shall be made in proportion to the respective Unfunded Capital Commitments of Investor and Ashford.

     Section 5.03 Capital Call Notices. Subject to the terms of Section 5.09, the Program Representatives shall make a Capital Call by providing written notice to each of PIM, on behalf of Investor, and Ashford (each, a “Capital Call Notice”) in the manner set forth in this Section 5.03. Each Capital Call Notice shall specify the total amount of the Capital Call and the date (the “Funding Date”) that the applicable Capital Contribution shall be funded by Investor and Ashford, which date shall be no less than three (3) Business Days nor more than five (5) Business Days after the Capital Call Notice is provided to each of PIM, on behalf of Investor, and Ashford. On the Funding Date, each of Investor and Ashford shall contribute their respective amounts so called to the Company in immediately available funds by wire transfer to an account specified by the Program Representatives. Investor and Ashford shall contribute capital called under this Section 5.03 to acquire Investments in proportion to their Percentage Interests and capital in all other purposes in proportion to the respective Unfunded Capital Commitments of the Investor and Ashford.

     At any time, the Program Representatives may send a written notice to the Investor (on behalf of each of Investor(s)) and Ashford) advising that the Program Representatives are rescinding all or a portion of a specific Capital Call Notice (a “Rescission Notice”), which Rescission Notice shall identify the particular Capital Call Notice being rescinded and the revised amount of any remaining unfunded Capital Contribution obligation of each Member with respect to such Capital Call Notice.

     Section 5.04 Failure to Fund Capital Contributions. If a Member fails to contribute an amount equal to the entire amount required to be contributed by it within the applicable period specified above after the Capital Call Notice (the “Failing Member”), and if the other Member (the “Non-Failing Member”) makes its proportionate contribution within such applicable period and so notifies the Failing Member, and the Failing Member fails fully to remedy its failure to

25

contribute within five (5) days after the giving of a notice by the Non-Failing Member with respect to a failure under this Section 5.04 (the “Notice of Intention”), then one or more of the following may occur, at the option and election of the Non-Failing Member, which election shall be specified in the Notice of Intention: (i) the Non-Failing Member may require the Company to repay immediately to the Non-Failing Member the contribution it made pursuant to the applicable Capital Call Notice, together with interest actually earned thereon by the Company until repayment, if any; (ii) the Non-Failing Member may, but need not, make an additional contribution to the Company not in excess of the amount the Failing Member failed to contribute pursuant to Section 5.03, in which case the Percentage Interests of the Members with respect to the Investment for which Capital Contributions were made in respect of such Capital Call Notice shall be adjusted and reflect the ratio of the Capital Contributions actually made by each Member to the total Capital Contributions actually made by each Member to the total Capital Contributions in respect of such notice, or (iii) the Non-Failing Member may elect to advance to the Company, as a loan to the Failing Member, an amount equal to the amount the Failing Member failed to contribute pursuant to Section 5.03, which loan shall bear interest at an annual rate (compounded semi-annually) equal to the highest rater permitted by applicable law in no event to exceed twenty percent (20%) (a “Member Loan”). During the Term, notwithstanding anything to the contrary, a Member Loan shall be repaid with amounts otherwise distributable by the Company to the Failing Member being delivered directly by the Company to the Non-Failing Member until such Member Loan and all interest thereon is repaid (which payments will be applied first to accrued interest on the outstanding principal balance of such loan and then outstanding principal balance of such loan) and any amounts so applied shall be treated under this Agreement as having been distributed to the Failing Member. Any such loan shall be recourse to the Failing Member and any outstanding balance following dissolution of the Company shall be immediately due and payable by the Failing Member. A Member Loan may be prepaid at any time or from time to time by a Failing Member.

     Section 5.05 Records to Reflect Capital Contributions and Capital Commitments. The Member Information described in Section 2.07 and set forth on Schedule A attached hereto shall be revised from time to time by the Program Representatives to reflect any change in the Member Information.

     Section 5.06 Further Capital Contributions. Unless it agrees otherwise in writing or in an amendment to this Agreement, no Member shall be required to make Capital Contributions other than those it has committed to make hereunder as set forth in Sections 5.01, 5.02 and 5.03 and on Schedule A.

     Section 5.07 Resignations; Withdrawals of Capital. Except upon dissolution of the Company or as may be expressly set forth in this Agreement, no Member shall have the right to withdraw from the Company or demand or receive the return of its Capital Contributions or any part of its Capital Account, and, except as expressly set forth in this Agreement, no Member shall be entitled to receive any interest on its outstanding Capital Account balance or any distribution (including the return of its Capital Contributions) that is not expressly provided for in this Agreement.

     Section 5.08 Restoration of Negative Capital Accounts. No Member shall be obligated to restore any deficit balance in its Capital Account or be personally liable for the return of the

26

Capital Contributions of any other Member, or any portion thereof or return thereon, it being expressly understood that (x) any such return shall be made solely from Company Assets and amounts set aside in the Reserve Account but subject to the distribution provisions set forth in Section 4.03 hereof, and (y) a deficit in a Member’s Capital Account shall not constitute a Company Asset.

     Section 5.09 Capital Contributions to Cure Loan Defaults. Either Member shall have the right to make a capital call by delivery of written notice to the other for funds necessary to cure a default under any financing on any Company or Subsidiary property that is other than an Investment. Such notice shall specify the nature of the default and the amount required to cure such default. If the Members agree within five (5) Business Days following receipt of such notice to make the requested capital contributions, Ashford and Investor shall fund their respective shares of the amount requested pro rata in accordance with and to the extent of their Unfunded Capital Commitments, respectively. If a Member does not agree to make a requested capital contribution under this Section, the other Member shall have the right to advance the full capital contribution requested in the applicable notice. All amounts funded by a Member under this Section, together with any interest payable thereon pursuant to the documents evidencing and securing such financing, shall constitute “Cure Capital” of such Member and shall be repaid in accordance with Section 4.03.

     Section 5.10 Capital Contributions to Purchase Debt. If the Members elect to purchase indebtedness under Section 6.13(I), each Member shall make a Capital Contribution for such purpose in an amount equal to its Percentage Interest (without regard to any adjustment thereto pursuant to Section 5.04(ii)) of the total amount needed to effect such purchase (“Debt Purchase Capital”), and the indebtedness so acquired shall constitute an Investment under this Agreement; provided, however, that such Investment shall be excluded from the calculations of Investment Yield (and related calculations) hereunder, and provided, further, that any distributions of Current Income or Disposition Proceeds from such Investments shall be made to the Members in accordance with their Percentage Interests, notwithstanding any provision to the contrary contained herein. If, however, one Member does not wish to purchase indebtedness under Section 6.13(l), the other Member (the “Purchasing Member”) shall have the right to do so. The Members shall cooperate in all reasonable respects with respect to the structuring of the acquisition of the applicable indebtedness by the Purchasing Member, including by causing the Company or any applicable Subsidiary to assign its rights to purchase such indebtedness to the Purchasing Member if that is possible. If that is not possible or if the Purchasing Member otherwise elects, then the Purchasing Member shall have the right to fund all Debt Purchase Capital necessary to acquire such indebtedness to the Company and to cause the Company and any applicable Subsidiary to purchase such indebtedness on its behalf and, notwithstanding anything to the contrary, to distribute all proceeds and amounts of any nature received with respect to such indebtedness whenever received promptly and solely to the Purchasing Member.

ARTICLE VI

MANAGEMENT; INDEMNIFICATION

     Section 6.01 Management by the Program Representatives. Subject to the delegation by the Program Representatives to Ashford of the right to conduct the ordinary and routine day-to-

27

day activities of the Company and the Subsidiaries, as more particularly provided in Section 6.12, the business and affairs of the Company shall be managed solely and exclusively by the Program Representatives.

     Section 6.02 No Assignment of Rights. Other than as specifically provided herein, no party hereto shall have the right, directly or indirectly, by operation of law or otherwise, to assign, sell or otherwise transfer all or any portion of its right, title or interest under this Agreement, except to an entity under common Control with such party and upon prior written notice to the other party. Any assignment, sale or other transfer prohibited hereunder shall be null and void.

     Section 6.03 Program Representatives. Each of the Program Representatives shall be appointed in accordance with the provisions set forth in the Program Agreement. No action shall be taken under this Agreement without the unanimous consent of the Program Representatives.

     Section 6.04 Removal of Program Representatives. Each of the Program Representatives may be removed in accordance with the provisions set forth in the Program Agreement.

     Section 6.05 Affiliate Transactions. Notwithstanding anything to the contrary contained in this Agreement, the Program Representatives must approve of any contract or understanding between the Company and any Member or Affiliate of any Member in any capacity, including in connection with the business and operations of the Company, and the terms of any such arrangement shall be commercially reasonable and competitive with amounts that would be paid to third parties on an “arms-length” basis.

     Section 6.06 Company Expenses and Reserves. Company Expenses directly related to the acquisition or issuance of an Investment (including the Sourcing Fee for such Investment) shall be allocated to that Investment for purposes of determining the Investment Cost of such Investment (“Allocable Acquisition Costs”). Company Expenses not characterized as Allocable Acquisition Costs (such as the Management Fee and Workout Fee in respect of Investments) shall be allocated to each applicable Investment, and Company Expenses not reasonably allocable to any one Investment shall be allocated among the Investments as reasonably determined by the Program Representatives. Company Expenses not funded with Capital Contributions shall be paid out of Current Income of the Company, using any proceeds attributable to Temporary Investment Income first and thereafter from Current Income received in respect of Investments. To the extent that Current Income is insufficient to pay any Company Expenses, the Program Representatives may call capital pursuant to Section 5.02 or cause the Company or any Subsidiary to borrow funds to pay such amounts. The Program Representatives may cause the Company or any Subsidiary to create a reserve account funded with Current Income for purposes of (i) repaying any indebtedness (other than acquisition financing (and any refinancing thereof) in respect of an Investment, unless required by the terms of such acquisition financing (or refinancing thereof)) incurred by the Company or any Subsidiary, regardless of whether the Current Income was derived from the Investment for which such indebtedness was incurred, or (ii) paying other Company Expenses (a “Reserve Account”).

     Section 6.07 Presentation of Acquisition Opportunities.

28

(a) During the Commitment Period and pursuant to the Program Agreement, Ashford shall identify, investigate and analyze Acquisition Opportunities (as defined in the Program Agreement) for the Company and other Master Ventures to acquire, own, finance, encumber dispose of or and/or otherwise deal with proposed, targeted investments meeting the Investment Criteria set forth on Exhibit C hereto (as reasonably determined by the Ashford Program Representative in good faith).

(b) Any third party costs incurred by Ashford in identifying or underwriting, or that are otherwise associated with, an Acquisition Opportunity, shall remain the sole cost and expense of Ashford and shall not be considered a Company Expense, unless the applicable Preliminary Package is approved by the PIM Program Representative or such approval is provided for in the Program Agreement.

(c) To the extent Ashford acquires an Investment as contemplated by Section 4.08 of the Program Agreement, and that Investment is subsequently acquired by the Company or a Subsidiary, Ashford shall contribute the Investment to the Company in exchange for a Capital Contribution by Investor equal to the sum of (i) Investor’s Percentage Interest of the Investment Cost (including the Sourcing Fee) of such Investment, plus (ii) Investor’s Percentage Interest of the excess of (A) the reasonable costs incurred by Ashford on account of the administration (but not the financing) of such Investment following Ashford’s acquisition thereof and prior to Investor’s Capital Contribution under this item (c) in connection therewith, over (B) all amounts reimbursed or paid to Ashford on account of such costs by a borrower or other third party (such excess, “Administration Costs”). The Capital Contributions made by Investor under this item (c) shall be distributed and paid to Ashford on the date each such applicable Investment is transferred to the Company. Ashford’s Percentage Interest of the Investment Cost of any such Investment so contributed and of the Administration Costs paid in connection with such Investment shall be deemed a Capital Contribution to the Company. Any additional amount funded by Investor and paid to Ashford in respect of the Investment Cost of such Investment shall be paid to Ashford and treated as a guaranteed payment by the Company pursuant to Section 707 of the Code and not otherwise taken into account for purposes of determining Investment Yield, Investor Yield, Ashford Yield or any other provisions of this Agreement relating to distributions or payments of fees by the Company.

     Section 6.08 Company Acts. When the taking of Company action has been authorized pursuant to Section 6.03, or as otherwise provided in this Agreement, any duly appointed agent of the Company may execute any contract or other agreement or document consistent with such authorized action, in the name and on behalf of the Company.

     Section 6.09 Compensation.

(a) The Program Representatives shall serve in their capacities without compensation.

29

(b) Except as other provided herein, each of PIM, the Investor and Ashford shall bear their own costs and expenses associated with negotiating and entering into this Agreement.

(c) The Company shall enter into a Loan Servicing Agreement with Ashford or any of its Affiliates in respect of each Investment.

(d) All third party payments made to PIM, the Investor, Ashford or any of their Affiliates in connection with the business of the Company or any Subsidiary (exclusive of the fees expressly provided for herein as payable to Ashford) shall be deemed to belong to the Company and shall be paid over by the receiving party to the Company.

     Section 6.10 Sourcing Fees.

Ashford or any of its Affiliates (as it may designate) in connection with the sourcing of an Investment for the Company shall be entitled to receive for its own account a sourcing fee (the “Sourcing Fee”) equal to one-quarter percent (0.25%) of Capital Contributions funded by the Investor (excluding any Capital Contributions funded by the Investor to pay any management fees, the Sourcing Fee, or amounts funded to reimburse Program Reimbursable Expenses) pursuant to Capital Calls for such Investment, and shall be paid by the Company at closing of such Investment.

     Section 6.11 Indemnification. Neither (i) the Members, (ii) any Affiliate of the Member (including Program Representatives), nor (iii) any officer, director, member, partner, shareholder, agent, employee or representative of a Member or such Affiliate (including the Program Representatives) (each, an “Indemnified Person”), acting on behalf of the Company in connection with any business or activity of the Company, shall be liable, responsible or accountable to the Company or to any Member for any loss or damage arising out of or in connection with the management, operation or conduct of the Company affairs, except to the extent (x) caused by reason of bad faith, willful misconduct, fraud, gross negligence, or acting outside the scope of its authority hereunder or (y) caused as a result of a failure by Ashford to perform its obligations under Section 4.08 of the Program Agreement, which remains uncured beyond any applicable notice and cure period. The Company, to the fullest extent permitted by the Act and other applicable law, shall indemnify and hold harmless each Indemnified Person, in its capacity as such, from and against any and all claims, obligations, costs, losses, liabilities, damages, penalties, actions, judgments, suits, proceedings, disbursements, expenses (including the reasonable expense of defending, investigating or preparing to defend, or the cost of any appeal or settlement of, any claim, suit, action or proceeding instituted or threatened and the costs of enforcing its indemnification rights hereunder) or liabilities (including reasonable attorneys’ fees) of any kind or nature whatsoever suffered or sustained by such Indemnified Person by reason of, or in any way relating to or arising out of, or alleged to relate to or arise out of or caused or alleged to have been caused in whole or in part by, any acts performed or omitted to be performed by such Indemnified Person on behalf of the Company or in furtherance of the interest of the Company, except to the extent caused by reason of bad faith, willful misconduct, fraud, gross negligence, or acting outside the scope of its authority hereunder.

30

(a) No claim, action or proceeding, or any appeal therefrom which is subject to the indemnification provisions of Section 6.11 shall be settled by the Company without the consent of the Indemnified Person affected thereby, unless the settlement of such claim, action or proceeding requires solely the payment of money which is fully paid by the Company. Notwithstanding the foregoing, if the Company is also a defendant in any such claim, action, proceeding or appeal, the Company may enter into any settlement for itself without the consent of any other defendant; provided that (i) such settlement does not adversely affect any Indemnified Person and (ii) the Company shall remain liable for the satisfaction of its obligations to the Indemnified Persons in accordance with its obligations under this Agreement. The Company shall not be liable for any claim settled without the approval of the Program Representatives, which approval shall not be unreasonably withheld or delayed.

(b) To the extent that, at law or in equity, an Indemnified Person has duties (including fiduciary duties) and liabilities relating thereto to the Company or to the Members, such Indemnified Person acting under this Agreement or otherwise shall not be liable to the Company or to any Member for its good faith reliance on the provisions of this Agreement unless it constitutes bad faith, willful misconduct, fraud, gross negligence, or acting outside the scope of its authority. The provisions of this Agreement, to the extent that they expand or restrict the duties and liabilities of an Indemnified Person otherwise existing at law or in equity, are agreed by the Members to replace such other duties and liabilities of such Indemnified Person.

(c) In any action, suit or proceeding against the Company or any Indemnified Person relating to or arising, or alleged to relate to or arise, out of or caused or alleged to have been caused in whole or in part by any action or non-action of an Indemnified Person, the Indemnified Persons shall have the right to jointly employ, at the expense of the Company, counsel of the Indemnified Persons’ choice, which counsel shall be reasonably satisfactory to the Company, in such action, suit or proceeding, provided that if retention of joint counsel by the Indemnified Persons would create a conflict of interest, each group of Indemnified Persons which would not cause such a conflict shall have the right to employ, at the expense of the Company, separate counsel of the Indemnified Persons’ choice, which counsel shall be reasonably satisfactory to the Company, in such action, suit or proceeding. The satisfaction of the obligations of the Company under this Section 6.11 (c) shall be from and limited to the assets of the Company and no Member shall have any personal liability on account thereof.

(d) The provision of advances of funds from the Company to an Indemnified Person for legal expenses and other costs incurred as a result of any legal action or proceeding is required if requested by any Member or Indemnified Person if (i) such suit, action or proceeding relates to or arises out of, or is alleged to relate to or arise out of or caused or alleged to have been caused in whole or in part by, any action or inaction on the part of the Indemnified Person in the performance of its duties or provision of its services on behalf of the Company; and (ii) the Indemnified Person undertakes to repay any funds advanced pursuant to this Section 6.1l(d) in cases in which such Indemnified Person would not be entitled to indemnification under Section 6.1l(a). If advances are required under this Section 6.11 (d). the Indemnified Person shall furnish the Company

31

with an undertaking as set forth in clause (ii) of this paragraph and shall thereafter have the right to bill the Company for, or otherwise require the Company to pay, at any time and from time to time after such Indemnified Person shall become obligated to make payment therefor, any and all reasonable amounts for which such Indemnified Person is entitled to indemnification under Section 6.11 and the Company shall pay the same within thirty (30) days after request for payment. In the event that a determination is made by a court of competent jurisdiction or an arbitrator that the Company is not so obligated in respect of any amount paid by it to a particular Indemnified Person, such Indemnified Person will refund such amount within sixty (60) days of such determination, and in the event that a determination by a court of competent jurisdiction or an arbitrator is made that the Company is so obligated in respect to any amount not paid by the Company to a particular Indemnified Person, the Company will pay such amount to such Indemnified Person within thirty (30) days of such final determination, in either case together with interest at the Prime Rate plus two percent (2%) from the date paid until repaid or the date it was obligated to be paid until the date actually paid.

(e) Each Member (for purposes of this clause (e), the “First Member”) shall, severally and not jointly, indemnify and hold harmless the Company and each other Member and its respective officers, directors, members, partners, shareholders and agents from and against any and all claims, obligations, costs, losses, damages, penalties, actions, judgments, suits, proceedings, disbursements, expenses (including the expense of defending, investigating or preparing to defend, or the cost of any appeal or settlement of any claim, suit, action or proceeding instituted or threatened and the costs of enforcing its indemnification rights hereunder) or liabilities (including reasonable attorneys’ fees) suffered or sustained by the Company or any other Member to the extent caused by reason of bad faith, willful misconduct, fraud, gross negligence, and acting outside the scope of its authority hereunder. In any such action, suit or proceeding against the Company or any other Member, the Company and each such other Member shall have the right to jointly employ, at the expense of the First Member, counsel of the First Member’s choice, which counsel shall be reasonably satisfactory to the Company and each such other Member, in such action, suit or proceeding, provided that if retention of joint counsel by the Company and each such other Member would create a conflict of interest, the Company and each group of other Members which would not cause such a conflict shall have the right to employ, at the expense of the First Member, separate counsel of the First Member’s choice, which counsel shall be reasonably satisfactory to the Company and each such other Member, in such action, suit or proceeding, and provided, further that such counsel is acceptable to internal counsel of Investor, in its reasonable discretion, if Investor is an Indemnified Person.

(f) Notwithstanding anything to the contrary in this Agreement, the Members and the Company each waive any and all rights to allege or claim any punitive, special, speculative and/or consequential damages.

     Section 6.12 Delegation. Subject to the terms and conditions of this Agreement, the Program Representatives delegate to Ashford the responsibility and authority for the day-to-day management and operation of the business and affairs of the Company in accordance with policies and procedures established by the Program Representatives and the terms of this

32

Agreement. The Program Representatives shall have the right to revoke such delegation of authority at any time in their sole discretion. Investor, acting alone, shall have the right to revoke such authority at any time following the occurrence of a Duty Breach or a Change in Control of Ashford. Ashford accepts and agrees to perform its duties and undertake its responsibilities set forth in this Agreement and to exercise all commercially reasonable efforts to cause the business of the Company to be operated and managed in accordance with the policies and procedures established by the Program Representatives, Accepted Loan Servicing Practices, where applicable, and the terms of this Agreement. Notwithstanding anything to the contrary, Investor shall have sole and exclusive authority to act on behalf of the Company, its Subsidiaries and the Holders (as defined in the Loan Servicing Agreement) with respect to the termination of the Loan Servicing Agreement following a Servicer Default (as defined in the Loan Servicing Agreement).

     Section 6.13 Major Decisions. Notwithstanding Ashford’s right to conduct the ordinary and routine day-to-day activities of the Company in accordance with the terms of this Agreement, Ashford shall have no authority to undertake any of the following actions except upon the approval of the Program Representatives (each, a “Major Decision”):

     (a) Entering into any Investment;

     (b) Selling, financing or refinancing any Investment;

     (c) Consummating any modification, restructuring or workout in connection with any Investment;

     (d) Consenting to any requested approvals under any Investment-related documents;

     (e) Declaring a default under, or taking or waiving any enforcement actions upon the continuance of a default under, any Investment-related documents;

     (f) Making any material change in investment strategy of the Company or any Subsidiary from that contemplated in this Agreement;

     (g) Materially amending this Agreement or the Certificate of Formation;

     (h) Except as otherwise provided herein, making any additional Capital Contribution to the Company;

     (i) Authorizing or effecting a merger or consolidation of the Company with or into one or more other entities;

     (j) Filing of any petition for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any similar federal or state law, by the Company;

     (k) Guaranteeing the debt of any other Person, including any Member;

33

     (1) Acquiring all or any portion of or direct or indirect interest in any indebtedness related to any property directly or indirectly securing any Investment;

     (m) Acquiring an REO Property, selling an REO Property for a gross purchase price of less than the sum of the Investment Cost of the Investment that led to the existence of such REO Property, all other Capital Contributions made by one (1) or more Members in accordance with the terms of this Agreement with respect to such Investment and all accrued unpaid interest and other amounts that were owing on such Investment at the time it became an REO Property or failing to sell any REO Property within ninety (90) days following its acquisition by the Company or a Subsidiary;

     (n) Taking any of the following actions as Tax Matters Member: entering into a settlement agreement with the Internal Revenue Service which purports to bind Members other than Ashford; filing a petition as contemplated in Section 6226(a) or 6228 of the Code; intervening in any action as contemplated in Section 6226(b)(6) of the Code; filing any request contemplated in Section 6227(a) of the Code; or entering into any agreement to extend the period of limitations contemplated under Section 6229(b)(l)(B) of the Code;

     (o) Subject to Article XIII. approving or making any determination with respect to a proposed activity or transaction of the Company or any Subsidiary that may affect the REIT status of any Member or its direct or indirect owners. The determination of whether a proposed activity or transaction may affect the REIT status of the Investor REIT shall be made in the sole discretion of the PIM Program Representative. The determination of whether a proposed activity or transaction may affect the REIT status of Ashford Hospitality Trust, Inc. shall be made in the sole discretion of the Ashford Program Representative; and

     (p) Except as otherwise provided in Section 6.12 above, approving any item requiring approval of the Company or any Holder under the Loan Servicing Agreement, including, without limitation, under Section 2(c) thereof.

     Section 6.14 Real Estate Owned. In the event Company or any Subsidiary proposes to acquire the real estate or other collateral underlying any Investment (“REO Property”) during the existence of a default thereunder (an “REO Event”), a Subsidiary of the Company shall acquire such REO Property in a manner consistent with Section 13.01 herein and such other terms as the Program Representatives shall determine. If any REO Property is not sold in accordance with the terms hereof within ninety (90) days following its acquisition by the Company or any Subsidiary, the value of such REO Property shall be determined by a national, reputable M.A.I. appraisal firm retained by Investor. Such appraiser shall have more than ten (10) years’ experience in appraising the value of real estate and other collateral securing investments of the nature of the applicable REO Property to determine the value thereof. The value of any such REO Property, as so determined, shall be deemed distributed in-kind by the Company to its Members pursuant to Section 4.03(b) in respect of the related Investment and recontributed to the Company by the Members as a new Investment (a “REO Investment”) with the percentage interests of the Members in such REO Investment based on the relative amounts of each Member in the value of the REO Property as determined by the appraiser (the “REO Investment

34

Percentages”) and any Current Income or Disposition Proceeds in respect of such REO Investment distributed in accordance with such REO Investment Percentages. Any amount deemed recontributed by a Member to the Company shall not reduce such Member’s Unfunded Capital Commitment. The original Investment resulting in an REO Property shall be removed from the calculations under Section 4.02 for purposes of calculating the Ashford Promote, and the Members shall determine the ongoing economic terms applicable to each REO Investment prior to the acquisition thereof

ARTICLE VII

TRANSFER RIGHTS OF MEMBERS

     Section 7.01 Transfers. Except as expressly provided in this Article VII. no Member, or any assignee or successor in interest of a Member, may sell, assign, give, pledge, hypothecate, encumber or otherwise transfer, or permit the transfer of, all or any portion of its interest in the Company, or in any loans made by it, or in all or any part of the assets of the Company, directly or indirectly, whether by operation of law or otherwise without the prior written consent of the other Member, which consent shall not be unreasonably withheld; provided, however, that with respect to any transfer by Ashford, Investor may consider the experience of an Offerer (as hereinafter defined) in terms of its reputation of owning and operating hotel properties and investments. Any purported sale, assignment, gift, pledge, hypothecation, encumbrance or other transfer of all or any portion of a Member’s interest in the Company or any loans made by it not otherwise expressly permitted by this Article VII shall be null and void and of no force or effect whatsoever. A sale, assignment, gift, pledge, hypothecation, encumbrance or other transfer by Investor of all or a portion of its Entire Interest (as defined below) in the Company to an Affiliate or to a pension fund advisory client of PIM from time to time, or in connection with any corporate merger, acquisition or other combination or the sale or transfer of all or substantially all of its assets shall be a transfer permitted under this Article VII, and Investor shall not be required to obtain the consent of, nor offer all or any portion of its Entire Interest to be sold, assigned, given, pledged, hypothecated, encumbered or transferred, to Ashford. No transfers of any interest in PIM shall be restricted in any way. Further, if necessary or desirable for or to Investor for purposes described in Article XIII, Ashford will cooperate in all reasonable respects with respect to the structuring of the acquisition of any Investment, including, without limitation, by structuring the acquisition of such Investment in a manner that would allow Investor to invest through one (1) or more taxable REIT subsidiaries, so long as such structuring does not adversely affect the economic terms intended to be provided Ashford under this Agreement.

     Section 7.02 Sales of Company Interests to Third Parties. If, at any time, either of the Members shall receive from an Institutional Investor (the “Offeror”) a bona fide offer (the “Offer”), in writing, signed by the Offeror setting forth all the material terms of the Offer for such Member’s entire equity interest in the Company (which shall include any and all interests in the Company held by persons that acquired their interests from such Member) and all unpaid Member Loans made by such Member (collectively, such Member’s “Entire Interest”), including a statement of the cash value, as reasonably determined by such Member, of any non-cash consideration to be delivered for all or any portion of the Entire Interest (the “Cash Value”), then the Member who shall have received such Offer (the “Receiving Member”) shall, if it wishes to accept the Offer, forward a true and complete copy thereof to the other Member (the

35

“Non-Receiving Member”), together with reasonable information as to the identity of the Offeror (e.g., its partners or directors, officers and controlling shareholders) and the terms of the Offer.

(a) In such event, the Non-Receiving Member may, within thirty (30) days after receiving a copy of the Offer from the Receiving Member, either:

     (1) notify the Receiving Member of the Non-Receiving Member’s intent to purchase the Receiving Member’s Entire Interest upon the same terms and conditions contained in the Offer, except as to date, hour and place of closing and as otherwise provided below in this item (1). If the Offer proposes an acquisition of the Receiving Member’s Entire Interest for consideration that is in whole or in part other than cash, the Non-Receiving Member shall be entitled to purchase the Receiving Member’s Entire Interest for cash in an amount equal to the sum of any cash to have been paid pursuant to the Offer plus the Cash Value, if any (the “Third Party Sale Amount”). Notice of election to purchase the Receiving Member’s Entire Interest shall be addressed to the Receiving Member and shall provide for the consummation of the transaction on the date set forth in the notice of election, which date shall be not more than thirty (30) days after receipt by the Receiving Member of the Non- Receiving Member’s notice. Such notice shall also set forth the hour and place of closing, which shall be in the offices of the seller’s counsel set forth herein, during usual business hours and such notice shall be accompanied by a deposit in an amount equal to five percent (5%) of the Third Party Sale Amount which amount shall be non-refundable except in the event of any default by the Receiving Member. If the Non-Receiving Member elects to purchase the Receiving Member’s Entire Interest in accordance with this Section 7.02(a)(1), then the Receiving Member shall be obligated to sell and transfer its Entire Interest to the Non-Receiving Member in accordance with the terms and conditions of the Offer and notice of election provided for in Section 7.02(a)(l); or

     (2) notify the Receiving Member that the Non-Receiving Member objects for reasonable reasons to the Offeror becoming a Member in the Company. If the Non-Receiving Member shall not have given notice of such objection within such thirty (30) day period, it shall thereafter have no option to dissolve the Company as provided in Section 7.02(b).

(b) If the Non-Receiving Member does not exercise its right to purchase as described above and has objected on reasonable grounds within the required thirty (30) day period to the Offeror becoming a Member in the Company, then the Receiving Member shall have the right and option (to be exercised by notice to the Non-Receiving Member to such effect within thirty (30) days after the Receiving Member shall have received such notice of objection from the Non-Receiving Member in the manner provided in Section 7.02(a)(2)) either to (i) retain its Entire Interest and not proceed with a sale of it to the Offeror or (ii) subject to the terms of this Section 7.02, sell its Entire Interest to the Offeror upon the terms submitted in the Offer, and upon the Offerer’s

36

complying with the provisions of Sections 7.03 and 7.04, the assignee shall become a Member in place of the Receiving Member. Any assignment of the Receiving Member’s Entire Interest to the Offeror pursuant to Section 7.02(b)(ii) shall give the Non-Receiving Member the option (to be exercised within sixty 60 days after receipt by the Non-Receiving Member of notice that such assignment has been completed) to dissolve the Company pursuant to Article XI. The Receiving Member shall deliver notice to the Non-Receiving Member of the completion of an assignment of its Entire Interest pursuant to Section 7.02(b)(iii) within five (5) days of such completion.

(c) If the Non-Receiving Member neither exercises its rights under Section 7.02(a)(1) nor objects to the sale of the Receiving Member’s Entire Interest to the Offeror pursuant to Section 7.02(a)(2), then, upon the assignment of the Receiving Member’s Entire Interest to the Offeror, the Offeror shall be admitted as a Member of the Company in place of the Receiving Member, which shall have sold its Entire Interest. As a condition precedent to the foregoing, the Offeror shall execute and deliver an instrument, in substance and form reasonably satisfactory to the Non-Receiving Member, assuming and agreeing to perform the terms and conditions of this Agreement as provided in Section 7.03, and such other documents as the Non-Receiving Member may reasonably require in order to effectuate the foregoing.

(d) Whether or not any transaction contemplated by the foregoing provisions of this Section 7.02 is consummated pursuant to the provisions of the Offer, all the provisions of this Section 7.02 shall apply to any subsequent offer or offers to purchase a Member’s Entire Interest.

     Section 7.03 Assumption by Assignee. Any assignment of an Entire Interest in the Company permitted under this Article VII shall be in writing, and shall be an assignment and transfer of all of the assignor’s rights and obligations hereunder, and the assignee shall expressly agree in writing to be bound by all of the terms of this Agreement and assume and agree to perform all of the assignor’s agreements and obligations existing or arising at the time of and subsequent to such assignment. Upon any such permitted assignment of the assignor’s Entire Interest, and after such assumption, the assignor shall be relieved of its agreements and obligations hereunder arising after such assignment and the assignee shall become a Member in place of the assignor. An executed counterpart of each such assignment of a Entire Interest in the Company and assumption of a Member’s obligations shall be delivered to each Member and to the Company. The assignee shall pay all expenses incurred by the Company in admitting the assignee as a Member. Except as otherwise expressly provided herein, no permitted assignment shall terminate the Company.

     As a condition to any assignment of an Entire Interest, the selling Member shall obtain such consents as may be required from third parties, if any, or waivers thereof. The other Member shall use reasonable efforts to cooperate with the selling Member in obtaining such consents or waivers.

     Section 7.04 Amendment of Certificate of Formation. If an assignment of an Entire Interest in the Company shall take place pursuant to the provisions of this Article VII then unless the Company is dissolved by such assignment, the continuing Members promptly thereafter shall

37

cause to be filed, to the extent necessary, an amendment to the Company’s Certificate of Formation with all applicable state authorities, together with any necessary amendments to the fictitious or assumed name(s) of the Company in order to reflect such change or take such similar action as may be required.

     Section 7.05 Resolution of Deadlock.

(a) If the Members are unable to agree upon any Major Decision with respect to an Investment for more than fifteen (15) days (such fifteen day period, the “Deadlock Notice Period”) following delivery of written notice from one to the other of the existence of a deadlock (each, a “Deadlock Notice”) then Ashford shall have the right to purchase the Investor’s indirect interest in the Subsidiary holding such Investment in accordance with the terms of this Section 7.05. Ashford shall notify the Investor in writing of its election within ten (10) days following the expiration of the Deadlock Notice Period (the “Ashford Election Period”), and such written notice shall be accompanied by a non-refundable deposit in the amount of five percent (5 %) of the Put Purchase Price payable by Ashford as determined pursuant to Section 7.05(c). Ashford shall thereafter close on the acquisition of the Investor’s indirect interest in such Subsidiary on such date as is specified in the Ashford Election, which shall not be more than seventy-five (75) days nor earlier than twenty (20) days following the expiration of the Deadlock Notice Period, all in accordance with the terms of Section 7.02 as if Ashford were the acquiring Member. Any failure by Ashford to deliver the Ashford Election within the Ashford Election Period shall constitute an election not to acquire the Investor’s indirect interest in such Subsidiary.

(b) If Ashford elects not or is deemed to have elected not to acquire Investor’s indirect interest in such Subsidiary, then:

     (i) the Investor shall have the right to purchase the Ashford’s indirect interest in the Subsidiary holding such Investment provided it notifies Ashford in writing of its election within ten (10) days following the Ashford Election Period (the “Investor Election”) and such written notice shall be accompanied by a non-refundable deposit in the amount of five percent (5%) of the Put Purchase Price payable by Investor as determined pursuant to Section 7.05(c). Investor shall thereafter close on the acquisition of Ashford’s indirect interest in such Subsidiary on such date as is specified in the Investor Notice, which shall not be more than seventy-five (75) days nor earlier than twenty (20) days following the expiration of the Deadlock Notice Period, all in accordance with the terms of Section 7.02 as if Investor were the acquiring Member; or

     (ii) If Investor has not elected to purchase Ashford’s indirect interest in such Subsidiary, then Investor shall have the right to make all decisions with respect to the Investment that was the subject of the Deadlock Notice without any of them constituting a Major Decision or otherwise in any way requiring Ashford’s approval, and the Investor shall have the right to cause the applicable Subsidiary to retain a special loan servicer pursuant to a loan servicing agreement

38

to assist in the handling of such Investment, including any and all enforcement activities in connection therewith.

(c) Put Purchase Price. The Put Purchase Price payable by Ashford pursuant to Section 7.05(a) shall be equal to the sum of the Investor Unreturned Capital plus the accrued and unpaid Investor Yield attributable to such Investment and the Put Purchase Price payable by Investor pursuant to Section 7.05(b) shall be equal to the sum of the Ashford Unreturned Capital plus the accrued and unpaid Ashford Yield attributable to such Investment.

ARTICLE VIII

COMPANY BOOKS AND RECORDS

     Section 8.01 Books, Records, Accounting and Reports.

(a) Ashford, acting as a Member and on behalf of the Company, shall maintain, or cause to be maintained, in a manner customary and consistent with good accounting principles, practices and procedures, a comprehensive system of office records, books and accounts (which records, books and accounts shall be and remain the property of the Company) in which shall be entered fully and accurately each and every financial transaction with respect to the ownership and operation of the property of the Company. Such books and records of account shall be prepared and maintained at the principal place of business of the Company. Such books and records shall be maintained, and income, gain, losses and deductions shall be determined and accounted for, on the accrual basis in accordance with generally accepted accounting principals consistently applied (with sufficient supplementary records to permit the computation of cash flow on a cash basis). Each Member or its duly authorized representative, upon reasonable prior notice, shall have the right to inspect, examine and copy such books and records of account at the Company’s office during reasonable business hours and to receive other material information about the Company and its operations. A reasonable charge for copying books and records may be charged by the Company. Each Member, upon reasonable prior notice, shall have the right to audit such records and books of account by an accountant of its choice at its expense. Ashford, acting as a Member and on behalf of the Company, shall reasonably cooperate with any Member or its agents in connection with any review or audit of the Company or its records and books. Ashford, acting as a Member and on behalf of the Company, shall retain all records and books relating to the Company for a period of at least six (6) years after the dissolution of the Company and shall thereafter destroy such records and books only after giving at least thirty (30) days’ advance written notice to the Members.

(b) The Company and its Subsidiaries shall report their operations for tax purposes on the accrual method. The Company Year may be changed from time to time by the Program Representatives in accordance with the Code.

     Section 8.02 Tax Returns. Independent accountants for the Company selected by the Program Representatives (the “Independent Accountants”) shall either prepare or review and

39

sign, as requested by the Program Representatives, all federal, state and/or local income tax returns of the Company, including required Schedule K-1s for the Members. Ashford, acting as a Member and on behalf of the Company, shall use its commercially reasonable efforts to cause the tax and information returns that the Company may be required to file, to be filed on a timely basis with the appropriate governmental authorities; provided that the Program Representatives shall have provided their approval of all such tax and information returns on a timely basis. The Company shall provide to each Member a copy of each tax return filed by the Company within thirty (30) days of the applicable due date or as soon thereafter as reasonably possible.

     Section 8.03 Reports.

(a) Ashford, acting as a Member and on behalf of the Company, or an officer designated by Ashford, shall cause the preparation of the financial reports and other information provided for herein it such manner as it determines appropriate, provided, however, that all such reports shall be prepared in form and substance as required for public reporting if and to the extent (x) that it determines appropriate or (y) requested by any Member. In any event:

     (i) Ashford, acting as a Member and on behalf of the Company, or an officer designated by Ashford, shall cause to be prepared and furnished to the Program Representatives in draft form within seventy-five (75) calendar days after the close of each Company Year a balance sheet of the Company dated as of the end of the Company Year, a related statement of income and expense, a statement of cash flow and a statement of changes in Members’ capital for the Company for the Company Year and information for the Company Year as to the balance in each Member’s Capital Account, unpaid balance under all obligations of the Company and all other information reasonably required by each Member, all of which shall be certified by the Chief Financial Officer of Ashford, to the best of his or her knowledge, as being true and correct and all of which shall promptly thereafter be finalized by Ashford upon its receipt of comments from, or the approval of, the Program Representatives. If requested by a Member, Ashford shall cause all or any portion of the materials to be delivered under this Section to be reviewed and/or audited at such Member’s sole cost and expense.

     (ii) Ashford, acting as a Member and on behalf of the Company, or an officer designated by Ashford, shall prepare and furnish to each of the Members, within forty-five (45) days after the end of each calendar quarter (including the fourth calendar quarter), a balance sheet of the Company dated as of the end of such calendar quarter, a related statement of income and expense and a statement of cash flow, each of which shall be unaudited, and a consolidated operations report with respect to such calendar quarter in such form as the Program Representatives shall reasonably determine;

     (iii) Ashford, acting as a Member and on behalf of the Company, or an officer designated by Ashford, within ninety (90) days after the end of each Company Year, shall use all commercially reasonable efforts to cause the Independent Accountants to prepare and deliver to each Member a report setting forth in sufficient detail all such information and data with respect to business transactions effected by or involving the Company during the applicable Company Year as shall enable the Company and each

40

Member timely to prepare its federal, state and local income tax returns in accordance with all applicable laws, rules and regulations. Ashford or an officer designated by Ashford, also shall use all commercially reasonable efforts to cause the Independent Accountant to prepare federal, state and local tax returns required of the Company, submit those returns to the Members for their joint approval no later than twenty (20) calendar days prior to the date required for the filing thereof (including any extensions granted) and shall file the tax returns after they have been jointly approved by the Members. In the event the Members shall not desire or be able to approve any such tax return prior to the date required for the filing thereof (including any extensions granted), Ashford, acting as a Member and on behalf of the Company, or an officer designated by Ashford, shall timely obtain an extension of such date to the extent permitted by the Code.

     (b) All other decisions as to accounting principles shall be made by the Program Representatives, subject to the provisions of this Agreement.

     Section 8.04 Bank Accounts. All funds of the Company shall be deposited in its name in an account or accounts maintained with a bank or other financial institution selected by the Program Representatives. Funds of the Company shall not be commingled with funds of any other Person. Checks and wire transfers shall be drawn upon the Company’s account or accounts only for the purposes of the Company and shall be signed by duly authorized representatives of the Company.

     Section 8.05 Tax Elections. Any and all federal, state or local tax elections for the Company shall be made by the Program Representatives in their reasonable discretion. In making such elections, Program Representatives shall take into account tax matters with respect to the Company that would adversely affect a Member and shall use its good faith efforts to consult with such Member and to make elections that have the least adverse effect on that Member, provided that such election(s) do not have a material adverse effect on the Company or any other Member.

     Section 8.06 Tax Matters Member. Ashford shall be the “Tax Matters Member” of the Company within the meaning of Code § 6231(a)(7) and in any similar capacity under applicable state or local law and shall have all of the power and responsibilities of such position as provided in the Code. Any reasonable expenses incurred by Ashford, on behalf of the Members, while acting in such capacity shall be paid or reimbursed by the Company.

ARTICLE IX

COVENANTS

     Section 9.01 Preservation of Company’s Existence and Compliance with Laws and Regulations. The Members shall use all commercially reasonable efforts to cause to be done all things necessary to preserve, renew and keep in full force and effect and good standing the Company’s existence, rights, licenses, permits and franchise, and shall use all commercially reasonable efforts to cause the Company to comply in all material respects with all applicable laws and regulations.

41

     Section 9.02 Confidentiality.

(a) General. It is expected that the Members and the Company will disclose to each other during the Term certain information which is confidential or proprietary and which may include technology, products, trade secrets, processes, programs, technical know-how, customers, distributors, costs, pricing, business operations and other business information (“Proprietary Information”). All Proprietary Information owned solely by one party or by the Company and disclosed to any other party shall remain solely the property of the disclosing party or the Company, and its confidentiality shall be maintained and protected by the party to whom the information was disclosed with the same degree of care used to protect its own Proprietary Information of a similar nature; provided, however, that Pipeline Transactions and Acquisition Opportunities designated to the Company by the Program Committee and designated to be an Investment shall be deemed the property of the Company or the applicable Subsidiary and client lists, financial and analytical models, processes and procedures utilized or developed by Ashford in connection with the business of the Company or the applicable Subsidiary shall be deemed the property of Ashford, but only to the extent they are different than the client lists, models, processes and procedures currently used by Affiliates of the Investor. No Proprietary Information owned solely by one party or by the Company shall be used by the other party except in furtherance of the terms and provisions of this Agreement. Except to the extent permitted under this Agreement or as required by law or court order, the parties shall in all circumstances exercise reasonable care not to allow to be published or disclosed the other party’s or the Company’s Proprietary Information to any third party or to any of its own employees not having a need to know. Each party shall advise its employees to whom the other party’s or the Company’s Proprietary Information is disclosed of these obligations of confidentiality.

(b) The parties agree that the following information shall not constitute Proprietary Information under this Agreement:

     (i) information available from public sources at any time before or after it is disclosed to a party hereto by the other party hereto;

     (ii) information obtained from a third party who obtained such information, directly or indirectly, from a party other than a party to this Agreement; and

     (iii) information independently developed by the party against whom enforcement of this provision is sought without the use of information provided by the party seeking such enforcement.

(c) Notwithstanding any provision of this Agreement to the contrary, any person (and each employee, representative, or other agent of such person) may disclose to any and all other persons, without limitation of any kind, (i) the tax treatment and tax structure of any transaction contemplated or consummated pursuant to this Agreement, (ii) all materials of any kind (including any opinions or other tax analysis) that are provided to such person relating to the tax treatment and tax structure of any such

42

transaction and (iii) any information required to be disclosed or obtained by law or court order.

ARTICLE X

REPRESENTATIONS AND WARRANTIES OF THE MEMBERS

     Section 10.01 Member Representations. Each Member represents and warrants to and covenants with the other Members as follows:

(a) Organization. It is duly organized, validly existing and in good standing under the laws of its jurisdiction of formation with all requisite power and authority to enter into this Agreement, to perform its obligations hereunder and to conduct the business of the Company.

(b) Enforceability. This Agreement constitutes the legal, valid and binding obligation of such Member enforceable in accordance with its terms.

(c) Consents and Authority. No consents or approvals are required from any governmental authority or other Person for the Member to enter into this Agreement. All action on the part of such Member necessary for the authorization, execution and delivery of this Agreement and the consummation of the transactions contemplated hereby by such Member, have been duly taken.

(d) No Conflict. The execution and delivery of this Agreement by such Member and the consummation of the transactions contemplated hereby by such Member do not conflict with or contravene the provisions of its organizational documents or any agreement or instrument by which it or its properties or assets are bound or any law, rule, regulation, order or decree to which it or its properties or assets are subject.

(e) Investment Intent. Such Member’s interest in the Company is intended to be and is being acquired solely for such Member’s own account for investment, with no present intention of distributing or reselling all or any part thereof; such Member acknowledges that it is able and is prepared to bear the economic risk of making all Capital Contributions contemplated hereby and to suffer any loss up to the amount of such Member’s liability hereunder.

(f) Sophistication. It, alone or with its professional advisors, has the educational, financial and business background and knowledge so as to be capable of evaluating the merits and risks of an investment in the Company and has the capacity to protect its own interests in making this investment.

(g) Regulatory Approval. It understands that neither the Commission nor any state regulatory agency has passed upon or endorsed the merits of an investment in the Company.

43

(h) Registration. It understands that its interest in the Company has not been and will not be registered pursuant to the 1933 Act, or any applicable state securities laws, and is being issued pursuant to an exemption therefrom.

(i) Transfer Restrictions. It understands that there are substantial restrictions on the transferability of its interest in the Company and such interest will not be, and such Member has no right to require that it be, registered or qualified under the 1933 Act, and/or any applicable state securities laws. It understands that there will be no public market for interests in the Company.

(j) Advisors. It has been afforded the opportunity to seek and rely upon the advice of its own attorney, accountant or other professional advisor in connection with an investment in the Company and the execution of this Agreement.

(k) Rule 144. It understands that the exemption under Rule 144 under the 1933 Act, for holders of securities which have been held for at least two years since the acquisition of such securities from the issuer or any affiliate of the issuer and concerning which issuer there is available specified public information, may not be available to it or to the Company for sales of Company Interests because the Company does not contemplate making available such public information, and there may never be a trading market for the interests in the Company sufficient to permit compliance with the “brokers’ transaction” requirement of such Rule 144.

(1) Government Determinations. It is aware that no federal or state agency has made any finding or determination as to the fairness of any aspect of the Investment in the Company.

(m) Breach. As of the date hereof, it is not aware of any breach of this Agreement by any of the other Members.

(n) Investment Company. Either (i) all of its outstanding securities (as such term is defined in the 1940 Act) are beneficially owned by five or less natural person or (ii) it is not an “investment company” (as such term is defined in the 1940 Act) and is not excluded from the definition of “investment company” under the 1940 Act based on the exceptions set forth in subparagraph 3(c)(l) or 3(c)(7) of the 1940 Act.

(o) ERISA. If any portion of its Capital Contributions consist, or will consist, of assets of an employee benefit plan as defined in Section 3(3) of ERISA, whether or not such plan is subject to Title I of ERISA or a plan subject to Section 4975 of the Code, determined after giving effect to applicable regulations, rulings, and exemptions thereunder, it has so notified the Program Representatives in writing.

44

ARTICLE XI

DISSOLUTION AND TERMINATION

     Section 11.01 Dissolution.

(a) The Company shall be dissolved upon the occurrence of any of the following events:

     (i) On the twentieth (20^th) anniversary of date of this Agreement unless and to the extent extended by mutual agreement of all of the Members;

     (ii) (x) the filing by the Company of a voluntary petition for relief under Title 11 of the United States Code or any successor or amendatory provisions thereto, or (y) ninety (90) days after the filing of an involuntary petition against the Company for relief under Title 11 of the United States Code or any successor or amendatory provisions thereto, or (z) ninety (90) days after the appointment of a trustee or receiver of the Company or the assignment of the Company or any material part of the Company Assets for the benefit of creditors by, of, or with respect to the Company, unless any such event referred to in subsection (a)(ii)(y) or (a)(ii)(z) is remedied within ninety (90) days of its occurrence or unless within ninety (90) days after the occurrence of an event referred to in subsection (a)(ii)(x) or the expiration of the ninety (90)-day period referred to in subsection (a)(ii)(y) or (a)(ii)(z) the Members jointly determine to continue the Company;

     (iii) a unanimous election by the Members to dissolve the Company;

     (iv) by the Investor, in its sole discretion, if there is a Major Uncured Breach, or once its Capital Commitment has been fully funded; provided that, in each instance, there is no Investment outstanding;

     (v) the termination of the Program Agreement pursuant to Article VIII thereof provided that no Investment governed or affected by this Agreement shall remain unpaid or otherwise outstanding; and

     (vi) any other event causing the dissolution of the Company under the Act.

(b) The Company shall be dissolved in accordance with Section 11.02. Notwithstanding any provision of the Act to the contrary, the Company shall continue and not dissolve as a result of the death, retirement, resignation, expulsion, bankruptcy or dissolution of any Member or any other event that terminates the continued membership of any Member.

45

     Section 11.02 Winding Up, Liquidation and Distribution of Assets.

(a) Upon dissolution, (i) the Program Representatives shall immediately proceed to wind up the affairs of the Company as expeditiously as business circumstances allow and proceed within a reasonable period of time to sell or otherwise liquidate the Company Assets. In the event that the Program Representatives shall, in its discretion, determine that a sale or other disposition of part or all of the Company Assets would cause undue loss to the Members or otherwise be impractical, the Program Representatives may either defer liquidation of any such Company Assets, and withhold distributions relating thereto for a reasonable time, or distribute part or all of such Company Assets to the Members in accordance with this Agreement.

(b) Upon any liquidation, dissolution or winding up of the Company, proceeds from the Company Assets shall be distributed as follows:

     (i) first, to creditors, including Members and Program Representatives who are creditors in satisfaction of liabilities of the Company (whether by payment or the making of reasonable provision for payment thereof) other than liabilities for which reasonable provision for payment has been made, and for the expenses of winding up or liquidation; and

     (ii) the balance to the Members in accordance with the priorities of Section 4.03.

     Section 11.03 Certificate of Cancellation. When all debts, liabilities and obligations have been paid and discharged or adequate provisions have been made therefor and all of the remaining property and Company Assets have been distributed to the Members, a certificate of cancellation shall be prepared, executed and filed by the Program Representatives in accordance with the Act.

     Section 11.04 Return of Contribution Nonrecourse to Other Members. Except as provided by law or as expressly provided in this Agreement, upon dissolution, each Member shall look solely to the Company Assets for the return of such Member’s Capital Contribution. If the distribution provided in Section 11.02(b)(ii) is insufficient to return the Capital Contribution of one or more Members, such Member or Members shall have no recourse against the Company or any other Member.

ARTICLE XII

MISCELLANEOUS

     Section 12.01 Specific Performance; Other Rights. The parties recognize that various of the rights granted under this Agreement are unique and, accordingly, the parties shall, in addition to such other remedies as may be available to them at law or in equity, have the right to enforce their rights under this Agreement by actions for injunctive relief and specific performance.

     Section 12.02 Notices. All notices or other communications required or permitted to be given hereunder shall be in writing and shall be delivered by hand or sent, postage prepaid, by

46

registered, certified or express mail or reputable overnight courier service or by telecopier and shall be deemed given when so delivered by hand or, if mailed, three days after mailing (one business day in the case of express mail or overnight courier service), addressed as follows:

If to Ashford:

c/o Ashford Hospitality Trust
14185 Dallas Parkway
Suite 1100
Dallas, Texas 75254
Attention: Douglas A. Kessler
Telephone: 972-490-9600
Facsimile: 972-980-2705

with a simultaneous copies (which shall not constitute notice) to:

c/o Ashford Hospitality Trust
14185 Dallas Parkway
Suite 1100
Attention: David A. Brooks
Telephone: 972-490-9600
Facsimile: 972-980-2705

and

Akin Gump Strauss Hauer & Feld LLP
1700 Pacific Avenue
Suite 4100
Dallas, TX 75201-4675
Attention: Robert W. Dockery, Esq.
Telephone: (214) 969-4316
Facsimile: (214) 969-4343

If to the Investor or PIM:

c/o Prudential Investment Management, Inc.
8 Campus Drive
Parsippany, NJ 07054
Attention: Jim Walker
Telephone: (973) 683-1690
Facsimile: (973) 683-1752

47

And

c/o PREI Law Department
8 Campus Drive
Parsippany, NJ 07054
Attention: Joan N. Hayden, Esq.
Telephone: (973) 683-1772
Facsimile: (973) 683-1788

with a simultaneous copy (which shall not constitute notice) to:

Goodwin Procter LLP
Exchange Place
Boston, MA 02109
Attention: Minta E. Kay, Esq.
Telephone: (617) 570-1877
Facsimile: (617) 523-1231

or to such other address, individual or electronic communication number as may be designated by notice given by any party to the others.

     Section 12.03 Prior Agreements; Construction; Entire Agreement. This Agreement, including the Exhibits and other documents referred to herein (which form a part hereof), constitutes the entire agreement of the parties with respect to the subject matter hereof, and supersedes all prior agreements and understandings between them as to such subject matter and all such prior agreements and understandings are merged herein and shall not survive the execution and delivery hereof.

     Section 12.04 No Waiver. The waiver of any breach of any term or condition of this Agreement shall not operate as a waiver of any other breach of such term or condition or of any other term or condition, nor shall any failure to enforce any provision hereof operate as a waiver of such provision or of any other provision hereof.

     Section 12.05 Amendments. This Agreement may not be amended, altered or modified except by (i) the approval of the Program Representatives and (ii) instrument in writing and signed by all Members. Notwithstanding anything to the contrary in this Agreement, this Agreement shall be amended by the Program Representatives automatically and without any further action of the Program Representatives to the extent necessary to reflect (a) the admission or substitution of any Member permitted under this Agreement or (b) any Transfer permitted under this Agreement.

     Section 12.06 Severability. If any provision of this Agreement shall be held or deemed by a final order of a competent authority to be invalid, inoperative or unenforceable, such circumstance shall not have the effect of rendering any other provision or provisions herein contained invalid, inoperative or unenforceable, but this Agreement shall be construed as if such invalid, inoperative or unenforceable provision had never been contained herein so as to give full force and effect to the remaining such terms and provisions.

48

     Section 12.07 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the parties and delivered to each of the other parties.

     Section 12.08 Applicable Law; Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. The parties consent to the exclusive jurisdiction of the United States District Court for the District of New York in connection with any civil action concerning any controversy, dispute or claim arising out of or relating to this Agreement, or any other agreement contemplated by, or otherwise with respect to, this Agreement or the breach hereof, unless such court would not have subject matter jurisdiction thereof, in which event the parties consent to the jurisdiction of the state courts of the State of New York. The parties hereby waive and agree not to assert in any litigation concerning this Agreement the doctrine of forum non-conveniens.

     Section 12.09 Waiver Of Jury Trial. THE MEMBERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.

     Section 12.10 Arbitration. Any unresolved dispute, question, disagreement, controversy or claim arising from or relating to this Agreement or breach thereof that is to be settled by arbitration shall be settled by arbitration in New York, New York, administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules including the Emergency Interim Relief Procedures, and judgment on the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. Except as may be required by law, neither a party nor an arbitrator may disclose the existence, content or results of any arbitration hereunder without the prior written consent of all parties.

     Section 12.11 No Rights of Third Parties. This Agreement is made solely and specifically between and for the benefit of the parties hereto and their respective members, successors and assigns subject to the express provisions hereof relating to successors and assigns. No other Person whatsoever shall have any rights, interest, or claims hereunder or be entitled to any benefits under or on account of this Agreement as a third party beneficiary or otherwise.

     Section 12.12 Further Assurances. In connection with this Agreement, as well as all transactions contemplated by this Agreement, each Member agrees to execute and deliver such additional documents and instruments and to perform such additional acts as may be necessary or appropriate to effectuate, carry out and perform all of the terms, provisions and conditions of this Agreement, and all such transactions contemplated hereby.

     Section 12.13 Survival. The covenants contained in this Agreement which, by their terms, require performance after the expiration or termination of this Agreement shall be enforceable notwithstanding the expiration or other termination of this Agreement.

     Section 12.14 Headings. Headings are included solely for convenience of reference and if there is any conflict between headings and the text of this Agreement, the text shall control.

49

     Section 12.15 No Broker. Each Member represents and warrants that it has not dealt with any broker in connection with this Agreement and agrees to indemnify, defend and hold harmless each other Member and its Affiliates from all claims or damages as a result of its representation and warranty contained in this sentence being false. Each Member further represents and warrants that it has not dealt with any broker with respect to the acquisition of its Company Interests or the acquisition by the Company of the Company Assets and agrees to indemnify, defend and hold harmless each other Member and its Affiliates from all claims or damages as a result of its representation and warranty contained in this sentence being false.

     Section 12.16 Services to Members. Each Member hereby acknowledges and recognizes that the Company has retained, and may in the future retain, the services of various professionals, including general and special legal counsel, accountants, architects and engineers, for the purposes of representing and providing services to the Company in the investigation, analysis, acquisition, development, renting, marketing and operation of the Company Assets, or otherwise. Each Member hereby acknowledges that such persons or entities may have in the past represented and performed and currently and/or may in the future represent or perform services for certain of the Members or their Affiliates. Accordingly, each Member and the Company consents to the performance by such persons or entities of services for the Company and waives any right to claim a conflict of interest based on such past or present representation or services to any of the Members or their Affiliates.

     Section 12.17 Currency. Any exchange of funds between the Company and its Members shall be made in United States dollars, including any distribution, reimbursement or fee payable to Members and any Capital Contributions made by Members. In addition, all calculations including, without limitation, those relevant to distributions and fees shall be based on United States dollars.

     Section 12.18 Attorneys’ Fees. Should any litigation be commenced between the parties hereto or their representatives, or should any party institute any proceeding in a bankruptcy or similar court which has jurisdiction over any other party hereto or any or all of his or its property or assets concerning any provision of this Agreement or the rights and duties of any Person in relation thereto, the party or parties prevailing in such may be granted a reasonable sum as and for his or its or their attorneys’ fees and court and other costs in such matter, which amount shall be determined by the judicial referee, a court in such litigation or in a separate action brought for that purpose.

     Section 12.19 Compliance with ERISA

(a) The Company will not enter into any agreements, or suffer any conditions, that Investor determines would result in a Plan Violations. At Ashford’s request, Investor shall deliver notice of each such determination to Ashford together with an explanation of the reasons for the determination.

(b) Investor and Ashford will cooperate in all reasonable respects to discover and correct Plan Violations.

50

ARTICLE XIII

REIT COMPLIANCE

     Section 13.01 REIT Compliance. The Members and the Program Representatives acknowledge that Investor is indirectly owned through one or more pass-through entities by the PRISA III Fund REIT, Inc. (the “Investor REIT”), and that Ashford is subject to the federal income tax rules applicable to REITs (as defined below). The Members and the Program Representatives acknowledge and agree that:

(a) the business and affairs of the Company will be managed in a manner that will ensure that the Investor REIT and Ashford qualify as a real estate investment trust under the Code (a “REIT”) and do not incur any amount of tax pursuant to Sections 857 or 4981 of the Code;

(b) the Program Representatives shall be entitled to exercise any vote, consent, election or other right under this Agreement consistent with this Section 13.01 and without regard to whether conducting the business of the Company in such manner will maximize either pre-tax or after-tax profit of the Company to the Members;

(c) it is the intent of the PIM Program Representative to exercise its approval rights pursuant to Sections 6.01, 6.13, this Article XIII, the Program Agreement and under any other provision of this Agreement or the organizational documents of any Subsidiary in order to ensure that the Investor REIT qualifies as a REIT and does not incur any amount of tax pursuant to Sections 857 or 4981 of the Code; and

(d) it is the intent of the Ashford Program Representative to exercise its approval rights pursuant to Sections 6.01, 6.13, this Article XIII, the Program Agreement and under any other provision of this Agreement or the organizational documents of any Subsidiary, in order to ensure that Ashford qualifies as a REIT and does not incur any amount of tax pursuant to Sections 857 or 4981 of the Code; and

(e) the Program Representatives shall cooperate in all reasonable respects with respect to (i) the structuring of the acquisition and operation of any Qualifying Investment, any REO Property or any other Company Asset, and (ii) changes to the structure of the ownership or operation of any existing Investment, REO Property or other Company Asset, as may be necessary or advisable to allow Investor REIT or Ashford to each qualify as a REIT and not incur any amount of tax pursuant to Sections 857 or 4981 of the Code, including, without limitation, by structuring the acquisition, operation or ownership of any such Qualifying Investment, existing Investment, REO Property or any other Company Asset in a manner that would allow Investor REIT and Ashford, as each may request, to invest in all or a part of such Qualifying Investment, Investment, REO Property or other Company Asset, through one (1) or more taxable REIT subsidiaries (as defined in Section 856(1) of the Code), so long as the structuring requested by one party does not adversely affect the economic terms intended to be provided the other party under this Agreement.

51

ARTICLE XIV

REOC COMPLIANCE

     Section 14.01 Application. The Members acknowledge and agree that the provisions of this Article XIV shall be applicable if Investor REIT has a direct or indirect ownership interest in the Company.

     Section 14.02 REOC Compliance. The Members acknowledge that the Operating Partner is intended to qualify as a REOC under the Plan Assets Regulation and, to the extent the underlying Company Assets constitute an investment in real estate that is managed or developed (within the meaning of the Plan Assets Regulation), that the ownership interest in the Company is intended to qualify as a real estate investment for purposes of qualification by the Operating Partner as a REOC. The Members agree that the Operating Partner shall have the following management rights with respect to such underlying real estate (the “Land”) and further agree that they will give due consideration to such input as may be provided by the Operating Partner in exercise of such rights:

(a) The right to review and approve the Land’s annual budgets and business plans, and to offer suggestions and input regarding the same;

(b) The right to review and approve any agreements with independent contractors with respect to the Land that provide for payments in excess of $10,000 and to offer suggestions and input regarding the same;

(c) The right to review and approve any capital expenditures for the Land in excess of $10,000 and to offer suggestions and input regarding the same;

(d) The right to discuss, and provide advice with respect to, the Land with the Company’s members, officers, employees, directors and agents and the right to consult with and advise the Company’s management on matters materially affecting the Land;

(e) The right to submit business proposals or suggestions relating, to the Land to the Company’s management from time to time with the requirement that one or more members of the Company’s management discuss such proposals or suggestions with the Operating Partner within a reasonable period after such submission and the right to call a meeting with the Company’s management in order to discuss such proposals or suggestions; and

(f) The right (i) to visit the Company’s business premises and the Land during normal business hours, (ii) to receive financial statements, operating reports, budgets or other financial reports of the Company (including those relating to the Land) on a regular basis describing the financial performance, significant proposals and other material aspects of the Company (including the Land), (iii) to examine the books and records of the Company (including those relating to the Land) and (iv) to request such other information relating to the Company (including the Land) at reasonable tunes and intervals in light of the Company’s normal business operations concerning the general

52

status of the Company’s business, financial condition and operations (including the Land) but only to the extent such information is reasonably available to the Company and in a format consistent with how the Company maintains such information.

The Company shall not enter into any agreement delegating to any person management rights with respect to the Land other than agreements (i) that are terminable by the Company on not more than one month’s notice without penalty or cause and (ii) pursuant to which the Company maintains substantial oversight and approval rights with respect to the delegated management functions. Any such agreement must provide that it is fully subject to all, and in no way limits or abrogates any, of Investor’s (and the Operating Partner’s) approval and other rights with respect to the Land. The Members hereby acknowledge and agree that all rights of Investor (and the Operating Partner) in respect of the Company and the Land shall be exercised and enforced solely by the sole member of Investor in its capacity as such. In the event the Land is owned by an entity that is owned, directly or indirectly, by the Company, Investor (and the Operating Partner) shall have the same rights with respect to the Land as they would have hereunder were the Land owned directly by the Company, and the Company shall take such actions, and/or cause any such entity to take such actions, as are necessary to achieve the foregoing result.

     Notwithstanding the provision of Sections 2.10 and 12.19, and this Article XIV, nothing contained therein shall require the parties hereto to waive, modify or otherwise amend the definition of “Qualifying Investments” and to the extent that any Qualifying Investments are deemed not suitable by Investor under the provisions of Sections 2.10 and 12.19 or Article XIV, such Qualifying Investment shall be deemed “rejected” for purposes of this Agreement and the Program Agreement as provided herein and therein.

[Remainder of page intentionally left blank.]

53

     IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first above written.

PRISA III INVESTMENTS, LLC, a Delaware limited liability company
By:	PRISA III REIT Operating LP, a Delaware limited partnership, its sole member
By:	PRISA III OP GP, LLC, a Delaware limited liability company, its general partner
By:	PRISA III Fund LP, a Delaware limited partnership, its manager
By:	PRISA III Fund GP, LLC, a Delaware limited liability company, its general partner
By:	PRISA III Fund PIM, LLC, a Delaware limited liability company, its sole member
By:	Prudential Investment Management, Inc., a Delaware corporation, its sole member
By:	/s/ James P. Walker
	Name:	James P. Walker
	Title:	Vice President

ASHFORD HOSPITALITY FINANCE LP, a Delaware limited partnership
By:	Ashford Hospitality Finance General Partner LLC, a Delaware limited liability company, its general partner
By:
	Name:	David Brooks
	Title:	Vice President

Signature Page to Limited Liability Company Agreement

     IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first above written.

PRISA III INVESTMENTS, LLC, a Delaware limited liability company
By:	PRISA III REIT Operating LP, a Delaware limited partnership, its sole member
By:	PRISA III OP GP, LLC, a Delaware limited liability company, its general partner
By:	PRISA III Fund LP, a Delaware limited partnership, its manager
By:	PRISA III Fund GP, LLC, a Delaware limited liability company, its general partner
By:	PRISA III Fund PIM, LLC, a Delaware limited liability company, its sole member
By:	Prudential Investment Management, Inc., a Delaware corporation, its sole member
By:
	Name:	James P. Walker
	Title:	Vice President

ASHFORD HOSPITALITY FINANCE LP, a Delaware limited partnership
By:	Ashford Hospitality Finance General Partner LLC, a Delaware limited liability company, its general partner
By:	/s/ David Brooks
	Name:	David Brooks
	Title:	Vice President

Signature Page to Limited Liability Company Agreement

SCHEDULE A

							UNFUNDED		WESTIN
	MEMBER	PERCENTAGE			CAPITAL		CAPITAL		LOANS
MEMBER NAME	ADDRESS	INTEREST			COMMITMENT		COMMITMENT		INVESTMENT
PRISA III	c/o Prudential Investment		75	%	$	300,000,000	$	283,834,687.50	$	16,165,312.50
Investments, LLC	Management
	8 Campus Drive
	Parsippany, NJ 07054
Ashford	c/o Ashford Hospitality Trust		25	%	$	100,000,000	$	94,611,562.50	$	5,388,437.50
Hospitality	14185 Dallas Parkway
Finance LP	Suite 1100
	Dallas, Texas 75254

Investments

1. Westin Loans Investment. As of February 5, 2008, the Company formed PIM Ashford Subsidiary I, LLC, a Delaware limited liability company (“Subsidiary I”), to acquire all of the right, title and interest of Ashford Hospitality Finance LP (“Assignor”) in, to and under that certain mezzanine loan (the “Westin Loans Investment”) originated in accordance with that certain Mezzanine Loan Agreement dated December 5, 2007 by and among Assignor and Transwest Tucson II, L.L.C., formerly known as SCG Tucson II, L.L.C. (“La Paloma Borrower”), a Delaware limited liability company, and Transwest Hilton Head II, L.L.C, formerly known as SCG Hilton Head II, L.L.C, a Delaware limited liability company (“Hilton Head Borrower” and together with La Paloma Borrower, “Borrowers”). Subsidiary I is the owner of the Westin Loans Investment pursuant to that certain Assignment and Assumption of Loan Documents dated as of February 6, 2008.

Exhibit C to LLC Agreement

Investment Criteria

• Target Returns: Overall Venture unlevered returns of 9% - 13+% yield on Venture equity with the variance depending upon the relative risk/reward profile of the investment.

• Investment Period: Each Venture will have an investment period of two years from closing of the Venture.

• Collateral: Participations in first mortgages, second mortgages, stock secured loans, guarantees, preferred equity, or pledge of equity interests in Borrower’s collateral or other collateral acceptable to the Members.

• Collateral Asset Class: Single hotel assets, hotel portfolios, and preferred positions in hotel entities. Full-service (branded and independent) hotels and resorts in upper-upscale to luxury segments along with branded select service hotels in upscale and mid-scale segments. Extended stay and economy assets may be considered if they constitute a minority position in a portfolio.

• Location: Hotels located in the U.S.

• Investment Size: Maximum single asset investment of $50 million (with typical range of $10 - $25 million) and up to $75 million for diversified portfolio.

• Capital Stack Positioning: Typically a position in the capital structure within the 60% - 85% LTV range based upon cost in the case of a new acquisition and Sponsor/Investor underwriting in the case of assets already owned. Additional collateral support may allow for higher LTV positions.

• Loan Maturity: Generally three to five years (including extensions) for floating rate loans, whereas three to ten years for fixed rate. In select cases, maturities may be shorter, particularly if loans are acquired, rather than originated. Floating rates will typically have at least twelve month lockouts and fixed rates will be structured with either defeasance or yield maintenance.

• Debt Service Coverage: Assets will be at least 1.0x TTM coverage unless adequate collateral support (reserves, guarantees, etc.) is provided.

• REIT Compliance: Investments will comply with the REIT Compliance requirements in the organizational documents of the Master Joint Ventures and Subsidiaries, unless otherwise approved by Investor in its sole and absolute discretion.

Exhibit D to LLC Agreement

Hypothetical Investment Calculations Example

(All calculations contained herein contain rounding errors, but are confirmed on the attached spreadsheet)

The Company desires to acquire an existing mezzanine loan (the “Loan”) at a discount to its par value. The Loan is described as follows:

Original Principal Amount: $96,053,199
Interest Rate: LIBOR + 2.75%
Current LIBOR: 4.32%
Amortization: None

Purchase Price: $82,705,726
Discount: $13,140,709
Discount Margin: 6.82%
Sourcing Fee: $206,764 (0.25% of the Purchase Price)
Unreimbursed Company Expenses: $0
Origination Fee: $0

The Purchase Price is the price required to achieve a zero net present value of the projected income stream from the Loan (e.g., interest payments projected using the forward LIBOR curve plus receipt of the Discount at maturity) using a discount rate equal to current LIBOR plus the desired Discount Margin.

Section 1. Venture Cost

The Venture Cost is the Purchase Price (or if the Loan is originated by Ashford or the Company, the original principal balance of the Loan), plus the sum of (i) the Sourcing Fee and all Company Expenses allocable to the Loan (to the extent not reimbursed by the borrower), less (ii) the amount of any origination fees, application fees or similar upfront fees allocable to the Loan but only to the extent not in excess of the amounts described in clause (i) of this sentence. If and to the extent the amounts set forth in clause (ii) of the previous sentence exceed the amounts set forth in clause (i) of the previous sentence (the “Origination Excess”), the Origination Excess shall be distributed to the parties in accordance with their Current Yield Percentages (as calculated in Section 2 below); provided, however, the Origination Excess shall be excluded from the calculation of the Investment Yield and the Current Yield Percentages for all purposes.

          Venture Cost = $82,705,726 + $206,764 - 0 = $82,912,490

Section 2. Ashford Promote Qualification

For purposes of the Ashford Promote, the Investor Yield must be at least 9% for the period of calculation. The calculation utilizes the LIBOR rate in effect at the time the Loan is acquired. In addition, for this example, the calculation must take into account the payment of the Discount at maturity. Using the Discount Margin, the Investment Yield for any given period is as follows:

          = (4.32% Libor + 6.82%) x Purchase Price / Venture Cost = 11.11%

The resulting Ashford Yield and Investor Yield are:

          Ashford Yield = 1.3 x 11.11% = 14.45%

          Investor Yield = [(75% x 11.11%) - [(14.45% - 11.11%) x 25%]] / 75% = 10.00%

The difference between the Ashford Yield and the Investor Yield does not exceed the Maximum Spread of 4.5%. Therefore, no further adjustment to the yields is required.¹ Since the Investor Yield exceeds 9%, the Loan qualifies for the Ashford Promote.²

The Current Yield Percentages for purposes of distributing any Origination Excess are:

          Ashford Yield Percentage = 14.45% x 25% / 11.11% = 32.5%

          Investor Yield Percentage = 10% x 75% / 11.11% = 67.5%

Section 3. Monthly Payments of Current Income

Each monthly payment of interest is calculated pursuant to the terms of the loan documents, typically being the Loan Principal x Interest Rate x number of days in the month / 360 days. For this example, we will review the first February interest payment of $543,875. Upon receipt of the monthly payment, an Investment Yield will be calculated by annualizing the payment as follows (the “Annualized Interest Payment”).

          = $543,875 x 365days / 28 days = $7,089,799.11

The Annualized Payment / Venture Cost = the “Annualized Investment Yield”

          = $7,089,799.11 / Venture Cost = 8.55%

The Annualized Investment Yield is split into the Ashford Yield and Investor Yield as follows:

          Ashford Yield = 1.3 x 8.55% = 11.12%

          Investor Yield = [(75% x 8.55%) - [(11.12% - 8.55%) x 25%]] / 75% = 7.70%

The difference between the Ashford Yield and the Investor Yield does not exceed the 4.5% Maximum Spread, so no adjustment is required to the Ashford Yield.

The monthly interest payment is divided between Ashford and Investor based on their respective Current Yield Percentages as follows:

          Ashford Yield Percentage = 11.12% x 25% / 8.55% = 32.5%

          Investor Yield Percentage = 7.70% x 75% / 8.55% = 67.5%

Thus, Ashford receives $176,759 (32.5% of the interest payment) and Investor receives $367,115 (67.5% of the interest payment).

1	Had the difference between the Ashford Yield and the Investor Yield exceeded 4.5%, the Ashford Yield would be reduced (and the Investor Yield consequently increased) until the spread equaled 4.5%.
2	If there are other Investments in the Company, the Investor Yield for each Investment must be weight averaged (based on Investor’s invested capital) to determine if the 9% threshold is satisfied.

Section 4. Amortization and Other Payments

If the Loan had a regularly scheduled amortization feature, the principal amount received each month would be allocated pro rata among (i) principal applied against the Venture Cost, which would be distributed to the parties in accordance with their Percentage Interests, and (ii) principal to be applied against the Discount, which would be added to the Annualized Interest Payment for calculation of the Ashford Yield and Investor Yield and distributed to the parties in accordance with their resulting Current Yield Percentages, as described in the prior Section 3. The amount to be applied against the Venture Cost is the ratio that the Purchase Price bears to the Original Principal Amount of the Loan. The amount to be applied against the Discount is the ratio that the Discount bears to the Original Principal Amount of the Loan.³ In the event the Loan is partially prepaid prior to maturity, the principal amount prepaid shall be allocated and distributed in the manner described in this paragraph (and footnote 3), with any prepayment penalty or exit fees received in connection therewith added to the Annualized Interest Payment for calculation of the Ashford Yield and Investor Yield in accordance with Section 3.

Except as otherwise provided in the prior paragraph, if the Company receives any extension fees, late payment fees, assumption fees or default interest (to the extent in excess of the non-default interest rate) prior to the full Loan repayment date (which do not constitute principal allocable to a return of Venture Cost or a reimbursement of Company Expenses), such amounts shall be excluded from the calculation of the Investment Yield and the Current Yield Percentages, and shall be distributed to the parties in accordance with their Percentage Interests.

Section 5. Ashford Promote Calculation

Assuming the Ashford Promote is qualified for the Company, on the second anniversary of the Company, the monthly Ashford Yields utilized for the then expired term of the Loan are recalculated by allocating an additional 5% of the Investment Yield to the Ashford Yields (i.e., an Investment Yield multiplier of 1.35x assuming no prior Maximum Spread adjustments. If there had been a Maximum Spread adjustment, the recalculation would utilize the actual multiplier + 0.05x).

For the February interest payment, the recalculated Ashford Yield is as follows:

          Ashford Yield = 1.35 x 8.55% = 11.54%

The Ashford Yield Percentage is recalculated with respect to each payment of monthly interest received during the expired term. For the February interest payment:

          Ashford Yield % = 11.54% x 25% / 8.55% = 33.75%

Thus, Ashford should have received $183,558 (33.75% of the interest payment). The shortfall of $6,798 together with the sum of the shortfalls for all months of the expired term totaling $150,321 are to be paid to Ashford by Investor as the Ashford Promote on the second anniversary of the Company.

The foregoing recalculation of the Ashford Yields and payment of shortfall amounts by Investor shall be performed on each anniversary date following the second anniversary of the Company, covering the prior twelve month period. Upon repayment of the Loan in full, the recalculation of the Ashford Yields and payment of shortfall amounts shall cover the period since the last anniversary date of the Company.

³ If the Loan were not purchased at a Discount, the full amount of the principal received would be distributed to the parties in accordance with their Percentage Interests.

Section 6. Payment of the Discount at Maturity

Upon full repayment of the Loan, a final Investment Yield in the form of an internal rate of return on the total cash flow (of whatever amounts or character) of the Venture Cost shall be calculated in order to determine the allocation of the Discount between Ashford and Investor.⁴ For this example, the Investment Yield is equal to 11.02% as shown on the attached spreadsheet (the “Final Investment Yield”1.

The Final Investment Yield is split into the Ashford Yield and Investor Yield (without reference to the Ashford Promote) as follows:

          Ashford Yield = 1.3 x 11.02% = 14.32

          Investor Yield = [(75% x 11.02%) - [(14.32% - 11.02%) x 25%]] / 75% = 9.92%

The difference between the Ashford Yield and the Investor Yield does not exceed the 4.5% Maximum Spread, so no adjustment is required to the Ashford Yield.

Because the Loan qualifies for the Ashford Promote, the final Ashford Yield and Investor Yield is calculated as follows (the “Final Yields”):

          Ashford Yield = (1.35) x 11.02% = 14.87%

          Investor Yield = [(75% x 11.02%) - [(14.87% - 11.02%) x 25%]] / 75% = 9.73%

The Discount is distributed to Ashford and Investor in such amounts that will achieve the parties having received their respective Final Yields for the overall Loan transaction.

Section 7. Fees received at Full Repayment.

When an Investment is paid in full at maturity (or prepaid in full prior to maturity), whether or not the Investment was purchased for a discount, the distribution of any prepayment premiums, exit fees, or equity participations will be allocated and distributed in the same manner as the Discount pursuant to Section 6 above.

See attached spreadsheet

⁴ The principal amount of the Loan not represented by the Discount shall be distributed to the parties in accordance with Section 4.03(b) of the Agreement.

EX-10.26.2

Exhibit 10.26.2

LOAN SERVICING AGREEMENT

Dated as of February 6, 2008

by and between

PIM ASHFORD VENTURE I, LLC

AND

ASHFORD HOSPITALITY SERVICING LLC

     THIS LOAN SERVICING AGREEMENT (this “Agreement”), dated as of February 6, 2008, is made and entered into by and between PIM Ashford Venture I, LLC, a Delaware limited liability company (the “Company”), for itself and on behalf of its Subsidiaries (hereinafter defined), and Ashford Hospitality Servicing LLC, a Delaware limited liability company (the “Ashford”). It is anticipated by the parties hereto that Subsidiaries will be added as parties and signatories to this Agreement as Investments are acquired by the Company.

WITNESSETH:

          WHEREAS, Ashford and Prudential Investment Management, Inc., a Delaware corporation (“PIM”), are parties to that certain Investment Program Agreement dated of even date herewith (the “Program Agreement”). Pursuant to the Program Agreement, Ashford and PIM agreed to establish an exclusive investment program (the “Program”) whereby PIM will identify one (1) or more investors to invest in Master Ventures (as defined in the Program Agreement) to make Investments (as defined in the Program Agreement) through such Master Ventures and Master Venture subsidiaries (the “Subsidiaries”);

          WHEREAS, Ashford and PRISA III Investments, LLC, a Delaware limited liability company (the “Investor”), have formed the Company pursuant to that certain Limited Liability Company Agreement of the Company dated as of February 6, 2008 (the “Master Venture Agreement”) to invest through one or more Subsidiaries in Investments. The Investments that are the subject of this Agreement on the date hereof are listed on Exhibit A hereto, which exhibit shall be amended from time to time as additional Investments are acquired;

          WHEREAS, the parties hereto desire to enter into this Agreement to define the relative rights and powers of the Holders (hereinafter defined) and to provide for the security and administration of the Investments.

          NOW, THEREFORE, in consideration of the premises and the mutual promises and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

          NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto mutually agree as follows:

          SECTION 1. DEFINITIONS; CONFLICTS.

          References to a “Section” or the “recitals” are, unless otherwise specified, to a Section or the recitals of this Agreement. The terms “include(s)” or “including” shall mean “include(s), without limitation” and “including, without limitation”, respectively. Whenever used in this Agreement, the following terms shall have the respective meanings set forth below unless the context clearly requires otherwise. Initially capitalized terms used and not otherwise defined herein shall have the meanings respectively ascribed to them in the Master Venture Agreement.

          “Agreement” shall mean this Agreement, the exhibits and schedules hereto and all amendments hereof and supplements hereto.

          “Bankruptcy Code” shall mean the United States Bankruptcy Code, as amended from time to time, any successor statute or rule promulgated thereto.

          “Borrower”, for an Investment, shall mean, collectively, the borrowers under such Investment.

          “Borrower Related Party” shall mean any Affiliate of the Borrower. For avoidance of doubt, any mezzanine lender shall be considered a Borrower Related Party if any such mezzanine lender becomes an Affiliate of the Borrower through foreclosure or other conversion of the collateral for a mezzanine loan in connection with any Property.

          “Borrower Transfer” means a “Transfer,” as defined in the Loan Documents.

          “Business Day” shall mean any day that is not a Saturday or Sunday, and that is not a legal holiday in New York, New York, nor a day that banking institutions or savings associations in any of the foregoing cities are closed for business.

          “Code” shall mean the Internal Revenue Code of 1986, as amended.

          “Company” shall have the meaning set forth in the introductory paragraph hereof.

          “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

          “Event of Default” shall have the meaning set forth in Section 2(i).

          “Holder” shall mean the Company and each of the Subsidiaries that are or become signatories hereto.

          “Insolvency Proceeding” shall mean any proceeding under Title 11 of the United States Code (11 U.S.C. Sec. 101 et seq.) or any other insolvency, liquidation, reorganization or other similar proceeding concerning the Borrower, any action for the dissolution of the Borrower, any proceeding (judicial or otherwise) concerning the application of the assets of the Borrower, for the benefit of its creditors, the appointment of or any proceeding seeking the appointment of a trustee, receiver or other similar custodian for all or any substantial part of the assets of the Borrower or any other action concerning the adjustment of the debts of the Borrower or the cessation of business by the Borrower, except following a sale, transfer or other disposition of all or substantially all of the assets of the Borrower in a transaction permitted under the Loan Documents; provided, however, that following any such permitted transaction affecting the title to the Property or the Interests, the Borrower for purposes of this Agreement shall be defined to mean the successor owners to the Property or the Interests; provided, further, however, that for the purposes of this definition, in the event that more than one entity comprises the Borrower, the term “Borrower” shall refer to any such entity.

          “Interests” shall mean the ownership interests in Borrower pledged to Lender pursuant to the Loan Documents.

2

          “Lender” shall mean the holder of legal title to the Loan Documents. Initially, the Lender for each Investment and for all purposes under the Loan Documents and this Agreement shall be the Company or the Subsidiary that holds such Investment.

          “Loan”, for each Investment, shall mean the loan made or acquired by Lender and evidenced and secured by the Loan Documents.

          “Loan Documents”, for each Investment, shall mean those documents evidencing, securing and guarantying the Loan as identified on Schedule 1 to this Agreement, as updated from time to time.

          “Management Fee” shall have the meaning assigned to such term in Section 2(i).

          “Person” shall mean any individual, sole proprietorship, corporation, general partnership, limited partnership, limited liability company or partnership, joint venture, insurance company, association, joint stock company, bank, trust, estate, unincorporated organization, any federal, state, county or municipal government (or any agency or political subdivision thereof), and any other legal entity.

          “Principal Balance”, for each Loan, shall mean, at any time of determination, the initial principal balance of the Loan thereof, less any payments of principal thereon received by the Lender.

          “Principal Prepayment”, for each Loan, shall mean any payment of principal made by the Borrower on the Loan that is received in advance of its scheduled payment date, whether made by reason of casualty or condemnation or otherwise.

          “Property”, for each Investment, shall mean each parcel of real property that is the subject of, directly or indirectly, or is secured in connection with, each Investment, whether or not encumbered by a mortgage.

          “Servicer” shall mean initially Ashford or any replacement Servicer appointed in accordance with the terms of this Agreement.

          “Servicer Default” is defined in Section 5(c).

          “Workout Fee” shall have the meaning assigned to such term in Section 2(i).

          SECTION 2. ADMINISTRATION OF THE LOAN.

          (a) The Servicer shall service and administer the Loan, as agent for the Holders, in accordance with the express terms of this Agreement and Accepted Loan Servicing Practices, taking into account the interests of the Holders with a view to maximizing the realization for all Holders as a collective whole. The Holders acknowledge that the Servicer is to comply with this Agreement and the Loan Documents in servicing the Loan and, notwithstanding anything to the contrary contained herein, shall act at all times at the direction of

3

the Company. Servicer shall not be entitled to any servicing fees or other compensation for its services hereunder except for the Management Fee and the Workout Fee, each as described below in Section 2(i).

          (b) The Servicer shall:

     (i) provide to the Holders (1) a summary of the current status of principal and interest payments on the Loan, (2) copies of the Borrower’s current financial statements, to the extent in the Servicer’s possession, (3) current information, if any, as to the value of the Property, to the extent in the Servicer’s possession, (4) copies of any default or acceleration notices sent to the Borrower with respect to the Loan and all material correspondence related thereto, (5) copies of all notices received or given by Servicer pursuant to any intercreditor agreement related to the Loan, (6) copies of any written report prepared by any consultant retained by Servicer, and (7) other information with respect to the Borrower or the Loan, requested by any Holder, to the extent in the Servicer’s possession.

     (ii) receive all payments of interest, principal and other sums on account of or with respect to the Loan;

     (iii) in accordance with the provisions of this Agreement, remit to the Company or to the applicable Subsidiary all interest, principal and other sums received by or on behalf of Servicer on account of or with respect to the Loan;

     (iv) notwithstanding anything to the contrary in the Loan Documents, notify each Holder of the amount of each unfunded disbursement, if any, of the Loan requested by Borrower (which may be greater than the amount actually disbursed) at least five (5) Business Days prior to the date of disbursement.

          (c) Except as otherwise expressly provided herein and subject to the terms of the Program Agreement and the Master Venture Agreement, the Servicer shall have full power and authority to do or perform any act or thing which in the reasonable judgment of the Servicer is necessary to enable it to discharge and perform its duties under this Agreement, the Loan Documents (or any other agreement or agreements entered into in connection therewith), or which in the reasonable judgment of Servicer is necessary or required to preserve and protect the liens and security interests created by the Loan Documents and the priority thereof and the collateral for the Loan and the interest of the Holders, and to do any and all things which it may deem necessary or desirable in connection with the servicing and administration of the Loan in accordance with the Loan Documents and the terms hereof, which Servicer reasonably believes will not materially and adversely affect the value of the Loan, all in accordance with Accepted Loan Servicing Practices. Subject to the below provisions of this Section 2, the Program Agreement and the Master Venture Agreement, the Servicer shall have authority to act on behalf of the Lender and the Holders with respect to the Loan, to transact with the Borrower and to grant or withhold consents or approvals under the Loan Documents, enforce the Loan Documents and otherwise act on behalf of the Lender and the Holders, all in accordance with Accepted Loan Servicing Practices. None of the following actions may be undertaken by the Servicer without the prior written consent of the Company:

4

     (i) modify, amend or waive in any respect whatsoever (A) the interest rate, monthly payment, or other monetary or economic provisions (including with respect to the date or time upon which any obligations are due) of the Loan, including to defer interest payments; (B) any provision in the Loan Documents that restricts Borrower from incurring additional indebtedness; or (C) any other provisions in the Loan Documents other than non-monetary, non-economic or administrative amendments or modifications which the Servicer believes in good faith and in accordance with Accepted Loan Servicing Practices will not in any material and adverse way affect any Holder’s rights under this Agreement, the Loan Documents or the value of the Property;

     (ii) waive or reduce the amount of any reserves required to be maintained by Borrower, except as explicitly permitted by the Loan Agreement;

     (iii) modify the principal amount of the Loan;

     (iv) extend or shorten the maturity date of the Loan or any note, other than in accordance with the express provisions of the Loan Agreement;

     (v) waive, compromise or settle any material claim against Borrower or any or other Person liable for payment of the Loan in whole or in part or for the observance and performance by Borrower of any of the terms, covenants, provisions and conditions of the Loan Documents, or release Borrower or any other Person liable for payment of the Loan in whole or in part from any obligation or liability under the Loan Documents;

     (vi) approve or consent to a Borrower Transfer;

     (vii) encumber, release, or modify, in whole or in part, any collateral or security interest held under the Loan Documents other than in accordance with the terms hereof or any of the express provisions of the Loan Agreement;

     (viii) enforce or refrain from enforcing all of the rights, remedies and privileges afforded or available to the respective Holders under the terms of the Loan Documents, including, without limitation, accelerating the Loan (unless such acceleration is automatic under the Loan Documents), foreclosing on any mortgage or pledge or accepting a deed in lieu of foreclosure;

     (ix) following a foreclosure of the Mortgage or any pledge or acceptance of a deed in lieu of foreclosure, approve a recommended course of action for the Property, approve the property manager and selling agent, and approve the sale price of the Property;

     (x) the approval or adoption of any plan of bankruptcy, reorganization, restructuring or similar event in an Insolvency Proceeding with respect to the Borrower or any guarantor;

     (xi) any incurrence of additional debt by the Borrower or any mezzanine financing by any direct or indirect beneficial owner of the Borrower (to the extent that the Lender has consent rights pursuant to the Loan Documents with respect thereto);

5

     (xii) any waiver of the enforcement of any insurance requirements under the Loan Documents with respect to terrorism, earthquake, flooding, windstorm or political risk;

     (xiii) any material amendment to the special purpose entity provisions in the Loan Agreement;

     (xiv) the subordination of any mortgage or pledge to any other mortgage or pledge or other material monetary claim against the Property; or

     (xv) waiver of any material default or Event of Default.

          (d) The Servicer shall have no liability to any other Holder for any action taken, or for refraining from the taking of any action, in good faith and in accordance with Accepted Loan Servicing Practices pursuant to this Agreement, and/or the Loan Documents, so long as Servicer is acting in accordance with Accepted Loan Servicing Practices; provided, however, that the Servicer will not be protected against any liability which would otherwise be imposed by reason of gross negligence, a breach of an Accepted Loan Servicing Practice, which breach is not cured within ten (10) Business Days following notice thereof, willful misfeasance, bad faith or fraud in the performance of duties or obligations hereunder. Without limiting the generality of the foregoing, the Servicer, acting on behalf of the Holders in accordance with the terms of this Agreement, may rely on the advice of legal counsel, accountants and other experts (including those retained by the Borrower) and upon any written communication or telephone conversation which the Servicer believes to be genuine and correct or to have been signed, sent or made by the proper Person.

          (e) Notwithstanding any direction to act, or approval or disapproval of, or right to give direction to or to approve or disapprove an action of the Servicer by any other Holder, as applicable, in no event shall the Servicer be obligated to take any action that would violate, or refrain from taking any action necessary to avoid violation of, any applicable law, or be inconsistent with or violate any provisions of this Agreement.

          (f) Each Holder hereby undertakes and agrees, upon the request of the Servicer, to execute, verify, deliver and file in a timely manner any proofs of claim, consents, assignments or other action necessary or appropriate to permit the Servicer to enforce the obligations of Borrower to the Lender in respect of the Loan, and to vote any claims at any meeting of creditors or for any plan or with respect to any matter as the Servicer shall direct, subject to the provisions of this Section 2 and otherwise in accordance with the terms of this Agreement, all in order to preserve and maintain all claims against Borrower for sums due under the Loan so that the Lender will have the benefit of such claims as provided in the Loan Documents or under applicable law.

          (g) Servicer shall not, without the consent of the Company, assign its rights or delegate its duties hereunder unless such assignment is to an Affiliate of Ashford (as defined in the Master Venture Agreement) and does not constitute a Change in Control (as defined in the Master Venture Agreement).

6

          (h) If title to the Property or any Interests is to be acquired after a foreclosure sale or by a deed in lieu of foreclosure, title shall be held as directed by the Company. If, at this time, any Holder is an employee benefit plan subject to Part 4 of Title I of ERISA or to which Section 4975 of the Code applies, or an entity which is deemed to hold assets of such a plan, such limited liability company (or other special purpose entity) shall be structured and operated in a manner which, under the ERISA “plan asset regulations,” 29 C.F.R. § 2510.3-101, as modified by Section 3(42) of ERISA, is intended to cause the limited liability company (or other special purpose entity) either (A) to be a real estate operating company (“REOC”) or (B) to otherwise have its underlying assets not deemed to be “plan assets” of any employee benefit plan subject to Part 4 of Title I of ERISA or to which Section 4975 of the Code applies, and such limited liability company (or other special purpose entity) will be required to advise the Holders, as soon as reasonably possible, of any change or circumstance which could reasonably be expected to affect its status as a REOC, or to otherwise cause its underlying assets to be deemed to be “plan assets.”

          (i) As full compensation for its services hereunder, Servicer shall be entitled to a management fee with respect to each Investment, which shall be an annual fee payable in equal quarterly installments in arrears equal to 0.25% multiplied by the Capital Contribution (as defined in the Master Venture Agreement) made by the Investor and Ashford (as defined in the Master Venture Agreement) to acquire such Investment (the “Management Fee”). Notwithstanding the foregoing to the contrary and except as otherwise provided in Section 5(c) below, with respect to any Investment that is subject to a default remaining uncured beyond any applicable notice and cure periods (an “Event of Default”). Servicer shall receive a workout fee in lieu of the Management Fee with respect to such Investment, which shall be an annual fee payable for such Investment in the amount of 0.50% of the Capital Contributions made by the Investor and Ashford (as defined in the Master Venture Agreement) to acquire such Investment (the “Workout Fee”). Any Workout Fee due hereunder shall be prorated for any partial year (i.e. less than 365 day year) during the existence of an Event of Default and shall be paid upon the earlier of (i) the cure of the applicable Event of Default, and (ii) the 365 day following the occurrence of the applicable Event of Default. Notwithstanding anything to the contrary contained herein, Servicer shall act at the direction of the Company with respect to all matters relating to each Investment that is subject to an Event of Default.

          SECTION 3. PAYMENT PROCEDURE.

          If a court of competent jurisdiction orders, at any time that any amount received or collected in respect of the Loan must, pursuant to any insolvency, bankruptcy, fraudulent conveyance, preference or similar law, be returned to the Borrower or paid to any Holder or any other Person, then, notwithstanding any other provision of this Agreement, the Servicer shall not be required to distribute any portion thereof to any Holder, and all Holders shall promptly on demand repay to the Servicer the portion thereof which shall have been theretofore distributed to the related Holder, together with interest thereon at such rate, if any, as the Servicer shall have been required to pay to the Borrower, the Holders, or such other Person with respect thereto. Each Holder agrees that if at any time it shall receive from any source whatsoever (other than as a distribution from the Servicer to which it is entitled hereunder) any payment on account of the Loan in excess of amounts due such Holder hereunder, it will promptly remit such excess to the Servicer. The Servicer shall have the right to offset any amounts due hereunder from any Holder

7

with respect to the Loan against any future payments due to such Holder from the Loan; provided, that the obligations of each Holder under this Section 3 are separate and distinct obligations from one another. The obligations of each Holder under this Section 3 constitute absolute, unconditional and continuing obligations.

          SECTION 4. LIMITATION ON LIABILITY.

          No Holder shall have any liability to any other Holder hereunder, except with respect to losses actually suffered due to the gross negligence, willful misconduct or breach of this Agreement on the part of such Holder.

          SECTION 5. ADDITIONAL UNDERSTANDINGS.

          (a) Notices of Transfer Etc. The Servicer shall notify the Holders promptly if the Borrower seeks or requests a release of the lien with respect to the Loan or seeks or requests the Lender’s consent to, or takes any action in connection with or in furtherance of, any Borrower Transfer, incurring additional indebtedness or a Principal Prepayment of the Loan. If the Borrower requests consent to a Borrower Transfer or incurring any incur additional indebtedness, the Servicer shall obtain the prior written consent of the Company prior to the Lender’s granting consent or agreement thereto (which consent shall be subject to the same standard applicable to the Lender’s ability to withhold such consent set forth in the Loan Documents).

          (b) Replacement of Servicer. An event of default by Servicer (a “Servicer Default”) hereunder shall exist in the event that one or more of the following events shall occur and be continuing beyond any applicable grace or cure periods:

     (i) a decree or order of a court or agency or supervisory authority having jurisdiction for the appointment of a conservator or receiver or liquidator in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of its affairs, shall have been entered against Servicer;

     (ii) Servicer shall consent to the appointment of a conservator or receiver or liquidator or liquidating committee in any insolvency, readjustment of debt, marshalling of assets and liabilities, voluntary liquidation or similar proceedings of or relating to Servicer or of or relating to all or substantially all of its property;

     (iii) Servicer shall admit in writing its inability to pay its debts generally as they become due, file a petition to take advantage of any applicable insolvency or reorganization statute, make an assignment for the benefit of its creditors or voluntarily suspend payment of its obligations;

     (iv) any failure on the part of Servicer to observe or perform in any material respect any covenant or agreement on the part of Servicer contained in this Agreement, which remains unremedied for a period of fifteen (15) Business Days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to Servicer by a Holder (except that said fifteen (15) Business Day period shall be

8

extended for such period of time as shall be reasonably necessary in order to cure such default as long as Servicer shall be diligently prosecuting such cure to completion and said extended period would not reasonably be expected to materially impair a Holder’s interest in the Loan but in no event shall such additional period exceed sixty (60) days); or

     (v) any failure by Servicer to notify the Holders of a default by Borrower under the Loan Documents within five (5) Business Days after Servicer’s receipt of written notice thereof.

In the event of a Servicer Default in addition to whatever other rights the Holders may have hereunder or at law or in equity, the Company, may by notice given to Servicer and the other Holders terminate all of the rights and obligations of Servicer as servicer of the Loan, and in such event the Company shall appoint another servicer to perform the obligations of Servicer pursuant to the terms hereof. In the event of such termination, the Servicer shall cooperate with the Holders and any such successor servicer in the transition of such servicing obligations, turning over all Loan Documents in Servicer’s possession (other than, if applicable, those held in its capacity as a Holder), and such successor servicer shall deliver to each of the Holders a writing in recordable form whereby it assumes all of the obligations of Servicer hereunder.

          (c) Appointment of Special Servicer. The Holders shall have the right to appoint a special servicer upon two (2) Business Days written notice to Servicer with respect to any Investment that is subject to an Event of Default. In the event that a special servicer is appointed with respect to an Investment, (1) Servicer shall cooperate with the Holders and any special servicer in the transition of such servicing obligations, including, without limitation, turning over all Loan Documents in Servicer’s possession with respect to such Investment to such special servicer or as otherwise directed by the Holders, and (2) Servicer shall not be entitled to a Workout Fee or Management Fee with respect to such Investment for any period following receipt of written notice of the appointment of the special servicer.

          SECTION 6. REPRESENTATIONS OF SERVICER.

     With respect to each Loan, Servicer hereby represents and warrants to each of the Holders on the date of acquisition of such Loan by the Holders:

          (a) if Servicer or any Affiliate (as defined in the Master Venture Agreement) of Servicer acquired the Loan, Servicer and/or such Affiliate conveying the Loan to the Holders have good title to, and are the sole holders of the Loan, free and clear of any liens, security interests, claims, charges or other encumbrances;

          (b) Servicer has not assigned, pledged, transferred or encumbered all or any portion of the Loan;

          (c) Servicer has no other material agreements with the Borrower under the Loan with respect to the Loan other than as set forth in the Loan Documents,

          (d) none of the Borrower or any guarantors under the Loan have been released by Servicer from any obligation under any of the Loan Documents, and no collateral has been

9

released by Servicer from the lien of any other security agreement executed in connection with the Loan;

          (e) the Servicer has acted in accordance with Accepted Loan Servicing Practices in acquiring the Loan; and

          (f) the Servicer will report the Loan as a purchase of an interest in the Loan under generally accepted accounting principles.

          SECTION 7. NOT A SECURITY.

          No Investment shall be deemed to be a security within the meaning of the Securities Act of 1933 or the Securities Exchange Act of 1934.

          SECTION 8. EXERCISE OF REMEDIES.

          Each Holder acknowledges that, subject to the terms of this Agreement, (i) each Holder may exercise or refrain from exercising any rights that such Holder may have hereunder in a manner that may be adverse to the interests of the other Holder, so long as such actions are in accordance with the terms of this Agreement, (ii) a Holder shall have no liability whatsoever to the other Holder as a result of such Holder’s exercise of such rights or any omission by such Holder to exercise such rights, except as expressly provided herein or for acts or omissions that are taken or omitted to be taken by such Holder that constitute the gross negligence or willful misconduct of such Holder or a breach of this Agreement, and (iii) the Servicer shall service and administer the Loan on behalf of the Holders in accordance with the terms of this Agreement, taking into account the interests of the Holders and in accordance with Accepted Loan Servicing Practices.

          SECTION 9. SEVERABILITY.

          Wherever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable laws, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

          SECTION 10. NO PLEDGE OR LOAN; CHARACTERIZATION.

          This Agreement shall not be deemed to represent a pledge of any interest in the Loan by any Holder to any other Holder, or a loan from any Holder to any other Holder. No Holder shall have any interest in any property taken as security for the Loan. The Holders acknowledge and agree that the Loan represents a single “claim” under Section 101 of the Bankruptcy Code, and that no Holder would be a separate creditor of the Borrower under the Bankruptcy Code. The obligations of the Holders under this Agreement are separate and distinct and no such Holder shall be liable for defaults by the other.

10

          SECTION 11. GOVERNING LAW; WAIVER OF JURY TRIAL.

          THIS AGREEMENT AND THE RESPECTIVE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE. EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.

          SECTION 12. MODIFICATIONS.

     This Agreement shall not be modified, cancelled or terminated except by an instrument in writing signed by the parties hereto. The party seeking modification of this Agreement shall be solely responsible for any and all expenses that may arise in order to modify this Agreement.

          SECTION 13. SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES.

          This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns; provided that no successors or assigns of any Holder shall have any liability for a breach of a representation or warranty set forth in this Agreement or any side agreement (but the liability of the Holder that made such representation shall survive). Except as provided in the preceding sentence, none of the provisions of this Agreement shall be for the benefit of or enforceable by any Person not a party hereto or a successor or assign of a party hereto.

          SECTION 14. COUNTERPARTS.

          This Agreement may be executed in any number of counterparts and all of such counterparts shall together constitute one and the same instrument. This Agreement may be executed by signature(s) transmitted by facsimile or PDF provided that original signature pages follow.

          SECTION 15. CAPTIONS.

          The titles and headings of the paragraphs of this Agreement have been inserted for convenience of reference only and are not intended to summarize or otherwise describe the subject matter of the paragraphs and shall not be given any consideration in the construction of this Agreement.

          SECTION 16. NOTICES.

          All notices required hereunder shall be given by (a) telephone (confirmed in writing if the sender on the same day sends a confirming copy of such notice by reputable overnight delivery service (charges prepaid)) or shall be in writing and personally delivered, (b) facsimile transmission or e-mail if the sender on the same day sends a confirming copy of such notice by reputable overnight delivery service (charges prepaid), (c) reputable overnight delivery

11

service (charges prepaid) or (d) certified United States mail, postage prepaid return receipt requested, and addressed to the respective parties at their addresses set forth in the Master Venture Agreement, or at such other address as any party shall hereafter inform the other party by written notice given as aforesaid. All written notices so given shall be deemed effective upon receipt or, if mailed, upon the earlier to occur of receipt or the expiration of the fourth (4th) day following the date of mailing.

          SECTION 17. REGISTRATION OF TRANSFERS.

          The Lender or the Servicer on its behalf, as agent for the Holders, shall maintain a register for the recording of the names and addresses of the Holders, the name and address of each Holder’s agent for service of process (the “Register”). The entries in the Register shall be conclusive and binding for all purposes, absent manifest error, and the Servicer and the Holders may treat each person or entity whose name is recorded in the Register as a Holder hereunder for all purposes of this Agreement. The Register shall be available for inspection and copying by any Holder during normal business hours upon reasonable prior notice to the Servicer.

12

     IN WITNESS WHEREOF, each of the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

PIM ASHFORD VENTURE I, LLC, a Delaware limited liability company
By:	PRISA III Investments, a Delaware limited liability company
By:	PRISA III REIT Operating LP, a Delaware limited partnership, its sole member
By:	PRISA III OP GP, LLC, a Delaware limited liability company, its general partner
By:	PRISA III Fund LP, a Delaware limited partnership, its manager
By:	PRISA III Fund GP, LLC, a Delaware limited liability company, its general partner
By:	PRISA III Fund PIM, LLC, a Delaware limited liability company, its sole member
By:	Prudential Investment Management, Inc., a Delaware corporation, its sole member
By:	James P. Walker
	Name: James P. Walker
	Title:   Vice President
By:	Ashford Hospitality Finance LP, a Delaware limited partnership
By:	Ashford Hospitality Finance General Partner LLC, a Delaware limited liability company, its general partner
By:
	Name:	David Brooks
	Title:	Vice President

Signature Page to Loan Servicing Agreement

     IN WITNESS WHEREOF, each of the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

PIM ASHFORD VENTURE I, LLC, a Delaware limited liability company
By:	PRISA III Investments, a Delaware limited liability company
By:	PRISA III REIT Operating LP, a Delaware limited partnership, its sole member
By:	PRISA III OP GP, LLC, a Delaware limited liability company, its general partner
By:	PRISA III Fund LP, a Delaware limited partnership, its manager
By:	PRISA III Fund GP, LLC, a Delaware limited liability company, its general partner
By:	PRISA III Fund PIM, LLC, a Delaware limited liability company, its sole member
By:	Prudential Investment Management, Inc., a Delaware corporation, its sole member
By:
	Name:	James P. Walker
	Title:	Vice President
By:	Ashford Hospitality Finance LP, a Delaware limited partnership
By:	Ashford Hospitality Finance General Partner LLC, a Delaware limited liability company, its general partner

By:	/s/ David Brooks
	Name:	David Brooks
	Title:	Vice President

Signature Page to Loan Servicing Agreement

ASHFORD HOSPITALITY SERVICING LLC, a Delaware limited liability company
By:	/s/ David Brooks
	Name:	David Brooks
	Title:	Vice President

Signature Page to Loan Servicing Agreement

EXHIBIT A

INVESTMENTS

Westin Loans Investment. As of February 5, 2008, the Company formed PIM Ashford Subsidiary I, LLC, a Delaware limited liability company (“Subsidiary I”), to acquire all of the right, title and interest of Ashford Hospitality Finance LP (“Assignor”) in, to and under that certain mezzanine loan (the “Westin Loans Investment”) originated in accordance with that certain Mezzanine Loan Agreement dated December 5, 2007 by and among Assignor and Transwest Tucson II, L.L.C., formerly known as SCG Tucson II, L.L.C. (“La Paloma Borrower”), a Delaware limited liability company, and Transwest Hilton Head II, L.L.C, formerly known as SCG Hilton Head II, L.L.C, a Delaware limited liability company(“Hilton Head Borrower” and together with La Paloma Borrower, “Borrowers”). Subsidiary I is the owner of the Westin Loans Investment pursuant to that certain Assignment and Assumption of Loan Documents dated as of February 6, 2008.

SCHEDULE 1

LOAN DOCUMENTS

Westin Loans Investment Loan Documents:

1.	Mezzanine Loan Agreement, dated December 5, 2007, between Borrowers and Assignor;
2.	Promissory Note, dated December 5, 2007, in the principal amount of $21,500,000 made by Borrowers to the order of the Assignor;
3.	Pledge and Security Agreement, dated December 5, 2007, made by La Paloma Borrower, in favor of the Assignor;
4.	Acknowledgement of Security Interest by La Paloma Borrower, dated as of December 5, 2007;
5.	Instruction to Registered Pledge between Assignor and La Paloma Borrower, dated as of December 5, 2007;
6.	Confirmation Statement and Instruction Agreement by Transwest Tucson Property, L.L.C., formerly known as SCG Tucson Property, L.L.C. (“La Paloma Project Owner”), dated as of December 5, 2007;
7.	Pledge and Security Agreement, dated December 5, 2007, made by Hilton Head Borrower, in favor of the Assignor;
8.	Acknowledgment of Security Interest by Hilton Head Borrower, dated as of December 5, 2007;
9.	Instruction to Registered Pledge between Assignor and Hilton Head Borrower, dated as of December 5, 2007;
10.	Confirmation Statement and Instruction Agreement by Transwest Hilton Head Property, L.L.C, formerly known as SCG Hilton Head Property, L.L.C. (“Hilton Head Project Owner”), dated as of December 5, 2007;
11.	UCC-1 Financing Statement #2007-4584966 for La Paloma Borrower, filed with the Delaware Secretary of State on December 5, 2007;
12.	UCC-1 Financing Statement #2007-4585039 for Hilton Head Borrower, filed with the Delaware Secretary of State on December 5, 2007;
13.	Environmental Indemnity Agreement by and among Borrowers, Michael J. Hanson and Randal D. Dix, dated as of December 5, 2007;
14.	Cash Collateral Account Security Agreement by and among Borrowers and Assignor, dated as of December 5, 2007;
15.	Guaranty of Recourse Obligations by Michael J. Hanson and Randal D. Dix, dated as of December 5, 2007;

16.	Completion Guaranty by Michael J. Hanson and Randal D. Dix, dated as of December 5, 2007;
17.	Membership Certificate evidencing 100% Interest of La Paloma Borrower in La Paloma Project Owner, dated as of December 5, 2007;
18.	Membership Certificate evidencing 100% Interest of Hilton Head Borrower in Hilton Head Project Owner, dated as of December 5, 2007;
19.	Spousal Consent (Michael J. Hanson), by Christine Hanson;
20.	Recognition Agreement by and among Westin Hotel Management, L.P., Assignor, La Paloma Project Owner and La Paloma Borrower, dated as of December 5, 2007;
21.	Recognition Agreement by and among Westin Hotel Management, L.P., Assignor, Hilton Head Project Owner and Hilton Head Borrower, dated as of December 5, 2007;
22.	Mezzanine Agreement Regarding Agreements, Permits, and Contracts by and among Hilton Head Project Owner, La Paloma Project Owner, Assignor and Borrowers, dated as of December 5, 2007;
23.	Contribution Agreement by and among Borrowers and Assignor, dated as of December 5, 2007;
24.	Authorization to Wire Funds (Funding Letter) by Borrowers, dated as of December 5, 2007;
25.	Subordination Agreement by and among Project Owners, Assignor and Guarantors, dated as of December 5, 2007;
26.	Subordination and Standstill Agreement by and among JPMorgan Chase Bank, N.A., Assignor and SCG Hotel DLP, LP, dated as of December 5, 2007;
27.	Closing Certificate, by Borrowers, dated as of December 5, 2007;
28.	Post-Closing Letter Agreement, by and between Borrowers and Assignor, dated as of December 5, 2007; and
29.	Intercreditor Agreement, dated December 5, 2007, by and between JPMorgan Chase Bank, N.A. and the Assignor.

EX-10.30.4

Exhibit 10.30.4

FACSIMILE

DATE:	August 21, 2009
TO:	Ashford Hospitality LP
	Phone #: 972-778-9452
	Fax #:
	Attn: Doug Kessler
CC:	Chatham Financial Corporation
	Phone #: 720-221-3515
	Fax #: 720-221-3519
FROM:	The Bank of New York Mellon
	Derivative Products Support Department
	32 Old Slip, 16th Floor
	New York, New York 10286
	Contacts for Documentation/Confirmations:
	Attn: Swap Confirmation Dept.
	Phone#: 212-804-5163 / 212-804-5103
	Fax #: 212-804-5818 / 212-804-5837
	Group Email: irdsuppdocs@bnymellon.com
	Contacts for Settlements and Rate Resets:
	Attn: Settlements Dept.
	Phone #: 412-234-0805 / 412-236-7737
	Fax #: 412-209-2020
	Group Email: Derivatives_admin@bnymellon.com
RE:	Transaction Reference Number: 48473
Remarks:

Enclosed is the copy of the Confirmation for the captioned Transaction. Please review the Confirmation, have it executed by an authorized signatory, and return via facsimile followed by an original by mail along with an original copy of the incumbency certificate verifying the true signatures and authority of the person or persons signing this Confirmation to: The Bank of New York Mellon, Derivative Products Support Department, 32 Old Slip, 16^th floor, New York, NY 10286, Attn: Kenny Au-Yeung / Eugene Chun.

Confidentiality Note: The information in this facsimile message and any attachments herein (“fax”) may contain confidential or proprietary information for use by the addressee only. If the reader of this message is not the intended recipient, you are notified that retention, dissemination, distribution or copying of this fax is strictly prohibited. If you receive this fax in error, please notify us immediately by telephone and return it to the sender above. Thank you.

THE BANK OF NEW YORK MELLON

CONFIRMATION

DATE:	July 1, 2009
TO:	Ashford Hospitality LP (“Party B”)
	Phone #: 972-778-9452
	Fax #:
	Attn: Doug Kessler
FROM:	The Bank of New York Mellon (“Party A”)
	Derivative Products Support Department
	32 Old Slip, 16th Floor
	New York, New York 10286
	Attn: Swap Confirmation Dept.
	Phone #: 212-804-5163/5161/5103
	Fax #: 212-804-5818/5837
	Email: irdsuppdocs@bnymellon.com
RE:	Transaction Reference Number: 48473

The purpose of this letter (this “Confirmation”) is to confirm the terms and conditions of the Swap Transaction entered into between The Bank of New York Mellon (“Party A”) and Ashford Hospitality LP (“Party B”) on the Trade Date specified below.

The definitions and provisions contained in the 2000 ISDA Definitions, as published by the International Swaps and Derivatives Association, Inc., are incorporated into this Confirmation. In the event of any inconsistency between those definitions and provisions and this Confirmation, this Confirmation will govern. In case you are located in a state of the European Union other than the United Kingdom, The Bank of New York Mellon (International) Limited, an indirect subsidiary of Party A, has acted as arranger for the Transaction.

This Confirmation evidences a complete and binding agreement between you and us to the terms of the Swap Transaction set forth below and replaces any previous agreement between us with respect to the subject matter hereof. This Confirmation constitutes a “Confirmation” and also constitutes a “Schedule” as referred to in the ISDA Master Agreement (as defined below). This Confirmation supplements, forms a part of and is subject to an agreement in the form of the 1992 ISDA Master Agreement (Multicurrency-Cross Border) (the “ISDA Master Agreement”) as if we had executed an agreement in such form, subject to the terms of a Schedule as set forth in Paragraph 2 hereof. In the event of any inconsistency among any of the following documents, the document listed first shall govern: (i) this Confirmation, exclusive of the provisions set forth in Paragraph 2 hereof; (ii) the provisions set forth in Paragraph 2 hereof; (iii) the Definitions; and (iv) the ISDA Master Agreement.

The term “Section” as used herein will mean a Section of the ISDA Master Agreement; “Part” will mean a Part of the Schedule to the ISDA Master Agreement as set forth in Paragraph 2 herein, which is deemed to constitute a Schedule to the ISDA Master Agreement; and “Paragraph” will mean a Paragraph of this Confirmation.

1

1. The terms of the particular Swap Transaction to which this Confirmation relates are as follows:

Notional Amount:	USD 1,800,000,000
Trade Date:	July 1, 2009
Effective Date:	December 13, 2010
Termination Date:	December 13, 2011, subject to adjustment in accordance with the Modified Following Business Day Convention.
FIXED AMOUNTS
Fixed Amount Payer:	Party B
Fixed Amount:	USD 15,245,000
Fixed Amount Payer Payment Date:	July 3, 2009, subject to adjustment in accordance with the Modified Following Business Day Convention.
PARTY A FLOATING AMOUNTS
Floating Rate Payer:	Party A
Floor Rate:	2.75%
Floating Rate Payer Payment Dates:	The 13th day of each month, beginning on January 13, 2011 and ending on the Termination Date, subject to adjustment in accordance with the Modified Following Business Day Convention.
Floating Rate Option:	USD-LIBOR-BBA
Designated Maturity:	One month
Spread:	None
Floating Rate Day Count Fraction:	Actual/360
Reset Dates:	The first day of each Calculation Period
Compounding:	Inapplicable
PARTY B FLOATING AMOUNTS
Floating Rate Payer:	Party B

2

Floor Rate:	0.50%
Floating Rate Payer Payment Dates:	The 13th day of each month, beginning on January 13, 2011 and ending on the Termination Date, subject to adjustment in accordance with the Modified Following Business Day Convention.
Floating Rate Option:	USD-LIBOR-BBA
Designated Maturity:	One month
Spread:	None
Floating Rate Day Count Fraction:	Actual/360
Reset Dates:	The first day of each Calculation Period
Compounding:	Inapplicable
ADDITIONAL TERMS
Business Days:	New York
Calculation Agent:	Party A
Optional Termination:	Provided that no Event of Default, Potential Event of Default or Termination Event has occurred, Party B may terminate this Transaction, in whole or in part, on any Business Day (such day the “Optional Termination Date”) by providing at least two (2) Business Days’ prior notice of its election to terminate this Transaction. In the event of such termination, Party A shall serve as the Calculation Agent and shall determine the amount owed in connection with such termination using the swap rate applicable on the Optional Termination Date disregarding any funding charges, capital charge or spread to LIBOR. If Party B objects to such determination, the amount due shall be determined pursuant to Section 17.3 of the 2000 ISDA Definitions electing (a) Cash Price as the Cash Settlement Method, (b) the date two Business Days following the Optional Termination Date as the Cash Settlement Payment Date, and (c) Mid as the Quotation Rate. Cash Settlement Reference Banks shall be agreed mutually by Party A and Party B, provided, however, notwithstanding Section 17.3(a)

3

of the 2000 ISDA Definitions, if fewer than three quotations are provided, the Cash Settlement Amount will be the average of the amounts determined by each of the parties in good faith and in a commercially reasonable manner.

2. Terms deemed incorporated into a Schedule to the ISDA Master Agreement.

Part 1. Termination Provisions.

(a) “Specified Entity” means none in relation to Party A and Party B.

(b) “Specified Transaction” will have the meaning specified in Section 14 of this Agreement.

(c) The “Cross Default” provisions of Section 5(a)(vi) will not apply to Party A and will not apply to Party B.

(d) The “Credit Event Upon Merger” provisions of Section 5(b)(iv) will not apply to Party A and will not apply to Party B.

(e) The “Automatic Early Termination” provision of Section 6(a) will not apply to Party A and will not apply to Party B.

(f) Payments on Early Termination. For the purpose of Section 6(e) of this Agreement:

          (i) Market Quotation will apply.

          (ii) Second Method will apply.

(g) “Termination Currency” means United States dollars.

(h) Additional Termination Event will not apply.

Part 2. Tax Representations.

(a) Payer Representations. For the purpose of Section 3(e) of this Agreement:—

Party A and Party B each make the following representation: —

It is not required by any applicable law, as modified by the practice of any relevant governmental revenue authority, of any Relevant Jurisdiction to make any deduction or withholding for or on account of any Tax from any payment (other than interest under Section 2(e), 6(d)(ii), or 6(e) of this Agreement) to be made by it to the other party under this Agreement. In making this representation, it may rely on (i) the accuracy of any representations made by

4

	the other party pursuant to Section 3(f) of this Agreement, (ii) the satisfaction of the agreement contained in Section 4(a)(i) or 4(a)(iii) of this Agreement and the accuracy and effectiveness of any document provided by the other party pursuant to Section 4(a)(i) or 4(a)(iii) of this Agreement and (iii) the satisfaction of the agreement of the other party contained in Section 4(d) of this Agreement, except’ that it will not be a breach of this representation where reliance is placed on clause (ii) above and the other party does not deliver a form or document under Section 4(a)(iii) by reason of material prejudice to its legal or commercial position.
(b)	Payee Representations. For the purpose of Section 3(f) of this Agreement—
	Party A and Party B each make the following representation:—
	It is a “U.S. person” (as that term is used in section 1.1441-4(a)(3)(ii) of United States Treasury Regulations) for United States federal income tax purposes.

Part 3. Agreement to Deliver Documents.

Other documents to be delivered are:

Party required to		Date by which to be	Covered by Section 3(d)
deliver	Form/ Document/ Certificate	delivered	Representation
Party A	Certified copies of (i) resolutions adopted by its Board of Directors or its by-laws authorizing the person or persons signing this Agreement to so sign, (ii) an incumbency certificate certifying the names, true signatures and authority of the person or persons signing this Agreement; and (iii) other necessary approvals and authorizations with respect to the execution, delivery and performance of this Agreement, if any.	Upon execution and delivery this Agreement and if required by a Confirmation on or before the date set forth therein.	Yes
Party B	Certified copies of an incumbency certificate of Party B certifying the names, true signatures and authority	Upon execution and delivery this Agreement and if required by a	Yes

5

Party required to		Date by which to be	Covered by Section 3(d)
deliver	Form/ Document/ Certificate	delivered	Representation
	of the person or persons signing this Agreement.	Confirmation on or before the date set forth therein.
Party B	A correct, complete and executed copy of U.S. Internal Revenue Service Form W-9 (or any successor thereto), including appropriate attachments, that eliminates U.S. federal backup withholding tax on payments under this Agreement.	(A) Upon first scheduled Payment Date; (B) promptly upon reasonable demand by Party A; and (C) promptly upon learning that any Form W-9 previously provided by Party B to Party A has become obsolete or incorrect.	Yes

Part 4. Miscellaneous.

(a)	Addresses for Notices. For the purpose of Section 12(a) of this Agreement:
	Address for notices or communications to Party A:

The Bank of New York Mellon
Global Risk Management Services
Global Markets Division
32 Old Slip -15^th Floor
New York, New York 10286
Attention: Stephen M. Lawler, Managing Director
Fax No.: (212) 495-1015
Telephone No.: (212) 804-2137

And provided, that any notice sent to Party A under Sections 5, 6, or 13(b) of the Agreement shall be given to:

The Bank of New York Mellon
Legal Department
One Wall Street-10^th Floor
New York, NY 10286
Attention: General Counsel

Address for notices or communications to Party B:

Ashford Hospitality LP
14185 Dallas Parkway
Suite 1150
Dallas, TX 75254
Attention: Doug Kessler

6

Telephone No.: 972-778-9452

With copies to:

Chatham Financial Corporation
10901 West Toller Drive, #301
Littleton, CO 80127
Attention: Randy Medina
Telephone No: 720-221-3515
Fax No: 720-221-3519

(b)	Process Agent. For the purpose of Section 13(c) of this Agreement:
	Party A appoints as its Process Agent — not applicable.
	Party B appoints as its Process Agent — not applicable.
(c)	Offices. The provisions of Section 10(a) will apply to this Agreement.
(d)	Multibranch Party. For the purpose of Section 10(c) of this Agreement: Party A is not a Multibranch Party.
	Party B is not a Multibranch Party.
(e)	Calculation Agent. The Calculation Agent is Party A.
(f)	Credit Support Document. Details of any Credit Support Document:
	Party A’s obligations hereunder are supported by the following Credit Support Documents: none.
	Party B’s obligations hereunder are supported by the following Credit Support Documents: none.
(g)	Credit Support Provider.
	Credit Support Provider means in relation to Party A: none.
	Credit Support Provider means in relation to Party B: none.
(h)	Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of New York without reference to choice of law doctrine that would result in the application of the laws of another jurisdiction.
(i)	Netting of Payments. Subparagraph (ii) of Section 2(c) of this Agreement will apply.
(j)	“Affiliate” will have the meaning specified in Section 14 of this Agreement.

7

(k) Additional Representations. In addition to the representations in Section 3 of this Agreement:

(i) each party will be deemed to represent to the other party on the date on which it enters into a Transaction that (absent a written agreement between the parties that expressly imposes affirmative obligations to the contrary for that Transaction):

(1) Non-Reliance. It is acting for its own account, and it has made its own independent decisions to enter into that Transaction and as to whether that Transaction is appropriate or proper for it based upon its own judgment and upon advice from such advisers as it has deemed necessary. It is not relying on any communication (written or oral) of the other party as investment advice or as a recommendation to enter into that Transaction; it being understood that information and explanations related to the terms and conditions of a Transaction shall not be considered investment advice or a recommendation to enter into that Transaction. No communication (written or oral) received from the other party shall be deemed to be an assurance or guarantee as to the expected results of that Transaction.

(2) Assessment and Understanding. It is capable of assessing the merits of and understanding (on its own behalf or through independent professional advice), and understands and accepts, the terms, conditions and risks of that Transaction. It is also capable of assuming, and assumes, the risks of that Transaction.

(3) Status of Parties. The other party is not acting as a fiduciary for or an adviser to it in respect of that Transaction.

(ii) Commodity Exchange Act. each party represents and warrants that (A) it is an “eligible contract participant” within the meaning of Section 1a(12) of the Commodity Exchange Act, as amended; (B) this Agreement and each Transaction is subject to individual negotiation by such party; and (C) neither this Agreement nor any Transaction will be executed or traded on a “trading facility” within the meaning of Section 1a(33) of the Commodity Exchange Act, as amended.

(iii) Pension Plans, etc. each party represents and warrants that it is neither:

(1) an “employee benefit plan” as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974 which is subject to Part 4 of Subtitle B of Title I of such Act;

(2) a “plan” as defined in Section 4975(e)(1) of the Internal Revenue Code of 1986, as amended; nor

(3) an entity the assets of which are deemed to be assets of any such “employee benefit plan” or “plan” by reason of the U.S. Department of Labor’s plan asset regulation, 29 C.F.R. Part 2510.3-101.

8

The parties agree that each representation contained in this Part 4(k) shall be deemed to be made on the date this Transaction is entered into, provided that the representation in (iii) above shall be deemed made at all times.

(I) Recording. Each party (i) consents to the recording of the telephone conversations of its trading, operations and marketing personnel in connection with this Agreement or any potential Transaction; (ii) agrees to obtain any necessary consent of, and give notice of such recording to, such personnel and (iii) agrees that any such recordings may be submitted in evidence in any proceedings relating to this Agreement.

Part 5. Other Provisions,

(a) Waiver of Jury Trial. Each party hereby waives the right to trial by jury in any action or proceeding instituted with respect to this Agreement or the transactions contemplated hereby.

(b) Correction of Confirmations. Section 9(e)(ii) of the Agreement is hereby supplemented by the addition of the following text at the end thereof: “If Party B does not promptly confirm the accuracy of a Confirmation sent by Party A within three Local Business Days of the date it is sent (or such shorter time as may be appropriate given the maturity of the Transaction), such failure will be deemed a confirmation of accuracy of such Confirmation by Party B in the absence of manifest error. In any event, no failure to enter into, exchange or send a Confirmation shall invalidate any Transaction under this Agreement.”

(c) Set-off. For the purposes of the last sentence of Section 6(e) of the Master Agreement, set-off will not apply.

(d) 1989 Cap addendum Para. 4. Notwithstanding the terms of Sections 5 and 6, if Party B has satisfied its payment obligations under Section 2(a)(i), and shall, at the time, have no future payment or delivery obligation, whether absolute or contingent, then unless Party A is required pursuant to appropriate proceedings to return to Party B or otherwise returns to Party B upon demand of Party B any portion of such payment, (a) the occurrence of an event described in Section 5(a) with respect to Party B shall not constitute an Event of Default or Potential Event of Default with respect to Party B as the Defaulting Party and (b) Party A shall be entitled to designate an Early Termination Date pursuant to Section 6 only as a result of a Termination Event set forth in either Section 5(b)(i) or Section 5(b)(ii) with respect to Party A as the Affected Party or Section 5(b)(iii) with respect to Party A as the Burdened Party.

(e) Transfer. Each party agrees that with regard to the transfer provisions set forth in Section 7, consent to any such transfer shall not be unreasonably withheld. Notwithstanding the foregoing, a party shall not be required to consent to any transfer if the transfer would subject the non-transferring party to an increased tax burden; or if the transfer would violate in the good faith judgment of the non-transferring party any law or regulation applicable to the non-transferring party.

9

3. Payment Instructions:

When remitting funds to us, please pay:	The Bank of New York Mellon
	Derivative Products Support Department
	ABA #: 021000018
	Account #: 890-0068-175
	Reference: Interest Rate Swaps
We will pay you at:
Bank Information:	JP Morgan Chase Bank
	2200 Ross Ave
	Dallas, TX 75265-5415
	ABA: 021-000-021
Account Information:	Ashford Hospitality LP
	14185 Dallas Pkwy, Suite 1100
	Dallas, TX 75254
	Account: 088-06397111
Additional Notes:	Contact Shannon Jones
	(972) 778-9485

10

Please confirm that the foregoing correctly sets forth the terms of our agreement by having an authorized signatory execute the copy of this Confirmation and returning it via facsimile followed by an original by mail along with an original copy of the incumbency certificate to: The Bank of New York Mellon, Derivative Products Support Department, 32 Old Slip 16th Floor, New York, New York 10286, Attn: Kenny Au-Yeung / Eugene Chun.

THE BANK OF NEW YORK MELLON
By:	/s/ ANDREW SCHWARTZ
	Name:	ANDREW SCHWARTZ
	Title:	Vice President

Accepted and confirmed as
of the date first written:

ASHFORD HOSPITALITY LP

By:	/s/ David Brooks
	Name:
	Title:

11

EX-10.30.5

Exhibit 10.30.5

SMBC CAPITAL MARKETS, INC.

Sumitomo Mitsui Banking Corporation Group

CONFIRMATION

Date:	July 1, 2009
To:	Ashford Hospitality LP
	14185 Dallas Parkway
	Suite 1150
	Dallas, TX 75254
	United States
	Attention: Doug Kessler
	Phone: 972.778.9452
	Fax:
cc:	Chatham Financial Corporation
	Attention: Randy Medina
	10901 West Toller Drive, #301
	Littleton, CO 80127
	United States
	Phone: 720.221.3515
	Fax: 720.221.3519
From:	SMBC Capital Markets, Inc.
	277 Park Avenue, Fifth Floor
	New York, New York 10172
cc:	Documentation Contact: Irina Bababekov
	Tel: 212.224.5088
	Fax: 212.224.4959
	Email: confirms@smbc-cm.com

Re: USD 1,800,000,000.00 Rate Protection Transaction, dated as of July 1, 2009 between SMBC Capital Markets, Inc. (“Party A”) and Ashford Hospitality LP (“Party B”).

Our Reference Number: A970618

The purpose of this letter agreement is to confirm the terms and conditions of the Interest Rate Protection Transaction entered into between Party A and Party B on the Trade Date specified below (the “Rate Protection Transaction”). This letter agreement constitutes a “Confirmation” as referred to in the ISDA Form specified below. This document supersedes all previous confirmations and amendments with respect to the above referenced transaction.

          The parties agree that Items 1, 3, and 4 of this Long-form Confirmation constitute a “Confirmation” as referred to in the ISDA Form (defined below) and Item 2 of this Long-form Confirmation constitutes a “Schedule” as referred to in the ISDA Form.

277 Park Avenue New York, NY 10172 PHONE: 212-224-5063 FAX: 212-224-4958 Email: schinest@smbc-cm.com

Page 2 A970618

          The parties further agree that the Confirmation set forth at Items 1, 3 and 4 hereof shall supplement, form a part of, and be subject to an agreement in the form of the ISDA Master Agreement (Multicurrency — Cross Border) as published and copyrighted in 1992 by the International Swaps and Derivatives Association, Inc. (the “ISDA Form”), as if Party A and Party B had executed an agreement in such form on the date hereof, with a Schedule as set forth in Item 2 of this Long-form Confirmation. The Transaction described herein shall be the sole Transaction governed by such ISDA Form.

          This Long-form Confirmation incorporates by reference the definitions and provisions contained in the 2000 ISDA Definitions (the “2000 Definitions”) as published by the International Swaps and Derivatives Association, Inc. (“ISDA”). In the event of any inconsistency between this Long-form Confirmation and the 2000 Definitions or the ISDA Form, this Long-form Confirmation will govern. Any reference to a “Swap Transaction” in the 2000 Definitions is deemed to be a reference to a “Transaction” for purposes of this Agreement, and any reference to a “Transaction” in this Agreement is deemed to be a reference to a “Swap Transaction” for purposes of the 2000 Definitions.

          Each reference herein to a “Section” or to a “Section” “of this Agreement” will be construed as a reference to a Section of the ISDA Form and each reference herein to a “Part” will be construed as a reference to the Schedule to the ISDA Form.

Item 1. Terms of Rate Protection Transaction.

Party A:	SMBC Capital Markets, Inc.
Party B:	Ashford Hospitality LP
Trade Date:	July 1, 2009
Effective Date:	December 14, 2009
Termination Date:	December 13, 2010 subject to adjustment in accordance with the Modified Following Business Day Convention
Notional Amount:	USD 1,800,000,000.00
Floating Amounts 1:
Floating Rate Payer:	Party A
Floating Rate Calculation Periods:	The Floating Rate Calculation Periods will be from and including the thirteenth (13th) of each month to but excluding the thirteenth (13th) of the following month beginning with the Effective Date and continuing up to but excluding the Termination Date, subject to adjustment in accordance with the Modified Following Business Day Convention.
Floating Rate Payer Payment Dates:	The thirteenth (13th) calendar day of each month beginning with January 13, 2010 continuing up to and including December 13, 2010, subject to adjustment in accordance with the Modified Following Business Day Convention
Floating Rate Option:	USD-LIBOR-BBA
Designated Maturity:	One Month

Page 3 A970618

Spread:	Inapplicable
Floating Rate Day Count Fraction:	Actual/360
Reset Dates:	First (1st) day of each Floating Rate Calculation Period
Compounding:	Inapplicable
Floor Rate:	1.75000% (per cent) per annum
Floating Amounts 2:
Floating Rate Payer:	Party B
Floating Rate Calculation Periods:	The Floating Rate Calculation Periods will be from and including the thirteenth (13th) of each month to but excluding the thirteenth (13th) of the following month beginning with the Effective Date and continuing up to but excluding the Termination Date, subject to adjustment in accordance with the Modified Following Business Day Convention.
Floating Rate Payer Payment Dates:	The thirteenth (13th) calendar day of each month beginning with January 13, 2010 continuing up to and including December 13, 2010, subject to adjustment in accordance with the Modified Following Business Day Convention
Floating Rate Option:	USD-LIBOR-BBA
Designated Maturity:	One Month
Spread:	Inapplicable
Floating Rate Day Count Fraction:	Actual/360
Reset Dates:	First (1st) day of each Floating Rate Calculation Period
Compounding:	Inapplicable
Floor Rate:	1.25000% (per cent) per annum
Business Days for Payments by both parties:	New York
Calculation Agent:	SMBC Capital Markets, Inc.
Fixed Amounts:
Fixed Rate Payer:	Party B
Fixed Rate Payer Payment Date:	July 3, 2009
Fixed Amount:	USD 7,094,000.00

Page 4 A970618

2. Additional Provisions.

(a)	“Specified Entity” will not apply to Party A and will not apply to Party B.
(b)	Specified Transaction will have the meaning specified in Section 14 of the ISDA Form.
(c)	The “Cross Default” provisions of Section 5(a)(vi) of the ISDA Form will not apply to Party A or Party B.
(d)	The “Credit Event Upon Merger” provisions of Section 5(b)(iv) of the ISDA Form will not apply to Party A or Party B.
(e)	The “Automatic Early Termination” provision of Section 6(a) of the ISDA Form will not apply to Party A or Party B.
(f)	Payments on Early Termination. For the purpose of Section 6(e) of the ISDA Form:
	Market Quotation and the Second Method will apply
(g)	“Termination Currency” means U.S. Dollars.
(h)	“Additional Termination Event” will not apply to Party A and will not apply to Party B.
(i)	Tax Representations:

(a)	Payer Representation. For the purposes of Section 3(e) of the ISDA Form:
	Party A and Party B each makes the following representation:

It is not required by any applicable law, as modified by the practice of any relevant governmental revenue authority, of any Relevant Jurisdiction to make any deduction or withholding for or on account of any Tax from any payment (other than interest under Section 2(e), 6(d)(ii) or 6(e) of this Agreement) to be made by it to the other party under this Agreement. In making this representation, it may rely on: (i) the accuracy of any representations made by the other party pursuant to Section 3(f) of this Agreement; (ii) the satisfaction of the agreement of the other party contained in Section 4(a)(i) or 4(a)(iii) of this Agreement and the accuracy and effectiveness of any document provided by the other party pursuant to Section 4(a)(i) or 4(a)(iii) of this Agreement; and (iii) the satisfaction of the agreement of the other party contained in Section 4(d) of this Agreement.

(b)	Payee Representation. For the purposes of Section 3(f) of the ISDA Form:
	Party A makes the following representation:

It is a corporation organized under the laws of the State of Delaware with its principal place of business in the State of New York and its Taxpayer Identification Number is 13-3380138.

Party B makes the following representation:

It is a limited partnership organized under the laws of the State of Delaware with its principal place of business in the State of Texas and its Taxpayer Identification Number is 86-1062192.

(ii) Other Payee Representations: None.

Page 5 A970618

(j) Agreement to Deliver Documents.

     For the purposes of Section 4(a)(i) and (ii) of the ISDA Form, each party agrees to deliver the following documents, as applicable:

(a)	Tax forms, documents or certificates to be delivered are: as requested.
(b)	Other documents to be delivered are:

Party Required to		Date By Which To	Covered
Deliver Document	Form / Document / Certificate	Be Delivered	by 3(d)
Party A & Party B	Certificate of signing authority and specimen signatures of each individual executing this Confirmation	Upon execution of and delivery of this Confirmation	Yes
Party A	Certified copies of all corporate resolutions authorizing the execution of this Confirmation	Upon execution of and delivery of this Confirmation	Yes
Party A	A duly executed guaranty of the Credit Support Provider of Party A	Upon execution of and delivery of this Confirmation	Yes

(k) Addresses for Notices.

Address for notices or communications to Party A:

For the purpose of Section 12(a) of the ISDA Form:

SMBC Capital Markets, Inc.
277 Park Avenue, Fifth Floor
New York, New York 10172
USA
Attention: President

Facsimile No.: (212)224-4959
(212) 224-5111 (for payment and reset notices)

Telephone No.: (212) 224-5021

Address for notices or communications to Party B:

For all purposes:

To: Ashford Hospitality LP
14185 Dallas Parkway
Suite 1150
Dallas, TX 75254
United States
Attention: Doug Kessler
Phone: 972.778.9452
Fax:

Page 6 A970618

cc:	Chatham Financial Corporation
	Attention: Randy Medina
	10901 West Toller Drive, #301
	Littleton, CO 80127
	United States
	Phone: 720.221.3515
	Fax: 720.221.3519

(l)	Process Agent. For the purpose of Section 13(c) of the ISDA Form: Party A appoints as its Process Agent: Not applicable Party B appoints as its Process Agent:
	Not applicable
(m)	Offices. The provisions of Section 10(a) of the ISDA Form will not apply to this Confirmation.
(n)	Multibranch Party. For the purpose of Section 10(c) of the ISDA Form:

Party A is not a Multibranch Party.

Party B is not a Multibranch Party.

(o)	Credit Support Document. Details of any Credit Support Document:
	With respect to Party A, Credit Support Document means: the Guaranty of the Credit Support Provider of Party A With respect to Party B, Credit Support Document means: none.
(p)	Credit Support Provider.
	With respect to Party A, Credit Support Provider means: Sumitomo Mitsui Banking Corporation With respect to Party B, Credit Support Provider means: none.
(q)	Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of New York (without reference to choice of law doctrine).
(r)	Netting of Payments. Subparagraph (ii) of Section 2(c) of the ISDA Form will apply to this Transaction in each case starting from the date of this Confirmation.
(s)	“Affiliate” will have the meaning specified in Section 14 of the ISDA Form, provided that Party A shall have, or be deemed to have, no Affiliates for the purposes of this Confirmation.
(t)	Waiver of Jury Trial. Each party waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any suit, action, or proceeding relating to this Confirmation or any Credit Support Document. Each party (1) certifies that no representative, agent, or attorney of the other party or any Credit Support Provider has represented, expressly or otherwise, that such other party would not, in the event of such a suit, action or proceeding,

Page 7 A970618

	seek to enforce the foregoing waiver and (2) acknowledges that it and the other party have been induced to enter into this Confirmation and provide for any Credit Support Document, as applicable, by, among other things, the mutual waivers and certifications in this Section.
(u)	The parenthetical clause in Section 4(a)(iii) of the ISDA Form will not apply to either Party A or Party B.
(v)	For the purpose of Section 6(e), Set-off will not apply.
(w)	Notification of Recording of Telephone Conversations. Each party hereby notifies the other that telephone conversations between the parties will be recorded, and each party consents to such recording and to such recording being produced in evidence in court proceedings.
(x)	Fully-paid Transactions.

     (i) The condition precedent in Section 2(a)(iii)(l) of the ISDA Form does not apply to a payment and delivery owing by a party if the other party shall have satisfied in full all its payment or delivery obligations under Section 2(a)(i) of the ISDA Form and shall at the relevant time have no further payment or delivery obligations, whether absolute or contingent under Section 2(a)(i) of the ISDA Form.

     (ii) Notwithstanding the terms of Section 5 and 6 of the ISDA Form if at any time and so long as one of the parties to this Confirmation (“X”) shall have satisfied in full all its payment and delivery obligations under Section 2(a)(i) of the ISDA Form and shall at the time have no future payment or delivery obligations, whether absolute or contingent under such Section, then unless the other party (“Y”) is required pursuant to appropriate proceedings to return to X or otherwise returns to X upon demand of X any portion of any such payment or delivery, (a) the occurrence of an event described in Section 5(a) of the ISDA Form with respect to X any Credit Support Provider of X or any Specified Entity of X shall not constitute an Event of Default or a Potential Event of Default with respect to X as the Defaulting Party and (b) Y shall be entitled to designate an Early Termination Date pursuant to Section 6 of the ISDA Form only as a result of the occurrence of a Termination Event set forth in Section (5)(b)(i) of the ISDA Form with respect to Y as the Affected Party.

     (iii) This agreement (including, without limitation, the ISDA Form incorporated herein for the purpose of governing only the Transaction evidenced by this Confirmation) shall govern only the Transaction evidenced by this Confirmation.

(y) Additional Representations. Section 3(a) of the ISDA Form is hereby amended by the deletion of “and” at the end of sub-clause (iv), the insertion of a semicolon in place at the end of sub-clause (v) thereof and the addition of the following new subclauses:

(vi) Agency. It is entering into this Confirmation and the Transaction as principal and not as agent of any person;

(vii) Non-Reliance. It is acting for its own account, and has made its own independent decisions to enter into the Transaction and as to whether the Transaction is appropriate or proper for it based upon its own judgment and upon advice from such advisors as it has deemed necessary. It is not relying on any communication (written or oral) of the other party as investment advice or as a recommendation to enter into the Transaction; it being understood that information and explanations related to the terms and conditions of a Transaction shall not be considered investment advice or a recommendation to enter into the Transaction. No communication (written or oral) received from the other party shall be deemed to be an assurance or guarantee as to the expected results of the Transaction;

Page 8 A970618

(viii) Assessment and Understanding. It is capable of assessing the merits of and understanding (on its own behalf or through independent professional advice), and understands and accepts, the terms, conditions and risks of the Transaction. It is also capable of assuming, and assumes, the risks of the Transaction;

(ix) Status of Parties. The other party is not acting as a fiduciary for or an advisor to it in respect of the Transaction; and

(x) Eligible Contract Participant. It is an “eligible contract participant” as defined in the U.S. Commodity Exchange Act.

(bb) Collateral Assignment. Party A consents to a collateral assignment of this Confirmation and the transaction evidenced thereby (if requested) and agrees to execute separate consents as may be reasonably requested by the parties to such agreements.

(cc) Assignment. Party B can assign its position in the transaction (in whole or in part) to any other third party with Party A’s consent, which will not unreasonably be withheld or delayed.

3. Early Termination:

Provided that no Event of Default, Potential Event of Default or Termination Event has occurred, Party B may terminate this Transaction, in whole or in part, on any Business Day (such day the “Optional Termination Date”) by providing at least two (2) Business Days’ prior notice of its election to terminate this Transaction. In the event of such termination, Party A and Party B shall attempt to agree on the amount owed in connection with such termination using the then current swap rate as of the Optional Termination Date and no funding charges, capital charge, or spread to LIBOR will apply. If Party A and Party B fail to reach agreement, the amount due with respect to such termination shall be determined in accordance with Section 17.3 of the 2000 ISDA Definitions as if (a) the Cash Settlement Method is Cash Price, (b) the Cash Settlement Payment Date is the Optional Termination Date, (c) the Quotation Rate is Mid, and (d) Cash Settlement Reference Banks are to be agreed mutually by Party A and Party B. Notwithstanding Section 17.3(a) of the 2000 ISDA Definitions, if fewer than three quotations are provided, or three banks agreed to, then Party A and Party B will attempt to arrange for an assignment of Party B’s rights and obligations under the Transaction to a mutually agreed upon Reference Market-maker. If Party A and Party B cannot agree upon, or are not able to effect, an assignment then the Cash Settlement Amount will be the average of the amounts determined by each of the parties, determined in good faith and in a commercially reasonable manner.

4. Payment Instructions.

Payments to Party A of USD amounts:

Depository:	JPMorgan Chase Bank, N.A. New York Branch
ABA Routing No.:	021000021
In Favor Of:	SMBC Capital Markets, Inc.
Account No.:	544-7-77993

	Please contact Larry Weissblum of our Operations Group if you have any questions concerning SMBC Capital Markets, Inc’s payment instructions referenced above (Telephone: 212-224-5061; Telefax: 212-224-5111).
	Payments to Party B of USD amounts: PLEASE PROVIDE
5.	Counterparts. This Confirmation may be executed in any number of counterparts, each of which shall constitute an original and all of which together shall constitute one and the same agreement and may be executed by facsimile.

Page 9 A970618

Please confirm that the foregoing correctly sets forth the terms of the agreement between you and us by executing this Confirmation and returning it to the documentation contact above.

Yours Sincerely,

Party A:

By: SMBC Capital Markets, Inc.

By:	/s/ Larry Weissblum
	Name:	Larry Weissblum
	Title:	Senior Vice President
By:	/s/ Danny Boodram
	Name:	Danny Boodram
	Title:	Vice President

Party B:

By: Ashford Hospitality LP

By:	/s/ David Brooks
	Name:	David Brooks
	Title:	COO - Chief Operating Officer

AUTHORIZATION
and
INCUMBENCY CERTIFICATE
for
Ashford Hospitality LP

I hereby certify on this l^st day of July 2009 that Ashford Hospitality LP is permitted to enter into derivative transaction(s) including but not limited to interest rate swaps, caps and floors (“transactions”) for the purposes of hedging.

Name: Title: Signature:

IN WITNESS WHEREOF, the undersigned certifies that the person(s) signing above are authorized to transact and bind Ashford Hospitality LP in hedging transaction(s). Each of the persons listed above has been authorized to transact on behalf of Ashford Hospitality LP and is duly elected to and now holds the office set forth opposite his or her name and the signature of each person set forth opposite his or her respective name is a true and genuine signature. I have hereunto signed my name as of this 1^st day of July 2009.

By:
	Name:
	Title:	Secretary (or other authorized individual; title must be provided in such case)* * This individual cannot be included on the list above.

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Monty J. Bennett, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Ashford Hospitality Trust, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
(d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 6, 2009

/s/ MONTY J. BENNETT

Monty J. Bennett

Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, David J. Kimichik, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Ashford Hospitality Trust, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 6, 2009

/s/ DAVID J. KIMICHIK

David J. Kimichik

Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report of Ashford Hospitality Trust, Inc. (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2009, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Monty J. Bennett, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)	The Report fully complies with the requirements of Section 13(a) or 5(d) of the Securities Exchange Act of 1934, as amended; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 6, 2009

/s/ MONTY J. BENNETT

Monty J. Bennett

Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report of Ashford Hospitality Trust, Inc. (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2009, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David J. Kimichik, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)	The Report fully complies with the requirements of Section 13(a) or 5(d) of the Securities Exchange Act of 1934, as amended; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 6, 2009

/s/ DAVID J. KIMICHIK

David J. Kimichik

Chief Financial Officer