10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2004.

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

ASHFORD HOSPITALITY TRUST, INC.

(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	75254
Dallas, Texas
(Address of principal executive offices)	(Zip code)

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

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. Yes [X] No [  ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

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

Class	Outstanding at November 12, 2004
Common Stock, $0.01 par value per share	25,810,447

ASHFORD HOSPITALITY TRUST, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2004

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
ITEM 1. Consolidated and Combined Financial Statements (Unaudited)
Consolidated Balance Sheets for the Company as of September 30, 2004 and December 31, 2003	3
Consolidated and Combined Statements of Operations for the Company for the three months ended September 30, 2004, and for the period from August 29, 2003 through September 30, 2003, and for the Predecessor for the period from July 1, 2003 through August 28, 2003	4
Consolidated and Combined Statements of Operations for the Company for the nine months ended September 30, 2004, and for the period from August 29, 2003 through September 30, 2003, and for the Predecessor for the period from January 1, 2003 through August 28, 2003	5
Consolidated Statement of Owners’ Equity for the Company for the nine months ended September 30, 2004	6
Consolidated and Combined Statements of Cash Flows for the nine months ended September 30, 2004 and 2003	7
Notes to Consolidated and Combined Financial Statements	8
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk	31
ITEM 4. Controls and Procedures	31
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings	32
ITEM 2. Changes in Securities and Use of Proceeds	32
ITEM 3. Defaults Upon Senior Securities	32
ITEM 4. Submission of Matters to a Vote of Security Holders	32
ITEM 5.Other Information	32
ITEM 6.Exhibits	33
SIGNATURES	34
First Amendment to Credit Agreement
Loan and Security Agreement
Loan Agreement
Mezzanine Loan Agreement
Broker Agreement
Agreement of Purchase and Sale
First Amendment to Agreement of Purchase and Sale
Second Amendment to Agreement of Purchase and Sale
Third Amendment to Agreement of Purchase and Sale
Fourth Amendment to Agreement of Purchase and Sale
International Swap Dealers Association, Inc. Master Agreement
International Swap Dealers Association, Inc. Master Agreement
International Swap Dealers Association, Inc. Master Agreement
Certification Required by Rule 13a-14(a) - Chief Executive Officer
Certification Required by Rule 13a-14(a) - Chief Financial Officer
Certification Required by Rule 13a-14(a) - Chief Accounting Officer
Certification Required by Rule 13a-14(b) - Chief Executive Officer
Certification Required by Rule 13a-14(b) - Chief Financial Officer
Certification Required by Rule 13a-14(b) - Chief Accounting Officer

2

PART I: FINANCIAL INFORMATION (Unaudited)

ITEM 1: FINANCIAL STATEMENTS

ASHFORD HOSPITALITY TRUST, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	September 30,			December 31,
	2004			2003
ASSETS
Investment in hotel properties, net	$	347,738,782		$	173,723,998
Cash and cash equivalents		92,344,154			76,254,052
Restricted cash		21,029,522			1,373,591
Accounts receivable, net of allowance of $51,337 and $19,408, respectively		4,473,071			1,534,843
Inventories		464,703			262,619
Notes receivable		90,552,800			10,000,000
Deferred costs, net		10,249,080			2,386,937
Prepaid expenses		1,834,236			1,577,628
Other assets		2,274,142			550,636
Due from affiliates		195,060			218,113
Total assets	$	571,155,550		$	267,882,417
LIABILITIES AND OWNERS’ EQUITY
Indebtedness	$	286,422,168		$	50,201,779
Capital leases payable		369,927			456,869
Accounts payable		5,690,010			2,127,611
Accrued expenses		10,074,102			4,572,594
Other liabilities		208,313			—
Dividends payable		4,467,172			—
Deferred income		519,872			—
Due to affiliates		1,026,910			584,643
Total liabilities		308,778,474			57,943,496
Minority interest		40,128,755			37,646,673
Commitments and contingencies (see Note 12)
Preferred stock, $0.01 par value, 50,000,000 shares authorized, 2,300,000 issued and outstanding at September 30, 2004		23,000			—
Common stock, $0.01 par value, 200,000,000 shares authorized, 25,810,447 and 25,730,047 shares issued and outstanding at September 30, 2004 and December 31, 2003, respectively		258,104			257,300
Additional paid-in capital		235,124,140			179,226,668
Unearned compensation		(4,542,279	)		(5,564,401	)
Accumulated other comprehensive loss		(102,831	)		—
Accumulated deficit		(8,511,813	)		(1,627,319	)
Total owners’equity		222,248,321			172,292,248
Total liabilities and owners’ equity	$	571,155,550		$	267,882,417

See notes to consolidated financial statements.

3

ASHFORD HOSPITALITY TRUST, INC. AND PREDECESSOR

CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS

(Unaudited)

	The Company			The Company			The Predecessor
	Three Months			Period From			Period From
	Ended			August 29, 2003 to			July 1, 2003 to
	September 30, 2004			September 30, 2003			August 28, 2003
REVENUE
Rooms	$	24,908,944		$	2,764,856		$	5,098,062
Food and beverage		2,975,955			463,125			832,795
Other		1,035,406			70,572			210,554
Total hotel revenue		28,920,305			3,298,553			6,141,411
Interest income from notes receivable		2,075,406			—			—
Asset management fees from related parties (see Note 11)		340,711			110,591			—
Total Revenue		31,336,422			3,409,144			6,141,411
EXPENSES
Hotel operating expenses
Rooms		5,711,214			632,740			1,145,377
Food and beverage		2,491,446			373,313			687,997
Other direct		557,010			76,130			127,968
Indirect		9,609,951			1,084,900			2,233,281
Management fees (see Note 11)		908,472			98,997			182,678
Total hotel expenses		19,278,093			2,266,080			4,377,301
Property taxes, insurance, and other		2,317,570			248,900			375,423
Depreciation and amortization		2,768,427			328,052			723,445
Corporate general and administrative:
Stock-based compensation		605,061			228,215			—
Other corporate and administrative		2,488,587			717,076			—
Total Operating Expenses		27,457,738			3,788,323			5,476,169
OPERATING INCOME (LOSS)		3,878,684			(379,179	)		665,242
Interest income		115,850			100,487			5,951
Interest expense		(2,986,713	)		(73,333	)		(1,474,082	)
Amortization of loan costs		(569,730	)		(11,716	)		(93,198	)
Write-off of loan costs		(1,633,369	)		—			—
LOSS BEFORE INCOME TAXES AND MINORITY INTEREST		(1,195,278	)		(363,741	)		(896,087	)
Provision for income taxes		(530,476	)		—			—
Minority interest		335,227			65,583			—
NET LOSS	$	(1,390,527	)	$	(298,158	)	$	(896,087	)
Net Loss Available To Common Shareholders:
Basic	$	(0.06	)	$	(0.01	)
Fully diluted	$	(0.06	)	$	(0.01	)
Weighted Average Common Shares Outstanding:
Basic		25,130,651			23,544,987
Fully diluted		30,996,692			23,544,987

See notes to consolidated and combined financial statements.

4

ASHFORD HOSPITALITY TRUST, INC. AND PREDECESSOR

CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS

(Unaudited)

	The Company			The Company			The Predecessor
	Nine Months			Period From			Period From
	Ended			August 29, 2003 to			January 1, 2003 to
	September 30, 2004			September 30, 2003			August 28, 2003
REVENUE
Rooms	$	59,991,874		$	2,764,856		$	19,688,349
Food and beverage		8,176,507			463,125			3,629,807
Other		2,366,860			70,572			681,656
Total hotel revenue		70,535,241			3,298,553			23,999,812
Interest income from notes receivable		4,946,547			—			—
Asset management fees from related parties (see Note 11)		1,000,033			110,591			—
Total Revenue		76,481,821			3,409,144			23,999,812
EXPENSES
Hotel operating expenses
Rooms		13,595,603			632,740			4,511,632
Food and beverage		6,229,246			373,313			2,801,002
Other direct		1,334,411			76,130			498,085
Indirect		23,361,370			1,084,900			8,687,362
Management fees (see Note 11)		2,191,532			98,997			718,408
Total hotel expenses		46,712,162			2,266,080			17,216,489
Property taxes, insurance, and other		4,928,028			248,900			1,600,082
Depreciation and amortization		6,727,667			328,052			2,915,777
Corporate general and administrative:
Stock-based compensation		1,792,069			228,215			—
Other corporate and administrative		6,909,195			717,076			—
Total Operating Expenses		67,069,121			3,788,323			21,732,348
OPERATING INCOME (LOSS)		9,412,700			(379,179	)		2,267,464
Interest income		247,087			100,487			22,800
Interest expense		(5,397,125	)		(73,333	)		(4,225,289	)
Amortization of loan costs		(919,041	)		(11,716	)		(357,857	)
Write-off of loan costs		(1,633,369	)		—			—
INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTEREST		1,710,252			(363,741	)		(2,292,882	)
Provision for income taxes		(687,176	)		—			—
Minority interest		(165,037	)		65,583			—
NET INCOME (LOSS)	$	858,039		$	(298,158	)	$	(2,292,882	)
Net Income (Loss) Available To Common Shareholders:
Basic	$	0.03		$	(0.01	)
Fully diluted	$	0.03		$	(0.01	)
Weighted Average Common Shares Outstanding:
Basic		25,066,981			23,544,987
Fully diluted		30,829,818			23,544,987

See notes to consolidated and combined financial statements.

5

Ashford Hospitality Trust, Inc.

Consolidated Statement of Owners’ Equity

For the Nine Months Ended September 30, 2004
(Unaudited)

	Preferred Stock				Common Stock				Additional					Accumulated Other
	Number of		$ 0.01		Number of		$0.01		Paid-In		Unearned			Comprehensive			Accumulated
	Shares		Par Value		Shares		Par Value		Capital		Compensation			Loss			Deficit			Total
Balance at December 31, 2003		—	$	—		25,730,047	$	257,300	$	179,226,668	$	(5,564,401	)	$	—		$	(1,627,319	)	$	172,292,248
Amortization of Unearned Compensation		—		—		—		—		—		1,754,985			—			—			1,754,985
Issuance of Restricted Common Shares to Employees		—		—		70,400		704		732,159		(732,863	)		—			—			—
Issuance of Common Shares to Directors		—		—		10,000		100		88,900		—			—			—			89,000
Dividends Declared — Common Shares		—		—		—		—		—		—			—			(7,742,533	)		(7,742,533	)
Issuance of Preferred Shares		2,300,000		23,000		—		—		55,076,413		—			—			—			55,099,413
Net Unrealized Loss on Derivative Instruments		—		—		—		—		—		—			(102,831	)		—			(102,831	)
Net Income		—		—		—		—		—		—			—			858,039			858,039
Balance at September 30, 2004		2,300,000	$	23,000		25,810,447	$	258,104	$	235,124,140	$	(4,542,279	)	$	(102,831	)	$	(8,511,813	)	$	222,248,321

See notes to consolidated financial statements.

6

ASHFORD HOSPITALITY TRUST, INC. AND PREDECESSOR

CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS

(Unaudited)

				Company &
	The Company			Predecessor
	Nine Months			Nine Months
	Ended			Ended
	September 30, 2004			September 30, 2003
Cash flows from operating activities:
Net income (loss)	$	858,039		$	(2,591,040	)
Adjustments to reconcile net income (loss) to net cash flow (used in) provided by operations:
Depreciation and amortization		6,727,667			3,243,829
Amortization of deferred financing costs		1,051,175			369,573
Write-off of loan costs		1,633,369			—
Amortization of unearned compensation		1,792,069			228,215
Minority interest		165,037			(65,583	)
Changes in assets and liabilities:
Accounts receivable and inventories		(2,421,508	)		(238,952	)
Prepaids, other assets, and due from affiliates		(1,588,570	)		(2,729,234	)
Restricted cash		(18,688,708	)		2,910,694
Other liabilities		3,149,231			1,539,947
Net cash flow (used in) provided by operating activities		(7,322,199	)		2,667,449
Cash flows from investing activities:
Acquisitions of notes receivable		(87,600,000	)		—
Proceeds from payments of notes receivable		7,219,586			—
Acquisitions of hotel properties		(146,031,940	)		—
Improvements and additions to hotel properties		(9,726,378	)		(476,983	)
Net cash flow used in investing activities		(236,138,732	)		(476,983	)
Cash flows from financing activities:
Distributions paid to owners		—			(1,850,750	)
Contributions received from owners		—			765,000
Borrowings on indebtedness and capital leases		346,298,933			—
Payments on indebtedness and capital leases		(132,660,699	)		(62,851,155	)
Payments of deferred financing costs		(9,186,614	)		—
Proceeds received from public preferred stock offering		55,099,413			—
Proceeds received from initial public offering		—			202,396,981
Proceeds from sale of stock to CEO & Chairman		—			4,185,000
Cash paid upon the Company’s formation		—			(10,082,071	)
Proceeds received from over-allotment option		—			14,514,183
Payment of offering costs		—			(17,374,411	)
Net cash flow provided by financing activities		259,551,033			129,702,777
Net change in cash and cash equivalents		16,090,102			131,893,243
Cash and cash equivalents, beginning balance		76,254,052			2,968,814
Cash and cash equivalents, ending balance	$	92,344,154		$	134,862,057

See notes to consolidated and combined financial statements.

7

ASHFORD HOSPITALITY TRUST, INC. AND PREDECESSOR

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

September 30, 2004

(Unaudited)

1. Organization and Description of Business

Ashford Hospitality Trust, Inc. and subsidiaries (the “Company”) is a self-advised real estate investment trust (“REIT”), which commenced operations on August 29, 2003 (“inception”) when it completed its initial public offering (“IPO”) and concurrently consummated certain other formation transactions, including the acquisition of six hotels (“initial properties”) and eight asset management and consulting contracts, all previously owned by affiliates of Remington Hotel Corporation (the “Predecessor”).

The IPO consisted of the sale of 22,500,000 shares of common stock (“initial shares”), which included 22,336,478 shares sold to the public at a price of $9 per share and 163,522 shares sold to affiliates at a price of $8.37 a share. The IPO generated gross proceeds of approximately $202.4 million. However, the aggregate proceeds to the Company, net of underwriters’ discount and offering costs, was approximately $185.3 million. In addition to the initial shares, 500,000 shares of common stock were sold to Messrs. Archie and Montgomery Bennett, the Company’s Chairman and Chief Executive Officer, respectively, 216,634 shares of common stock were conveyed to a limited partnership owned by Messrs. Archie and Montgomery Bennett, 25,000 shares of restricted common stock were issued to Company directors, 65,024 shares of common stock were issued to the underwriters, and 650,300 shares of restricted common stock were issued to Company executives and certain employees of the Company and its affiliates. In total, 23,956,958 shares of common stock were issued in connection with the Company’s formation. In addition, 5,657,917 units of limited partnership interest, valued at $9 per unit, were issued to Company executives and certain employees of the Company and its affiliates.

On September 26, 2003, the Company issued an additional 1,734,072 shares of common stock at a price of $9 per share as a result of the exercise of the underwriters’ over-allotment option. This generated additional gross proceeds of approximately $15.6 million, or net proceeds of approximately $14.5 million after considering the underwriters’ fees of approximately $1.1 million. Concurrent with this, the Company issued an additional 39,017 shares of restricted common stock to its executives and certain employees of the Company and its affiliates.

During the nine months ended September 30, 2004, the Company completed the following transactions:

• On March 15, 2004, the Company issued an additional 70,400 shares of restricted common stock to its executives and certain employees.

• On April 1, 2004, the Company issued an additional 106,675 units of limited partnership interest in connection with the acquisition of a hotel property.

• On May 19, 2004, the Company issued an additional 10,000 shares of common stock to its directors as compensation for serving on the Board through May 2005.

• On September 2, 2004, the Company issued an additional 333,333 units of limited partnership interest in connection with the acquisition of nine hotel properties.

• On September 22, 2004, the Company issued 2,300,000 shares of preferred stock related to its initial public offering of Series A Cumulative Preferred Stock.

As of September 30, 2004, the Company owned 32 hotel properties in thirteen states with 4,441 rooms, and had acquired or originated mezzanine or first-mortgage loans receivable of approximately $90.6 million.

For the Company to qualify as a REIT, it cannot operate hotels. Therefore, the Company’s operating partnership, which, as of September 30, 2004, was owned 80.89% by the Company and 19.11% by: a) Company executives, b) certain employees of the Company and its affiliates, and c) other minority interest holders, leases its hotels to Ashford TRS Corporation (“Ashford TRS”), which is a wholly-owned subsidiary of the operating partnership. Ashford TRS then engages hotel management companies to operate the hotels under management contracts. Ashford TRS is treated as a taxable REIT subsidiary for federal income tax purposes. Therefore, the Company’s operating partnership and principal source of funds is dependent on Ashford TRS’s ability to generate cash flow from the operation of the Company’s hotels.

2. Basis of Presentation

The consolidated financial statements presented herein include all of the accounts of the Company beginning with its commencement of operations on August 29, 2003. Prior to that time, this report includes the combined financial statements of the Predecessor.

These consolidated and combined financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include certain information and disclosures required by GAAP for complete financial statements. However, in the opinion of management, all adjustments, consisting of normal recurring adjustments and accruals, considered necessary for a fair presentation have been included. In addition, the operations of the Company’s hotels have historically been seasonal. This seasonality pattern can be expected to cause fluctuations in the Company’s operating results. Consequently, operating results for the three and nine months ended September 30, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004.

8

These consolidated and combined financial statements should be read in conjunction with the Company’s audited consolidated financial statements and footnotes for the year ended December 31, 2003, included in the Company’s Form 10-K, as filed with the Securities and Exchange Commission on March 29, 2004. The accounting policies used in preparing these consolidated and combined financial statements are consistent with those described in such Form 10-K.

3. Significant Accounting Policies Summary

Principles of Consolidation – The Company’s consolidated financial statements include the Company and its majority-owned subsidiaries. The Predecessor’s financials statements are presented on a combined basis as a result of common ownership and control. All significant intercompany accounts and transactions among the consolidated and combined entities have been eliminated in the consolidated and combined financial statements.

Revenue Recognition – Hotel revenues include room, food, beverage, and other hotel revenues such as long-distance telephone service, laundry, and space rentals. Interest income from notes receivable represents interest earned on the Company’s mezzanine and first-mortgage loans receivable portfolio. Asset management fees relate to asset management services performed on behalf of an affiliate, including risk management and insurance procurement, assistance with taxes, negotiating franchise agreements and equipment leases, monitoring compliance with loan covenants, preparation of capital and operating budgets, and property litigation management. Revenues are recognized as the related services are delivered.

Use of Estimates – The preparation of these consolidated and combined 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 and 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.

Restricted Cash – Restricted cash includes reserves for debt service, real estate taxes, and insurance, as well as excess cash flow deposits and reserves for furniture, fixtures, and equipment replacements of approximately 4% of property revenue for certain hotels, as required by certain mortgage debt agreement restrictions and provisions.

Investment in Hotel Properties – The initial six hotel properties are stated at the Predecessor’s historical cost, net of any impairment charges, plus an approximate $8.1 million minority interest partial step-up recorded upon formation of the Company on August 29, 2003, related to the acquisition of minority interest from unaffiliated parties associated with four of the initial properties. Hotel properties acquired subsequent to the Company’s formation are stated at cost. Improvements and additions which extend the life of the property are capitalized.

Impairment of Investment in Hotel Properties – Hotel properties are reviewed for impairment whenever events or changes in circumstances indicate the carrying value of the hotel properties may not be recoverable. The Company tests for impairment in several situations, including when current or projected cash flows are less than historical cash flows, when it becomes more likely than not that a hotel will be sold before the end of its previously estimated useful life, and when events or changes in circumstances indicate that a hotel’s net book value may not be recoverable. In the evaluation of the impairment of hotel properties, the Company makes many assumptions and estimates, including projected cash flows, holding period, expected useful life, future capital expenditures, and fair values, including consideration of capitalization rates, discount rates, and comparable selling prices. To date, no such impairment charges have been recognized. If an asset were deemed to be impaired, the Company would record an impairment charge for the amount that the property’s net book value exceeds its fair value.

Depreciation and Amortization Expense – Depreciation expense is based on the estimated useful life of the Company’s assets, while amortization expense for leasehold improvements is the shorter of the lease term or the estimated useful life of the related assets. Presently, hotel properties are depreciated using the straight-line method over lives which range from 15 to 39 years for buildings and improvements and 3 to 5 years for furniture, fixtures, and equipment. While the Company believes its estimates are reasonable, a change in the estimated lives could affect depreciation expense and net income (loss) as well as the gain or loss on the potential sale of any of the Company’s hotels.

Notes Receivable – The Company provides mezzanine and first-mortgage financing in the form of loans. Loans receivable are recorded at cost, adjusted for net origination fees and costs. Premiums, discounts, and net origination fees are amortized or accreted as an adjustment to interest income using the effective interest method. Loans receivable are reviewed for potential impairment at each balance sheet date. A loan receivable is considered impaired when, based on current information, it becomes probable that the Company will be unable to collect all amounts due according to the loan’s contractual terms. The amount of impairment, if any, is measured by comparing the recorded amount of the loan to the present value of the expected cash flows or fair value of collateral. If a loan were deemed to be impaired, the Company would record a reserve for loan losses through a charge to income for any shortfall. To date, no such impairment charges have been recognized.

Derivative Instruments and Hedging Activities – Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended and interpreted (“SFAS No. 133”), establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. As required by SFAS No. 133, the Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and the resulting designation. Derivatives used to hedge the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.

9

For derivatives designated as fair value hedges, changes in the fair value of the derivative and the hedged item related to the hedged risk are recognized in earnings. For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is initially reported in other comprehensive income (outside of earnings) and subsequently reclassified to earnings when the hedged transaction affects earnings, and the ineffective portion of changes in the fair value of the derivative is recognized directly in earnings. The Company assesses 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.

The Company’s objective in using derivatives is to add stability to interest expense and to manage its exposure to interest rate movements or other identified risks. To accomplish this objective, the Company primarily uses interest rate swaps and caps as part of its cash flow hedging strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts in exchange for fixed-rate payments over the life of the agreements without exchange of the underlying principal amount. Interest rate caps designated as cash flow hedges provide the Company with interest rate protection above the strike rate on the cap and result in the Company receiving interest payments when rates are above the cap strike.

Income Taxes – As a REIT, the Company generally will not be subject to federal corporate income tax on that portion of its net income (loss) that does not relate to taxable REIT subsidiaries. However, Ashford TRS is treated as a taxable REIT subsidiary for federal income tax purposes.

Stock-based Compensation – The Company accounts for stock-based compensation using the intrinsic-value method in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees.” In connection with the Company’s formation, the Company established an Employee Stock Plan (the “Stock Plan”). Under the Stock Plan, the Company has issued 784,717 shares of restricted common stock to its executives, directors, and certain employees of the Company and its affiliates and 10,000 shares of non-restricted common stock to its directors. Of the 784,717 restricted shares issued, 759,717 vest over three years and 25,000 vested over six months. Although the 10,000 non-restricted shares issued are immediately vested, these shares represent compensation for the subsequent year of service. All such shares are charged to compensation expense on a straight-line basis over the vesting or service period based on the Company’s stock price on the date of issuance. Under the Stock Plan, the Company may issue a variety of performance-based stock awards, including nonqualified stock options. As of September 30, 2004, no performance-based stock awards have been issued other than the restricted shares discussed above. Consequently, stock-based compensation as determined under the intrinsic-value method is the same under the fair-value method.

Earnings (Loss) Per Share – Basic earnings (loss) per common share is calculated by dividing net income (loss) applicable to common shareholders by the weighted average common shares outstanding during the period. Dilutive earnings (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 earnings (loss) per share. For the three and nine months ended September 30, 2004, the following table reconciles the amounts used in calculating basic and fully diluted earnings (loss) per common share:

	Three Months			Nine Months
	Ended			Ended
	September 30, 2004			September 30, 2004
Net income (loss) applicable to common shareholders — basic	$	(1,390,527	)	$	858,039
Remove minority interest		335,227			(165,037	)
Net income (loss) applicable to common shareholders — diluted	$	(1,725,754	)	$	1,023,076
Weighted average common shares outstanding — basic		25,130,651			25,066,981
Weighted average units of limited partnership interest		5,866,041			5,762,837
Incremental diluted shares related to unvested restricted shares		—			—
Weighted average common shares outstanding — diluted		30,996,692			30,829,818
Net income (loss) per common share — basic	$	(0.06	)	$	0.03
Net income (loss) per common share — diluted	$	(0.06	)	$	0.03

For the period from the Company’s inception on August 29, 2003 to September 30, 2003 and the three months ended September 30, 2004, the Company reported a net loss. Consequently, the effects of the restricted shares of common stock and outstanding units of limited partnership interest are anti-dilutive for those periods. Therefore, basic and dilutive earnings (loss) per common share are the same for those periods. For the nine months ended September 30, 2004, the application of the treasury stock method resulted in no incremental diluted shares related to unvested restricted shares.

Segments – The Company presently operates in two business segments within the hotel lodging industry: direct hotel investments and hotel financing. Direct hotel investments refers to owning hotels through either acquisition or new development. Hotel financing refers to owning subordinate hotel-related mortgages through acquisition or origination. The Predecessor only operated within the direct hotel investments segment.

10

Recent Accounting Pronouncements –

FIN No. 46 – In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46, “Consolidation of Variable Interest Entities,” as revised (“FIN No. 46”). FIN No. 46 requires existing variable interest entities, as defined, to be consolidated by their primary beneficiaries if the variable interest entities do not effectively disperse risks among parties involved. FIN No. 46 was effective immediately for variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date. FIN No. 46 applies to financial statements for periods ending after March 15, 2004, related to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003.

Since November 2003, the Company has acquired or originated a $90.6 million portfolio of mezzanine and first-mortgage loans receivable, each of which are secured by various hotel properties or partnership interests in hotel properties and are subordinate to primary loans related to the secured hotels. All of these loans receivable are considered to be variable interests in the entities that own the related hotels, which are variable interest entities. However, the Company is not considered to be the primary beneficiary of these hotel properties as a result of holding these loans. Therefore, the Company will not consolidate the hotels for which it has provided financing. Hence, the adoption of FIN No. 46 did not have a material impact on the Company’s results of operations, financial position, or cash flows. Interests in entities acquired or created in the future will be evaluated based on FIN No. 46 criteria and such entities will be consolidated, if required.

4. Investment in Hotel Properties

Investment in Hotel Properties consists of the following as of September 30, 2004 and December 31, 2003:

	September 30,			December 31,
	2004			2003
Land	$	51,113,115		$	28,652,386
Buildings and improvements		288,021,397			143,811,837
Furniture, fixtures, and equipment		35,996,188			22,002,543
Total cost		375,130,700			194,466,766
Accumulated depreciation		(27,391,918	)		(20,742,768	)
Investment in hotel properties, net	$	347,738,782		$	173,723,998

On March 24, 2004, the Company acquired a hotel property in Lake Buena Vista, Florida, from JHM Ruby Lake Hotel, Ltd. for approximately $25.6 million in cash. Considering closing costs, this acquisition generated an increase in Investment in Hotel Properties of approximately $25.4 million with the remainder of the purchase price related to working capital.

On April 1, 2004, the Company acquired a hotel property in Atlantic Beach, Florida, from Huron Jacksonville Limited Partnership for approximately $23.1 million, which consisted of approximately $6.3 million in cash, approximately $15.7 million in assumed mortgage debt, and approximately $1.1 million worth of limited partnership units, which equates to 106,675 units based on the market price of the Company’s common stock on the date of issuance. Considering closing costs, this acquisition generated an increase in Investment in Hotel Properties of approximately $23.3 million.

On May 17, 2004, the Company acquired a hotel property in Baltimore, Maryland, from The Buccini/Pollin Group for approximately $15.9 million, which included approximately $9.1 million in cash and approximately $6.8 million in assumed mortgage debt. Considering closing costs, this acquisition generated an increase in Investment in Hotel Properties of approximately $16.2 million.

On July 7, 2004, the Company acquired a hotel property and adjacent office building in Philadelphia, Pennsylvania, from Household OPEB I, Inc. for approximately $16.7 million in cash. Considering closing costs, this acquisition generated an increase in Investment in Hotel Properties of approximately $17.6 million.

On July 23, 2004, the Company acquired four hotel properties from Day Hospitality Group for approximately $25.9 million in cash plus a contingent component to be paid, if earned, no later than April 30, 2005. Considering closing costs, this acquisition generated an increase in Investment in Hotel Properties of approximately $25.6 million with the remainder of the purchase price related to working capital.

On September 2, 2004, the Company acquired nine hotel properties from Dunn Hospitality Group for approximately $62.0 million, which consisted of approximately $59.0 million in cash and approximately $3.0 million worth of limited partnership units, which equates to 333,333 units based on the market price of the Company’s common stock on the date of issuance. Considering closing costs, this acquisition generated an increase in Investment in Hotel Properties of approximately $62.9 million.

11

5. Notes Receivable

Notes receivable consists of the following as of September 30, 2004 and December 31, 2003:

	September 30,		December 31,
	2004		2003
$10 million mezzanine loan secured by one hotel property, matures August 2006, at an interest rate of LIBOR plus 9% with a 2% LIBOR floor, with interest-only payments through August 2004 plus principal payments thereafter based on a twenty-five year amortization schedule	$	10,000,000	$	10,000,000
$15 million mezzanine loan secured by one hotel property, matures January 2006, at an interest rate of LIBOR plus 9%, with interest-only payments through maturity		15,000,000		—
$17.8 million mezzanine loan secured by 15 hotel properties, matures July 2005, at an interest rate of LIBOR plus 8.7% with a 2.5% LIBOR floor, with principal and interest payments due monthly based on a twenty-five year amortization schedule		17,780,414		—
$15 million mezzanine loan secured by one hotel property, matures April 2007, at an interest rate of LIBOR plus 10.25% with a 1.75% LIBOR floor and 5% LIBOR cap, with interest-only payments through maturity		15,000,000		—
$6.8 million mezzanine loan secured by one hotel property, matures January 2006, at an interest rate of the greater of 15% or LIBOR plus 13% with a 2% LIBOR floor (LIBOR plus 10% with 2% LIBOR floor pay rate with deferred interest through maturity), with interest-only payments through maturity		6,759,553		—
$11 million mezzanine loan secured by one hotel property, 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		11,012,833		—
$10 million mortgage loan secured by one hotel property, matures October 2006, at an interest rate of LIBOR plus 2.8%, with interest-only payments through maturity		10,000,000		—
$5 million mezzanine loan secured by one hotel property, matures October 2006, at an interest rate of LIBOR plus 11.35%, with interest-only payments through maturity		5,000,000		—
Total	$	90,552,800	$	10,000,000

Since December 31, 2003, the $15 million, $17.8 million, $15 million, $6.8 million, $11 million, $10 million, and $5 million notes receivable, as described sequentially in the above table, were acquired or originated on January 23, 2004, March 4, 2004, March 19, 2004, March 24, 2004, September 10, 2004, September 30, 2004, and September 30, 2004, respectively. In general, the Company’s notes receivable have extension options, prohibit prepayment through a certain period, and require decreasing prepayment penalties through maturity.

On August 20, 2004, the Company received an approximate $7.2 million payment that was related to the portion of its $25.0 million mezzanine loan that was secured by two hotel properties. Hence, the $25.0 million mezzanine loan, originally secured by 17 hotel properties, became the aforementioned $17.8 million mezzanine loan, secured by 15 hotel properties.

As of September 30, 2004, all notes receivable balances were current, and no reserve for loan losses has been recorded.

12

6. Indebtedness

Indebtedness consists of the following as of September 30, 2004 and December 31, 2003:

	September 30,		December 31,
	2004		2003
$210 million term loan secured by 25 hotel properties, matures September 29, 2006, at varying interest rates averaging LIBOR plus 1.95%, with interest-only payments due monthly, with three one-year extension options	$	210,000,000	$	—
$60 million secured credit facility secured by one hotel property, matures August 17, 2007, at an interest rate of LIBOR plus a range of 2.0% to 2.3% depending on the loan-to-value ratio, with interest-only payments due monthly, with a commitment fee of 0.25% to 0.5% on the unused portion of the line payable quarterly, with two one-year extension options		2,764,045		—
$45.6 million secured credit facility secured by four mezzanine notes receivable totaling approximately $56 million, matures July 14, 2007, with no additional advances permitted in the final year, at an interest rate of LIBOR plus 6.25% with a 2% LIBOR floor, with interest-only payments due monthly through maturity, a commitment fee of 0.5% on the unused portion of the line after 180 days payable monthly, and an option to extend the revolving period by one year		32,861,962		—
Mortgage note payable secured by one hotel property, matures December 31, 2006, at an interest rate of the greater of LIBOR plus 3.5% or 5.5%, with interest-only payments due monthly plus principal payments of $20,000 due monthly beginning January 1, 2005, with a 1% mandatory exit fee and a 0.5% one-year extension fee		—		16,000,000
Mortgage note payable secured by five hotel properties, matures December 31, 2007, at an interest rate of LIBOR plus 3.25% with a 4.75% total floor, with interest-only payments due monthly plus principal payments of $57,000 due monthly beginning January 1, 2006, with a $180,000 mandatory exit fee and a 0.5% one-year extension fee		—		27,800,000
Mortgage note payable secured by one hotel property, matures January 1, 2006, at an interest rate of 7.08%, with principal and interest payments due monthly of approximately $46,000 and a 1% mandatory exit fee		6,323,426		6,401,779
Mortgage note payable secured by one hotel property, matures December 31, 2005, at an interest rate of 7.25%, with principal and interest payments due monthly of approximately $114,000		15,557,979		—
Mortgage note payable secured by one hotel property, matures April 1, 2011, at an interest rate of the average weekly yield for 30-day commercial paper plus 3.4%, with principal and interest payments due monthly, with the principal portion escalating from approximately $15,000 to approximately $53,000 by maturity		11,959,756		—
Mortgage note payable secured by two hotel properties, matures July 31, 2007, at an interest rate of LIBOR plus 3.5% with a 5% total floor, with interest-only payments due monthly plus principal payments of $25,000 due monthly beginning August 1, 2006, with two one-year extension options		6,955,000		—
Total	$	286,422,168	$	50,201,779

13

On September 2, 2004, the Company executed a $210.0 million term loan, as discussed in the above table, and used the proceeds to repay three mortgage notes payable totaling approximately $57.8 million, pay down its $60.0 million secured credit facility by approximately $57.2 million, and pay down another mortgage note payable by approximately $12.6 million. These reductions in debt are discussed more specifically below. Unamortized loan costs associated with the repaid mortgage notes were approximately $1.6 million, which were charged off.

The $16.0 million mortgage note payable outstanding at December 31, 2003, was repaid upon completion of the aforementioned $210.0 million term loan. The balance outstanding at the time the loan was repaid was $16.0 million.

The $27.8 million mortgage note payable outstanding at December 31, 2003, which relates to a $36 million non-recourse loan, was repaid upon completion of the aforementioned $210.0 million term loan. The balance outstanding at the time the loan was repaid was approximately $32.1 million.

On February 5, 2004, the Company completed the $60.0 million secured credit facility, of which approximately $49.8 million of the proceeds were funded March 24, 2004 and the remainder was funded May 17, 2004. The credit facility allows for an increase to $75.0 million subject to certain conditions. Upon completion of the aforementioned $210.0 million term loan, the credit facility was paid down by approximately $57.2 million. On August 17, 2004, the Company modified this credit facility such that the interest rate was reduced from LIBOR plus 3.25% to LIBOR plus a range of 2.0% to 2.3% depending on the loan-to-value ratio, and maturity was extended from February 5, 2007 to August 17, 2007, with two one-year extension options.

On April 1, 2004, in connection with the acquisition of a hotel property, the Company assumed a mortgage note payable of approximately $15.7 million, which matures December 31, 2005, as shown in the above table. As of September 30, 2004, this mortgage note payable had an outstanding balance of approximately $15.6 million.

On May 17, 2004, in connection with the acquisition of a hotel property, the Company assumed a mortgage note payable of approximately $6.8 million, which matures April 1, 2011, as shown in the above table. On August 12, 2004, the Company increased this commitment by approximately $5.2 million and reduced the overall interest rate from the average weekly yield for 30-day commercial paper plus 3.5% to the average weekly yield for 30-day commercial paper plus 3.4%. As of September 30, 2004, this mortgage note payable had an outstanding balance of approximately $11.96 million.

On July 7, 2004, the Company executed a $14.8 million mortgage note payable, secured by one hotel property, at an interest rate of LIBOR plus 3.5%, with a 5% total floor. The mortgage note payable had a maturity date of July 31, 2007 with two one-year extension options, with interest-only payments due monthly plus principal payments of $20,000 due monthly beginning July 1, 2006. Upon completion of the aforementioned $210.0 million term loan, this mortgage note payable was repaid. The balance outstanding at the time the loan was repaid was approximately $9.7 million.

On July 14, 2004, the Company executed a $45.6 million credit facility, which matures July 14, 2007, as shown in the above table. Approximately $37.5 million of the proceeds were funded immediately. On August 26, 2004, the Company paid down approximately $4.6 million of this credit facility in connection with the partial payoff of one of the mezzanine notes receivable securing the facility.

On July 23, 2004, the Company executed a $19.6 million mortgage note payable, which matures July 31, 2007, as shown in the above table. Upon completion of the aforementioned $210.0 million term loan, this mortgage note payable was paid down approximately $12.6 million. As of September 30, 2004, this mortgage note payable had an outstanding balance of approximately $6.96 million.

On August 4, 2004, the Company announced a commitment for an $80.0 million revolving credit facility, which will be secured by certain loans within the Company’s mezzanine notes receivable portfolio, at an interest rate representing the greater of 7.5% or LIBOR plus 5.5%. The credit facility will mature in three years with two one-year extension options, will require interest-only payments due monthly plus principal amortization terms consistent with each mezzanine note receivable pledged, and an origination fee of 1%. Currently, the Company continues discussions with the lender regarding finalizing certain terms.

In addition, the Company’s $6.3 million, $15.6 million, and $11.96 million mortgage notes payable agreements generally require decreasing prepayment penalties through maturity.

7. Derivative Instruments and Hedging Activities

On September 2, 2004, the Company was required by a lender to purchase a 6.0% LIBOR interest rate cap with a $210.0 million notional amount to limit its exposure to rising interest rates on $210.0 million of its floating-rate debt. To partially offset the cost of the purchased cap, the Company sold a 6.0% LIBOR interest rate cap with a $105.0 million notional amount with identical terms to the purchased cap. Both interest rate caps mature October 2, 2006. The Company has designated the net purchased option of $105.0 million as a cash flow hedge of its exposure to changes in interest rates on a corresponding amount of variable-rate debt.

On September 7, 2004, the Company entered into a $105.0 million stair-stepped interest rate swap agreement, at an average interest rate of 4.9% over the term of the swap, which matures March 1, 2007. The interest rate swap effectively converts the interest payments on $105.0 million of the Company’s floating-rate debt to a fixed rate and has been designated as a cash flow hedge.

As of September 30, 2004, no derivatives were designated as fair value hedges or hedges of net investments in foreign operations.

At September 30, 2004, derivatives with a fair value of approximately $173,000 were included in other assets, and derivatives with a fair value of approximately $208,000 were included in other liabilities. During the three and nine months ended September 30, 2004, the change in net unrealized gains/losses of approximately $103,000 for derivatives designated as cash flow hedges is separately

14

disclosed in the consolidated statement of owners’ equity. During the three and nine months ended September 30, 2004, no hedge ineffectiveness was recognized.

Amounts reported in accumulated other comprehensive loss related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the next twelve months, the Company estimates that a gain of approximately $60,000 will be reclassified from other comprehensive loss existing at September 30, 2004, to interest expense.

8. Employee Stock Grants

Upon consummation of the IPO and subsequent exercise of the underwriters’ over-allotment, the Company issued 714,317 shares of restricted common stock to its executives, directors, and certain employees of the Company and its affiliates. Of the 714,317 shares issued, 689,317 vest over three years and 25,000 vested over six months. The value of the shares is charged to compensation expense on a straight-line basis based on the IPO price of $9 per share.

On March 15, 2004, the Company issued an additional 70,400 shares of restricted common stock to its executives and certain employees. These shares vest over three years, and the value of the shares is charged to compensation expense on a straight-line basis based on the closing price on the date of issuance of $10.41 per share.

On May 19, 2004, the Company issued 10,000 shares of common stock to its directors as compensation for serving on the Board through May 2005. These shares are immediately vested, and the value of these shares is charged to compensation expense over the year of service on a straight-line basis based on the closing price on the date of issuance of $8.90 per share.

For the three and nine months ended September 30, 2004, the Company recognized compensation expense of approximately $605,000 and $1.8 million, respectively, related to these shares.

9. Preferred Stock

On September 22, 2004, the Company issued 2,300,000 shares of 8.55% Series A Cumulative Preferred Stock (“Preferred Stock”) at $25 per share, which generated gross proceeds of approximately $57.5 million. However, the aggregate proceeds to the Company, net of underwriters’ discount and offering costs, was approximately $55.1 million.

The Preferred Stock has no maturity date, and the Company is not required to redeem the shares at any time. Prior to September 22, 2009, the Preferred Stock is not redeemable, except in certain limited circumstances relating to the ownership limitation necessary to preserve the Company’s qualification as a REIT. However, on and after September 22, 2009, the Preferred Stock will be redeemable at the Company’s option for cash, in whole or from time to time in part, at a redemption price of $25 per share plus accrued and unpaid dividends, if any, at the redemption date. In general, the holders of the Preferred Stock have no voting rights.

Preferred Stock dividends are cumulative from the date of original issuance and are payable quarterly, when and as declared, commencing on January 18, 2005 at the rate of 8.55% per annum of the $25 liquidation preference (equivalent to an annual dividend rate of $2.1375 per share). Dividends will be payable on the 15th day of January, April, July, and October of each year, or if such day is not a business day, the next succeeding business day. For the three and nine months ended September 30, 2004, the Company did not accrue preferred stock dividends payable for the period between issuance on September 22, 2004 and September 30, 2004.

10. Minority Interest

Minority interest in the operating partnership represents the limited partners’ proportionate share of the equity in the operating partnership. Net income (loss) is allocated to minority interest based on the weighted average limited partnership percentage ownership throughout the period. Upon formation of the Company on August 29, 2003, and subsequent exercise of the underwriters’ over-allotment option on September 26, 2003, the Company issued 5,657,917 units of limited partnership interest to affiliates. On April 1, 2004, the Company issued an additional 106,675 units of limited partnership interest in connection with the acquisition of a hotel property. On September 2, 2004, the Company issued an additional 333,333 units of limited partnership interest in connection with the acquisition of nine hotel properties.

As of September 30, 2004, these units of limited partnership interest represent a 19.11% minority interest ownership. Beginning one year after issuance, each unit of limited partnership interest may be redeemed for either cash or one share of the Company’s common stock at the Company’s discretion.

11. Related Party Transactions

Under previous agreements with affiliates owned by the Company’s Chairman and the Company’s Chief Executive Officer and Director, the Predecessor was obligated to pay such affiliates management fees of 3%-4.5% of gross revenues, as defined by the agreements, and to reimburse such affiliates for certain accounting and administrative expenses. Under related management agreements, the Predecessor was obligated to pay a fee equal to 8% of all invoiced third-party expenditures necessary for the replacement of furniture, fixtures, and equipment, and for building repairs.

Upon formation of the Company on August 29, 2003, the Company became obligated to pay such affiliates a) monthly management fees equal to the greater of $10,000 or 3% of gross revenues as well as an annual incentive management fee, if certain operational criteria are met, b) market service fees on the approved capital improvements, including project management fees of up to 4% of project costs, and c) other reimbursements as approved by the Company’s independent directors.

15

Under these agreements, the Company or its Predecessor incurred the following amounts during the three and nine months ended September 30, 2004 and 2003:

	The Company		The Company		The Predecessor		The Company		Company & Predecessor
	Three Months		Period From		Period From		Nine Months		Nine Months
	Ended		August 29, 2003 to		July 1, 2003 to		Ended		Ended
	September 30, 2004		September 30, 2003		August 28, 2003		September 30, 2004		September 30, 2003
Management fees (a)	$	908,472	$	98,997	$	182,678	$	2,191,532	$	817,405
Market service and project management fees		742,462		970		19,832		906,842		55,266
Special Limited Partner fees (b)		—		—		122,995		—		506,307
Other reimbursements		955,468		25,758		151,054		1,492,674		382,370
Total	$	2,606,402	$	125,725	$	476,559	$	4,591,048	$	1,761,348

(a) For the three and nine months ended September 30, 2004, the above table includes management fees of approximately $243,000 and $412,000, respectively, related to third party managers who are not related parties. As of September 30, 2004, these third parties manage 18 of the Company’s 32 hotels. For the three and nine months ended September 30, 2004, the Company also accrued incentive fees to related parties of approximately $99,000 and $208,000, respectively, which are included in indirect hotel operating expenses.

(b) Upon formation of the Company on August 29, 2003 and related redemption of the Company’s interest in its Special Limited Partner, the Special Limited Partner fee ceased to exist.

The management agreement with an affiliate includes an exclusivity clause that requires the Company to engage the affiliate, unless the Company’s independent directors either (i) unanimously vote to hire a different manager or developer, or (ii) by a majority vote, elect not to engage the affiliate because special circumstances exist or, based on the affiliate’s prior performance, it is believed that another manager or developer could materially improve the performance of the duties.

In addition to the above, these affiliates also pay for certain corporate general and administrative expenses on behalf of the Company, including rent, payroll, office supplies, and travel. Such charges are allocated to the Company based on various methodologies, including headcount, office space, usage, and actual amounts incurred. For the three and nine months ended September 30, 2004, such costs were approximately $142,000 and $535,000, respectively, which are reimbursed by the Company monthly.

In May 2004, the Company engaged a financial services firm to act as a financial advisor in obtaining permanent financing related to various hotel properties. A Company board member is an employee and principal of this firm, and the engagement of such firm was approved by the Company’s Board.

12. Commitments and Contingencies

Restricted Cash — Under existing mortgage loan agreements, the Company is obligated to escrow payments for insurance, real estate taxes, and debt service. In addition, for certain properties with debt, the Company is obligated to escrow 4% of gross revenue for capital improvements.

Franchise Fees — Under the existing franchise agreements, the Company is obligated to pay the franchisors royalty fees between 2.5% and 5% of gross room revenue, and fees for marketing, reservations, and other related activities aggregating between 1% and 3.75% of gross room revenue. Franchise fees are included in indirect operating expenses in the accompanying consolidated and combined statements of operations. These franchise agreements expire beginning in 2011 through 2024. When a franchise term expires, the franchisor has no obligation to issue a new franchise. The loss of a franchise could have a material adverse effect on the operations or the underlying value of the affected hotel because of the loss of associated name recognition, marketing support, and centralized reservation systems provided by the franchisor. The loss of a franchise could also have a material adverse effect on cash available for distribution to stockholders. In addition, if the Company terminates a franchise prior to its expiration date, the Company may be required to pay up to three times the average annual franchise fees incurred for that property.

Management Fees — Under the existing management agreements, the Company is obligated to pay a) monthly management fees equal to the greater of $10,000 or 3% of gross revenues, or in some cases just 3% of gross revenues, as well as an annual incentive management fee, if applicable, b) market service fees on the approved capital improvements, including project management fees of up to 4% of project costs, for certain hotels, and c) other general fees at current market rates as approved by the Company’s independent directors. These management agreements expire beginning in 2006 through 2013, with renewal options on those related to affiliates of up to twenty-five additional years. In addition, if the Company terminates a management agreement on one of the initial properties prior to its expiration due to sale of the property, the Company may be required to pay all estimated management fees due under the management agreement’s remaining term. This termination fee may be avoided in certain circumstances by substitution of a similar property. If the Company terminates a management agreement on one of the hotels acquired after the Company’s formation, or on one of the initial properties for reasons other than sale of the property, the Company may be required to pay estimated management fees ranging from one to six years from the termination date or substitute a new management agreement related to a different hotel.

Common Stock Dividends — On March 15, 2004, the Company declared a cash dividend of approximately $1.9 million, or $0.06 per fully-diluted common share, for common shareholders and units of limited partnership of record on March 31, 2004, which was paid April 15, 2004. On June 16, 2004, the Company declared a cash dividend of approximately $3.2 million, or $0.10 per fully-diluted common share, for common shareholders and units of limited partnership of record on June 30, 2004, which was paid July 15, 2004. On September 13, 2004, the Company declared a cash dividend of approximately $4.5 million, or $0.14 per fully-diluted common share, for common shareholders and units of limited partnership of record on September 30, 2004, which was paid October 15, 2004.

16

Preferred Stock Dividends – Such dividends are cumulative from the date of original issuance and are payable quarterly, when and as declared, commencing on January 18, 2005 at the rate of 8.55% per annum of the $25 liquidation preference (equivalent to an annual dividend rate of $2.1375 per share). These dividends will be payable quarterly on the 15th day of January, April, July, and October of each year, or if such day is not a business day, the next succeeding business day.

Acquisition Contingency — On July 23, 2004, the Company acquired four hotel properties from Day Hospitality Group for approximately $25.9 million in cash plus a contingent component based on the 2004 performance of the four acquired hotels to be paid, if earned, no later than April 30, 2005. As of September 30, 2004, the Company had not accrued such contingent payment as the likelihood of such contingency is not determinable.

Insurance Losses — During August and September of 2004, four hurricanes caused significant damage throughout Florida and neighboring states. As a result, the Company’s four properties in that region experienced varying levels of property damage and business interruption. On July 20, 2004, the Company’s Radisson Hotel in Covington, Kentucky, experienced a fire on one of its hotel floors. As a result, this hotel was subsequently closed for approximately three days due to lack of electrical power. Although the Company’s insurance covers both property damage and business-interruption losses, the Company is liable for uninsured losses below its deductibles. During the three and nine months ended September 30, 2004, the Company accrued approximately $660,000 related to property damage associated with these events, and estimates that it lost an additional $340,000 related to business interruption. However, the Company is still evaluating the property damage incurred with respect to the related insurance policies. At this point, the Company feels the amount accrued for property damage is conservative and may exceed total losses for which it is ultimately liable.

Litigation — The Company is currently subject to litigation arising in the normal course of its business. In the opinion of management, none of these lawsuits or claims against the Company, either individually or in the aggregate, is likely to have a material adverse effect on the Company’s business, results of operations, or financial condition. In addition, the Company has adequate insurance in place to cover such litigation.

13. Supplemental Cash Flow Information

During the nine months ended September 30, 2004 and 2003, interest paid was approximately $5.2 million and $4.3 million, respectively.

During the nine months ended September 30, 2004, the Company recorded the following non-cash transactions: a) on September 13, 2004, the Company declared a cash dividend of approximately $4.5 million, or $0.14 per fully-diluted common share, for common shareholders and units of limited partnership of record on September 30, 2004, which was paid October 15, 2004, b) on March 15, 2004, the Company issued 70,400 shares of restricted common stock to its executives and certain employees, c) on April 1, 2004, the Company assumed approximately $15.7 million in mortgage debt related to the acquisition of a hotel property, d) on April 1, 2004, the Company issued 106,675 units of limited partnership interest related to the acquisition of a hotel property, e) on May 17, 2004, the Company assumed approximately $6.8 million in mortgage debt related to the acquisition of a hotel property, f) on May 19, 2004, the Company issued 10,000 shares of common stock to its directors, and g) on September 2, 2004, the Company issued 333,333 units of limited partnership interest related to the acquisition of nine hotel properties.

During the nine months ended September 30, 2003, in connection with the Company’s formation on August 29, 2003 and subsequent exercise of the underwriters’ over-allotment, the Company recorded the following non-cash transactions: a) contribution of initial properties with an historical net book value of approximately $82.6 million, b) an approximate $8.1 million minority interest partial step-up to the historical net carrying values of certain of its hotel properties resulting from the acquisition of unaffiliated minority interest partners, c) an approximate $3.3 million forgiveness of debt, d) an approximate $16.0 million assumption of debt from the Predecessor, e) an approximate $170,000 write-off of deferred loan costs associated with the repaid mortgage loans, and f) the issuance of 714,317 shares of restricted stock to Company executives, employees, affiliates, and directors.

14. Segments Reporting

The Company presently operates in two business segments within the hotel lodging industry: direct hotel investments and hotel financing. Direct hotel investments refers to owning hotels through either acquisition or new development. Hotel financing refers to owning subordinate hotel-related mortgages through acquisition or origination.

The Company does not allocate corporate-level accounts to its operating segments, including corporate general and administrative expenses, non-operating interest income, interest expense, provision for income taxes, and minority interest. For the three months ended September 30, 2004, financial information related to the Company’s reportable segments was as follows:

17

	Direct Hotel		Hotel
	Investments		Financing		Corporate			Consolidated
Total revenues	$	29,261,016	$	2,075,406	$	—		$	31,336,422
Operating expenses		21,595,663		—		—			21,595,663
Depreciation and amortization		2,768,427		—		—			2,768,427
Corporate general and administrative		—		—		3,093,648			3,093,648
Operating income (loss)		4,896,926		2,075,406		(3,093,648	)		3,878,684
Interest income		—		—		115,850			115,850
Interest expense		—		—		(2,986,713	)		(2,986,713	)
Amortization of loan costs		—		—		(569,730	)		(569,730	)
Write-off of loan costs		—		—		(1,633,369	)		(1,633,369	)
Income (loss) before minority interest and provision for income taxes		4,896,926		2,075,406		(8,167,610	)		(1,195,278	)
Provision for income taxes		—		—		(530,476	)		(530,476	)
Minority interest		—		—		335,227			335,227
Net income (loss)	$	4,896,926	$	2,075,406	$	(8,362,859	)	$	(1,390,527	)

For the nine months ended September 30, 2004, financial information related to the Company’s reportable segments was as follows:

	Direct Hotel		Hotel
	Investments		Financing		Corporate			Consolidated
Total revenues	$	71,535,274	$	4,946,547	$	—		$	76,481,821
Operating expenses		51,640,190		—		—			51,640,190
Depreciation and amortization		6,727,667		—		—			6,727,667
Corporate general and administrative		—		—		8,701,264			8,701,264
Operating income (loss)		13,167,417		4,946,547		(8,701,264	)		9,412,700
Interest income		—		—		247,087			247,087
Interest expense		—		—		(5,397,125	)		(5,397,125	)
Amortization of loan costs		—		—		(919,041	)		(919,041	)
Write-off of loan costs		—		—		(1,633,369	)		(1,633,369	)
Income (loss) before minority interest and provision for income taxes		13,167,417		4,946,547		(16,403,712	)		1,710,252
Provision for income taxes		—		—		(687,176	)		(687,176	)
Minority interest		—		—		(165,037	)		(165,037	)
Net income (loss)	$	13,167,417	$	4,946,547	$	(17,255,925	)	$	858,039

As of September 30, 2004, aside from the Company’s $90.6 million portfolio of mezzanine and first-mortgage notes receivable, all assets of the Company primarily relate to the direct hotel investments segment. For the three and nine months ended September 30, 2003, the Company and its Predecessor only operated within the direct hotel investments segment.

15. Business Combinations

On March 24, 2004, the Company acquired a hotel property in Lake Buena Vista, Florida, from JHM Ruby Lake Hotel, Ltd. for approximately $25.6 million in cash. The accompanying consolidated financial statements include the results of the acquired hotel since the date of acquisition. The purchase price was the result of an arms’ length negotiation, and the Company did not assign any value to goodwill or other intangible assets. However, the purchase price allocation is preliminary subject to further internal review and third-party appraisals. Annualized revenue of the acquired hotel is approximately $5.8 million. The Company used proceeds from borrowings to fund this acquisition.

On April 1, 2004, the Company acquired a hotel property in Atlantic Beach, Florida, from Huron Jacksonville Limited Partnership for approximately $23.1 million, which consisted of approximately $6.3 million in cash, approximately $15.7 million in assumed mortgage debt, and approximately $1.1 million worth of limited partnership units, which equates to 106,675 units based on the market price of the Company’s common stock on the date of issuance. The accompanying consolidated financial statements include the

18

results of the acquired hotel since the date of acquisition. The purchase price was the result of an arms’ length negotiation, and the Company did not assign any value to goodwill or other intangible assets. However, the purchase price allocation is preliminary subject to further internal review and third-party appraisals. Annualized revenue of the acquired hotel is approximately $9.1 million. The Company used proceeds from borrowings to fund this acquisition.

On May 17, 2004, the Company acquired a hotel property in Baltimore, Maryland, from The Buccini/Pollin Group for approximately $15.9 million, which consisted of approximately $9.1 million in cash and approximately $6.8 million in assumed mortgage debt. The accompanying consolidated financial statements include the results of the acquired hotel since the date of acquisition. The purchase price was the result of an arms’ length negotiation, and the Company did not assign any value to goodwill or other intangible assets. However, the purchase price allocation is preliminary subject to further internal review and third-party appraisals. Annualized revenue of the acquired hotel is approximately $3.9 million. The Company used proceeds from borrowings to fund this acquisition.

On July 7, 2004, the Company acquired a hotel property and adjacent office building in Philadelphia, Pennsylvania, from Household OPEB I, Inc. for approximately $16.7 million in cash, with an additional $5.7 million planned for future capital improvements. The accompanying consolidated financial statements include the results of the acquired property since the date of acquisition. The purchase price was the result of an arms’ length negotiation, and the Company did not assign any value to goodwill or other intangible assets. However, the purchase price allocation is preliminary subject to further internal review and third-party appraisals. Annualized revenue of the acquired hotel is approximately $9.0 million, while the adjacent office building has one tenant with nominal operations. In addition, the Company intends to sell the adjacent office building. The Company used proceeds from borrowings to fund this acquisition.

On July 23, 2004, the Company acquired four hotel properties from Day Hospitality Group for approximately $25.9 million in cash plus contingent consideration to be paid, if earned, no later than April 30, 2005. In addition, the Company anticipates capital improvements related to such properties of approximately $600,000. The accompanying consolidated financial statements include the results of the acquired hotels since the date of acquisition. The purchase price was the result of an arms’ length negotiation, and the Company did not assign any value to goodwill or other intangible assets. However, the purchase price allocation is preliminary subject to further internal review and third-party appraisals. Annualized revenues of these four hotel properties are approximately $7.8 million. The Company utilized cash from borrowings to fund the acquisition of these properties.

On September 2, 2004, the Company acquired nine hotel properties from Dunn Hospitality Group for approximately $62.0 million, which consisted of approximately $59.0 million in cash and approximately $3.0 million worth of limited partnership units, which equates to 333,333 units based on the market price of the Company’s common stock on the date of issuance. In addition, the Company plans an additional $6.5 million for future capital improvements. The accompanying consolidated financial statements include the results of the acquired hotels since the date of acquisition. The purchase price was the result of an arms’ length negotiation, and the Company did not assign any value to goodwill or other intangible assets. However, the purchase price allocation is preliminary subject to further internal review and third-party appraisals. Annualized revenues of these nine hotel properties are approximately $20.1 million. The Company utilized cash from borrowings to fund the acquisition of these properties.

The following unaudited pro forma statements of operations for the three and nine months ended September 30, 2004 are based on the historical consolidated financial statements of the Company adjusted to give effect to the completion of the aforementioned acquisitions, as if such transactions occurred at the beginning of the periods presented.

19

	Three Months			Nine Months
	Ended			Ended
	September 30, 2004			September 30, 2004
Total revenues	$	36,090,856		$	104,936,525
Operating expenses		31,781,492			91,588,445
Operating income		4,309,364			13,348,080
Interest income		115,850			247,087
Interest expense and amortization of loan costs		(5,948,341	)		(16,899,478	)
Write-off of loan costs		(1,633,369	)		(1,633,369	)
Loss before minority interest and provision for income taxes		(3,156,496	)		(4,937,680	)
Provision for income taxes		(669,740	)		(687,176	)
Minority interest		731,194			1,074,910
Net loss	$	(3,095,042	)	$	(4,549,946	)
Net loss per share:
Basic	$	(0.12	)	$	(0.18	)
Fully diluted	$	(0.12	)	$	(0.18	)
Weighted average shares outstanding:
Basic		25,130,651			25,066,981
Fully diluted		31,228,576			31,164,906

16. Subsequent Events

On October 1, 2004, the Company acquired the Hyatt Orange County hotel in Anaheim, California, for approximately $81.0 million in cash, inclusive of the seller’s commitment to fund a $6.0 million renovation, which will be completed November 2004. The purchase price was the result of an arms’ length negotiation. Annualized revenue of the acquired hotel is approximately $27.8 million. The Company used cash from borrowings as the source of funds for the acquisition of this property.

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

The following discussion should be read in conjunction with the 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”) cautions investors that any forward-looking statements presented herein, or which management may make 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 impacted 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 of the 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 as filed with the Securities and Exchange Commission on March 29, 2004. 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 it 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 a prediction of actual results.

20

Executive Overview

We are a real estate investment trust (“REIT”) that commenced operations upon completion of our initial public offering (“IPO”) and related formation transactions on August 29, 2003. As of September 30, 2004, we owned 32 hotels, $90.6 million of mezzanine and first-mortgage loans receivable, and eight asset management and consulting contracts. Six of these hotels were contributed upon our formation, nine of these hotels were acquired in the fourth quarter of 2003, and 17 of these hotels were acquired at various times throughout 2004. All of the loans receivable were originated or acquired since November 26, 2003. The 26 hotel properties acquired since our formation contributed approximately $19.5 million and $3.2 million to our total revenue and net income, respectively, for the three months ended September 30, 2004, and approximately $42.0 million and $7.5 million to our total revenue and net income, respectively, for the nine months ended September 30, 2004.

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

• acquiring hotels in unique locations where further large-scale development is limited for prospective competitors, including hotels located in urban and resort/convention locations,

• acquiring hotels with a favorable current yield with an opportunity for appreciation,

• implementing selective capital improvements designed to increase profitability and directing our managers to minimize operating costs and increase revenues,

• originating or acquiring mezzanine loans, and

• other investments that our Board deems appropriate.

We believe the lodging industry was negatively affected in 2003 by low levels of business travel resulting from a weak economy (predominantly in the first half of the year), the war in Iraq, continued changes in terrorist threat levels, and travel reductions and restrictions related to severe acute respiratory syndrome, or SARS. Economic growth in the United States economy in the second half of 2003 and the first nine months of 2004 helped improve lodging demand.

Our industry outlook for the fourth quarter of 2004 and throughout 2005 is cautiously optimistic. Historically, we have seen that lodging demand in the United States correlates to U.S. Gross Domestic Product (“GDP”) growth, with typically a two-quarter lag period. Therefore, given the relatively strong U.S. GDP growth experienced in late 2003 and through the first nine months of 2004, and the forecasts for the remainder of 2004 and through 2005, we are optimistic about improvement in lodging demand throughout the next several months. In addition, based on these GDP forecasts, as well as the anticipated strengthening of corporate profits and capital investment, we expect an increase in business-related travel and improvement in the volume of group bookings.

Results of Operations

During August and September of 2004, four hurricanes caused significant damage throughout Florida and neighboring states. As a result, our four properties in that region experienced varying levels of property damage and business interruption. On July 20, 2004, our Radisson Hotel in Covington, Kentucky, experienced a fire on one of its hotel floors. As a result, this hotel was subsequently closed for approximately three days due to lack of electrical power. Although our insurance covers both property damage and business-interruption losses, we are liable for uninsured losses below our deductibles. During the three and nine months ended September 30, 2004, we accrued approximately $660,000 related to property damage associated with these events, and estimate that we lost an additional $340,000 related to business interruption. However, we are still evaluating the property damage incurred with respect to the related insurance policies. At this point, we feel the amount accrued for property damage is conservative and may exceed total losses for which we are ultimately liable.

RevPAR is a commonly used measure within the hotel industry to evaluate hotel operations. RevPAR is defined as the product of the average daily room rate (“ADR”) charged and the average daily occupancy achieved. RevPAR does not include revenues from food and beverage or parking, telephone, or other guest services generated by the property. Although RevPAR does not include these ancillary revenues, it is generally considered the leading indicator of core revenues for many hotels. We also use RevPAR to compare the results of our hotels between periods and to analyze results of our comparable hotels. Increases in RevPAR attributable to increases in occupancy are generally accompanied by increases in most categories of variable operating costs. Increases in RevPAR attributable to increases in ADR are accompanied by increases in limited categories of operating costs, such as management fees and franchise fees.

The following table illustrates the key performance indicators for the three and nine months ended September 30, 2004 and 2003 for our initial properties (“comparable hotels”), which represent the six hotels we’ve owned throughout the comparative periods presented (unaudited):

21

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2004			2003			2004			2003
Comparable (six hotels)
Room revenues	$	7,950,622		$	7,862,918		$	23,565,909		$	22,453,205
RevPar	$	78.99		$	78.12		$	78.62		$	75.18
Occupancy		72.70	%		76.51	%		70.72	%		72.17	%
ADR	$	108.65		$	102.10		$	111.17		$	104.17
Embassy Suites (four hotels)
Room revenues	$	5,583,738		$	5,316,852		$	17,784,580		$	16,382,241
RevPar	$	90.59		$	86.26		$	96.88		$	89.56
Occupancy		75.11	%		77.01	%		77.74	%		76.88	%
ADR	$	120.61		$	112.01		$	124.62		$	116.49
Radisson Hotels (two hotels)
Room revenues	$	2,366,884		$	2,546,066		$	5,781,329		$	6,070,964
RevPar	$	60.68		$	65.27		$	49.76		$	52.45
Occupancy		68.90	%		75.73	%		59.63	%		64.73	%
ADR	$	88.07		$	86.19		$	83.45		$	81.03

The consolidated and combined financial information presented herein include all of the accounts of the Company beginning with its commencement of operations on August 29, 2003. Prior to that time, this report includes the combined financial information of certain affiliates of Remington Hotel Corporation (the “Predecessor”).

The following table reflects key line items from our consolidated and combined statements of operations for the three months ended September 30, 2004 and 2003 (unaudited):

	The Company			Company & Predecessor
	Three Months			Three Months			Favorable (Unfavorable)
	Ended			Ended			Change
	September 30, 2004			September 30, 2003			2003 to 2004
Total revenue	$	31,336,422		$	9,550,555		$	21,785,867
Total hotel expenses		19,278,093			6,643,381			(12,634,712	)
Property taxes, insurance, and other		2,317,570			624,323			(1,693,247	)
Depreciation and amortization		2,768,427			1,051,497			(1,716,930	)
Corporate general and administrative		3,093,648			945,291			(2,148,357	)
Operating income		3,878,684			286,063			3,592,621
Interest income		115,850			106,438			9,412
Interest expense		(2,986,713	)		(1,547,415	)		(1,439,298	)
Amortization of loan costs		(569,730	)		(104,914	)		(464,816	)
Write-off of loan costs		(1,633,369	)		—			(1,633,369	)
Provision for income taxes		(530,476	)		—			(530,476	)
Minority interest		335,227			65,583			269,644
Net loss	$	(1,390,527	)	$	(1,194,245	)	$	(196,282	)

22

The following table reflects key line items from our consolidated and combined statements of operations for the nine months ended September 30, 2004 and 2003 (unaudited):

	The Company			Company & Predecessor
	Nine Months			Nine Months			Favorable (Unfavorable)
	Ended			Ended			Change
	September 30, 2004			September 30, 2003			2003 to 2004
Total revenue	$	76,481,821		$	27,408,956		$	49,072,865
Total hotel expenses		46,712,162			19,482,569			(27,229,593	)
Property taxes, insurance, and other		4,928,028			1,848,982			(3,079,046	)
Depreciation and amortization		6,727,667			3,243,829			(3,483,838	)
Corporate general and administrative		8,701,264			945,291			(7,755,973	)
Operating income		9,412,700			1,888,285			7,524,415
Interest income		247,087			123,287			123,800
Interest expense		(5,397,125	)		(4,298,622	)		(1,098,503	)
Amortization of loan costs		(919,041	)		(369,573	)		(549,468	)
Write-off of loan costs		(1,633,369	)		—			(1,633,369	)
Provision for income taxes		(687,176	)		—			(687,176	)
Minority interest		(165,037	)		65,583			(230,620	)
Net income (loss)	$	858,039		$	(2,591,040	)	$	3,449,079

Comparison of the Three Months Ended September 30, 2004 and September 30, 2003

Revenue. Total revenue for the three months ended September 30, 2004 increased approximately $21.8 million or 228.1% from total revenue for the three months ended September 30, 2003, primarily due to approximately $19.5 million in revenues attributable to the acquisitions of five hotel properties on October 8, 2003, four hotel properties on November 25, 2003, and 17 hotel properties at various times throughout 2004, as well as approximately $2.1 million of interest income earned on the Company’s $90.6 million mezzanine and first-mortgage loans receivable portfolio, all of which was acquired or originated since November 26, 2003. In addition, revenues for comparable hotels increased due to increases in room revenues.

Room revenues at comparable hotels for the three months ended September 30, 2004 increased approximately $88,000 or 1.1% compared to the same quarter of 2003, primarily due to an increase in RevPar from $78.12 to $78.99, which consisted of a 6.4% increase in ADR offset by a 5.0% decrease in occupancy. Due to the continued recovery in the economy and consistent with industry trends, several hotels experienced increases in ADR. In particular, the Las Vegas and Dulles markets recovered significantly, and the two Embassy Suites at these locations performed accordingly. However, occupancy decreased significantly at the Holtsville Radisson due to substantial group sales related to certain customers during the third quarter of 2003 that did not recur in 2004 and new area competition. In addition, occupancy decreased slightly at certain other hotels, which is consistent with market conditions prevalent in those areas.

Food and beverage revenues at comparable hotels for the three months ended September 30, 2004 decreased approximately $69,000 or 5.3% compared to the third quarter of 2003. Food and beverage revenues decreased at certain hotels due to decreases in occupancy, while the Covington Radisson also closed a restaurant and lost a banquet due to a fire.

Other revenues at comparable hotels for the three months ended September 30, 2004 were virtually flat compared to the third quarter of 2003.

Interest income from notes receivable increased to approximately $2.1 million for the three months ended September 30, 2004, compared to zero for the third quarter of 2003 due to the mezzanine and first-mortgage loans receivable portfolio of approximately $90.6 million, all of which was acquired or originated since November 2003.

Asset management fees increased to approximately $341,000 for the three months ended September 30, 2004 compared to approximately $111,000 for the third quarter of 2003 due to the eight asset management and consulting contracts acquired from an affiliate upon formation of the Company on August 29, 2003.

Hotel Operating Expenses. Hotel operating expenses, which consist of room expense, food and beverage expense, other direct expenses, indirect expenses, and management fees, increased approximately $12.6 million or 190.2% for the three months ended September 30, 2004 compared to the third quarter of 2003, primarily due to approximately $12.4 million of expenses associated with the 26 hotel properties acquired since the third quarter of 2003. In addition, hotel operating expenses at comparable hotels experienced an increase of approximately $148,000 or 2.2% for the three months ended September 30, 2004 compared to the third quarter of 2003, primarily due to increases in rooms and indirect expenses, offset by a slight decrease in food and beverage expense.

Rooms expense at comparable hotels increased approximately $97,000 or 5.4% for the three months ended September 30, 2004 compared to the third quarter of 2003 primarily due to increased occupancy at certain hotels and virtually flat costs at hotels experiencing comparable or decreased occupancy due to the fixed nature of maintaining staff. Food and beverage expense at comparable hotels for the three months ended September 30, 2004 compared to the third quarter of 2003 decreased slightly, which is

23

consistent with the decrease in food and beverage revenues and the overall decrease in occupancy. Indirect expenses at comparable hotels increased approximately $97,000 or 2.9% for the three months ended September 30, 2004 compared to the third quarter of 2003. Indirect expenses increased as a result of:

•	increased sales and marketing expenses due to increased headcount and marketing budget at certain hotels,
•	increased franchise fees due to increased room revenues at certain hotels, and
•	increased energy costs due to increased utility rates.
	These increases were partially offset by:
•	decreased general and administrative expenses due to open positions in 2004, and
•	decreased repairs and maintenance due to substantial improvements made by the Predecessor at certain hotels during the third quarter of 2003.

Property Taxes, Insurance, and Other. Property taxes, insurance, and other increased approximately $1.7 million or 271.2% for the three months ended September 30, 2004 compared to the third quarter of 2003, due to approximately $1.8 million of expenses associated with the 26 hotel properties acquired since the third quarter of 2003, which includes approximately $635,000 of uninsured losses related to hurricane damage experienced at certain of these hotels. Aside from costs incurred at the additional hotels acquired, property taxes, insurance, and other incurred in the third quarter of 2004 decreased when compared to the third quarter of 2003, primarily due to decreased insurance rates.

Depreciation and Amortization. Depreciation and amortization increased approximately $1.7 million or 163.3% for the three months ended September 30, 2004 compared to the third quarter of 2003, due to approximately $2.0 million of depreciation associated with the 26 hotel properties acquired since the third quarter of 2003. Aside from the additional hotels acquired, depreciation and amortization decreased in the third quarter of 2004 compared to the third quarter of 2003 as a result of certain assets becoming fully depreciated.

Corporate General and Administrative. Corporate general and administrative expense increased to approximately $3.1 million for the three months ended September 30, 2004 compared to approximately $945,000 for the third quarter of 2003 as a result of expenses associated with becoming a publicly-traded company on August 29, 2003, including salaries, payroll taxes, benefits, insurance, stock-based compensation related to employee stock grants, audit fees, and directors fees. For the quarter ended September 30, 2004, the total includes approximately $605,000 of non-cash expenses associated with the amortization of employee stock grants, approximately $210,000 of offering costs associated with a public offering that was subsequently postponed, and approximately $325,000 of nonrecurring implementation costs associated with Sarbanes-Oxley internal controls documentation requirements. For the quarter ended September 30, 2003, the total includes approximately $228,000 of non-cash expenses associated with the amortization of employee stock grants.

Operating Income. Operating income increased approximately $3.6 million from approximately $286,000 for the three months ended September 30, 2003 to approximately $3.9 million for the three months ended September 30, 2004 as a result of the aforementioned operating results.

Interest Income. Interest income increased approximately $9,000 from approximately $106,000 for the three months ended September 30, 2003 to approximately $116,000 for the three months ended September 30, 2004, primarily due to interest earned on funds received from borrowings in the third quarter of 2004 in excess of interest earned on IPO funds held between August 29, 2003 and September 30, 2003.

Interest Expense and Amortization of Loan Costs. Interest expense and amortization of loan costs increased approximately $1.9 million from approximately $1.7 million for the three months ended September 30, 2003 to approximately $3.6 million for the three months ended September 30, 2004. The increase in interest expense and amortization of loan costs is associated with the higher average debt balance over the course of the two comparative periods.

Write-off of Loan Costs. On September 2, 2004, the Company executed a $210.0 million term loan, and used the proceeds to repay three mortgage notes payable totaling approximately $57.8 million, pay down its $60.0 million secured credit facility by approximately $57.2 million, and pay down another mortgage note payable by approximately $12.6 million. Unamortized loan costs associated with the repaid mortgage notes was approximately $1.6 million, which was charged off.

Provision for Income Taxes. As a REIT, the Company generally will not be subject to federal corporate income tax on that portion of its net income that does not relate to taxable REIT subsidiaries. However, the Company leases each of its hotel properties to Ashford TRS, which is treated as a taxable REIT subsidiary for federal income tax purposes. For the three months ended September 30, 2004, the Company recognized a provision for income taxes related to Ashford TRS of approximately $530,000.

Minority Interest. Minority interest was a reduction to net loss of approximately $335,000 for the three months ended September 30, 2004 compared to a reduction to net loss of approximately $66,000 for the third quarter of 2003. Upon formation of the Company on August 29, 2003, minority interest in the operating partnership was established to represent the limited partners’ proportionate share of the equity in the operating partnership. Net income (loss) is allocated to minority interest based on the weighted-average limited partnership percentage ownership throughout the period.

Net Loss. Net loss was approximately $1.4 million for the three months ended September 30, 2004 and approximately $1.2 for the three months ended September 30, 2003, which represents a net loss increase of approximately $200,000 as a result of the aforementioned operating results.

24

Comparison of the Nine Months Ended September 30, 2004 and September 30, 2003

Revenue. Total revenue for the nine months ended September 30, 2004 increased approximately $49.1 million or 179.0% from total revenue for the nine months ended September 30, 2003, primarily due to approximately $42.0 million in revenues attributable to the acquisitions of five hotel properties on October 8, 2003, four hotel properties on November 25, 2003, and 17 hotel properties at various times throughout 2004, as well as approximately $4.9 million of interest income earned on the Company’s $90.6 million mezzanine and first-mortgage loans receivable portfolio, all of which was acquired or originated since November 26, 2003. In addition, revenues for comparable hotels increased due to increases in both room revenues and food and beverage revenues.

Room revenues at comparable hotels for the nine months ended September 30, 2004 increased approximately $1.1 million or 5.0% compared to the same period of 2003 due to an increase in RevPAR from $75.18 to $78.62, which consisted of a 6.7% increase in ADR and a 2.0% decrease in occupancy. Due to the continued recovery in the economy and consistent with industry trends, several hotels experienced increases in ADR. In particular, the Las Vegas and Dulles markets recovered significantly, and the two Embassy Suites at these locations performed accordingly. However, occupancy decreased significantly at the Holtsville Radisson due to substantial group sales related to certain customers during the first nine months of 2003 that did not recur in 2004 and new area competition, which generated the overall slight decline in occupancy at comparable hotels.

Food and beverage revenues at comparable hotels for the nine months ended September 30, 2004 increased approximately $98,000 or 2.4% compared to the same period of 2003. Although occupancy declined slightly overall, food and beverage revenues increased as certain hotels experienced an increase in banquets or group sales which generated higher food and beverage revenues.

Other revenues at comparable hotels for the nine months ended September 30, 2004 were virtually flat compared to the comparable period of 2003.

Interest income from notes receivable increased to approximately $4.9 million for the nine months ended September 30, 2004, compared to zero for the first nine months of 2003 due to the mezzanine and first-mortgage loans receivable portfolio of approximately $90.6 million, all of which was acquired or originated since November 2003.

Asset management fees increased to approximately $1.0 million for the nine months ended September 30, 2004 compared to approximately $111,000 for the first nine months of 2003 due to the eight asset management and consulting contracts acquired from an affiliate upon formation of the Company on August 29, 2003.

Hotel Operating Expenses. Hotel operating expenses, which consist of room expense, food and beverage expense, other direct expenses, indirect expenses, and management fees, increased approximately $27.2 million or 139.8% for the nine months ended September 30, 2004 compared to the first nine months of 2003, primarily due to approximately $27.0 million of expenses associated with the 26 hotel properties acquired since the third quarter of 2003. In addition, hotel operating expenses at comparable hotels experienced an increase of approximately $274,000 or 1.4% for the nine months ended September 30, 2004 compared to the same period of 2003, primarily due to an increase in rooms expense, partially offset by decreases in food and beverage expense and indirect expenses.

Rooms expense at comparable hotels increased approximately $288,000 or 5.6% for the nine months ended September 30, 2004 compared to the first nine months of 2003 primarily due to increased occupancy at certain hotels and virtually flat costs at hotels experiencing comparable or decreased occupancy due to the fixed nature of maintaining staff. Food and beverage expense at comparable hotels for the nine months ended September 30, 2004 compared to the respective 2003 period decreased slightly, which is consistent with the overall decrease in occupancy. Indirect expenses at comparable hotels decreased approximately $13,000 or 0.1% for the nine months ended September 30, 2004 compared to the comparable period of 2003. Indirect expenses decreased as a result of:

•	decreased general and administrative expenses due to open positions in 2004, and
•	decreased repairs and maintenance due to substantial improvements made by the Predecessor at certain hotels during 2003.
	These decreases were partially offset by:
•	increased sales and marketing expenses due to increased headcount and marketing budget at certain hotels,
•	increased franchise fees due to increased room revenues at certain hotels, and
•	increased energy costs due to increased utility rates.

Property Taxes, Insurance, and Other. Property taxes, insurance, and other increased approximately $3.1 million or 166.5% for the nine months ended September 30, 2004 compared to the first nine months of 2003, due to approximately $3.3 million of expenses associated with the 26 hotel properties acquired since the third quarter of 2003, which includes approximately $635,000 of uninsured losses related to hurricane damage experienced at certain of these hotels. Aside from costs incurred at the additional hotels acquired, property taxes, insurance, and other incurred in the first nine months of 2004 decreased when compared to the same period of 2003, primarily due to decreased insurance rates.

Depreciation and Amortization. Depreciation and amortization increased approximately $3.5 million or 107.4% for the nine months ended June 30, 2004 compared to the same period of 2003, due to approximately $4.3 million of depreciation associated with the 26 hotel properties acquired since the third quarter of 2003. Aside from the additional hotels acquired, depreciation and amortization decreased for the nine months ended September 30, 2004 compared to the first nine months of 2003 as a result of certain assets becoming fully depreciated.

25

Corporate General and Administrative. Corporate general and administrative expense increased to approximately $8.7 million for the nine months ended September 30, 2004 compared to approximately $945,000 for the first nine months of 2003 as a result of expenses associated with becoming a publicly-traded company on August 29, 2003, including salaries, payroll taxes, benefits, insurance, stock-based compensation related to employee stock grants, audit fees, and directors fees. For the nine months ended September 30, 2004, the total includes approximately $1.8 million of non-cash expenses associated with the amortization of employee stock grants, approximately $210,000 of offering costs associated with a public offering that was subsequently postponed, and approximately $383,000 of nonrecurring implementation costs associated with Sarbanes-Oxley internal controls documentation requirements. For the nine months ended September 30, 2003, the total includes approximately $228,000 of non-cash expenses associated with the amortization of employee stock grants.

Operating Income. Operating income increased approximately $7.5 million from approximately $1.9 million for the nine months ended September 30, 2003 to approximately $9.4 million for the nine months ended June 30, 2004 as a result of the aforementioned operating results.

Interest Income. Interest income increased approximately $124,000 from approximately $123,000 for the nine months ended September 30, 2003 to approximately $247,000 for the nine months ended September 30, 2004, primarily due to interest earned on funds remaining from the Company’s IPO and funds received from subsequent borrowings during the first nine months of 2004 in excess of interest earned on IPO funds held between August 29, 2003 and September 30, 2003.

Interest Expense and Amortization of Loan Costs. Interest expense and amortization of loan costs increased approximately $1.6 million from approximately $4.7 million for the nine months ended September 30, 2003 to approximately $6.3 million for the nine months ended September 30, 2004. The increase in interest expense and amortization of loan costs is associated with the higher average debt balance over the course of the two comparative periods.

Write-off of Loan Costs. On September 2, 2004, the Company executed a $210.0 million term loan, and used the proceeds to repay three mortgage notes payable totaling approximately $57.8 million, pay down its $60.0 million secured credit facility by approximately $57.2 million, and pay down another mortgage note payable by approximately $12.6 million. Unamortized loan costs associated with the repaid mortgage notes was approximately $1.6 million, which was charged off.

Provision for Income Taxes. As a REIT, the Company generally will not be subject to federal corporate income tax on that portion of its net income that does not relate to taxable REIT subsidiaries. However, the Company leases each of its hotel properties to Ashford TRS, which is treated as a taxable REIT subsidiary for federal income tax purposes. For the nine months ended September 30, 2004, the Company recognized a provision for income taxes related to Ashford TRS of approximately $687,000.

Minority Interest. Minority interest was a reduction to net income (loss) of approximately $165,000 for the nine months ended September 30, 2004 compared to an increase to net income (loss) of approximately $66,000 for the comparative 2003 period. Upon formation of the Company on August 29, 2003, minority interest in the operating partnership was established to represent the limited partners’ proportionate share of the equity in the operating partnership. Net income (loss) is allocated to minority interest based on the weighted-average limited partnership percentage ownership throughout the period.

Net Income (Loss). Net income (loss) was approximately $858,000 of net income for the nine months ended September 30, 2004 and approximately $2.6 million of net loss for the nine months ended September 30, 2003, which represents a net income increase of approximately $3.5 million as a result of the aforementioned operating results.

Funds From Operations

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 generally accepted accounting principles (“GAAP”), excluding gains (or losses) from 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 related to unconsolidated entities and joint ventures. 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 do not define the term in accordance with the current NAREIT definition or that 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 (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 fund our cash needs, including our ability to make cash distributions. We believe that to facilitate a clear understanding of our historical operating results, FFO should be considered along with our net income (loss) and cash flows reported in the consolidated financial statements.

26

The following table reconciles net loss to FFO for the Company for the three months ended September 30, 2004 and the period from August 29, 2003 to September 30, 2003, and for the Predecessor for the period from July 1, 2003 to August 28, 2003 (unaudited):

	The Company			The Company			The Predecessor
	Three Months			Period From			Period From
	Ended			August 29, 2003 to			July 1, 2003 to
	September 30, 2004			September 30, 2003			August 28, 2003
Net loss	$	(1,390,527	)	$	(298,158	)	$	(896,087	)
Plus real estate depreciation and amortization		2,751,286			328,052			723,445
Remove minority interest		(335,227	)		65,583			—
Gross FFO	$	1,025,532		$	95,477		$	(172,642	)

The following table reconciles net income (loss) to FFO for the Company for the nine months ended September 30, 2004 and the period from August 29, 2003 to September 30, 2003, and for the Predecessor for the period from January 1, 2003 to August 28, 2003 (unaudited):

	The Company		The Company			The Predecessor
	Nine Months		Period From			Period From
	Ended		August 29, 2003 to			January 1, 2003 to
	September 30, 2004		September 30, 2003			August 28, 2003
Net income (loss)	$	858,039	$	(298,158	)	$	(2,292,882	)
Plus real estate depreciation and amortization		6,691,446		328,052			2,915,777
Remove minority interest		165,037		65,583			—
Gross FFO	$	7,714,522	$	95,477		$	622,895

For both the three and nine months ended September 30, 2004, FFO has not been adjusted to add back the non-recurring write-off of loan costs of approximately $1.6 million, which is included in net income (loss).

Liquidity and Capital Resources

Our principal source of funds to meet our cash requirements, including distributions to stockholders, will be our share of the operating partnership’s cash flow. The operating partnership’s principal sources of revenue include: (i) cash flow from hotel operations, (ii) interest income from our mezzanine and first-mortgage loans receivable portfolio, and (iii) management fees related to our eight asset management and consulting contracts with an affiliate.

Cash flow from hotel operations is subject to all operating risks common to the hotel industry, including:

• Competition for guests from other hotels;

• Adverse effects of general and local economic conditions;

• Dependence on demand from business and leisure travelers, which may fluctuate and be seasonal;

• Increases in energy costs, airline fares, and other expenses related to travel, which may deter traveling;

• Increases in operating costs related to inflation and other factors, including wages, benefits, insurance, and energy;

• Overbuilding in the hotel industry, especially in particular markets; and

• Actual or threatened acts of terrorism and actions taken against terrorists, which often cause public concern about travel safety.

During the nine months ended September 30, 2004, we completed the following significant transactions, which impacted or will impact our cash flow and liquidity:

On January 23, 2004, we acquired a $15.0 million subordinated first-mortgage loan receivable related to a hotel property in Denver, Colorado. The loan bears interest at LIBOR plus 9%, matures in January 2006, and provides for three one-year extension options subject to certain conditions. In accordance with the loan agreement, we will receive interest-only payments through maturity, with principal and interest paid through the extension periods based on a twenty-five-year amortization schedule. Prepayments of the loan are prohibited through November 30, 2004, require decreasing prepayment premiums through August 31, 2005, and require no prepayment premiums thereafter. We used proceeds from our IPO as well as proceeds from borrowings to fund this acquisition.

27

On February 5, 2004, we executed a $60.0 million secured credit facility, at an interest rate of LIBOR plus 3.25%, of which approximately $49.8 million of the proceeds were funded March 24, 2004 and the remainder was funded May 17, 2004. The credit facility matures in three years, is collateralized by eight hotel properties, is subject to certain financial covenants, requires a commitment fee of 0.45% to 0.55% on the unused portion of the line, which is payable quarterly, and allows for an increase to $75.0 million subject to certain conditions of the lender. On August 17, 2004, we modified the terms of this credit facility, as discussed below.

On March 4, 2004, we acquired a $25.0 million mezzanine loan receivable secured by 17 hotel properties. The mezzanine loan bears interest at LIBOR plus 8.7% with a 2.5% LIBOR floor, matures in July 2005, and provides for three one-year extension options subject to certain conditions. In accordance with the loan agreement, we will receive principal and interest payments through the extension periods based on a twenty-five-year amortization schedule. Prepayments of the loan are prohibited through maturity subject to certain provisions. We used proceeds from our IPO as well as proceeds from borrowings to fund this acquisition. On August 20, 2004, we received an approximate $7.2 million payment related to the portion of this mezzanine loan that was secured by two hotel properties. As a result, the $25.0 million mezzanine loan, originally secured by 17 hotel properties, became a $17.8 million mezzanine loan, secured by 15 hotel properties.

On March 15, 2004, we declared a cash dividend of approximately $1.9 million, or $0.06 per fully-diluted share, for common shareholders and units of limited partnership of record on March 31, 2004, which was paid April 15, 2004.

On March 19, 2004, we originated a $15.0 million mezzanine loan receivable related to a hotel property in Boston, Massachusetts. The mezzanine loan bears interest at LIBOR plus 10.25% with a 1.75% LIBOR floor and a 5% LIBOR cap, matures in March 2007, and provides for two one-year extension options subject to certain conditions. In accordance with the loan agreement, we will receive interest-only payments through maturity. Prepayments of the loan are prohibited through September 1, 2005. We used proceeds from our IPO as well as proceeds from borrowings to fund this acquisition.

On March 24, 2004, we acquired a $6.6 million mezzanine loan receivable related to a hotel property in Brooklyn Park, Minnesota. The mezzanine loan bears interest at LIBOR plus 10% with a 2% LIBOR floor and a 5% LIBOR cap and matures in January 2006. In accordance with the loan agreement, we will receive interest-only payments through maturity. In addition, if certain operating conditions are met, we will receive an additional interest payment upon maturity based on an accrual rate of the greater of 15% or LIBOR plus 13% with a 2% LIBOR floor. We used proceeds from borrowings to fund this acquisition.

On March 24, 2004, we acquired a hotel property in Lake Buena Vista, Florida, from JHM Ruby Lake Hotel, Ltd. for approximately $25.6 million in cash. Annualized revenue of the acquired hotel is approximately $5.8 million. We used proceeds from borrowings to fund this acquisition.

On April 1, 2004, we acquired a hotel property in Atlantic Beach, Florida, from Huron Jacksonville Limited Partnership for approximately $23.1 million, which consisted of approximately $6.3 million in cash, approximately $15.7 million in assumed mortgage debt, and approximately $1.1 million worth of limited partnership units, which equates to 106,675 units based on the market price of the Company’s common stock on the date of issuance. Annualized revenue of the acquired hotel is approximately $9.1 million. We used proceeds from borrowings to fund this acquisition.

On May 17, 2004, we acquired a hotel property in Baltimore, Maryland, from The Buccini/Pollin Group for approximately $15.9 million, which included approximately $9.1 million in cash and approximately $6.8 million in assumed mortgage debt, which matures April 1, 2011. On August 12, 2004, we increased this debt commitment by approximately $5.2 million and reduced the overall interest rate from the average weekly yield for 30-day commercial paper plus 3.5% to the average weekly yield for 30-day commercial paper plus 3.4%. Annualized revenue of the acquired hotel is approximately $3.9 million. We used proceeds from borrowings to fund this acquisition.

On June 16, 2004, we declared a cash dividend of approximately $3.2 million, or $0.10 per fully-diluted share, for common shareholders and units of limited partnership of record on June 30, 2004, which was paid July 15, 2004.

On July 7, 2004, we acquired a hotel property and adjacent office building in Philadelphia, Pennsylvania, from Household OPEB I, Inc. for approximately $16.7 million in cash, with an additional $5.7 million planned for future capital improvements. Annualized revenue of the acquired hotel is approximately $9.0 million, while the adjacent office building has one tenant with nominal operations. We used proceeds from borrowings to fund this acquisition.

On July 7, 2004, we executed a $14.8 million mortgage note payable, secured by one hotel property, at an interest rate of LIBOR plus 3.5%, with a 5% total floor. The mortgage note payable had a maturity date of July 31, 2007 with two one-year extension options, with interest-only payments due monthly plus principal payments of $20,000 due monthly beginning July 1, 2006. Upon completion of the $210.0 million term loan on September 2, 2004, as discussed below, this mortgage note payable was repaid. The balance outstanding at the time the loan was repaid was approximately $9.7 million.

On July 14, 2004, we executed a $45.6 million credit facility, with an interest rate of LIBOR plus 6.25% with a 2% LIBOR floor, which matures July 14, 2007. Approximately $37.5 million of the proceeds were funded immediately. On August 26, 2004, we paid down approximately $4.6 million of this credit facility in connection with the partial payoff of one of the mezzanine notes receivable securing the facility.

On July 23, 2004, we acquired four hotel properties from Day Hospitality Group for approximately $25.9 million in cash plus contingent consideration to be paid, if earned, no later than April 30, 2005. In addition, we anticipate capital improvements related to

28

such properties of approximately $600,000. Annualized revenues of these four hotel properties are approximately $7.8 million. We used proceeds from borrowings to fund the acquisition of these properties.

On July 23, 2004, we executed a $19.6 million mortgage note payable, with an interest rate of LIBOR plus 3.5% with a 5% total floor, which matures July 31, 2007. Upon completion of the $210.0 million term loan on September 2, 2004, as discussed below, this mortgage note payable was paid down by approximately $12.6 million.

On August 17, 2004, we modified our $60.0 million credit facility such that the interest rate was reduced from LIBOR plus 3.25% to LIBOR plus a range of 2.0% to 2.3% depending on the loan-to-value ratio, and maturity was extended from February 5, 2007 to August 17, 2007, with two one-year extension options.

On September 2, 2004, we executed a $210.0 million term loan, at varying interest rates averaging LIBOR plus 1.95%, with interest-only payments due monthly. We used the proceeds to repay three mortgage notes payable totaling approximately $57.8 million (with interest rates ranging from LIBOR plus 3.25% to LIBOR plus 3.5%), pay down our $60.0 million secured credit facility (interest rate of LIBOR plus 3.25%) by approximately $57.2 million, and pay down another mortgage note payable by approximately $12.6 million (interest rate of LIBOR plus 3.5%).

On September 2, 2004, we acquired nine hotel properties from Dunn Hospitality Group for approximately $62.0 million, which consisted of approximately $59.0 million in cash and approximately $3.0 million worth of limited partnership units, which equates to 333,333 units based on the market price of the Company’s common stock on the date of issuance. In addition, we plan an additional $6.5 million for future capital improvements. Annualized revenues of these nine hotel properties are approximately $20.1 million. We used proceeds from borrowings to fund the acquisition of these properties.

On September 10, 2004, we acquired an $11.0 million mezzanine loan receivable related to a hotel property in Westminster, Colorado. The mezzanine loan bears interest at 14% (12% through the first two years) and matures in September 2011. In accordance with the loan agreement, we will receive interest-only payments through maturity. We used proceeds from borrowings to fund this acquisition.

On September 13, 2004, we declared a cash dividend of approximately $4.5 million, or $0.14 per fully-diluted common share, for common shareholders and units of limited partnership of record on September 30, 2004, which was paid October 15, 2004.

On September 22, 2004, we issued 2,300,000 shares of 8.55% Series A Cumulative Preferred Stock (“Preferred Stock”) at $25 per share, which generated gross proceeds of approximately $57.5 million. However, our aggregate proceeds, net of underwriters’ discount and offering costs, was approximately $55.1 million. Dividends on the Preferred Stock are cumulative from the date of original issuance and are payable quarterly, when and as declared, commencing on January 18, 2005 at the rate of 8.55% per annum of the $25 liquidation preference (equivalent to an annual dividend rate of $2.1375 per share). Dividends will be payable on the 15th day of January, April, July, and October of each year, or if such day is not a business day, the next succeeding business day.

On September 30, 2004, we originated a $10.0 million first-mortgage loan receivable related to a hotel property in Denver, Colorado, which bears interest at LIBOR plus 2.8%. Also on September 30, 2004, we originated a $5.0 million mezzanine loan receivable related to the same hotel property in Denver, Colorado, which bears interest at LIBOR plus 11.35%. Both loans mature October 2006. In accordance with the loan agreements, we will receive interest-only payments through maturity. We used proceeds from borrowings to fund these originations.

Net Cash Flow (Used In) Provided By Operating Activities. For the nine months ended September 30, 2004, net cash flow used in operating activities decreased approximately $10.0 million from cash flow provided of approximately $2.7 million for the first nine months of 2003 to cash flow used of approximately $7.3 million for the first nine months of 2004. The decrease in net cash flow provided by operating activities was primarily attributable to the increase in restricted cash, primarily related to escrow requirements associated with the aforementioned $210.0 million term loan executed on September 2, 2004, as well as the timing of operational payments, offset somewhat by an increase in net income experienced in 2004, which resulted from improved operations at the six comparable hotels as well as the 26 hotels acquired since October 2003.

Net Cash Flow Used In Investing Activities. For the nine months ended September 30, 2004, net cash flow used in investing activities was approximately $236.1 million, which consisted of approximately $87.6 million of acquisitions or originations of mezzanine and first-mortgage loans receivable, approximately $146.0 million related to the acquisitions of 17 hotel properties, and approximately $9.7 million of improvements to various hotel properties, which is consistent with capital improvements anticipated for such properties upon acquisition, offset by approximately $7.2 million of payments on notes receivable. For the nine months ended September 30, 2003, there was approximately $477,000 of investing activities related to improvements to various hotel properties.

Net Cash Flow Provided By Financing Activities. For the nine months ended September 30, 2004, net cash flow provided by financing activities was approximately $259.6 million, the majority of which relates to approximately $346.3 million of borrowings on indebtedness, including the $210.0 million term loan executed on September 2, 2004, and $55.1 million of proceeds received related to the preferred stock offering on September 22, 2004, offset by repayments of three mortgage notes payable totaling approximately $57.8 million, pay down of the $60.0 million secured credit facility by approximately $57.2 million, pay down of another mortgage note payable by approximately $12.6 million, pay down of the $45.6 million credit facility by approximately $4.6 million, and payments of deferred financing costs of approximately $9.2 million. For the nine months ended September 30, 2003, net cash provided by financing activities of approximately $129.7 million primarily relates to net cash received associated with our IPO and related formation transactions on August 29, 2003. Gross proceeds from the IPO and subsequent sale of over-allotment shares to our underwriters was approximately $216.9 million, and proceeds received related to the sale of shares to our Chief Executive Officer and our Chairman was approximately $4.2 million. These proceeds were offset by cash paid upon our formation of approximately $10.1 million, payments of indebtedness of approximately $62.9 million, and offering costs of approximately $17.4 million. Prior to the IPO, net cash distributions to the Predecessor’s owners in 2003 were approximately $1.1 million.

29

In general, we are focused exclusively on investing in the hospitality industry across all segments, including direct hotel investments, first mortgages, mezzanine loans, and sale-leaseback transactions. We intend to acquire and, in the appropriate market conditions, develop additional hotels and provide structured financings to owners of lodging properties. We may incur indebtedness to fund any such acquisitions, developments, or financings. We may also 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 make the required distributions.

However, no assurances can be given that we will obtain additional financings or, if we do, what the amount and terms will be. Our failure to obtain future financing under favorable terms could adversely impact our ability to execute on our business strategy. In addition, we may selectively pursue mortgage financing on individual properties and our mortgage investments. Our current policy is to limit consolidated indebtedness to no more than 60% of our aggregate investment in hotels and debt instruments. However, our Board of Directors may change the financing policy at any time without the approval of our stockholders.

We will acquire or develop additional hotels and invest in structured financings only as suitable opportunities arise, and we will not undertake such investments unless adequate sources of financing are available. 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 borrowings or from the proceeds of additional issuances of common stock or other securities. However, other than the aforementioned acquisitions, 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 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.

Subsequent Events

On October 1, 2004, the Company acquired the Hyatt Orange County hotel in Anaheim, California, for approximately $81.0 million in cash, inclusive of the seller’s commitment to fund a $6.0 million renovation, which will be completed November 2004. Annualized revenues of the acquired hotel are approximately $27.8 million. The Company used cash from borrowings as the source of funds for the acquisition of this property.

Inflation

We rely entirely on the performance of our properties and the ability of the properties’ managers to increase revenues to keep pace with inflation. Hotel operators can generally increase room rates rather quickly, but competitive pressures may limit their ability to raise rates faster than inflation. Our general and administrative costs, such as real estate and personal property taxes, property and casualty insurance, and utilities, are subject to inflation as well.

Seasonality

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

Critical Accounting Policies

The critical accounting policies which we believe are the most significant to fully understand and evaluate our reported financial results are described below:

Investment in Hotel Properties – The initial six hotel properties are stated at the Predecessor’s historical cost, net of any impairment charges, plus an approximate $8.1 million minority interest partial step-up recorded upon our formation on August 29, 2003, related to the acquisition of minority interest from unaffiliated parties related to four of the initial properties. Hotel properties acquired subsequent to our formation are stated at cost. Improvements and additions which extend the life of the property are capitalized.

Impairment of Investment in Hotel Properties — Hotel properties are reviewed for impairment whenever events or changes in circumstances indicate the carrying value of the hotel properties may not be recoverable (i.e., the future undiscounted cash flows for the hotel are projected to be less than the net book value of the hotel). We test for impairment in several situations, including when current or projected cash flows are less than historical cash flows, when it becomes more likely than not that a hotel will be sold before the end of its previously estimated useful life, and when events or changes in circumstances indicate that a hotel’s net book value may not be recoverable. In the evaluation of the impairment of our hotels, we make many assumptions and estimates, including projected cash flows, holding period, expected useful life, future capital expenditures, and fair values, including consideration of capitalization rates, discount rates, and comparable selling prices. To date, no such impairment charges have been recognized. If an asset were deemed to be impaired, we would record an impairment charge for the amount that the property’s net book value exceeds its fair value.

30

Depreciation and Amortization Expense — Depreciation expense is based on the estimated useful life of our assets, while amortization expense for leasehold improvements is the shorter of the lease term or the estimated useful life of the related assets. The lives of the assets are based on a number of assumptions, including cost and timing of capital expenditures to maintain and refurbish the assets, as well as specific market and economic conditions. Presently, hotel properties are depreciated using the straight-line method over lives which range from 15 to 39 years for buildings and improvements and 3 to 5 years for furniture, fixtures, and equipment. While we believe our estimates are reasonable, a change in the estimated lives could affect depreciation expense and net income (loss) or the gain or loss on the potential sale of any of our hotels.

FIN No. 46 — In January 2003, the Financial Accounting Standards Board issued Interpretation No. 46, “Consolidation of Variable Interest Entities,” as revised (“FIN No. 46”). FIN No. 46 requires existing variable interest entities, as defined, to be consolidated by their primary beneficiaries if the variable interest entities do not effectively disperse risks among parties involved. FIN No. 46 was effective immediately for variable interest entities created after January 31, 2003, and to variable interest entities in which an enterprise obtains an interest after that date. FIN No. 46 applies to financial statements for periods ending after March 15, 2004, related to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003.

Since November 2003, the Company has acquired or originated a $90.6 million portfolio of mezzanine and first-mortgage loans receivable, each of which are secured by various hotel properties or partnership interests in hotel properties and are subordinate to primary loans related to the secured hotels. All of these loans receivable are considered to be variable interests in the entities that own the related hotels, which are variable interest entities. However, the Company is not considered to be the primary beneficiary of these hotel properties as a result of holding these loans. Therefore, the Company will not consolidate the hotels for which it has provided financing. Hence, the adoption of FIN No. 46 did not have a material impact on the Company’s results of operations, financial position, or cash flows. Interests in entities acquired or created in the future will be evaluated based on FIN No. 46 criteria and such entities will be consolidated, if required.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our primary market risk exposure consists of changes in interest rates on borrowings under our debt instruments 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.

As of September 30, 2004, our $286.4 million debt portfolio consisted of approximately $264.5 million of outstanding variable-rate debt and approximately $21.9 million of outstanding of fixed-rate debt, with interest rates ranging from 7.08% to 7.25%. As discussed below, $105.0 million of the variable-rate debt was converted to fixed-rate debt via an interest rate swap.

On September 2, 2004, we purchased a 6.0% LIBOR interest rate cap with a $210.0 million notional amount to limit our exposure to rising interest rates on $210.0 million of our floating-rate debt. To partially offset the cost of the purchased cap, we sold a 6.0% LIBOR interest rate cap with a $105.0 million notional amount with identical terms to the purchased cap. Hence, we own a net interest rate cap with a $105.0 million notional amount. Both the purchased and sold interest rate caps mature October 2, 2006.

On September 7, 2004, we entered into a $105.0 million stair-stepped interest rate swap agreement, at an average interest rate of 4.9% over the term of the swap, which matures March 1, 2007. The interest rate swap effectively converts the interest payments on $105.0 million of our floating-rate debt to a fixed rate.

Our objective in using derivatives is to add stability to interest expense and to manage its exposure to interest rate movements or other identified risks. To accomplish this objective, we primarily use interest rate swaps and caps as part of our cash flow hedging strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts in exchange for fixed-rate payments over the life of the agreements without exchange of the underlying principal amount. Purchased interest rate caps provide us with interest rate protection above the strike rate on the cap and result in us receiving interest payments when rates are above the cap strike.

For the nine months ended September 30, 2004, the impact to our results of operations of a one-point change in interest rate on the outstanding balance of variable-rate debt as of September 30, 2004, net of the $105.0 million notional amount protected by an interest rate swap as of that date, would be approximately $1.2 million.

As of September 30, 2004, we owned approximately $90.6 million of variable-rate loans receivable. For the nine months ended September 30, 2004, the impact to our results of operations of a one-point change in interest rate on the outstanding balance of variable-rate loans receivable as of September 30, 2004, would be approximately $680,000. We had no other outstanding loans receivable as of September 30, 2004.

The above amounts were determined based on the impact of hypothetical interest rates on our borrowing cost, and assume no changes in our capital structure. As the information presented above includes only those exposures that exist as of September 30, 2004, it does not consider those exposures or positions which could arise after that date. Hence, the information represented herein has limited predictive value. As a result, the ultimate realized gain or loss with respect to interest rate fluctuations will depend on the exposures that arise during the period, the hedging strategies at the time, and the related interest rates.

ITEM 4: CONTROLS AND PROCEDURES

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report have been designed and are functioning effectively to provide reasonable assurance that the information required to be disclosed

31

by us in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. We believe that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Management is required to apply judgment in evaluating the cost-benefit relationship of possible controls and procedures.

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 its 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 currently have adequate insurance in place to cover such litigation.

ITEM 2: UNREGISTERED SALES OP EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3: DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5: OTHER INFORMATION

None.

32

ITEM 6: EXHIBITS

Exhibit
Number	Description of Exhibit
*10.15.1	First Amendment to Credit Agreement, dated August 17, 2004, among the Registrant, Calyon New York Branch, and Merrill Lynch Capital
*10.16	Loan and Security Agreement, dated July 13, 2004, among the Registrant and CapitalSource Finance LLC
*10.17	Loan Agreement, dated September 2, 2004, among the Registrant, Merrill Lynch Mortgage Lending, Inc., and Merrill Lynch Capital
*10.17.1	Mezzanine Loan Agreement, dated September 2, 2004, among the Registrant and Merrill Lynch Capital
*10.17.2	Broker Agreement, dated May 10, 2004, among the Registrant and Secured Capital Corp
*10.18	Agreement of Purchase and Sale, dated May 19, 2004, among the Registrant, Dunn Hospitality Group, and entities related to Dunn Hospitality Group
*10.18.1	First Amendment to Agreement of Purchase and Sale, dated July 1, 2004, among the Registrant, Dunn Hospitality Group, and entities related to Dunn Hospitality Group
*10.18.2	Second Amendment to Agreement of Purchase and Sale, dated July 23, 2004, among the Registrant, Dunn Hospitality Group, and entities related to Dunn Hospitality Group
*10.18.3	Third Amendment to Agreement of Purchase and Sale, dated August 4, 2004, among the Registrant, Dunn Hospitality Group, and entities related to Dunn Hospitality Group
*10.18.4	Fourth Amendment to Agreement of Purchase and Sale, dated September 2, 2004, among the Registrant, Dunn Hospitality Group, and entities related to Dunn Hospitality Group
*10.19	International Swap Dealers Association, Inc. Master Agreement, dated September 2, 2004, among the Registrant and Calyon New York Branch
*10.19.1	International Swap Dealers Association, Inc. Master Agreement, dated September 2, 2004, among the Registrant and SMBC Derivative Products Limited
*10.19.2	International Swap Dealers Association, Inc. Master Agreement, dated September 2, 2004, among the Registrant and SMBC Derivative Products Limited
*31.1	Certification of the Chief Executive Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended
*31.2	Certification of the Chief Financial Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended
*31.3	Certification of the Chief Accounting Officer Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended
*32.1	Certification of the Chief Executive Officer Required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (In accordance with Sec Release 33-8212, this exhibit is being furnished, and is not being filed as part of this report or as a separate disclosure document, and is not being incorporated by reference into any Securities Act of 1933 registration statement.)
*32.2	Certification of the Chief Financial Officer Required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (In accordance with Sec Release 33-8212, this exhibit is being furnished, and is not being filed as part of this report or as a separate disclosure document, and is not being incorporated by reference into any Securities Act of 1933 registration statement.)
*32.3	Certification of the Chief Accounting Officer Required by Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (In accordance with Sec Release 33-8212, this exhibit is being furnished, and is not being filed as part of this report or as a separate disclosure document, and is not being incorporated by reference into any Securities Act of 1933 registration statement.)

* filed herewith

33

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.

Dated: November 12, 2004	By:	/s/ MONTGOMERY J. BENNETT
		Montgomery J. Bennett
		Chief Executive Officer (Principal Executive Officer)

Dated: November 12, 2004	By:	/s/ DAVID J. KIMICHIK
		David J. Kimichik
		Chief Financial Officer (Principal Financial Officer)

Dated: November 12, 2004	By:	/s/ MARK L. NUNNELEY
		Mark L. Nunneley
		Chief Accounting Officer (Principal Accounting Officer)

34

EX-10.15.1

                                                                EXHIBIT 10.15.01

- --------------------------------------------------------------------------------

                       FIRST AMENDMENT TO CREDIT AGREEMENT

                                   dated as of

                                 August 17, 2004

                                      among

                    ASHFORD HOSPITALITY LIMITED PARTNERSHIP,
                                  as Borrower,

                        ASHFORD HOSPITALITY TRUST, INC.,
                         ASHFORD OP GENERAL PARTNER LLC,
                         ASHFORD OP LIMITED PARTNER LLC,
                          ASHFORD TRS CORPORATION, and
                  THE BORROWING BASE SUBSIDIARIES PARTY HERETO,
                                 as Guarantors,

                            THE LENDERS PARTY HERETO,

                     CALYON NEW YORK BRANCH (as successor in
                  interest to Credit Lyonnais New York Branch),
                      as Administrative Agent and Sole Lead
                           Arranger and Book Manager,

                                       and

                  MERRILL LYNCH CAPITAL, a division of Merrill
                    Lynch Business Financial Services, Inc.,
                              as Syndication Agent

- --------------------------------------------------------------------------------



      FIRST AMENDMENT TO CREDIT AGREEMENT dated as of August 17, 2004 (this
"Amendment"), among ASHFORD HOSPITALITY LIMITED PARTNERSHIP, a Delaware limited
partnership (the "Borrower") having an office at 14185 Dallas Parkway, Suite
1100, Dallas, Texas 75254, the Guarantors as of the date hereof, the Lenders as
of the date hereof, CALYON NEW YORK BRANCH (as successor in interest to Credit
Lyonnais New York Branch), as administrative agent for the Lenders (in its
capacity as administrative agent for the Lenders, together with any permitted
successor administrative agent, the "Administrative Agent") and sole lead
arranger and book manager, and MERRILL LYNCH CAPITAL, a division of Merrill
Lynch Business Financial Services, Inc., as syndication agent (in such capacity,
the "Syndication Agent").

            WHEREAS, Borrower, Guarantors, Administrative Agent, Syndication
Agent and Lenders are parties to that certain Credit Agreement dated as of
February 5, 2004, as supplemented by that certain Joinder Agreement and
Ratification dated as of March 24, 2004 and that certain Joinder Agreement and
Ratification dated as of May 17, 2004 (as so supplemented, the "Existing Credit
Agreement") (all capitalized terms used but not defined herein shall have the
meaning set forth in the Existing Credit Agreement); and

            WHEREAS, Borrower, Guarantors, Administrative Agent, Syndication
Agent and Lenders desire to amend the Existing Credit Agreement as set forth
herein.

            NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth in this Amendment, and for good and valuable consideration,
the receipt of which is hereby acknowledged, the parties hereto hereby agree as
follows:

                                    ARTICLE I

                   AMENDMENT TO THE EXISTING CREDIT AGREEMENT

            SECTION 1.01. Additional Definitions. The following definitions are
hereby added to the Existing Credit Agreement:

            (a) "First Extension Period" has the meaning set forth in Section
      2.21(a) hereof.

            (b) "Initial Maturity Date" means August 17, 2007.

            (c) "Loan-to-NOI Ratio" means, as of any date, the ratio of (a) the
      aggregate Revolving Credit Exposure as of such date to (b) Borrowing Base
      Net Operating Income for the twelve (12) consecutive fiscal month period
      with respect to which financial statements, computations and certificates
      were most recently delivered to the Administrative Agent pursuant to
      Sections 5.01(c) and (e)(i) hereof (provided that if any such documents
      are not delivered to the Administrative Agent within the time required
      pursuant to said Sections, the Administrative Agent may, in its
      discretion, determine the

                                       1


      Loan-to-NOI Ratio based on its estimate of Borrowing Base Net Operating
      Income for such period).

            (d) "Second Extension Period" has the meaning set forth in Section
      2.21(a) hereof.

            SECTION 1.02. Amendments. The Existing Credit Agreement is hereby
amended as follows:

            (a) The definition of "Acquisition Costs" is hereby amended by
      deleting the text "Newly-Acquired Borrowing Base Property" wherever it
      appears therein and replacing it with the text "Borrowing Base Property".

            (b) The definition of "Applicable Margin" is hereby deleted in its
      entirety and replaced with the following:

                  "Applicable Margin" means with respect to Loans maintained as
            (a) Base Rate Loans, one and one-quarter percent (1.25%) per annum
            and (b) LIBOR Loans, (i) two and three-tenths percent (2.30%) if the
            Loan-to-NOI Ratio is greater than 7.0:1.0, (ii) two and fifteen
            one-hundredths percent (2.15%) if the Loan-to-NOI Ratio is greater
            than or equal to 6.0:1.0 but less than or equal to 7.0:1.0, and
            (iii) two percent (2.00%) if the Loan-to-NOI Ratio is less than
            6.0:1.0, in each of the foregoing cases, as confirmed by, and
            effective as of the date of, the notice by the Administrative Agent
            to the Borrower of any adjustment delivered pursuant to Section
            5.01(e) hereof (or, if any financial statements, computations or
            certificates required pursuant to Section 5.01(c) or (e)(i) hereof
            are not delivered to the Administrative Agent within the time
            required pursuant to said Sections, as of any date that the
            Administrative Agent notifies the Borrower in writing (which notice
            may be by facsimile transmission to the Borrower only) of such
            adjustment)."

            (c) The definition of "Borrowing Base" is hereby deleted in its
      entirety and replaced with the following:

                  "`Borrowing Base' means, as of any date of determination, an
            amount equal to the sum of the lesser of (a) the Implied Loan Amount
            and (b) the lesser of (i) sixty-five percent (65%) of the aggregate
            Appraised Values of all Borrowing Base Properties and (ii)
            sixty-five percent (65%) of the aggregate Acquisition Costs of all
            Borrowing Base Properties; provided, however that, with respect to
            any Borrowing Base Property, if the Administrative Agent has
            obtained an Appraisal pursuant to Section 5.14 hereof independently
            or at the request of the Borrower (which request may be made only
            one (1) time as to any Borrowing Base Property) after such Borrowing
            Base Property has been admitted to the Borrowing Base hereunder,
            then the amount of such Borrowing Base Property's contribution to
            the Borrowing Base shall be determined for purposes of clauses (i)
            and (ii) above solely with respect to such Appraised Value."

                                       2


            (d) The definition of "Borrowing Base Net Operating Income" is
      hereby amended by deleting the proviso therein and deleting the last
      sentence thereof.

            (e) Clause (l) of the definition of "Borrowing Base Property" is
      hereby amended by deleting the text ", if such Borrowing Base Property
      would be a Newly-Acquired Borrowing Base Property," therein.

            (f) The definition of "Commitment Fee Rate" is hereby deleted in its
      entirety and replaced with the following:

                  "`Commitment Fee Rate' means, at any time, the per annum rate
            equal to (i) if the aggregate Revolving Credit Exposures of the
            Lenders at such time is less than or equal to one-half (1/2) of the
            Maximum Revolver Amount, one-half of one percent (0.50%), (ii) if
            the aggregate Revolving Credit Exposures of the Lenders is less than
            or equal to three-quarters (3/4) but greater than one-half (1/2) of
            the Maximum Revolver Amount at such time, three hundred and
            seventy-five one thousandths of one percent (0.375%), and (iii) if
            the aggregate Revolving Credit Exposures of the Lenders is greater
            than three-quarters (3/4) of the Maximum Revolver Amount at such
            time, one-quarter of one percent (0.25%)."

            (g) The definition of "Implied Loan Constant Rate" is hereby deleted
      in its entirety and replaced with the following:

                  "`Implied Loan Constant Rate' means, as to any period with
            respect to which Implied Debt Service is being determined, a rate
            per annum equal to the greatest of:

                        (a) eight and nine-tenths percent (8.90%);

                        (b) two and one-half percent (2.50%) in excess of the
                  then most-recently published annual yield to maturity of the
                  U.S. Treasury Constant Maturity Series with a five (5) year
                  maturity, as such yield is reported on such date in the
                  "Federal Reserve Statistical Release H.15 - Selected Interest
                  Rates", or any successor publication, published by the Board
                  in effect on the date of calculation. In the event such rate
                  per annum is no longer available, the rate described in this
                  clause (b) shall be two and one-half percent (2.50%) in excess
                  of the most-recent per annum rate equal to the annual yield to
                  maturity on a comparable debt security with a five (5) year
                  maturity issued by the Federal National Mortgage Association,
                  as determined by the Administrative Agent; and

                        (c) the interest rate in effect hereunder on the date of
                  calculation, determined on a weighted average basis based on
                  the respective principal balances of each Loan and any LC
                  Exposure."

                                       3


            (h) The definition of "Maturity Date" is hereby deleted in its
      entirety and replaced with the following:

                  "`Maturity Date' means the Initial Maturity Date, as same may
            have been extended pursuant to Section 2.21 hereof."

            (i) The definition of "Newly-Acquired Borrowing Base Property" is
      hereby deleted in its entirety.

            (j) The definition of "Rate Agreements" is hereby deleted in its
      entirety and replaced with the following:

                  "`Rate Agreement' means an interest rate swap (including any
            Swap Agreement), cap or other interest rate protection product."

            (k) Section 2.05(e) is hereby amended by deleting each occurrence of
      the text "or the Implied Loan Amount" therein.

            (l) Section 2.11 is hereby amended by deleting the text "; or" at
      the end of clause (i) thereof and replacing it with "." and by deleting
      clause (ii) thereof in its entirety.

            (m) Section 4.02(i) is hereby deleted in its entirety and replaced
      with the following text: "Intentionally Omitted".

            (n) Section 4.03(b)(ix) is hereby amended by deleting the text "In
      the case of any Hotel which if qualifying as a Borrowing Base Property
      would be a Newly-Acquired Borrowing Base Property," therein and replacing
      it with the text "If applicable,".

            (o) Section 4.03(b)(xvii) is hereby deleted in its entirety and
      replaced with the following text: "Intentionally Omitted".

            (p) Section 4.03(c) is hereby amended by inserting the text "or"
      immediately after clause (i) thereof and deleting the text "or (iii) the
      requirements set forth in provisos in the definition of "Borrowing Base"
      herein" therein.

            (q) Section 4.03(d) is hereby deleted in its entirety and replaced
      with the following text: "Intentionally Omitted".

            (r) Section 4.03(e) is hereby amended by deleting the text ", and in
      any case shall not exceed the Implied Loan Amount" in clause (iii) thereof
      and by deleting clause (vi) thereof in its entirety.

            (s) Section 5.01(e) is hereby deleted in its entirety and replaced
      with the following:

                                       4


                  "Promptly after the preparation thereof, and no later than
            forty-five (45) days after the last day of each fiscal quarter of
            the Borrower, (i) computations of Borrowing Base Net Operating
            Income for each Borrowing Base Property, the Loan-to-NOI Ratio,
            Interest Coverage Ratio and Tangible Net Worth, set forth in a
            certificate executed by a Financial Officer of the Borrower, and
            (ii) a Borrowing Base Certificate executed by a Financial Officer of
            the Borrower setting forth its computation of the Borrowing Base,
            including its computation of the Implied Loan Amount, in each case
            as of the last day of such fiscal quarter. The Administrative Agent
            shall within ten (10) days of receipt of such information (and with
            respect to the Applicable Margin, the operating statements for such
            fiscal quarter required pursuant to Section 5.01(c) hereof), notify
            the Borrower in writing (which notice may be by facsimile
            transmission to the Borrower only) of any calculation errors or
            other errors in the calculation of Borrowing Base Net Operating
            Income or the Loan-to-NOI Ratio determined by Administrative Agent
            on the basis of the definition of "Borrowing Base Net Operating
            Income" herein, any corresponding adjustments to the Borrowing Base
            and any resulting adjustment to the Applicable Margin."

            (t) Section 5.14 is hereby amended by deleting the phrase
      "`Newly-Acquired Borrowing Base Property'" therein and replacing it with
      the phrase "`Borrowing Base'" and by adding the following sentence as the
      last sentence thereof:

                  "If the Borrower makes a request for an Appraisal as referred
      to in the definition of "Borrowing Base" herein, the Administrative Agent
      shall obtain same and deliver copies to the Borrower and the Lenders at
      the Borrower's expense."

            (u) Section 6.01(d) is hereby deleted in its entirety and replaced
      with the following text:

                  "Recourse Indebtedness in an aggregate principal amount for
            the REIT, the Borrower and their respective Subsidiaries (other than
            any Borrowing Base Subsidiary) not in excess of $15,000,000 at any
            time outstanding; excluding from such $15,000,000 limitation (i) any
            Indebtedness referred to in clause (a) or (b) above, and (ii) any
            Indebtedness in connection with credit facilities provided to the
            REIT and/or the Borrower and/or their respective Consolidated
            Subsidiaries (other than any Borrowing Base Subsidiary) in an
            aggregate principal amount at any time outstanding which does not
            exceed the lesser of (y) $150,000,000 or (z) twenty-five percent
            (25%) of the Total Assets."

            (v) Section 6.04 is hereby amended by deleting the text "Guarantee"
      and "Guarantees" where they appear in the first grammatical paragraph,
      clause (b) and the second line of clause (f) thereof and replacing them
      with the text "guarantee" and "guarantees" respectively.

            (w) Section 6.15 is hereby amended by deleting each sentence therein
      other than the last sentence thereof.

                                       5


            (x) The form of Borrowing Base Certificate attached to the Existing
      Credit Agreement as Exhibit N is hereby replaced with the form attached
      hereto as Exhibit A.

            (y) The following is hereby added as Section 2.21 of the Credit
      Agreement:

                  "SECTION 2.21. Extension of Maturity Date.

                  (a) Generally. Subject to the conditions set forth in Section
            2.21(b) and (c) hereof, the Borrower shall have two (2) options to
            extend the Maturity Date. The first option shall be exercisable as
            provided in Section 2.21(b) hereof and shall extend the Initial
            Maturity Date to August 17, 2008 (such extension period is referred
            to herein as the "First Extension Period"). The second option shall
            be exercisable as provided in Section 2.21(c) hereof and shall
            extend the Maturity Date to August 17, 2009 (such extension period
            is referred to herein as the "Second Extension Period").

                  (b) Conditions to First Extension Period. The Borrower's
            option to extend the Initial Maturity Date as referred to in Section
            2.21(a) hereof for the First Extension Period shall be subject to
            the following conditions being satisfied by the Borrower at its sole
            cost and expense to the satisfaction of the Administrative Agent,
            except to the extent that the Administrative Agent may elect (which
            election may be made without written or express notice of such
            waiver) to waive any of the following conditions, on or prior to the
            Initial Maturity Date:

                        (i) The Borrower shall have delivered to the
                  Administrative Agent an irrevocable written notice of the
                  Borrower's election to extend the Initial Maturity Date no
                  later than thirty (30) days, but no earlier than ninety (90)
                  days, prior to the first day of the First Extension Period;

                        (ii) No Default arising under Section 6.13 or 6.14 of
                  the Credit Agreement (as of the fiscal quarter ending on June
                  30, 2007), First Tier Default or Event of Default shall have
                  occurred and then be continuing as of the first day of the
                  First Extension Period;

                        (iii) As of the first day of the First Extension Period,
                  the aggregate Revolving Credit Exposure of the Lenders shall
                  not exceed the Borrowing Base;

                        (iv) The Borrower shall have delivered to the
                  Administrative Agent (w) a certification that no Default
                  arising under Section 6.13 or 6.14 of the Credit Agreement
                  (determined as of the last day of the fiscal quarter ending on
                  June 30, 2007), First Tier Default or Event of Default exists,
                  (x) a ratification by the Borrower and the Guarantors that the
                  Financing Documents are ratified and continue in full force
                  and effect, (y) a title

                                       6


                  report on each Borrowing Base Property which shall show no
                  liens of record or other encumbrances or exceptions to title
                  except those permitted under the applicable Mortgages and (z)
                  current tax lien, Uniform Commercial Code, bankruptcy and
                  judgment searches against the Borrower and each Guarantor in
                  such jurisdictions required by the Administrative Agent, which
                  searches shall be acceptable in content to the Administrative
                  Agent;

                        (v) The Borrower shall have paid to the Administrative
                  Agent all reasonable costs and expenses, including reasonable
                  attorneys' fees, incurred in connection with such extension;
                  and

                        (vi) The Borrower shall have paid to the Administrative
                  Agent for the ratable benefit of the Lenders on the first day
                  of the First Extension Period a fee for such extension in the
                  amount equal to twenty one-hundredths of one percent (0.20%)
                  of the aggregate amount of the Commitments of all Lenders as
                  of the first day of the First Extension Period.

                  (c) Conditions to Second Extension Period. The Borrower's
            option to extend the Maturity Date as referred to in Section 2.21(a)
            hereof for the Second Extension Period shall be subject to the
            following conditions being satisfied by the Borrower at its sole
            cost and expense to the satisfaction of the Administrative Agent,
            except to the extent that the Administrative Agent may elect (which
            election may be made without written or express notice of such
            waiver) to waive any of the following conditions, on or prior to the
            Initial Maturity Date:

                        (i) The Initial Maturity Date shall have been extended
                  through the First Extension Period as provided in Section
                  2.21(b) hereof;

                        (i) The Borrower shall have delivered to the
                  Administrative Agent an irrevocable written notice of the
                  Borrower's election to extend the Maturity Date no later than
                  thirty (30) days, but no earlier than ninety (90) days, prior
                  to the first day of the Second Extension Period;

                        (ii) No Default arising under Section 6.13 or 6.14 of
                  the Credit Agreement (as of the fiscal quarter ending on June
                  30, 2008), First Tier Default or Event of Default shall have
                  occurred and then be continuing as of the first day of the
                  Second Extension Period;

                        (iii) As of the first day of the Second Extension
                  Period, the aggregate Revolving Credit Exposure of the Lenders
                  shall not exceed the Borrowing Base;

                        (iv) The Borrower shall have delivered to the
                  Administrative Agent (w) a certification that no Default
                  arising under Section 6.13 or 6.14

                                       7


                  of the Credit Agreement (determined as of the last day of the
                  fiscal quarter ending on June 30, 2008), First Tier Default or
                  Event of Default exists, (x) a ratification by the Borrower
                  and the Guarantors that the Financing Documents are ratified
                  and continue in full force and effect, (y) a title report on
                  each Borrowing Base Property which shall show no liens of
                  record or other encumbrances or exceptions to title except
                  those permitted under the applicable Mortgages and (z) current
                  tax lien, Uniform Commercial Code, bankruptcy and judgment
                  searches against the Borrower and each Guarantor in such
                  jurisdictions required by the Administrative Agent, which
                  searches shall be acceptable in content to the Administrative
                  Agent;

                        (v) The Borrower shall have paid to the Administrative
                  Agent all reasonable costs and expenses, including reasonable
                  attorneys' fees, incurred in connection with such extension;
                  and

                        (vi) The Borrower shall have paid to the Administrative
                  Agent for the ratable benefit of the Lenders on the first day
                  of the Second Extension Period a fee for such extension in the
                  amount equal to twenty one-hundredths of one percent (0.20%)
                  of the aggregate amount of the Commitments of all Lenders as
                  of the first day of the Second Extension Period."

                                   ARTICLE II

                         REPRESENTATIONS AND WARRANTIES

            Borrower and each Guarantor hereby represents and warrants to the
Administrative Agent, the Syndication Agent and the Lenders as follows:

            SECTION 2.01. Existence and Power. Each such Credit Party is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization and has all necessary powers required to enter into
this Amendment and to perform its obligations under the Existing Credit
Agreement, as amended hereby.

            SECTION 2.02. Authorization; No Contravention. The execution and
delivery by each such Credit Party of this Amendment and the performance of the
Existing Credit Agreement, as amended hereby, (a) are within its powers and have
been duly authorized by all necessary action, (b) require no action by or in
respect of, or filing with, any Governmental Authority, any property manager or
other third party, (c) do not contravene, or constitute a breach of or default
under, any provision of applicable law or regulation, any of its constitutive
documents or of any judgment, injunction, order, decree, permit, license, note,
mortgage, agreement or other material instrument binding upon such Person or any
of its Subsidiaries or their respective assets and (d) do not result in the
creation or imposition of any Lien on any asset of any Credit Party or any of
its Subsidiaries (except the Security Interests).

                                       8


            SECTION 2.03. Binding Effect. This Amendment has been duly executed
and delivered by such Credit Party and the Existing Credit Agreement, as amended
hereby, constitutes the valid and binding agreement of each such Credit Party,
in each case enforceable in accordance with their respective terms, except as
the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization or moratorium or other similar laws relating to the enforcement
of creditors' rights generally and by general equitable principles.

            SECTION 2.04. Representations and Warranties in Financing Documents.
Without limiting the foregoing, all representations and warranties of such
Credit Party set forth in the Existing Credit Agreement, as amended hereby, and
the other Financing Documents, are, giving effect to this Amendment, true and
correct in all material respects as of the date hereof, provided that any such
representations and warranties that by their express terms are made as of a
specific date are true and correct in all material respects as of such specific
date. In connection with the foregoing representations and warranties, Exhibits
B, C, E, F, G, H, I and J of the Credit Agreement are each hereby amended to
include the information set forth on Exhibits B, C, D, E, F, G, H and I,
respectively, attached hereto, the date of September 30, 2003 set forth in
clauses (a) and (b) of Section 3.04 of the Credit Agreement shall refer to March
31, 2004, the reference to "the date hereof" set forth in clause (i) of Section
3.04 of the Credit Agreement shall refer to the date of this Amendment, and the
reference to the Effective Date set forth in Section 3.19 of the Credit
Agreement shall refer to the date of this Amendment.


                                   ARTICLE III

                                  MISCELLANEOUS

            SECTION 3.01. Effectiveness of Change of Commitment Fee Rate. The
modification of the Commitment Fee Rate set forth in Section 1.02 hereof shall
be effective only as of the date hereof and shall not reduce or otherwise modify
the amount of the Commitment Fee accrued through the date hereof determined on
the basis of the Commitment Fee Rate under the Existing Credit Agreement. The
portion of the Commitment Fee due and payable on September 30, 2004 shall be
determined on the basis of the Commitment Fee Rate under the Existing Credit
Agreement for the period ending on the day immediately preceding the date hereof
and on the basis of the Commitment Fee Rate as modified by this Amendment for
the period commencing on the date hereof and ending on September 30, 2004.
Thereafter, the Commitment Fee shall be determined on the basis of the
Commitment Fee Rate as amended by this Amendment.

            SECTION 3.02. Effectiveness of Change of Applicable Margin. The
modification of the Applicable Margin set forth in Section 1.02 hereof shall be
effective only as of the date hereof and shall not reduce or otherwise modify
the amount of interest that has accrued through the date hereof determined on
the basis of the Base Rate and/or the Adjusted LIBO Rate, as applicable, and the
Applicable Margin under the Existing Credit Agreement. The portion of interest
due and payable on September 1, 2004 shall be determined on the basis of the
Base Rate and/or the Adjusted LIBO Rate, as applicable, and the Applicable
Margin under the Existing Credit Agreement for the period ending on the day
immediately preceding the date

                                       9


hereof and on the basis of the Base Rate and/or the Adjusted LIBO Rate, as
applicable, and the Applicable Margin as modified by this Amendment for the
period commencing on the date hereof and ending on September 1, 2004.
Thereafter, the Applicable Margin shall be determined on the basis of the
Applicable Margin as amended by this Amendment.

            SECTION 3.03. No Other Amendments. Except as amended hereby, the
Existing Credit Agreement remains unmodified. As amended hereby, the Existing
Credit Agreement remains in full force and effect. Each Credit Party ratifies
and reaffirms the obligations, waivers and covenants made under the Existing
Credit Agreement, as amended hereby, and the other Financing Documents. Without
limiting the foregoing, the Guarantors acknowledge and agree that the Guaranteed
Obligations include the Obligations, as amended hereby, and that the Financing
Documents remain in full force and effect and shall secure and otherwise apply
to the Guaranteed Obligations and all other terms of the Existing Credit
Agreement, as amended hereby.

            SECTION 3.04. Counterparts. This Amendment may be executed in
counterparts (and by different parties hereto on different counterparts), each
of which shall constitute an original, but all of which when taken together
shall constitute a single contract. Delivery of an executed counterpart of a
signature page of this Amendment by telecopy shall be effective as delivery of a
manually executed counterpart of this Amendment.

            SECTION 3.05. Severability. Any provision of this Amendment 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.

            SECTION 3.06. Headings, Etc. Article and Section headings used
herein are for convenience of reference only, are not part of this Amendment and
shall not affect the construction of, or be taken into consideration in
interpreting, this Amendment.

            SECTION 3.07. Governing Law. This Amendment shall be governed by,
and construed in accordance with, the substantive laws of the State of New York.

            SECTION 3.08. Waiver of Trial by Jury. Each party hereto hereby
expressly and unconditionally waives any and every right either party may have
to a trial by jury, in any suit, action or proceeding brought under or with
respect to this Amendment.

            SECTION 3.09. Texas Opinions. The Borrower shall deliver to the
Administrative Agent enforceability opinions with respect to Texas law in form
and substance reasonably acceptable to the Administrative Agent concerning the
deeds of trust granted by Ashford Dallas LP and Ashford Austin LP and the
amendments thereto being executed concurrently herewith within thirty (30) days
after the date hereof unless the Borrowing Base Properties encumbered by said
deeds of trust are released from the Borrowing Base on or before such date.

                                       10


            IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed by their respective authorized officers as of the day and year
first above written.

                              BORROWER:

                              ASHFORD HOSPITALITY LIMITED PARTNERSHIP

                              By:  Ashford OP General Partner LLC

                                   By:  Ashford Hospitality Trust, Inc.

                                        By: /s/ DAVID A. BROOKS
                                            -------------------
                                        Name: David A. Brooks
                                        Title: Secretary and Chief Legal Counsel

                              GUARANTORS:

                              ASHFORD HOSPITALITY TRUST, INC.

                              By: /s/ DAVID A. BROOKS
                                  --------------------------------------------
                              Name: David A. Brooks
                              Title: Secretary and Chief Legal Counsel

                              ASHFORD OP GENERAL PARTNER LLC

                              By: Ashford Hospitality Trust, Inc.

                                  By: /s/ DAVID A. BROOKS
                                      ----------------------------------------
                                  Name: David A. Brooks
                                  Title: Secretary and Chief Legal Counsel

                              ASHFORD OP LIMITED PARTNER LLC

                              By: Ashford Hospitality Trust, Inc.

                                  By: /s/ DAVID A. BROOKS
                                      ----------------------------------------
                                  Name: David A. Brooks
                                  Title: Secretary and Chief Legal Counsel

                              ASHFORD TRS CORPORATION

                              By: /s/ DAVID A. KIMICHIK
                                  ---------------------------------------------
                              Name: David J. Kimichik
                              Title: President

                                       11


                                    ASHFORD MOBILE LP

                                    By: Ashford Properties General Partner LLC

                                        By: /s/ DAVID A. BROOKS
                                            ----------------------------------
                                        Name: David A. Brooks
                                        Title: Vice President

                                    ASHFORD JACKSONVILLE II LP

                                    By: Ashford Properties General Partner LLC

                                        By: /s/ DAVID A. BROOKS
                                            ----------------------------------
                                        Name: David A. Brooks
                                        Title: Vice President

                                    ASHFORD LAWRENCEVILLE LP

                                    By: Ashford Properties General Partner LLC

                                        By: /s/ DAVID A. BROOKS
                                            ----------------------------------
                                        Name: David A. Brooks
                                        Title: Vice President

                                    ASHFORD AUSTIN LP

                                    By: Ashford Properties General Partner LLC

                                        By: /s/ DAVID A. BROOKS
                                            ----------------------------------
                                        Name: David A. Brooks
                                        Title: Vice President

                                    ASHFORD DALLAS LP

                                    By: Ashford Properties General Partner LLC

                                            By: /s/ DAVID A. BROOKS
                                                -------------------------------
                                            Name: David A. Brooks
                                            Title: Vice President

                                       12


                                    ASHFORD DULLES LP

                                    By: Ashford Properties General Partner LLC

                                        By: /s/ DAVID A. BROOKS
                                            ----------------------------------
                                        Name: David A. Brooks
                                        Title: Vice President

                                    ASHFORD HOLTSVILLE LP

                                    By: Ashford Properties General Partner LLC

                                            By: /s/ DAVID A. BROOKS
                                                -------------------------------
                                            Name: David A. Brooks
                                            Title: Vice President

                                    ASHFORD BUENA VISTA LP

                                    By: Ashford Properties General Partner LLC

                                            By: /s/ DAVID A. BROOKS
                                                -------------------------------
                                            Name: David A. Brooks
                                            Title: Vice President

                                    ADMINISTRATIVE AGENT:

                                    CALYON NEW YORK BRANCH

                                    By: /s/ OLIVER AUDEMARD
                                        ----------------------------------------
                                    Name: Oliver Audemard
                                    Title: Managing Director

                                    By: /s/ DAVID BOWERS
                                        ---------------------------------------
                                    Name: David Bowers
                                    Title: Director

                                    SYNDICATION AGENT:

                                    MERRILL LYNCH CAPITAL, a division of Merrill
                                    Lynch Business Financial Services, Inc.

                                    By: /s/ KIM LIAUTAUD
                                        ---------------------------------------
                                    Name: Kim Liautaud
                                    Title: Vice President

                                       13


                                    LENDERS:

                                    CALYON NEW YORK BRANCH

                                    By: /s/ OLIVER AUDEMARD
                                        ---------------------------------------
                                    Name: Oliver Audemard
                                    Title: Managing Director

                                    By: /s/ DAVID BOWERS
                                        ---------------------------------------
                                    Name: David Bowers
                                    Title: Director

                                    MERRILL LYNCH CAPITAL, a division of Merrill
                                    Lynch Business Financial Services, Inc.

                                    By: /s/ KIM LIAUTAUD
                                        ---------------------------------------
                                    Name: Kim Liautaud
                                    Title: Vice President

                                       14

EX-10.16

                                                                   EXHIBIT 10.16

                           LOAN AND SECURITY AGREEMENT

            THIS LOAN AND SECURITY AGREEMENT (the "AGREEMENT") dated as of July
13, 2004, is entered into by and among ASHFORD FINANCE SUBSIDIARY I LP, a
Delaware limited partnership ("BORROWER"), each of the Credit Parties signatory
hereto (the "CREDIT PARTIES") and CAPITALSOURCE FINANCE LLC, a Delaware limited
liability company ("LENDER").

            WHEREAS, Borrower has requested that Lender make available to
Borrower a revolving credit facility (the "LOAN") in a maximum principal amount
at any time outstanding of up to Forty-Five Million Five Hundred Fifty Thousand
Dollars ($45,550,000) (the "FACILITY CAP"), the proceeds of which shall be used
by Borrower to fund the generation and purchase of Eligible Receivables (the
"BUSINESS") (or the reimbursement to Borrower of the purchase price in respect
of the acquisition of Mortgage Loans which are to be pledged as Collateral on
the Closing Date) and for payment to the Lender of the sums provided for in the
Agreement;

            WHEREAS, Borrower is willing to grant Lender, a Lien on and security
interest in the Collateral to secure the Loan; and

            WHEREAS, Lender is willing to make the Loan available to Borrower
upon the terms and subject to the conditions set forth herein.

            NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and adequacy of which hereby are
acknowledged, Borrower and Lender hereby agree as follows:

I.    DEFINITIONS

      1.1   General Terms

            For purposes of the Loan Documents and all Annexes thereto, in
addition to the definitions above and elsewhere in this Agreement or the other
Loan Documents, the terms listed in Appendix A hereto shall have the meanings
given such terms in Appendix A, which is incorporated herein and made a part
hereof. All capitalized terms used which are not specifically defined shall have
meanings provided in Article 9 of the UCC in effect on the date hereof to the
extent the same are used or defined therein. Unless otherwise specified herein
or in Appendix A, this Agreement and any agreement or contract referred to
herein or in Appendix A shall mean such agreement as modified, amended or
supplemented from time to time. Unless otherwise specified, as used in the Loan
Documents or in any certificate, report, instrument or other document made or
delivered pursuant to any of the Loan Documents, all accounting terms not
defined in Appendix A or elsewhere in this Agreement shall have the meanings
given to such terms in and shall be interpreted in accordance with GAAP.

Loan and Security Agreement (Ashford)


II.   LOAN, PAYMENTS, INTEREST AND COLLATERAL

      2.1   THE LOAN

            (a) Subject to the provisions of this Agreement, Lender agrees to
make Advances to Borrower under the Loan from time to time during the Revolving
Period; provided, that (i) the Advances at any time outstanding under the Loan
shall not exceed the lesser of (A) the Facility Cap minus the Interest Reserve
and (B) the Availability and (ii) in the event Borrower has made a mandatory
prepayment of the Loan pursuant to Section 2.8(c), if Borrower has submitted to
Lender for its consideration a replacement Eligible Receivable within ninety
(90) days of such prepayment, and Lender has approved inclusion of such Eligible
Receivable in the Borrowing Base in accordance with the terms and conditions of
this Agreement, the Advance made to Borrower pursuant to this Section 2.1 in
respect of such Eligible Receivable shall be in an amount equal to such
mandatory prepayment. The Loan is a revolving credit facility which may be
drawn, repaid and redrawn from time to time as permitted under this Agreement.
Unless otherwise permitted by Lender, each Advance shall be in an amount of no
less than Three Million Dollars ($3,000,000) or more than Fifteen Million
Dollars ($15,000,000). No more than two (2) Advances may be made in any calendar
month for the period running from the Closing through January 13, 2005, and no
more than one (1) Advance may be made in any calendar month for the period
running from January 13, 2005 through the last day of the Revolving Period;
provided, however, that, notwithstanding the foregoing, Lender shall make
additional Advances during such periods subject to the payment by Borrower, to
Lender, of a Two Thousand Dollar ($2,000) administrative fee for each such
Advance in excess of the number permitted above in any calendar month. Subject
to the provisions of this Agreement, Borrower may request Advances up to and
including the value, in Dollars of one hundred percent (100%) of the Borrowing
Base, minus amounts reserved pursuant to this Agreement (such calculated amount
being referred to herein as the "AVAILABILITY"). Advances under the Loan
automatically shall be made for the payment of interest on the Notes and other
Obligations on the date when due to the extent available and as provided for
herein. Lender shall have the right to establish and readjust from time to time,
upon not less than sixty (60) days prior written notice to Borrower, and in
Lender's Permitted Discretion, reserves (other than the Interest Reserve)
against the Borrowing Base, which reserves shall have the effect of reducing the
amounts otherwise eligible to be disbursed to Borrower under the Loan pursuant
to this Agreement.

            (b) Seven Hundred Fifty Thousand and No/100 Dollars ($750,000.00) of
the Loan shall be reserved against the Facility Cap by Lender, and not funded on
the Closing Date, as an interest reserve for the Loan (the "INTEREST RESERVE").
Subject to the general conditions for disbursement set forth in Section 2.1(a),
such funds from the Interest Reserve may be disbursed monthly by Lender, in its
sole discretion, to the extent that Borrower fails to make any interest or
principal payment on the Loan when due. No interest shall accrue on the Interest
Reserve except to the extent of funds disbursed by Lender pursuant to this
Section 2.1(b). Advances by Lender from the Interest Reserve shall become an
Obligation hereunder, shall accrue interest at the Applicable Rates and be
payable in accordance with this Agreement, and shall be subject to all other
terms of this Agreement upon making the Advance from the Interest Reserve for
such interest payments or for any other uses permitted herein. Notwithstanding
the provisions of this Section 2.1(b), in no event shall Lender have any
obligation to make any disbursement out of the Interest Reserve. Notwithstanding
and without limiting or being limited

Loan and Security Agreement (Ashford)

                                       2


by any other provision of this Agreement, upon the occurrence and continuation
of an Event of Default, Lender shall have the right, in its sole discretion, to
use all or any portion of the amounts in the Interest Reserve to pay any amount
or Obligation hereunder and/or under the Loan, the Note, and any other Loan
Documents to be applied at such time and in such manner and order as Lender
shall decide in its sole discretion. Use of the Interest Reserve shall in no way
waive or otherwise modify any of Borrower's Obligations hereunder, or under the
Note or any other Loan Document, including, without limitation, the obligation
to make monthly interest, and when applicable principal payments.

      2.2   THE NOTES; MATURITY; EXTENSION OF REVOLVING PERIOD

            (a) All Advances under the Loan shall be evidenced by the Notes,
payable to the order of Lender in the principal amount of the Loan, and duly
executed and delivered by Borrower. The Notes shall evidence the aggregate
Indebtedness of Borrower to Lender resulting from Advances under the Loan from
time to time. Lender will account to Borrower monthly with a statement of
Advances under the Loan, and any charges and payments made pursuant to this
Agreement, and in the absence of manifest error, such accounting rendered by
Lender shall be deemed final, binding and conclusive unless Lender is notified
by Borrower in writing to the contrary within twenty (20) calendar days of
Receipt of each accounting, which notice shall be deemed an objection only to
items specifically objected to therein.

            (b) All amounts outstanding under the Notes and all other
Obligations under the Loan shall be due and payable in full, if not earlier in
accordance with this Agreement, on the Maturity Date.

            (c) Borrower may request that Lender extend the Revolving Period by
an additional twelve (12) months upon satisfaction of the following conditions:
(i) Borrower shall have delivered to Lender written notification of such
election no later than sixty (60) days prior to the first anniversary of the
Closing Date, (ii) no Default or Event of Default shall have occurred and be
continuing or be reasonably likely to occur, (iii) no material changes to the
Mortgage Loan Collateral shall have occurred nor shall a Material Adverse Effect
be reasonably likely to occur, in each case, in the sole determination of
Lender, and (iv) Borrower shall have paid the Extension Fee in accordance with
Section 3.7. Lender shall notify Borrower within forty five (45) days of receipt
of the notice set forth in clause (i) above whether Lender has chosen to extend
the Revolving Period. Notwithstanding the foregoing or anything contained in
this Agreement to the contrary and irrespective of whether the foregoing
conditions have been satisfied, Lender shall have the sole right to approve such
extension which approval may be granted or withheld in the sole discretion of
Lender.

            (d) Lender may, at any time after the Closing Date, elect to no
longer require that Notes be delivered by Borrower to evidence the Loans
hereunder. In the event Lender makes such election, the following provisions
shall apply:

                  (i) Lender shall maintain electronic or written records in
      which it will record (i) the amount of each Loan made hereunder, the type
      of Loan, and any applicable interest rate periods, (ii) the amount of any
      principal and/or interest due and payable

Loan and Security Agreement (Ashford)

                                       3


      and/or to become due and payable from Borrower to Lender hereunder and
      (iii) all amounts received by Lender hereunder from Borrower.

                  (ii) The entries made in the electronic or written records
      maintained pursuant to subsection (i) of this Section 2.2(d) (the
      "REGISTER") shall be prima facie evidence of the existence and amounts of
      the obligations and indebtedness therein recorded; provided, however, that
      the failure of Lender to maintain such records or any error therein shall
      not in any manner affect the obligations of Borrower to repay the Loans or
      Obligations in accordance with their terms. The Register shall be subject
      to the terms of Section 13.2(c).

                  (iii) Borrower agrees that upon written notice by Lender to
      Borrower that a promissory note or other evidence of indebtedness is
      requested by Lender to evidence the Loans owing or payable to, or to be
      made by, Lender, Borrower shall promptly (and in any event within three
      (3) Business Days of any such request) execute and deliver to Lender an
      appropriate promissory note or notes in form and substance reasonably
      acceptable to Lender and Borrower payable to the order of Lender in a
      principal amount equal to the amount of the Loans owing or payable to
      Lender.

                  (iv) All references to Notes in the Loan Documents shall mean
      Notes, if any, to the extent issued (and not returned to Borrower for
      cancellation) hereunder, as the same may be amended, modified, divided,
      supplemented and/or restated from time to time.

      2.3   INTEREST ON THE NOTES

            (a) The Borrower agrees to pay interest in respect of the
outstanding principal amount of each Advance, in arrears on the fifth (5th)
Business Day of each month, from the date the proceeds thereof are made
available to the Borrower (i.e., the date of funding) until paid, at a rate per
annum equal to the lesser of (i) the greater of (A) prior to the effectiveness
of the Interest Rate Reduction Election (1) LIBOR plus six and one-quarter
percent (6.25%) per annum and (2) eight and one-quarter percent (8.25%) per
annum or (B) from and after the effectiveness of the Interest Rate Reduction
Election (1) LIBOR plus five and three-quarters percent (5.75%) per annum and
(2) seven and three-quarters percent (7.75%) per annum and (ii) the Maximum
Rate. If Lender is ever prevented from charging or collecting interest at the
Applicable Rate, then the interest rate shall continue to be the Maximum Rate
until such time as Lender has charged and collected the full amount of interest
that would be chargeable and collectable if interest at the Applicable Rate had
always been lawfully chargeable and collectable.

            (b) Borrower shall have the one-time option to reduce the interest
rate set forth in Section 2.3(a)(i)(A) above (the "INTEREST RATE REDUCTION
ELECTION") on or prior to the first (1st) anniversary of the Closing Date (the
"INTEREST RATE REDUCTION EXPIRATION DATE"). In the event Borrower wishes to make
the Interest Rate Reduction Election, Borrower shall notify Lender in writing,
no later than the tenth (10th) Business Day prior to the Interest Rate Reduction
Expiration Date, of its desire to make the Interest Rate Reduction Election. On
the fifth (5th) Business Day after Lender's receipt of such notification, the
interest rate on the Loan shall be automatically reduced to the amount set forth
in Section 2.3(a)(i)(B) and the Advance Percentage

Loan and Security Agreement (Ashford)

                                       4


shall be automatically reduced by five percent (5%), in each case without any
further action by any party. If as a result of such reduction in the Advance
Percentage Borrower is required to make a payment of principal pursuant to
Section 2.7, such payment shall be made without prepayment premium.

            (c) Whenever, subsequent to the date of this Agreement, LIBOR or the
Prime Rate, as applicable, is increased or decreased, the Applicable Rate shall
be similarly changed without notice or demand of any kind by an amount equal to
the amount of such change in LIBOR or the Prime Rate, as applicable, on the day
of such change (subject to the Maximum Rate). The monthly interest due on the
principal balance of the Loan outstanding shall be computed for the actual
number of days elapsed during the month in question on the basis of a year
consisting of 360 days and shall be calculated by determining the average daily
principal balance outstanding for each day of the month in question. The daily
rate shall be equal to 1/360th times the Applicable Rate (but shall not exceed
the Maximum Rate). Lender may assess a late charge equal to five percent (5%) of
each delinquent payment due hereunder if such payment is not paid in the manner
required when such payment is due.

            (d) Lender shall determine (which determination shall, absent
manifest error, be presumptively correct) LIBOR on the applicable determination
date. Notwithstanding anything to the contrary contained herein, Lender shall
not be required to purchase United States dollar deposits in the London
interbank market or other applicable LIBOR market to fund any Advances, but the
provisions hereof shall be deemed to apply as if Lender had purchased such
deposits to fund the Advances.

            (e) If Lender determines in good faith (which determination shall be
conclusive and binding upon Borrower to the extent made in good faith by Lender)
that Dollar deposits of the relevant Advance amount are not available in the
London Interbank Market or the rate at which such Dollar deposits are being
offered will not adequately and fairly reflect the cost to Lender of maintaining
a LIBOR Advance, or that by reason of circumstances affecting such market,
adequate and reasonable means do not exist for ascertaining LIBOR, Lender
promptly shall give notice of such determination to Borrower. If such notice is
given (i) any Advances requested to be made on the first day of such Interest
Period shall be made as Prime Rate Advances and (ii) any outstanding LIBOR
Advances shall be converted to Prime Rate Advances. At such time as such
condition no longer exists, Lender shall withdraw such notice, and until such
notice has been withdrawn by Lender, no further LIBOR Advances shall be made.

            (f) In the event that, after the date hereof, by reason of a change
in any law, regulation or requirement or interpretation thereof by any
Governmental Authority, or the imposition of any requirement of any such
Governmental Authority, whether or not having the force of law, including the
imposition of any reserve and/or special deposit requirement (other than
reserves included in the Eurocurrency Reserve Requirements), Lender shall be
subjected to any tax, levy, impost, charge, fee, duty, deduction or withholding
of any kind whatsoever (other than Excluded Taxes) and if any such measures
shall result in an increase in the cost to Lender of maintaining any LIBOR
Advance or in a reduction in the amount of principal or interest receivable by
Lender in respect thereof, then Borrower shall pay to Lender, within ten (10)
days after receipt of a notice from Lender (which notice shall be accompanied by
a statement in reasonable detail setting forth the basis for the calculation
thereof, which calculation, in the

Loan and Security Agreement (Ashford)

                                       5


absence of manifest error, shall be presumptively correct), an amount equal to
such increased cost or reduced amount. At any time after receipt of such notice
Borrower may convert all LIBOR Advances to Prime Rate Advances, and such
conversion shall be effective three (3) Business Days after Lender has received
notice from Borrower of such conversion.

            (g) If at any time a change in any law, treaty or regulation, or any
interpretation thereof by any Governmental Authority shall make it unlawful for
Lender to fund or maintain its share of any LIBOR Advance, then, upon the
occurrence of such event, Lender shall notify Borrower thereof and thereupon (i)
the right of Borrower to request any LIBOR Advance shall be suspended for the
duration of such illegality and (ii) if required by such law, treaty, regulation
or interpretation, on such date as shall be specified in such notice all LIBOR
Advances shall be deemed converted to Prime Rate Advances. If any such
conversion of a LIBOR Advance occurs on a day which is not the last day of the
then current Interest Period with respect thereto, Borrower shall pay to Lender
such amounts, if any, as may be required pursuant to Section 2.3(h) below.

            (h) In addition to any other payments payable by Borrower to Lender
pursuant to the Loan Documents, Borrower shall indemnify Lender and hold Lender
harmless from any loss or expense which Lender may sustain or incur as a
consequence of (i) default by Borrower in making any prepayment in full of the
Loans to the extent consisting in whole or in part of LIBOR Advances after
Borrower has given the third (3rd) notice thereof in any calendar year in
accordance with the provisions of this Agreement, (ii) default by Borrower in
making any prepayment of a LIBOR Advance after Borrower has given the third
(3rd) notice thereof in any calendar year in accordance with the provisions of
this Agreement, and (iii) the making of a prepayment of a LIBOR Advance on a day
which is not the last day of an Interest Period with respect thereto. With
respect to LIBOR Advances, such indemnification may include an amount equal to
the excess, if any, of (A) the amount of interest which would have accrued on
the amount so prepaid, or not so borrowed, converted or extended, for the period
from the date of such prepayment or of such failure to borrow, convert or extend
to the last day of the applicable Interest Period (or, in the case of a failure
to borrow, convert or extend, the Interest Period that would have commenced on
the date of such failure) in each case at the Applicable Rate for such LIBOR
Advances provided for herein over (B) the amount of interest (as determined by
Lender) which would have accrued to Lender on such amount by placing such amount
on deposit for a comparable period with leading banks in the interbank
Eurodollar market. This covenant shall survive the termination or non-renewal of
this Agreement and the payment of the Obligations.

            (i) The Loan shall initially be a LIBOR Advance. Borrower shall have
no right to request that the Loan be converted to a Prime Rate Advance. Lender
shall have the option at any time, in its sole discretion, to convert the LIBOR
Advance to a Prime Rate Advance (a "PRIME RATE CONVERSION"). In the event Lender
elects to make a Prime Rate Conversion, Lender shall deliver written notice
thereof to Borrower at least one (1) Business Day prior to the effective date of
such conversion. Any Prime Rate Conversion shall (i) be at no cost to Borrower
and (ii) occur in such a manner that the Applicable Rate after the Prime Rate
Conversion shall equal the Applicable Rate immediately prior to the Prime Rate
Conversion and shall continue to be equal to the Applicable Rate which would
have been in effect hereunder from time to time as if no Prime Rate Conversion
had occurred, for so long as such Advances continue as Prime Rate Advances.

Loan and Security Agreement (Ashford)

                                       6


            (j) Notwithstanding anything to the contrary contained herein, no
Credit Party shall be required to make any payments to Lender pursuant to
Section 2.3(f) or (h) or Section 6.15 relating to any period of time which is
greater than 180 days prior to the date Lender demands payment of such amount.

            (k) Lender agrees that, upon the occurrence of any event giving rise
to an increase, cost or additional payment obligation pursuant to Section 2.3(f)
or (g) with respect to Lender, or to avoid the unavailability of LIBOR pursuant
to Section 2.3(e), it will, if requested by Borrower, use reasonable efforts
(subject to reimbursement by the Borrower of any out-of-pocket costs incurred by
Lender) to designate another lending office for any Advances affected by such
event with the object of avoiding the consequences of such event; provided, that
such designation is made on terms that, in the sole judgment of Lender, cause
Lender and its lending office(s) to suffer no economic, legal or regulatory
disadvantage.

      2.4   LOAN DISBURSEMENTS; REQUIREMENT TO DELIVER BORROWING CERTIFICATE

            So long as no Default or Event of Default shall have occurred and be
continuing, Borrower may give Lender irrevocable written notice (which may be
delivered via e-mail attachment, so long as it is signed by a Responsible
Officer) requesting an Advance under the Loan by delivering to Lender not later
than 12:00 noon (New York City time) at least five (5) Business Days before the
proposed Business Day on which such requested Advance is to be made (each, a
"BORROWING DATE"), a completed Borrowing Certificate requesting such Advance
accompanied by relevant supporting documentation satisfactory to Lender in its
sole discretion, which shall (a) specify the proposed Borrowing Date of such
Advance, (b) specify the principal amount of such requested Advance, and (c)
certify the matters contained in Section 4.2 (subject to (i) the update of the
Schedules hereto and (ii) the passage of not less than ten (10) Business Days
from the date of receipt by Lender of the last Funding Item required by Lender
in connection with such Advance) and, to the extent applicable, provide
calculations evidencing satisfaction of the conditions set forth in Section 4.2.
On the first Business Day of each fiscal quarter during the Term (and after the
occurrence and during the continuation of a Default or Event of Default, more
frequently if Lender shall so request) until the Obligations (other than
indemnity obligations under the Loan Documents that are not then due and payable
or for which any events or claims that would give rise thereto are not then
pending) are indefeasibly paid in cash in full and this Agreement is terminated
and each time a request for an Advance is made, Borrower shall deliver to Lender
a Borrowing Certificate accompanied by a roll forward of the Borrower's Accounts
with a representation as to whether the conditions precedent contained in
Section 4.2 are satisfied as of the date of such Borrowing Certificate and such
other supporting documentation with respect to the figures and information in
the Borrowing Certificate as Lender shall request in its Permitted Discretion.
On each Borrowing Date, Borrower irrevocably authorizes Lender to disburse the
proceeds of the requested Advance to the applicable account(s) of Borrower
specified in the applicable Borrowing Certificate, each of which accounts shall
constitute one or more of the accounts set forth on Schedule 2.4, in all cases
for credit to Borrower (or to such other account as to which Borrower shall
instruct Lender in writing) via Federal funds wire transfer no later than 3:00
p.m. (New York City time). Notwithstanding anything to the contrary in this
Agreement, Lender shall be entitled to rely upon the authority of a Responsible
Officer of Borrower for communications with and instructions from Borrower

Loan and Security Agreement (Ashford)

                                       7


until Lender has actually received written notice from Borrower that such
officer no longer has such authority.

      2.5   LOAN COLLECTIONS; REPAYMENT; BORROWING AVAILABILITY AND BLOCKED
ACCOUNT

            Borrower shall maintain one or more blocked accounts (individually
and collectively, the "BLOCKED ACCOUNT") with one or more banks acceptable to
Lender (each, a "BLOCKED ACCOUNT BANK"), and shall execute with each Blocked
Account Bank one or more agreements acceptable to Lender which shall provide
that, among other things (a) Lender's first priority Lien in such Blocked
Account is perfected, (b) subject to Section 2.5(c), on the fifth (5th) Business
Day of each calendar month, such Blocked Account Bank shall transfer all funds
on deposit in such Blocked Account into a depository account or accounts
maintained by Lender or an Affiliate of Lender at such bank as Lender may direct
from time to time (the "CONCENTRATION ACCOUNT") and (c) following the occurrence
and during the continuance of a Triggering Event, such Blocked Account Bank
shall honor all instructions received from Lender concerning such Blocked
Account, including, without limitation, at Lender's direction, the transfer of
all funds on deposit in such Blocked Account into the Concentration Account
(individually and collectively, the "BLOCKED ACCOUNT AGREEMENTS"), and such
other agreements related thereto as Lender may require. Borrower shall ensure
that all collections of its Accounts and all other proceeds of Collateral are
paid and delivered directly into the appropriate Blocked Account. To the extent
any such collections of Accounts and all other proceeds of Collateral are not
paid and delivered directly into a Blocked Account but are received by Borrower,
such collections and proceeds shall be held in trust for the benefit of Lender
and remitted immediately by the Borrower for deposit to a Blocked Account.
Notwithstanding and without limiting any other provision of any Loan Document,
Lender shall apply, on a daily basis, all funds transferred into the
Concentration Account pursuant to the Blocked Account Agreement and this Section
2.5 in such order and manner as noted in Section 2.16. Borrower acknowledges and
agrees that compliance with the terms of this Section 2.5 is an essential term
of this Agreement, and that, in addition to and notwithstanding any other rights
Lender may have hereunder, under any other Loan Document, under applicable law
or at equity, upon each and every failure by Borrower to comply with any such
terms Lender may consider such failure to be a Default or an Event of Default.
All funds deposited into the Blocked Account shall be applied to reduce the
Obligations under the Loan pursuant to Section 2.16. If as the result of
collections of Accounts and/or any other cash payments delivered by Borrower
pursuant to this Section 2.5 a credit balance exists with respect to the Blocked
Account, such credit balance shall not accrue interest in favor of Borrower
(except in accordance with the Blocked Account Agreements), but shall be
available to the Borrower in accordance with the terms of this Agreement. Each
Foreclosure Subsidiary shall ensure that all cash payments received or to be
received by it are paid or directed to be paid into a Blocked Account.

      2.6   PROMISE TO PAY; MANNER OF PAYMENT.

            Borrower absolutely and unconditionally promises to pay, when due
and payable pursuant hereto, principal, interest and all other amounts and
Obligations payable, hereunder or under any other Loan Document, without any
right of rescission and without any deduction whatsoever, including any
deduction for set-off, recoupment or counterclaim, notwithstanding any damage
to, defects in or destruction of the Collateral or any other event, including

Loan and Security Agreement (Ashford)

                                       8


obsolescence of any property or improvements. Any payments made by Borrower
(other than payments automatically paid through Advances under the Loan as
provided herein or with funds contained in the Blocked Account), shall be made
only by wire transfer on the date when due, without offset, deduction or
counterclaim, in Dollars, in immediately available funds to such account as may
be indicated in writing by Lender to Borrower from time to time. Any such
payment received after 2:00 p.m. (New York City time) on any date shall be
deemed received on the following Business Day. Whenever any payment hereunder
shall be stated to be due or shall become due and payable on a day other than a
Business Day, the due date thereof shall be extended to, and such payment shall
be made on, the next succeeding Business Day, and such extension of time in such
case shall be included in the computation of payment of any interest (at the
interest rate then in effect during such extension) and/or fees, as the case may
be.

      2.7   REPAYMENT OF EXCESS ADVANCES

            (a) Any balance of Advances under the Loan outstanding at any time
in excess of the lesser of (a) the Facility Cap minus the Interest Reserve and
(b) Availability shall be due and payable by Borrower within forty-five (45)
days of notice from Lender, at the Payment Office, whether or not a Default or
Event of Default has occurred or is continuing and shall be paid in the manner
specified in Section 2.6 and, notwithstanding any other provision of this
Agreement, shall be an Event of Default if not so paid. Lender may, at any time
and in its sole discretion, require a new appraisal conducted by an appraiser
selected by Lender of any or all of the Mortgage Loan Collateral for the
Eligible Receivables in order to determine whether an overadvance exists, and if
Lender determines an overadvance exists based on the results of such appraisal,
Borrower shall pay such excess amount in accordance with the immediately
preceding sentence. Any appraisal prepared pursuant to this Section 2.7(a) shall
be based upon appraisal criteria and methodology that are consistent with those
utilized in the appraisal approved by Lender in connection with the addition of
the relevant Mortgage Loan to the Borrowing Base. All costs and expenses of such
appraisal shall be at Borrower's expense; provided, that Borrower shall only be
obligated to pay for three (3) such appraisals of any particular Hotel during
the Term and no more than one (1) per calendar year.

            (b) Notwithstanding the foregoing, in lieu of paying such excess
amounts, Borrower shall have the option, at the election of Borrower, to add
Eligible Receivables to the Borrowing Base. Such addition of Eligible
Receivables shall be subject to the same terms and conditions as are applicable
to a request for an Advance pursuant to Sections 2.4 and 4.2.

      2.8   OTHER MANDATORY PREPAYMENTS; VOLUNTARY PREPAYMENTS

            In addition to and without limiting any provision of any Loan
Document:

            (a) If a Change of Control occurs that has not been consented to in
writing by Lender prior to the consummation thereof, on or prior to the first
Business Day following the date of such Change of Control, Borrower shall prepay
the Loan and all other Obligations (other than indemnity obligations under the
Loan Documents that are not then due and payable or for which any events or
claims that would give rise thereto are not then pending) in full in cash
together with accrued interest thereon to the date of prepayment and all other
amounts owing to Lender under the Loan Documents.

Loan and Security Agreement (Ashford)

                                       9


            (b) If Borrower, in any transaction or series of related
transactions, (i) sells any material assets (other than any Mortgage Loan) or
other properties (other than sales of assets that are promptly (and in any event
within 180 days) replaced with assets that are useful in the Business), (ii)
sells or issues any equity or debt securities, Equity Interests or ownership
interests (other than, so long as no Default or Event of Default exists, or,
after giving effect thereto, otherwise results therefrom, Permitted Securities),
including, but not limited to, any sale or issuance undertaken in connection
with or as part of a Public Offering, (iii) receives any property damage
insurance award or any other insurance proceeds of any kind (including any
proceeds received by Borrower from an Account Debtor in accordance with the
terms of the underlying Mortgage Loan Documents) that are not paid to a third
party as a result of or relating to the incidents giving rise to such award and
that, under the terms of the relevant Mortgage Loan Documents, are attributable
to the principal of such Mortgage Loan (but in no event in an amount in excess
of the amount that would be due to Lender upon a repayment in full of such
Mortgage Loan pursuant to Section 2.8(c) below), or (iv) incurs any Indebtedness
except for Permitted Indebtedness, then it shall apply one hundred percent
(100%) (or such lesser amount as is required to indefeasibly pay in cash in full
the Obligations (other than indemnity obligations under the Loan Documents that
are not then due and payable or for which any events or claims that would give
rise thereto are not then pending)) of the cash proceeds thereof (net of
reasonable transaction costs and expenses and taxes) to the prepayment of the
Loan together with accrued interest and all other Obligations, such payment to
be applied on the fifth (5th) day after receipt thereof by Borrower first, to
all then unpaid fees and expenses; second, to all accrued and unpaid interest on
the Loan; and third, to the principal under the Loan (with no permanent
reduction in Commitments); provided, however, that the reduction of the
principal balance of the Loan shall not affect the amount or timing of principal
payments (other than the extent to which reductions have been made with respect
to such principal payments as allocated pursuant to this paragraph) required
under this Agreement until the balance of such Loan is reduced to zero. If the
amount paid to Lender pursuant to clause (iii) above with respect to any
Mortgage Loan equals the amount that would be due to Lender upon a repayment in
full of such Mortgage Loan pursuant to Section 2.8(c), Lender shall release such
Mortgage Loan from this Agreement as if such payment had been made pursuant to
Section 2.8(c).

            (c) If Borrower receives (i) any principal payments on any Mortgage
Loan (other than with respect to the Wyndham Receivable, any payment specified
in subclause (ii) of this Section 2.8(c)), Borrower shall prepay the Loan on the
fifth (5th) day after receipt thereof by Borrower in an amount equal to the pro
rata percentage of such principal payment equal to the Advance Percentage on the
Mortgage Loan being repaid; provided, that if such payment received by Borrower
constitutes a repayment in full of such Mortgage Loan, Borrower shall prepay the
principal of the Loan in an amount such that the amount of such principal
prepayment, when aggregated with all previous payments of the principal of the
Loan made by Borrower on account of payments of the applicable Mortgage Loan,
equals one hundred fifteen percent (115%) of the original Advance made by Lender
in respect of such Mortgage Loan, whereupon (x) Lender shall execute such
documents and instruments as may be necessary to release such Mortgage Loan from
the Liens and security interests granted pursuant to this Agreement and the
other Loan Documents, and (y) such Mortgage Loan shall no longer be considered a
"Mortgage Loan" under this Agreement, or (ii) any principal payments on the
Wyndham Receivable as a result of the release of any Hotel in the Wyndham
Portfolio in accordance with the Wyndham Loan Documents, Borrower shall prepay
the principal of the Loan in an amount equal to one

Loan and Security Agreement (Ashford)

                                       10


hundred fifteen percent (115%) of the applicable Wyndham Portfolio Allocated
Loan Amount (minus the Wyndham Adjustment Amount, if any).

            (d) If any Foreclosure Subsidiary is permitted to commence an
Enforcement Action against the Mortgage Loan Collateral for any Mortgage Loan as
provided in Section 7.16 and Section 2.17, Borrower shall, within five (5) days
of its receipt of the proceeds of a completed foreclosure proceeding with
respect to such Mortgage Loan Collateral, prepay the principal of the Loan in an
amount such that the amount of such principal payment, when aggregated with all
previous payments of the principal of the Loan made by Borrower on account of
payments of the applicable Mortgage Loan, equals one hundred fifteen percent
(115%) of the original Advance made by Lender in respect of such Mortgage Loan,
whereupon (i) Lender shall execute such documents and instruments as may be
necessary to release such Mortgage Loan from the Liens and security interests
granted pursuant to this Agreement and the other Loan Documents and (ii) such
Mortgage Loan shall no longer be considered a "Mortgage Loan" for any purpose
under this Agreement.

            (e) Subject to Section 2.17(a), if a Mortgage Loan that was an
Eligible Receivable becomes an Ineligible Receivable, Borrower shall, on the
sixtieth (60th) day following the delivery of the Ineligibility Notice by Lender
to Borrower, prepay the principal of the Loan in an amount such that the amount
of such principal payment, when aggregated with all previous payments of the
principal of the Loan made by Borrower on account of payments of the applicable
Mortgage Loan, equals the amount of one hundred fifteen percent (115%) of the
Advance made hereunder on account of such Mortgage Loan, whereupon (i) Lender
shall execute such documents and instruments as may be necessary to release such
Mortgage Loan from the Liens and security interests granted pursuant to this
Agreement and the other Loan Documents and (ii) such Mortgage Loan shall no
longer be considered a "Mortgage Loan" for any purpose under this Agreement.

            (f) If Lender has prohibited the exercise of rights and remedies by
any Foreclosure Subsidiary in accordance with the last sentence of Section 7.16,
Borrower shall, on the thirtieth (30th) Business Day following the delivery of
notice by Lender to such Foreclosure Subsidiary of such prohibition, prepay the
principal of the Loan in an amount such that the amount of such principal
payment, when aggregated with all previous payments of the principal of the Loan
made by Borrower on account of payments of the applicable Mortgage Loan, equals
the amount of the Advance made hereunder on account of such Mortgage Loan,
whereupon (i) Lender shall execute such documents and instruments as may be
necessary to release such Mortgage Loan from the Liens and security interests
granted pursuant to this Agreement and the other Loan Documents and (ii) such
Mortgage Loan shall no longer be considered a "Mortgage Loan" for any purpose
under this Agreement.

            (g) Subject to Section 3.4, at any time and from time to time,
Borrower shall have the right to release any Eligible Receivable from the
Borrowing Base in connection with the transfer of such Eligible Receivable to
any Person (including, without limitation, an Affiliate of Borrower) by
prepaying the principal of the Loan in an amount such that the amount of such
principal prepayment, when aggregated with all previous payments of the
principal of the Loan made by Borrower on account of payments of the principal
of the applicable Eligible Receivable pursuant to Section 2.8(c)(i), equals one
hundred fifteen percent (115%) of the original Advance

Loan and Security Agreement (Ashford)

                                       11


made by Lender in respect of such Mortgage Loan, whereupon (i) Lender shall
execute such documents and instruments as may be necessary to release such
Mortgage Loan from the Liens and security interests granted pursuant to this
Agreement and the other Loan Documents, and (ii) such Eligible Receivable shall
no longer be considered a "Mortgage Loan" under this Agreement; provided, that
in no event will Borrower or any Foreclosure Subsidiary complete a foreclosure,
accept a deed in lieu of foreclosure or in any other way acquire title to any
Mortgage Loan Collateral prior to making such payment and receiving such release
from Lender.

            (h) Borrower shall have the right, at its option, to make a
voluntary prepayment of the Loan in order to cure its non-compliance with
Section 6.14(d) so long as such prepayment is made within five (5) days of
notice of such non-compliance by Lender. If such prepayment of the Loan is made
pursuant to this Section 2.8(h), Borrower may, at its option, reduce the
Commitment in an amount equal to such prepayment upon written notice to Lender,
and upon Lender's receipt of such notice, the Commitment (and Facility Cap)
shall be reduced by the amount of such prepayment.

            (i) If the Mortgage Loan in respect of the Wyndham Receivable or the
Adam's Mark Hotel in Denver, Colorado becomes an Ineligible Receivable, Borrower
may, at its option, on or prior to the ninetieth (90th) day following the
delivery of the Ineligibility Notice by Lender to Borrower, voluntarily prepay
in full in cash all Obligations (other than indemnity obligations under the Loan
Documents that are not then due and payable or for which any events or claims
that would give rise thereto are not then pending) in accordance with the terms
and conditions of Section 11.1.

            (j) If a Mortgage Loan that was an Eligible Receivable becomes an
Ineligible Receivable and Lender has waived the mandatory prepayment in Section
2.8(e) in accordance with Section 2.17, in the event any Affiliate of Borrower
acquires the related senior loan collateral at any foreclosure proceeding in
respect thereof, and by doing so causes the value of the Mortgage Loan
Collateral to become less than the Allocated Loan Amount for that Mortgage Loan,
Borrower shall prepay the Loan and all other Obligations (other than indemnity
obligations under the Loan Documents that are not then due and payable or for
which any events or claims that would give rise thereto are not then pending) in
full in cash on the date of such acquisition together with accrued interest
thereon to the date of prepayment and all other amounts owing to Lender under
the Loan Documents.

            (k) Mandatory or optional prepayments pursuant to subsections (b)
through (h) of this Section 2.8 during the Revolving Period shall not result in
any permanent reduction in the Facility Cap or Lender's Commitment, except to
the extent permitted pursuant to Section 2.8(h).

            (l) Notwithstanding anything to the contrary contained in this
Section 2.8, in the event Borrower would incur costs pursuant to Section 2.3(h)
as a result of any payment due pursuant to this Section 2.8, Borrower, at its
option, may deposit the amount of such payment with Lender in a cash collateral
account until the end of the applicable Interest Period. Borrower hereby grants
to Lender a security interest in all such amounts which are from time to time on
deposit in such cash collateral account and expressly waives all rights (which
rights Borrower

Loan and Security Agreement (Ashford)

                                       12


hereby acknowledges and agrees are vested exclusively in Lender) to exercise
dominion or control over any such amounts or such cash collateral account.

      2.9   PAYMENTS BY LENDER

            (a) Should any amount required to be paid under any Loan Document be
unpaid beyond any applicable cure period, such amount may be paid by Lender,
which payment shall be deemed a request for an Advance under the Loan as of the
date such payment is due, and Borrower irrevocably authorizes disbursement of
any such funds to Lender, by way of direct payment of the relevant amount,
interest or Obligations without necessity of any demand in accordance with
Section 2.6 whether or not a Default or Event of Default has occurred or is
continuing. No payment or prepayment of any amount by Lender or any other Person
shall entitle any Person to be subrogated to the rights of Lender under any Loan
Document unless and until the Obligations (other than indemnity obligations
under the Loan Documents that are not then due and payable or for which any
events or claims that would give rise thereto are not then pending) have been
fully performed and paid indefeasibly in cash and this Agreement has been
terminated. Any sums expended or amounts paid by Lender as a result of any
Credit Party's failure to pay, perform or comply with any Loan Document or any
of the Obligations may be charged to Borrower's account as an Advance under the
Loan and added to the Obligations.

            (b) Lender shall disburse monthly, to the extent that there are
funds available in any Blocked Account to make any interest and/or principal
payment on the Loan when due, funds from any Blocked Account or in satisfaction
of such payment. Notwithstanding the provisions of this Section 2.9(b), in no
event shall Lender have any obligation to make any such disbursement out of any
Blocked Account during the continuance of an Event of Default. Use of any
Blocked Account shall in no way waive or otherwise modify any of Borrower's
Obligations hereunder, or under the Note or any other Loan Document, including,
without limitation, the obligation to make monthly interest, and when applicable
principal payments.

      2.10  GRANT OF SECURITY INTEREST; COLLATERAL

            (a) To secure the payment and performance of the Obligations, each
of Borrower and each Foreclosure Subsidiary hereby grants to Lender, a valid,
perfected and continuing first priority security interest in and Lien upon, and
pledges to Lender, all of its right, title and interest in, to and upon the
following property and interests in property of such Person whether now owned or
hereafter acquired:

                  (i) all tangible personal property, including without
      limitation all present and future Goods, Inventory and Equipment
      (including items of Equipment which are or become Fixtures), Computer
      Hardware and Software, now owned or hereafter acquired and all real
      property, including leasehold interests, now owned or hereafter acquired;

                  (ii) all intangible personal property, including, without
      limitation, all present and future Accounts, Contract Rights, Permits,
      General Intangibles, customer lists, Chattel Paper, Investment Property
      (except if obtained using amounts on deposit in the Residual Proceeds
      Account), Intellectual Property, Documents, Instruments, Deposit

Loan and Security Agreement (Ashford)

                                       13


      Accounts (except the Residual Proceeds Account), Letter-of-Credit Rights
      and Supporting Obligations, rights to the payment of money or other forms
      of consideration of any kind, tax refunds, insurance proceeds (including,
      without limitation, proceeds of any life insurance policy), and all other
      intangible and tangible personal property relating to or arising out of
      any of the foregoing, including, but not limited to, the following:

                  (A) The Mortgage Loan Documents and Mortgage Loans;

                  (B) All other property whether now or hereafter owned,
            acquired or held by such Person which secures (or constitutes
            collateral for) any of the Mortgage Loan Documents or other
            instruments or agreements which evidence any of the Mortgage Loans,
            including without limitation, all right, title and interest in and
            to all financing statements perfecting such security interests in
            any of the foregoing;

                  (C) All financing statements perfecting the security interests
            of any of the foregoing;

                  (D) All Supporting Obligations in respect of the Mortgage
            Loans;

                  (E) All right, title and interest of such Person in and to all
            insurance policies pertaining to or obtained by any Account Debtor
            or such Person in connection with, or arising out of, any Mortgage
            Loan Document;

                  (F) All right, title and interest of such Person in and to all
            commitments and other agreements to purchase any Mortgage Loans;

                  (G) All right, title and interest of such Person in and to all
            collections on, and proceeds of or from, any and all of the
            foregoing (collectively, "COLLECTIONS");

                  (H) All files, surveys, certificates, correspondence,
            appraisals, computer programs, software, tapes, discs, cards,
            accounting records, and other records, information, and data of such
            Person relating to the Mortgage Loans (including all information,
            data, programs, tapes, discs and cards necessary to administer and
            service such Mortgage Loans);

                  (I) All now existing or hereafter arising rights to service,
            administer and/or collect Mortgage Loans and all rights to the
            payment of money on account of such servicing, administration and/or
            collection activities; and

                  (J) All contract rights, accounts, rights to payment of money,
            and general intangibles, relating to such documents and contracts
            described in (A) through (I) above and as to all such Collateral
            described in (A) through this subparagraph (J) whether now existing
            or hereafter at any time acquired or arising; and

Loan and Security Agreement (Ashford)

                                       14

                  (iii) any and all additions to any of the foregoing, and any
      and all replacements, products and proceeds (including insurance proceeds)
      of any of the foregoing.

            (b) Borrower shall promptly notify Lender of any Commercial Tort
Claims in which Borrower or any Foreclosure Subsidiary has an interest arising
after the Closing Date and shall provide all necessary information concerning
each such Commercial Tort Claim and make all necessary filings with respect
thereto to perfect Lender's first priority security interest therein.

            (c) Each of Borrower and each Foreclosure Subsidiary has full right
and power to grant to Lender a perfected, first priority security interest and
Lien on the Collateral pursuant to this Agreement, subject to the following
sentence. Upon the execution and delivery of this Agreement, and upon the filing
of the necessary financing statements and/or appropriate filings and/or delivery
of the necessary certificates evidencing an equity interest, control and/or
possession, as applicable, without any further action, Lender will have a good,
valid and first priority (other than with respect to property or assets covered
by Permitted Liens) perfected Lien and security interest in the Collateral,
subject to no transfer or other restrictions or Liens of any kind in favor of
any other Person, except for Permitted Liens. No financing statement relating to
any of the Collateral is on file in any public office except those on behalf of
Lender. Borrower is not party to any agreement, document or instrument that
conflicts with this Section 2.10.

            (d) It is acknowledged and agreed that the Collateral shall not
include the Residual Proceeds Account or any sums held therein or Investment
Property acquired with any such sums or any of Borrower's rights thereto.
Borrower shall have the unfettered right at any time to withdraw sums from the
Residual Proceeds Account.

      2.11  COLLATERAL ADMINISTRATION

            (a) All Collateral (except Deposit Accounts and Collateral in the
possession of Custodian) will at all times be kept by Borrower at the locations
set forth on Schedule 5.18B hereto, and shall not, without thirty (30) calendar
days prior written notice to Lender, be moved therefrom other than to another
such location, and in any case shall not be moved outside the continental United
States. Each of Borrower and each Foreclosure Subsidiary hereby agrees to
deliver to the Custodian, the Custodian Deliverables promptly but in any event
within five (5) Business Days of any Advance made in respect of the underlying
Account. All Accounts shall, regardless of their location, be deemed to be under
Lender's dominion and control and deemed to be in Lender's possession. Any of
Lender's officers, employees, representatives or agents shall have the right
upon reasonable notice, at any time during normal business hours, in the name of
Lender, or any designee of Lender or Borrower or any Foreclosure Subsidiary, to
verify the validity, amount or any other matter relating to the Collateral. Each
of Borrower and each Foreclosure Subsidiary shall cooperate fully with Lender in
an effort to facilitate and promptly conclude such verification process. Each of
Borrower and each Foreclosure Subsidiary shall endeavor in the first instance to
make collection of its respective Accounts for Lender.

            (b) As and when determined by Lender in its sole discretion, Lender
will perform the searches described in clauses (i) and (ii) below against each
of Borrower and each Foreclosure Subsidiary: (i) UCC searches with the Secretary
of State and local filing offices of

Loan and Security Agreement (Ashford)

                                       15


each jurisdiction where such Person is organized and/or maintains its executive
offices, a place of business or assets; and (ii) judgment, federal tax lien and
corporate and partnership tax lien searches, in each jurisdiction searched under
clause (i) above.

            (c) Upon Lender's request, each of Borrower and each Foreclosure
Subsidiary shall promptly deliver to Lender or Custodian all items for which
Lender must receive possession to obtain a perfected Lien and security interest
and all notes, certificates, and documents of title, Chattel Paper, warehouse
receipts, Instruments, and any other similar Instruments constituting
Collateral, in each case to the extent not already in possession of Lender or
Custodian, or in the case of a participation interest, in possession of the
participating lender.

            (d) Each of Borrower and each Foreclosure Subsidiary shall keep
accurate and complete records of the Collateral and all payments and collections
thereon and shall submit such records to Lender on such periodic bases as Lender
may request in its sole discretion. If requested by Lender upon or at any time
after the occurrence and during the continuation of an Event of Default, each of
Borrower and each Foreclosure Subsidiary shall execute and deliver to Lender,
formal written assignments of all of its Accounts as Lender may request,
including all Accounts created since the date of the last assignment, together
with copies of claims, invoices and/or other information related thereto. To the
extent that collections from such assigned Accounts exceed the amount of the
outstanding Obligations, such excess amount shall not accrue interest in favor
of Borrower (except as provided in the Blocked Account Agreements) but shall be
available to Borrower in accordance with the terms of Section 2.16.

            (e) Each of Borrower and each Foreclosure Subsidiary (i) upon the
receipt of written notice from Lender, shall provide prompt written notice to
each Account Debtor that Lender has been granted a Lien on and security interest
in, upon and to all Accounts payable by such Account Debtor, (ii) shall direct
or shall have directed each Account Debtor to make payments to the appropriate
Blocked Account to the extent required by Section 2.5, and hereby authorizes
Lender, upon any failure to send such directions, to send any and all similar
directions or notice to such Account Debtors, (iii) shall mark each Mortgage
Loan Note or any other Mortgage Loan Document constituting Chattel Paper and in
the possession of Borrower (by way of stamp or other method satisfactory to
Lender) the following language: "THIS DOCUMENT IS SUBJECT TO A SECURITY INTEREST
IN FAVOR OF, AND PLEDGED AS COLLATERAL TO, CAPITALSOURCE FINANCE LLC," and (iv)
shall do anything further that may be lawfully required by Lender in its
Permitted Discretion to secure Lender's interest, in the Collateral, and
effectuate the intentions of the Loan Documents.

            (f) Each of Borrower and each Foreclosure Subsidiary hereby agrees
to take the following protective actions to prevent destruction of records
pertaining to such Person's Collateral: (i) if such Person maintains its
Collateral records on a manual system such records shall be kept in a fire proof
cabinet or on no less than a monthly basis, a record of all payments on Accounts
and all other matters relating to the Collateral shall be placed in an off-site
safety deposit box (and Lender shall have access to such safety deposit box); or
(ii) if the Collateral records are computerized, each of Borrower and each
Foreclosure Subsidiary agrees to create a tape or diskette "back-up" of the
computerized information and to provide Lender with a tape or diskette copy of
such "back-up" information (A) prior to the Initial Advance and (B) on the first
day of each month following the Initial Advance.

Loan and Security Agreement (Ashford)

                                       16


            (g) Within two (2) Business Days after the payment in full of an
Eligible Receivable, Borrower shall give written notification to Lender and
Custodian of such payment in full using the form annexed hereto as Exhibit B.

      2.12  POWER OF ATTORNEY

            Lender is hereby irrevocably made, constituted and appointed the
true and lawful attorney for Borrower and each Foreclosure Subsidiary (without
requiring Lender to act as such) with full power of substitution to do the
following: (i) endorse the name of any such Person upon any and all checks,
drafts, money orders and other instruments for the payment of money that are
payable to such Person and constitute collections on such Person's Accounts;
provided, that the proceeds thereof are applied in accordance with this
Agreement; (ii) execute and/or file in the name of such Person any financing
statements, amendments to financing statements, schedules to financing
statements, releases or terminations thereof, assignments, instruments or
documents that it is obligated to give Lender under any of the Loan Documents
(to the extent such Person fails to so execute and/or file any of the foregoing
within two (2) Business Days of Lender's request or the time when such Person is
otherwise obligated to do so); (iii) execute and/or file in the name of such
Person assignments, instruments, documents, schedules and statements that it is
obligated to give Lender under any of the Loan Documents (to the extent such
Person fails to so execute and/or file any of the foregoing within two (2)
Business Days of Lender's request or the time when such Person is otherwise
obligated to do so); and (iv) do such other and further acts and deeds in the
name of such Person that Lender may deem necessary to enforce, make, create,
maintain, continue, enforce or perfect Lender's security interest, Lien or
rights in any Collateral. In addition, if either Borrower or any Foreclosure
Subsidiary breaches its obligation hereunder to direct payments of Accounts or
the proceeds of any other Collateral to the appropriate account, Lender, as the
irrevocably made, constituted and appointed true and lawful attorney for such
Person pursuant to this paragraph, may, by the signature or other act of any of
Lender's officers or authorized signatories (without requiring any of them to do
so), direct any federal, state or private payor or fiscal intermediary to pay
proceeds of Accounts or any other Collateral to the appropriate Blocked Account.

      2.13  NOTES

            Upon Lender's request, and in any event within three (3) Business
Days of any such request, Borrower shall execute and deliver to Lender new Notes
and/or split or divide the Notes in exchange for then existing Notes (which
Notes shall then be submitted to Borrower for cancellation) in such smaller
amounts or denominations as Lender shall specify in its sole and absolute
discretion; provided, that the aggregate principal amount of such new Notes does
not exceed the aggregate principal amount of the Notes outstanding at the time
such request is made, and the interest rate, rights to prepay, maturity dates,
and all other terms and conditions of such new Notes are in accordance with the
interest rate, rights to prepay, maturity dates, and all other terms and
conditions of the original Notes delivered by Borrower hereunder.

      2.14  REPLACEMENT OF LOST NOTES

            Upon receipt of evidence reasonably satisfactory to Borrower of the
mutilation, destruction, loss or theft of any Notes and the ownership thereof,
Borrower shall, upon the

Loan and Security Agreement (Ashford)

                                       17


written request of the holder of such Notes, execute and deliver in replacement
thereof new Notes in the same form, in the same original principal amount and
dated the same date as the Notes so mutilated, destroyed, lost or stolen; and
such Notes so mutilated, destroyed, lost or stolen shall then be deemed no
longer outstanding hereunder. If the Notes being replaced have been mutilated,
they shall be surrendered to Borrower after Lender's receipt of the replacement
Notes; and if such replaced Notes have been destroyed, lost or stolen, such
holder shall furnish Borrower with an indemnity in writing reasonably acceptable
to Borrower to save them harmless in respect of such replaced Note.

      2.15  RIGHT OF FIRST LOOK

            If, at any time during the Term or at any time thereafter when any
Obligation is outstanding, Borrower shall have obtained any bona fide
third-party proposal (the "THIRD-PARTY OFFER") for the financing or refinancing
of the Loan which Borrower intends to accept, Borrower shall, in writing,
promptly inform Lender (such writing to Lender is referred to herein as the
"FIRST LOOK OFFER") of such Third-Party Offer and the terms and conditions of
such Third-Party Offer (and shall attach a copy of such Third-Party Offer to
such First Look Offer). Lender shall have the opportunity to, within ten (10)
days after the receipt of such First Look Offer, deliver a writing to Borrower
stating the specific terms and conditions that Lender would be willing to
consider extending such financing, which terms shall be the same or better than
the terms of financing under such Third-Party Offer (as such terms were
communicated to Lender by Borrower). Borrower shall have the right to accept or
reject in its discretion any such proposal from Lender.

      2.16  DISTRIBUTION OF PROCEEDS

            Absent an Event of Default, all proceeds of the Collateral
(including without limitation, funds held in any Blocked Account) to the extent
permitted pursuant to Section 2.3(a) received by Lender or deposited into the
Concentration Account under this Agreement shall be applied monthly on the fifth
(5) Business Day of each month according to the following prioritization:

            First, to the payment of all fees and expenses due to Lender
            hereunder and all accrued but unpaid interest on the Loan on the
            date due;

            Second, to the payment of all protective advances made by Lender;

            Third, to the payment of principal of the Loans then due and owing;
            and

            Fourth, any excess shall be paid into the Residual Proceeds Account.

      2.17  PROCEDURE FOR INELIGIBLE RECEIVABLES; BID COMMITMENT

            (a) To the extent any Eligible Receivable becomes an Ineligible
Receivable, Borrower shall make a mandatory prepayment in accordance with
Section 2.8(e); provided, that notwithstanding the foregoing and anything to the
contrary contained in this Agreement, Lender may, at its option and in its sole
discretion, waive such mandatory prepayment by Borrower and allow such
Ineligible Receivable to remain in the Borrowing Base. In the event Lender
waives

Loan and Security Agreement (Ashford)

                                       18


such mandatory prepayment, (i) the applicable Foreclosure Subsidiary must be
actively and diligently pursuing its rights and remedies pursuant to the
applicable Mortgage Loan Documents, including without limitation, the
commencement and completion of foreclosure proceedings resulting in the sale of
such Mortgage Loan Collateral in respect of the applicable Mortgage Loan
Collateral within six (6) months of the date of the Ineligibility Notice, (ii)
such Foreclosure Subsidiary shall have cured all monetary events of default
under the senior loan related to such Mortgage Loan, after giving effect to any
applicable grace period under the applicable Intercreditor Agreement, (iii) the
senior lender in respect of such Mortgage Loan shall not have commenced an
Enforcement Action under the applicable senior loan documents (as if the
references in the definition of the term "Enforcement Action" to "Mortgage
Loan", "Mortgage Loan Collateral" and "Mortgage Loan Documents" were to mean and
refer to such senior loan, the collateral therefor and the documents evidencing
and securing the same), (iv) such Foreclosure Subsidiary shall be in full
compliance with all covenants and obligations under the related Mortgage Loan
Documents and Intercreditor Agreements, and (v) within sixty (60) days of
Receipt by Borrower of the Ineligibility Notice, Borrower shall have delivered
to Lender, the Cash Reserve in respect of such Mortgage Loan. The Cash Reserve
shall be made available to Borrower on a monthly basis to reimburse Borrower for
legal, administrative and other costs related to such foreclosure either set
forth in a foreclosure budget approved by Lender in its Permitted Discretion or
otherwise approved by Lender in its Permitted Discretion, and expended by
Borrower or such Foreclosure Subsidiary in the exercise of such Person's rights
or remedies in respect of such Mortgage Loan or to cure any defaults under the
applicable Mortgage Loan Documents or Intercreditor Agreements. Lender agrees to
invest the Cash Reserve in investments which yield no less than one percent (1%)
per annum. All such investments shall be at the risk of Borrower and Lender
shall not be liable to any person or entity with respect to any loss with
respect to such investments in the absence of Lender's gross negligence or
willful misconduct. All income from such investments shall be taxable to
Borrower, and Borrower shall pay when due such taxes on such income. Borrower
hereby grants to Lender a security interest in all such amounts which are from
time to time held as a Cash Reserve and expressly waives all rights (which
rights Borrower hereby acknowledges and agrees are vested exclusively in Lender)
to exercise dominion or control over any such amounts or the Cash Reserve.

            (b) Commencing November 1, 2004, and on the last day of each
calendar quarter occurring thereafter until the Maturity Date, Lender shall have
the right, in its sole discretion, to declare that the Northland Conference
Center is an Ineligible Receivable if there has occurred a Material Adverse
Change in respect of the Northland Conference Center. In the event Lender has
declared the Northland Conference Center to be an Ineligible Receivable,
Borrower shall make a mandatory prepayment in respect of the Northland
Conference Center in accordance with Section 2.8(e).

            (c) To the extent the Northland Conference Center becomes an
Ineligible Receivable and Lender has allowed it to remain in the Borrowing Base
and waived the mandatory prepayment under Section 2.8(e) in accordance with the
terms and conditions of Section 2.17(a) above, subject to the conditions
specified in Section 2.17(d), Lender agrees to make an Advance to Borrower, in
an amount equal to one hundred percent (100%) of the bid made by the applicable
Foreclosure Subsidiary for the related senior loan collateral at any foreclosure
sale (the "BID COMMITMENT AMOUNT"). Such Advance in the amount of the Bid
Commitment Amount will be made available to Borrower within five (5) Business
Days of

Loan and Security Agreement (Ashford)

                                       19


satisfaction of the conditions set forth in Section 2.17(d). Upon the making of
such Advance by Lender, the Facility Cap and Lender's Commitment shall
automatically be increased by an amount equal to the Bid Commitment Amount.

            (d) The obligations of Lender to make an Advance in respect of the
Bid Commitment Amount shall be subject to the satisfaction, in the sole judgment
of Lender, of the following conditions precedent:

                  (i) Satisfaction of the conditions precedent set forth in
      Section 4.2;

                  (ii) Borrower's delivery to Lender of evidence, satisfactory
      to Lender in its sole discretion, that neither Borrower nor such
      Foreclosure Subsidiary is able to obtain cash proceeds, whether pursuant
      to an equity or debt financing or otherwise, in an amount necessary to
      support such bid;

                  (iii) Lender's approval of the terms and conditions of such
      bid; and

                  (iv) Such Foreclosure Subsidiary's compliance with Section
      6.12, including without limitation, execution and delivery to Lender of a
      mortgage on the related Hotel.

            (e) Borrower shall use the proceeds of any Advance made in respect
of the Bid Commitment Amount to make an immediate capital contribution to the
applicable Foreclosure Subsidiary, and such Foreclosure Subsidiary shall use the
proceeds of such Advance to pay the applicable bid.

            (f) Notwithstanding anything to the contrary contained herein, if
either of the Mortgage Loans for the Northland Conference Center or Hilton Times
Square becomes an Ineligible Receivable, Borrower shall have the right to
exercise its right set forth in Section 2.8(g) to release such Mortgage Loan(s)
as Collateral irrespective of the fact that such Mortgage Loan is an Ineligible
Receivable (provided, that no other Event of Default would result therefrom),
and upon the full payment of all sums due in connection with such release, and
compliance with all other terms relating thereto as set forth in Section 2.8(g)
Borrower and Lender shall be restored to their respective positions.

      2.18  LENDER AS A QUALIFIED TRANSFEREE

            Lender hereby represents and warrants that as the date hereof, and
based solely upon Lender's review of the Intercreditor Agreements and Lender's
Form 10-Q filed on May 13, 2004, Lender is a Qualified Transferee, Eligible
Transferee or Qualified Institutional Lender, as applicable (each as defined in
each of the applicable Intercreditor Agreements).

Loan and Security Agreement (Ashford)

                                       20


III.    FEES AND OTHER CHARGES

      3.1   COMMITMENT FEE

            On or before the Closing Date, Borrower shall pay to Lender a fully
earned and nonrefundable commitment fee equal to Two Hundred Twenty-Four
Thousand Dollars ($224,000).

      3.2   UNUSED LINE FEE

            Borrower shall pay to Lender an unused line fee (the "UNUSED LINE
FEE") commencing on January 13, 2005 for so long as the Revolving Period remains
in effect, in an amount equal to one-half percent (0.5%) (per annum) of the
difference derived by subtracting (a) the daily average amount of the Advances
outstanding during the preceding month, from (b) the Facility Cap minus the
Interest Reserve. The Unused Line Fee shall be payable monthly in arrears on the
first day of each successive calendar month.

      3.3   FUNDING FEES

            From and after the Closing Date, Borrower shall pay to Lender a
funding fee (the "INITIAL FUNDING FEE") of One Hundred Eighty-Seven Thousand
Five Hundred Dollars ($187,500) which shall be paid in installments by Lender's
deduction from each Advance of an amount equal to one-half percent (0.5%) of
such Advance prior to disbursement of such Advance to Borrower. Each such
installment shall be applied by Lender toward payment of the unpaid Initial
Funding Fee until such time as the Initial Funding Fee has been paid in full;
provided, that notwithstanding the foregoing or anything else contained in this
Agreement to the contrary, the Initial Funding Fee shall be paid in full on or
before July 13, 2005, and to the extent the Initial Funding Fee has not been
paid in full by July 13, 2005, Borrower shall immediately pay to Lender the
unpaid Initial Funding Fee. From and after payment in full of the Initial
Funding Fee, Borrower shall pay to Lender a funding fee (the "SECONDARY FUNDING
FEE") in an amount equal to one-quarter percent (0.25%) of each Advance which
shall be deducted by Lender from such Advance prior to disbursement of such
Advance to Borrower. The Initial Funding Fees and the Secondary Funding Fees are
non-refundable.

      3.4   LOCKOUT; EARLY TERMINATION FEES

            Borrower shall have no right to voluntarily prepay the Loan before
July 13, 2005 unless such voluntary prepayment is made pursuant to Sections
2.8(h) or 2.8(i). If (a) Borrower terminates this Agreement under Section 11.1
hereof, (b) Lender demands or accelerates the Obligations, or Borrower is
otherwise required to make payment in full of the Loan, (c) a Change of Control
occurs, and/or final payment of all outstanding Obligations pursuant to Section
2.8 occurs or is required to occur as a result thereof, (d) any other
termination of this Agreement and/or final prepayment (in full or in part) of
the Loan or the Obligations occurs, whether by virtue of Lender's exercising its
right of set-off or otherwise, or (e) any automatic acceleration of the Loan or
the Obligations or cessation of lending on account of or during a bankruptcy,
reorganization or other proceeding or liquidation or pursuant to any Debtor
Relief Law (each, a "TERMINATION"), then, at the effective date of any such
Termination, Borrower shall pay Lender (in addition to the then outstanding
principal, accrued interest and other Obligations owing

Loan and Security Agreement (Ashford)

                                       21


pursuant to the terms of this Agreement and any other Loan Document), as yield
maintenance for the loss of bargain and not as a penalty, an amount equal to the
applicable Termination Fee (if any); provided, however, that no Termination Fee
shall be payable in respect of prepayments made in accordance with Section
2.7(a), 2.8(b), 2.8(c), 2.8(d), 2.8(e), 2.8(f) or 2.8(i) (unless the
circumstances giving rise to any such mandatory prepayment also constitute a
Change of Control). If a mandatory prepayment of the Loan is made pursuant to
Section 2.8(c) because a Mortgage Loan has been paid in full by the underlying
Account Debtor, Borrower may reduce the Commitment in an amount equal to such
mandatory prepayment upon written notice to Lender and payment to Lender of a
commitment reduction fee in the amount of one percent (1%) of the amount of the
Allocated Loan Amount for such Mortgage Loan (if the effective date of such
reduction is after July 13, 2005, but before April 13, 2006) and zero
thereafter. Upon Lender's receipt of such commitment reduction fee, the
Commitment (and Facility Cap) shall be reduced by such amount.

      3.5   COMPUTATION OF FEES; LAWFUL LIMITS

            All fees hereunder shall be computed on the basis of a year of 360
days and for the actual number of days elapsed in each calculation period, as
applicable. In no contingency or event whatsoever, whether by reason of
acceleration or otherwise, shall the interest and other charges paid or agreed
to be paid to Lender for the use, forbearance or detention of money hereunder
exceed the maximum rate permissible under applicable law which a court of
competent jurisdiction shall, in a final determination, deem applicable hereto
(the "MAXIMUM RATE"). If, due to any circumstance whatsoever, fulfillment of any
provision hereof, at the time performance of such provision shall be due, shall
exceed any such limit, then, the obligation to be so fulfilled shall be reduced
to such lawful limit, and, if Lender shall have received interest or any other
charges of any kind which might be deemed to be interest under applicable law in
excess of the Maximum Rate, then such excess shall be applied first to any
unpaid fees and charges hereunder, then to unpaid principal balance owed by
Borrower hereunder, and if the then remaining excess interest is greater than
the previously unpaid principal balance, Lender shall promptly refund such
excess amount to Borrower and the provisions hereof shall be deemed amended to
provide for such permissible rate. The terms and provisions of this Section 3.5
shall control to the extent any other provision of any Loan Document is
inconsistent herewith.

      3.6   DEFAULT RATE OF INTEREST

            Upon the occurrence and during the continuation of an Event of
Default, the Applicable Rate of interest then in effect at such time with
respect to the Obligations shall be increased by five percent (5.0%) per annum
(the "DEFAULT RATE"). Interest at the Default Rate shall accrue from the initial
date of such Event of Default until such Event of Default is waived or ceases to
continue, and shall be payable upon demand.

      3.7   EXTENSION FEE

            To the extent the conditions set forth in Sections 2.2(c) have been
satisfied and Lender has agreed to the extension contemplated thereby, Borrower
shall pay to Lender an extension fee (the "EXTENSION FEE") in an amount equal to
one-half percent (0.5%) (per annum) of the Facility Cap. The Extension Fee shall
be due and payable upon the extension of the Revolving Period as provided in
Section 2.2(c).

Loan and Security Agreement (Ashford)

                                       22


      3.8   ELIGIBLE RECEIVABLE FINANCING FEES

            In the event Borrower receives any financing fees, including without
limitation, commitment fees, funding fees and origination fees, on any Mortgage
Loan in an amount in excess of two percent (2%) of the original principal amount
of such Mortgage Loan, Borrower shall pay to Lender fifty percent (50%) of the
amount of such excess within five (5) days of Borrower's receipt of such fees.

IV.   CONDITIONS PRECEDENT

      4.1   CONDITIONS TO INITIAL ADVANCE AND CLOSING

            The obligations of Lender to consummate the transactions
contemplated herein and the obligations of the Lender to make the initial
advance under the Loan (the "INITIAL ADVANCE"), is subject to the satisfaction
(or waiver), in the sole judgment of Lender, of the following:

            (a) (i) Borrower shall have delivered to Lender (A) the Loan
Documents to which it is a party, each duly executed by an authorized officer of
Borrower and the other parties thereto, and (B) a Borrowing Certificate for the
Initial Advance, executed by an authorized officer of Borrower, and (ii) each
other Credit Party shall have delivered to Lender the Loan Documents to which it
is a party, each duly executed and delivered by such Credit Party and the other
parties thereto;

            (b) all in form and substance satisfactory to Lender in its sole
discretion, Lender shall have received (i) a report of UCC financing statement,
tax and judgment lien searches performed with respect to Borrower and each
Account Debtor under a Mortgage Loan in each jurisdiction determined by Lender
in its sole discretion, and such report shall show no Liens on the Collateral
(other than Permitted Liens and Liens to be terminated at Closing), (ii) each
document (including, without limitation, any UCC financing statement) required
by any Loan Document or under law or requested by Lender to be filed, registered
or recorded to create, in favor of Lender, a first priority and perfected
security interest upon the Collateral, and (iii) evidence of each such filing,
registration or recordation and of the payment by any Borrower of any necessary
fee, tax or expense relating thereto;

            (c) Lender shall have received (i) the Charter and Good Standing
Documents of each Credit Party, all in form and substance acceptable to Lender
in its sole discretion, (ii) a certificate of the corporate secretary or
assistant secretary of each Credit Party in his or her capacity as such and not
in his or her individual capacity dated the Closing Date, as to the incumbency
and signature of the Persons executing the Loan Documents on behalf of such
Credit Party in form and substance acceptable to Lender in its sole discretion,
(iii) the written legal opinions of counsel and/or special counsel for Credit
Parties, if any, in each case in form and substance satisfactory to Lender in
its sole discretion and its counsel and usual and customary for transactions of
this type which shall include, without limitation, a non-consolidation opinion
with respect to Borrower and its general partner and a "true sale" opinion with
respect to Borrower, and (iv) a certificate executed by an authorized officer of
Borrower, and on behalf of Borrower (and not in such officer's individual
capacity) which shall constitute a

Loan and Security Agreement (Ashford)

                                       23


representation and warranty by Borrower as of the Closing Date and the Borrowing
Date for the Initial Advance that the conditions contained in this Agreement
(including those in Section 4.2(b) and (c)) have been satisfied;

            (d) Lender shall have received a certificate of the chief financial
officer (or, in the absence of a chief financial officer, the chief executive
officer) of Ashford and its Subsidiaries, in his or her capacity, as such and
not in his or her individual capacity in form and substance satisfactory to
Lender in its sole discretion (a "SOLVENCY CERTIFICATE"), certifying (i) the
solvency of Ashford and its Subsidiaries after giving effect to the transactions
and the Indebtedness contemplated by the Loan Documents, and (ii) as to Ashford
and its Subsidiaries' financial resources and anticipated ability to meet their
respective obligations and liabilities as they become due, to the effect that as
of the Closing Date and the Borrowing Date for the Initial Advance, and after
giving effect to such transaction and Indebtedness: (A) the assets of Ashford
and its Subsidiaries, at a Fair Valuation, exceed the total liabilities
(including contingent, subordinated, unmatured and unliquidated liabilities) of
Ashford and its Subsidiaries, and (B) no unreasonably small capital base with
which to engage in their anticipated business exists with respect to Ashford and
its Subsidiaries;

            (e) Lender shall have completed examinations, the results of which
shall be satisfactory in form and substance to Lender, of the Borrower,
including, without limitation, (i) an examination of (A) the terms and
conditions of all obligations owed by Borrower and Guarantors deemed material by
Lender, the results of which shall be satisfactory in form and substance to
Lender and (B) customer reference checks and calls, credit checks, and
background checks with respect to the relevant key management and principals of
Borrower and Guarantors; (ii) an examination of the Collateral, the financial
statements and the books, records, business, obligations, financial condition
and operational state of the Borrower and Guarantors, and (x) Borrower and
Guarantors shall have demonstrated to Lender's satisfaction, in its sole
discretion, that operations comply, in all respects deemed material by Lender,
in its sole discretion, with all applicable federal, state, foreign and local
laws, statutes and regulations, (y) Borrower and Guarantors shall have
demonstrated to Lender's satisfaction, in its sole discretion, that operations
are not the subject of any governmental investigation, evaluation or any
remedial action which could result in any expenditure or liability deemed
material by Lender, in its sole discretion, and (z) Borrower shall have
demonstrated to Lender's satisfaction, in its sole discretion, that it has no
liabilities or obligations (whether contingent or otherwise) that are deemed
material by Lender, in its sole discretion;

            (f) Lender shall have received (or is satisfied that it will receive
simultaneously with the funding of the Initial Advance) all fees, charges and
expenses due and payable to Lender on or prior to the Closing Date pursuant to
the Loan Documents;

            (g) all in form and substance satisfactory to Lender, in its sole
discretion, Lender shall have received (i) such consents, approvals and
agreements from such third parties as Lender and its counsel shall determine in
their sole discretion are necessary or desirable with respect to (A) the Loan
Documents and/or the transactions contemplated thereby, (B) claims against any
Credit Party or the Collateral, and/or (C) agreements, documents or instruments
to which any Credit Party is a party or by which any of its properties or assets
are bound or subject and (ii) estoppel certificates and notice
andacknowledgements from the senior lender under each

Loan and Security Agreement (Ashford)

                                       24


Intercreditor Agreement which provides for delivery of an estoppel certificate
and notice and acknowledgment upon Borrower's request;

            (h) Borrower shall be in compliance with Section 7.7 and Section
6.5, and Lender shall have received original certificates of all such required
insurance policies and confirming that they are in effect and that the premiums
due and owing with respect thereto have been paid in full and naming only
Lender, as loss payee and additional insured, as appropriate;

            (i) all corporate and other proceedings, documents, instruments and
other legal matters in connection with the transactions contemplated by the Loan
Documents (including, but not limited to, those relating to corporate and
capital structures of the Credit Parties and the transfer of the Mortgage Loans
and Mortgage Loan Documents to Borrower) shall be satisfactory to Lender in its
sole discretion;

            (j) no default (after any applicable grace or cure period has
expired or been cancelled) shall exist pursuant to any obligations of any Credit
Party, if any, under any material contract, and each Credit Party shall be in
compliance with applicable laws, and there shall exist no fact, condition or
circumstance which, with the passage of time, the giving of notice or both,
could reasonably be expected to result in a Material Adverse Effect;

            (k) no Credit Party, or, principal or key management personnel of
any Credit Party shall have been indicted or is under active investigation by a
U.S. Attorney for a felony crime;

            (l) Borrower shall have established the Blocked Account pursuant to
Section 2.5;

            (m) Lender shall have received copies of all Permits required for
Borrower to conduct the business in which it is currently engaged or is
contemplated pursuant to the Loan Documents, the absence of which could
reasonably be expected to be, have or result in a Material Adverse Effect;

            (n) Lender shall have received evidence of release and termination
of, or Lender's authority to release and terminate, any and all Liens and/or UCC
financing statements in, on, against or with respect to any of the Collateral
(other than Permitted Liens);

            (o) there shall not have occurred any Material Adverse Change or
Material Adverse Effect from that which was reflected on the annual financial
statement for Ashford dated December 31, 2003, or the quarterly financial
statement for Ashford dated March 31, 2004, each as filed with the Securities
Exchange Commission or reflected in other securities filings made by Ashford
with the Securities Exchange Commission through July 12, 2004 or any liabilities
or obligations of any nature with respect to any Credit Party which could
reasonably be likely to have a Material Adverse Effect;

            (p) The Custodian shall have received the Custodian Deliverables
with respect to each Account;

Loan and Security Agreement (Ashford)

                                       25


            (q) Lender shall have received evidence of Borrower's authority and
licensing to provide the Mortgage Loans, if any;

            (r) Lender shall have received the Custodial Agreement, duly
executed by all parties thereto;

            (s) The principal amount of the Initial Advance shall not be less
than Eighteen Million Seven Hundred Fifty Thousand Dollars ($18,750,000); and

            (t) Lender shall have received such other documents and items as
Lender deems necessary, in its sole discretion.

      4.2   CONDITIONS TO EACH ADVANCE

            The obligations of Lender to make any Advance under the Loan
(including, without limitation, the Initial Advance) are subject to the
satisfaction, in the sole judgment of Lender, of the following additional
conditions precedent:

            (a) Borrower shall have delivered to Lender, a Borrowing Certificate
for the Advance with necessary supporting documentation and executed by an
authorized officer of Borrower on behalf of the Borrower (and not in his or her
individual capacity), which shall constitute a representation and warranty by
Borrower as of the Borrowing Date that the conditions contained in this Section
4.2, have been satisfied; provided, however, that any determination as to
whether the conditions to the funding of Advances or extensions of credit have
been satisfied shall be made by Lender in its sole discretion;

            (b) each of the representations and warranties made by the Credit
Parties in or pursuant to the Loan Documents shall be accurate before and after
giving effect to the making of such Advance (except for those representations
and warranties made as of a specific date), and no Default or Event of Default
shall have occurred or be continuing or would exist after giving effect to the
requested Advance on such date; provided, that Borrower may update the Schedules
upon the occurrence of a factual change which is not adverse to Lender, as
determined by Lender in its Permitted Discretion;

            (c) immediately after giving effect to the requested Advance, the
aggregate outstanding principal amount of Advances under the Loan shall not
exceed the lesser of the (i) Facility Cap minus the Interest Reserve and (ii)
Availability;

            (d) Lender shall have received all fees, charges and expenses
payable to Lender on or prior to such date pursuant to the Loan Documents;

            (e) Borrower shall have delivered to Lender the Funding Items, not
less than ten (10) Business Days prior to the date of the requested Advance
required by Lender, for approval by Lender, which approval shall be granted by
Lender in its sole discretion;

            (f) Credit Parties shall obtain and Borrower shall deliver to Lender
from time to time all required consents, approvals and agreements from such
third parties as are necessary

Loan and Security Agreement (Ashford)

                                       26


and that are satisfactory to Lender in its sole discretion with respect to the
Mortgage Loan for which such Advance is being made;

            (g) there shall not have occurred any Material Adverse Change;

            (h) The Loan-to-Cost in respect of each applicable Mortgage Loan
proposed to be included in the Borrowing Base shall not exceed eighty-five
percent (85%) on the date of such Advance; and

            (i) each Mortgage Loan shall meet each of the following criteria:

                  (i) The Mortgage Loans shall be genuine; shall in all respects
      be what they purport to be; and the Mortgage Loan Documents evidencing the
      relevant Account Debtor's obligation to pay the Indebtedness under such
      Mortgage Loan shall have only one original counterpart and no other party
      other than Lender or the Custodian shall be in actual or constructive
      possession of any such original Mortgage Loan Documents;

                  (ii) The Mortgage Loans shall represent undisputed, bona fide
      transactions completed in accordance with the terms and provisions
      contained in any documents related thereto;

                  (iii) Borrower shall be the sole owner and holder of each
      Mortgage Loan and shall have good title to each Mortgage Loan;

                  (iv) The amounts of the face value shown on any schedule of
      any Mortgage Loan provided to Lender shall actually and absolutely be
      owing to Borrower and shall not be contingent for any reason, except as
      set forth in the applicable Intercreditor Agreement;

                  (v) No adverse claims, set-offs, counterclaims, defaults or
      disputes as to payments or liability thereon exist or have been asserted
      with respect thereto and Borrower has not made any agreement with any
      Account Debtor thereunder or any deduction therefrom;

                  (vi) No facts, events or occurrences exist that, in any way,
      impair the validity or enforcement thereof or tend to reduce the amount
      payable thereunder from the amount of the Mortgage Loan shown on any
      schedule, or on all Mortgage Loan Documents delivered to Lender with
      respect thereto;

                  (vii) All Account Debtors in connection with Mortgage Loans
      shall have had the capacity to contract at the time any contract or other
      document giving rise to the Account was executed and generally shall have
      the ability to pay their debts as they become due;

                  (viii) No proceedings or actions shall be threatened or
      pending against any Account Debtor that might result in any Material
      Adverse Change in the Account Debtor's financial condition;

Loan and Security Agreement (Ashford)

                                       27


                  (ix) The Mortgage Loans shall not have been assigned or
      pledged to any Person other than Lender;

                  (x) The Mortgage Loan Collateral shall not have been released
      from the Lien of the Mortgage Loan Documents, nor has the respective
      Account Debtor been released from its obligations under any Mortgage Loan
      Document, in whole or in part, except in accordance with the terms of the
      Mortgage Loan Documents;

                  (xi) All requirements of applicable federal, state and local
      laws, and regulations thereunder, including, without limitation, usury
      laws or similar laws, in respect of all Mortgage Loan Documents have been
      complied with in all material respects;

                  (xii) All Mortgage Loan Documents shall represent the legal,
      valid and binding obligation of the Account Debtor, enforceable in
      accordance with its terms, subject to bankruptcy, insolvency and other
      laws (including, but not limited to principles of equity) affecting the
      rights of creditors;

                  (xiii) No instrument of release or waiver shall have been
      executed in connection with any Mortgage Loan Document;

                  (xiv) Except as disclosed in writing to and consented to by
      Lender (to the extent that such consent is required hereunder) in
      accordance with the terms of this Agreement, no Mortgage Loan Document
      shall have been amended or modified after the date on which such Account
      is pledged to Lender hereunder;

                  (xv) No Mortgage Loan Document shall be subject to any right
      of rescission, set-off, counter-claim or defense, including the defense of
      usury, and no such right of rescission, set-off, counter-claim or defense
      shall have been asserted with respect thereto, except as disclosed to
      Lender in writing and as reflected in the calculation of the amount of the
      Mortgage Loans;

                  (xvi) There shall be no proceeding pending for the total or
      partial condemnation of any of the Mortgage Loan Collateral, each Hotel
      shall be operated as a Hotel, in good repair and free and clear of any
      damage that would adversely affect the value of the Hotel and shall be
      lawfully used and occupied by the owner thereof and/or by tenants under
      Leases;

                  (xvii) The Mortgage Loan Documents relating to each Hotel
      shall include representations and covenants requiring the owner of the
      Hotel to comply with all applicable zoning and building laws or
      regulations and to obtain all permits, licenses and certificates required
      by law or regulation with respect to the Hotel and with respect to the use
      and occupancy of the same, including but not limited to certificates of
      occupancy and fire underwriter certificates. Borrower shall not have
      received from the applicable Account Debtor any notification from any
      Governmental Authority that the Hotel is in material noncompliance with
      such laws or regulations, is being used, operated or occupied unlawfully
      or has failed to have or obtain such permits, licenses or certificates, as
      the case may be;

Loan and Security Agreement (Ashford)

                                       28


                  (xviii) Each Account Debtor shall be the owner and holder or
      lessee of the applicable Mortgage Loan Collateral and no Account Debtor
      shall have granted any Liens on the Mortgage Loan Collateral in favor of
      any Person other than Borrower except to the extent provided for in the
      applicable Intercreditor Agreement; and

                  (xix) For those Hotels in which the Account Debtor holds a
      leasehold estate (i) the related lease shall be in full force and effect
      and shall not have been modified or amended in any manner except as may be
      permitted pursuant to the Mortgage Loan Documents, (ii) there shall be no
      material defaults under such lease and (iii) neither the Account Debtor
      nor the landlord under the lease shall have commenced any action or given
      or received any notice for the purpose of terminating the lease.

Lender shall make all Advances under the Loan within five (5) Business Days of
the satisfaction of this Section 4.2.

V.    REPRESENTATIONS AND WARRANTIES

            Borrower and each Foreclosure Subsidiary, jointly and severally, and
each other Credit Party, as to itself only (and only with respect to those
representations and warranties which specifically relate to such Credit Party,
as provided below), each represents and warrants as of the Closing Date and each
Borrowing Date as follows:

      5.1   ORGANIZATION AND AUTHORITY

            Each of Borrower and each Foreclosure Subsidiary is a limited
liability company duly formed, validly existing and in good standing under the
laws of its state of formation. Each of Borrower and each Foreclosure Subsidiary
(a) has all requisite power and authority to own its properties and assets
(including, without limitation, the Collateral) and to carry on its business as
now being conducted and as contemplated in the Loan Documents, and (b) is duly
qualified to do business in the jurisdictions set forth on Schedule 5.1, which
are all of the jurisdictions in which failure so to qualify could reasonably be
likely to have or result in a Material Adverse Effect. Each Credit Party has all
requisite power and authority (i) to execute, deliver and perform the Loan
Documents to which it is a party, (ii) to consummate the transactions
contemplated under the Loan Documents to which it is a party, and (iii) to grant
the Liens with regard to the Collateral pursuant to the Security Documents to
which it is a party. Borrower has all requisite power and authority to borrow
hereunder. No Credit Party is an "investment company" registered or required to
be registered under the Investment Company Act of 1940, as amended, or is
controlled by such an "investment company."

      5.2   LOAN DOCUMENTS

            The execution, delivery and performance by Credit Parties of the
Loan Documents to which each is a party, and the consummation of the
transactions contemplated thereby, (a) have been duly authorized by all
requisite action of such Credit Party and have been duly executed and delivered
by or on behalf of such Credit Party; (b) do not violate any provisions of (i)
any applicable law, statute, rule, regulation, ordinance or tariff, (ii) any
order of any Governmental Authority binding on such Credit Party or any of its
properties, or (iii) the bylaws (or any other equivalent governing agreement or
document) of Borrower, or any

Loan and Security Agreement (Ashford)

                                       29


agreement between Borrower and its shareholders or equity owners or among any
such shareholders or equity owners; (c) are not in conflict with, and do not
result in a breach or default of or constitute an event of default, or an event,
fact, condition or circumstance which, with notice or passage of time, or both,
would constitute or result in a conflict, breach, default or event of default
under, any indenture, agreement or other instrument to which such Credit Party
is a party, or by which the properties or assets of such Credit Party are bound,
the effect of which could reasonably be expected to be, have or result in a
Material Adverse Effect; (d) except as set forth herein or therein, will not
result in the creation or imposition of any Lien of any nature upon any of the
properties or assets of Borrower or any Foreclosure Subsidiary, and (e) except
as set forth on Schedule 5.2 and except for filings in connection with the
perfection of Lender's Liens, do not require the consent, approval or
authorization of, or filing, registration or qualification with, any
Governmental Authority or any other Person. When executed and delivered, each of
the Loan Documents to which such Credit Party is a party will constitute the
legal, valid and binding obligation of such Credit Party, enforceable against
such Credit Party in accordance with its terms, subject to the effect of any
applicable bankruptcy, moratorium, insolvency, reorganization or other similar
law affecting the enforceability of creditors' rights generally and to the
effect of general principles of equity which may limit the availability of
equitable remedies (whether in a proceeding at law or in equity).

      5.3   SUBSIDIARIES, CAPITALIZATION AND OWNERSHIP INTERESTS

            Borrower has no Subsidiaries other than the Foreclosure
Subsidiaries. Schedule 5.3 states the authorized and issued capitalization of
Borrower, and the number and class of equity securities and/or ownership, voting
or partnership interests issued and outstanding of Borrower and the beneficial
and record owners thereof (including options, warrants and other rights to
acquire any of the foregoing) as of the Closing Date. The outstanding equity
securities and/or ownership or voting interests of Borrower have been duly
authorized and validly issued and, in the case of shares of capital stock only,
are fully paid and nonassessable, and each Person listed on Schedule 5.3 as of
the Closing Date owns beneficially and of record all of the equity securities it
is listed as owning free and clear of any Liens other than Liens created by the
Loan Documents. Schedule 5.3 also lists the directors of Borrower as of the
Closing Date. Except as listed on Schedule 5.3 as of the Closing Date, Borrower
(i) owns no Investment Property and (ii) owns no interest in and does not
participate or engage in any joint venture, partnership or similar arrangements
with any Person, other than the participation interests comprising Mortgage
Loans or interests to be obtained in accordance with the Intercreditor
Agreements.

      5.4   PROPERTIES

            Each of Borrower and each Foreclosure Subsidiary (a) is the sole
owner and has good, valid and marketable title to, or a valid leasehold interest
in, license of, or right to use, all of its properties and assets, including the
Collateral, whether personal or real, subject to no transfer restrictions
(except for provisions restricting or prohibiting assignment of leases or other
contracts listed on Schedule 5.4 and restrictions on transfer set forth in the
Intercreditor Agreements) or Liens of any kind except for Permitted Liens, and
(b) is in compliance in all material respects with each lease or license to
which it is a party or otherwise bound. Schedule 5.4 lists all real properties
(and their locations) owned or leased by or to Borrower and each Foreclosure
Subsidiary, and all leases of real property covering or with respect to such

Loan and Security Agreement (Ashford)

                                       30


properties as of the Closing Date. The leases identified on Schedule 5.4
comprise all of the leases for real property used or otherwise related to the
Business and such leases are in full force and effect. All personal property and
assets of Borrower and each Foreclosure Subsidiary are in good repair, working
order and condition (normal wear and tear excepted) and are suitable and
adequate for the uses for which they are being used or are intended except where
the failure to do so would not have a Material Adverse Effect.

      5.5   OTHER AGREEMENTS

            Except as set forth on Schedule 5.5, no Credit Party is (a) a party
to any judgment, order or decree or any agreement, document or instrument, or
subject to any restriction, which would materially adversely effect its ability
to execute and deliver, or perform under, any Loan Document to which it is a
party or to pay the Obligations owed by it, (b) in default in the performance,
observance or fulfillment of any obligation, covenant or condition contained in
any agreement, document or instrument to which it is a party or to which any of
its properties or assets are subject, which default, if not remedied within any
applicable grace or cure period, could reasonably be expected to be, have or
result in a Material Adverse Effect, nor is there any event, fact, condition or
circumstance which, with notice or passage of time or both, would constitute or
result in a conflict, breach, default or event of default under, any of the
foregoing which, if not remedied within any applicable grace or cure period
could reasonably be expected to be, have or result in a Material Adverse Effect,
or (c) with respect to Borrower and each Foreclosure Subsidiary only, a party or
subject to any agreement, document or instrument (other than the Intercreditor
Agreements and any agreements entered into in accordance with Section 6.16) with
respect to, or obligation to pay any, service or management fee with respect to,
the ownership, operation, leasing or performance of any of its business. Except
as set forth on Schedule 5.5 and Schedule 5.16, there are no existing or
proposed agreements, arrangements, understandings or transactions between
Borrower and any of its officers, directors, stockholders, employees or
affiliates or any member of their respective immediate families.

      5.6   LITIGATION

            Except as expressly set forth on Schedule 5.6, (a) Borrower is not a
party to any material pending or threatened action, suit, proceeding or
investigation related to the Business for which coverage has been denied by
Borrower's insurance company, (b) there is no pending or, to the knowledge of
Borrower, threatened action, suit, proceeding or investigation involving any
Credit Party or its business that could reasonably be expected to prevent or
materially delay the consummation by any Credit Party of the transactions
contemplated herein, (c) neither Borrower nor any Foreclosure Subsidiary is a
party or subject to any order, writ, injunction, judgment or decree of any
Governmental Authority the effect of which could reasonably be expected to be,
have or result in a Material Adverse Effect, (d) there is no action, suit,
proceeding or investigation initiated by Borrower or any Foreclosure Subsidiary
currently pending and (e) neither Borrower nor any Foreclosure Subsidiary has
had any existing accrued and/or unpaid Indebtedness to any Governmental
Authority or any other governmental payor.

Loan and Security Agreement (Ashford)

                                       31


      5.7   HAZARDOUS MATERIALS

            Each of Borrower and each Foreclosure Subsidiary is in compliance in
all material respects with all applicable Environmental Laws and it has not been
notified of any action, suit, proceeding or investigation (a) relating in any
way to non-compliance by or liability of such Person under any Environmental
Laws, (b) which otherwise alleges that any of them has a liability or potential
liability with respect to any Hazardous Substance or any Environmental Law, or
(c) which seeks to suspend, revoke or terminate any license, permit or approval
of any of them necessary for the generation, handling, storage, treatment or
disposal of any Hazardous Substance.

      5.8   TAX RETURNS; GOVERNMENTAL REPORTS; TAXES

            Each of Borrower and each Foreclosure Subsidiary (a) has filed all
federal, state, foreign (if applicable) and local tax returns and other reports
which are required by law to be filed by such Person, and (b) has paid all
taxes, assessments, fees and other governmental charges, including, without
limitation, payroll and other employment related taxes, in each case that are
due and payable, except only for items that such Person is currently contesting
in good faith.

      5.9   FINANCIAL STATEMENTS AND REPORTS

            All financial statements and financial information relating to each
Credit Party that have been or may hereafter be delivered to Lender by Borrower
are (a) consistent with the books of account and records of such Credit Party,
(b) have been prepared in accordance with GAAP, on a consistent basis throughout
the indicated periods, except that the unaudited financial statements contain no
footnotes or year-end adjustments, and (c) present fairly in all material
respects the financial condition, assets and liabilities and results of
operations of such Credit Party at the dates and for the relevant periods
indicated in accordance with GAAP on a basis consistently applied. No Credit
Party has any material obligations or liabilities of any kind required to be
disclosed therein that are not disclosed in such audited financial statements,
and since the date of the most recent financial statements submitted to Lender
pursuant to Section 6.1, there has not occurred any Material Adverse Change or
Material Adverse Effect or, to Borrower's knowledge, any other event or
condition that could reasonably be expected to be, have or result in a Material
Adverse Effect.

      5.10  COMPLIANCE WITH LAW; BUSINESS

            Except as set forth on Schedule 5.10, each Credit Party (a) is in
compliance with all laws, statutes, rules, regulations, ordinances and tariffs
of any Governmental Authority applicable to such Credit Party, such Credit
Party's assets, the Business and/or Borrower's operations, and any laws or
regulations pertaining to the Business, and (b) is not in violation of any order
of any Governmental Authority or other board or tribunal, except, in the case of
both (a) and (b), where noncompliance or violation could not reasonably be
expected to be, have or result in a Material Adverse Effect. There is no event,
fact, condition or circumstance which, with notice or passage of time, or both,
would constitute or result in any noncompliance with, or any violation of, any
of the foregoing, in each case except where noncompliance or violation

Loan and Security Agreement (Ashford)

                                       32


could not reasonably be expected to be, have or result in a Material Adverse
Effect. No Credit Party has received any notice that any Credit Party is not in
compliance in any respect with any of the requirements of any of the foregoing
where noncompliance or violation could not reasonably be expected to be, have or
result in a Material Adverse Effect. Except as would not reasonably be expected
to have or result in a Material Adverse Effect, Borrower has (i) not engaged in
any non-exempt prohibited transactions as defined in Section 406 of ERISA and
Section 4975 of the Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder (the "CODE"), (ii) not failed to meet any
applicable minimum funding requirement under Section 302 of ERISA with respect
to any pension plan subject thereto or made any application for a funding waiver
or delayed extension of any amortization period under Section 412(d) and (e) of
the Code, (iii) no knowledge of any event or occurrence which would cause the
Pension Benefit Guaranty Corporation to institute proceedings under Title IV of
ERISA to terminate any of its employee benefit plans, (iv) no fiduciary
responsibility under ERISA for investments with respect to any plan existing for
the benefit of Persons other than its employees or former employees, or (v) not
withdrawn, completely or partially, from any multi-employer pension plans so as
to incur liability under Title IV of ERISA. With respect to Borrower, there
exists no event described in Section 4043 of ERISA, excluding Subsections
4043(c)(2) and 4043(c)(3) thereof, for which the thirty (30) day notice period
contained in the applicable regulations thereto has not been waived. Borrower
has maintained in all material respects all records required to be maintained by
any applicable Governmental Authority. The Borrower has not engaged, directly or
indirectly, in any business other than the Business.

      5.11  INTELLECTUAL PROPERTY

            Except as set forth on Schedule 5.11, neither Borrower nor any
Foreclosure Subsidiary owns, licenses, utilizes, and is not a party to, any
patents, patent applications, registered trademarks, trademark applications,
registered service marks, service mark applications, registered copyrights,
domain name registrations, copyright applications, trade secrets, trade names,
software (other than mass marketed, commercially available software) or licenses
or other registrations or applications for registration of Intellectual
Property. The items listed on Schedule 5.11 constitute all of the Intellectual
Property necessary or required for the operation of the Business as of the
Closing Date and each of them owns or has a valid and enforceable right to use
all such Intellectual Property. All such items are in full force and effect and
none are in known conflict with the rights of others. Neither Borrower nor any
Foreclosure Subsidiary is in breach of or default of or default under the
provisions of any license agreement, domain name registration or other agreement
related to Intellectual Property, nor is there any event, fact, condition or
circumstance which breach or default would reasonably be expected to be, have or
result in a Material Adverse Effect.

      5.12  LICENSES AND PERMITS; LABOR

            Except as set forth on Schedule 5.12, each of Borrower and each
Foreclosure Subsidiary is in compliance with and has all Permits necessary or
required by applicable law or any Governmental Authority for the operation of
the Business as presently conducted and as proposed to be conducted except where
noncompliance, violation or lack thereof could not reasonably be expected to be,
have or result in a Material Adverse Effect. All Permits necessary or required
by applicable law or Governmental Authority for the operation of the Business
are in

Loan and Security Agreement (Ashford)

                                       33


full force and effect and not in known conflict with the rights of others,
except where such conflict or lack of being in full force and effect could not
reasonably be expected to be, have or result in a Material Adverse Effect. There
is no event, fact, condition or circumstance which, with notice or passage of
time or both, would constitute or result in a conflict, breach, default or event
of default under, any of the foregoing in this Section 5.12, which, if not
remedied within any applicable grace or cure period could reasonably be expected
to be, have or result in a Material Adverse Effect, and Borrower has not been
involved in any labor dispute, strike, walkout or union organization which could
reasonably be expected to be, have or result in a Material Adverse Effect.

      5.13  NO DEFAULT; SOLVENCY

            There does not exist any Default or Event of Default. Borrower is
and, after giving effect to the transactions and the Indebtedness contemplated
by the Loan Documents, will be solvent and able to meet its obligations and
liabilities as they become due, and the assets of the Borrower, at a Fair
Valuation, exceed the total liabilities (including contingent, subordinated,
unmatured and unliquidated liabilities) of Borrower, and no unreasonably small
capital base with which to engage in its anticipated business exists with
respect to Borrower.

      5.14  DISCLOSURE

            No Loan Document nor any other agreement, document, certificate, or
statement furnished to Lender and prepared by or on behalf of any Credit Party
in connection with the transactions contemplated by the Loan Documents, nor any
representation or warranty made by any Credit Party in any Loan Document,
contains any untrue statement of material fact or omits to state any fact
necessary to make the factual statements therein taken as a whole not materially
misleading in light of the circumstances under which it was furnished. There is
no fact known to either Borrower or any Foreclosure Subsidiary which has not
been disclosed to Lender in writing which could reasonably be expected to be,
have or result in a Material Adverse Effect.

      5.15  EXISTING INDEBTEDNESS; INVESTMENTS, GUARANTEES AND CERTAIN CONTRACTS

            The Borrower does not (a) have any outstanding Indebtedness, except
Permitted Indebtedness, or (b) own or hold any equity or long-term debt
investments in, or have any outstanding advances to or any outstanding
guarantees for, the obligations of, or any outstanding borrowings from, any
other Person, except as permitted under Section 7.4. Borrower has performed all
material obligations required pursuant to or in connection with any Permitted
Indebtedness and there has occurred no breach, default or event of default under
any document evidencing any such items or any fact, circumstance, condition or
event which, with the giving of notice or passage of time or both, would
constitute or result in a breach, default or event of default thereunder. Except
for Permitted Indebtedness and actions permitted under Section 7.4, Borrower has
not, directly or indirectly, made, and there does not exist, any loan, advances
or guarantees to or for the benefit of any Person or agreements to assume,
guarantee, endorse, contingently agree to purchase or otherwise become liable
for or upon or incur any obligation of any Person.

Loan and Security Agreement (Ashford)

                                       34


      5.16  AFFILIATED AGREEMENTS

            Except as set forth on Schedule 5.16, there are no existing or
proposed agreements, arrangements, understandings or transactions between
Borrower, on the one hand, and Borrower's officers, directors, stockholders,
other equity holders, employees, or Affiliates or any members of their
respective families, on the other hand.

      5.17  INSURANCE

            As of the Closing Date, Borrower has in full force and effect such
insurance policies as are listed on Schedule 5.17.

      5.18  NAMES; LOCATION OF OFFICES, RECORDS AND COLLATERAL; DEPOSIT ACCOUNTS
AND INVESTMENT PROPERTY

            During the preceding five (5) years, neither Borrower nor any
Foreclosure Subsidiary has conducted business under or used any name (whether
corporate, partnership or assumed) other than as shown on Schedule 5.18A. Each
of Borrower and each Foreclosure Subsidiary is the sole owner of all of its
names listed on Schedule 5.18A, and any and all business done and invoices
issued in such names are Borrower's or such Foreclosure Subsidiary's (or any
such predecessors') sales, business and invoices. Each trade name of Borrower
and each Foreclosure Subsidiary represents a division or trading style of such
Person. Each of Borrower and each Foreclosure Subsidiary maintains places of
business and chief executive offices only at the locations set forth on Schedule
5.18B or, after the Closing Date, as additionally disclosed to Lender in writing
in accordance with Section 7.4, and all Accounts of Borrower and each
Foreclosure Subsidiary arise, originate and are located, and all of the
Collateral and all of Borrower's and such Foreclosure Subsidiary's books and
records in connection therewith or in any way relating thereto or evidencing the
Collateral are located and shall be only, in and at such locations (other than
(i) Deposit Accounts and (ii) Collateral in the possession of Lender or the
Custodian). All of the Collateral is located only in the continental United
States. Schedule 5.18C lists all of Borrower's Deposit Accounts and Investment
Property as of the Closing Date.

      5.19  NON-SUBORDINATION

            The Obligations are not subordinated in any way to any other
obligations of the Credit Parties or to the rights of any other Person.

      5.20  LEGAL INVESTMENTS; USE OF PROCEEDS

            Neither Borrower nor any Foreclosure Subsidiary is engaged in the
business of extending credit for the purpose of purchasing or carrying any
"margin stock" or "margin security" (within the meaning of Regulations T, U or X
issued by the Board of Governors of the Federal Reserve System), and no proceeds
of the Loan will be used to purchase or carry any margin stock or margin
security or to extend credit to others for the purpose of purchasing or carrying
any margin stock or margin security.

Loan and Security Agreement (Ashford)

                                       35


      5.21 BROKER'S OR FINDER'S COMMISSIONS

            Except as set forth on the "Broker Schedule" attached hereto, no
broker's, finder's or placement fee or commission will be payable to any broker
or agent engaged by Borrower or any of its officers, directors or agents with
respect to the Loans or the transactions contemplated by this Agreement except
for fees payable to Lender. Borrower agrees to indemnify Lender and hold it
harmless from and against any claim, demand or liability for broker's, finder's
or placement fees or similar commissions, whether or not payable by the
Borrower, alleged to have been incurred in connection with such transactions,
other than any broker's or finder's fees payable to Persons engaged by Lender
without the knowledge of the Borrower. To Borrower's knowledge, no broker's,
finder's or placement fee or commission will be payable to any broker or agent
engaged by Lender or any of its officers, directors or agents with respect to
the Loans or the transactions contemplated by this Agreement.

      5.22 SURVIVAL

            Each of the Credit Parties hereby makes the representations and
warranties contained herein with the knowledge and intention that Lender is
relying and will rely thereon. All such representations and warranties will
survive the execution and delivery of this Agreement, the Closing and the making
of any and all Advances.

VI. AFFIRMATIVE COVENANTS

            Each of Borrower and each Foreclosure Subsidiary hereby jointly and
severally, and each other Credit Party, as to itself only (and only with respect
to the those covenants which specifically relate to such Credit Party as
provided below), covenants and agrees that, until full performance and
satisfaction, and indefeasible payment in full in cash, of all the Obligations
(other than indemnity obligations under the Loan Documents that are not then due
and payable or for which any events or claims that would give rise thereto are
not then pending) and termination of this Agreement:

      6.1 FINANCIAL STATEMENTS, REPORTS AND OTHER INFORMATION

            (a) FINANCIAL REPORTS. Borrower shall furnish, and shall cause
Ashford to furnish, to Lender (i) as soon as available and in any event within
ninety (90) calendar days after the end of each fiscal year of Borrower and
Ashford audited consolidated annual financial statements of Borrower and Ashford
and its Subsidiaries, respectively, including the notes thereto, each consisting
of a balance sheet at the end of such completed fiscal year and the related
statements of income, retained earnings, cash flows and owners' equity for such
completed fiscal year, which financial statements shall be prepared and
certified without qualification (other than any qualification consented to by
Lender) by Ernst & Young LLP or an independent certified public accounting firm
satisfactory to Lender in its sole discretion and accompanied by related
management letters, if available, and (ii) as soon as available and in any event
within forty-five (45) calendar days after the end of each fiscal quarter,
unaudited consolidated financial statements of Borrower each consisting of a
balance sheet and statements of income, retained earnings, cash flows and
owners' equity as of the end of the immediately preceding fiscal quarter. All
such financial statements shall be prepared in accordance with

Loan and Security Agreement (Ashford)

                                       36


GAAP consistently applied with prior periods (subject, as to interim statements,
to lack of footnotes and year-end adjustments). With each annual financial
statement, Borrower shall also deliver a copy of its federal tax return for the
applicable year and with each annual financial statement and quarterly financial
statement of each year, Borrower shall also deliver a compliance certificate of
an officer of the Borrower on behalf of Borrower and not in his or her
individual capacity in the form satisfactory to Lender stating that (A) such
Person has reviewed the relevant terms of the Loan Documents and the condition
of Borrower, (B) no Default or Event of Default has occurred or is continuing,
or, if any of the foregoing has occurred or is continuing, specifying the nature
and status and period of existence thereof and the steps taken or proposed to be
taken with respect thereto, (C) Borrower is in compliance with all financial
covenants in this Agreement attached as Annex I hereto. Such certificate shall
be accompanied by the calculations necessary to show compliance with the
financial covenants in a form satisfactory to Lender in its sole discretion.

            (b) OTHER MATERIALS. Borrower shall furnish to Lender as soon as
available, and in any event within twenty (20) calendar days after the
preparation or issuance thereof or such other time as set forth below, as
applicable: (i) copies of such financial statements (other than those required
to be delivered pursuant to Section 6.1(a)) prepared by, for or on behalf of
Borrower and any other notes and reports related thereto, including, without
limitation, any pro forma financial statements and monthly board reports, (ii)
any reports, returns, information, notices and other materials that Borrower
shall send to its stockholders, members, partners and/or other equity owners
and/or directors or managers generally or by class at any time together with any
and all supporting documentation related thereto, (iii) within (A) thirty (30)
days after the end of each calendar month other than the last calendar month of
each fiscal quarter and (B) forty-five (45) days after the end of each fiscal
quarter, a monthly report in respect of the Mortgage Loans constituting
Collateral, which report shall include a detailed summary of the status of each
such Mortgage Loan, including without limitation, the principal balance thereof,
the existence or non-existence of any default thereunder known to Borrower, the
maturity date, whether any amendments or modifications have been made thereto
(and attaching a copy of such amendments or modifications) and such other
information requested by Lender in its Permitted Discretion, (iv) copies of any
reports submitted to Borrower by its independent accountants in connection with
any interim audit of the books of such Person or any of its Affiliates and
copies of each management control letter provided by such independent
accountants, (v) copies of any and all materials, documents, instruments and
other items that relate to, secure, evidence, give rise to or generate or
otherwise relate to the Collateral, and (vi) such additional information,
documents, statements, reports and other materials as Lender may request in its
Permitted Discretion from time to time, including but not limited to the items
on Annex II. Borrower shall furnish to Lender not less than thirty (30) calendar
days prior to the commencement of each fiscal year in the Term, a list setting
forth the location of the Collateral. Borrower shall furnish to Lender within
ten (10) calendar days after the end of each calendar month a report specifying
all unpaid amounts, fees, payables and balances owing to any Governmental
Authority (other than for taxes) as of the last day of such ended calendar
month.

            (c) NOTICES. Borrower shall promptly, and in any event within five
(5) Business Days after any Credit Party or any authorized officer of Borrower
obtains knowledge thereof, notify Lender in writing of (i) any pending or
threatened litigation, suit, investigation, arbitration, dispute resolution
proceeding or administrative or regulatory proceeding brought or

Loan and Security Agreement (Ashford)

                                       37


initiated by or against any Credit Party or otherwise affecting or involving or
relating to any Credit Party or any of their property or assets to the extent
(A) the amount in controversy exceeds $500,000 in the aggregate for all such
events in any single calendar year, or (B) to the extent any of the foregoing
seeks any material injunctive relief, (ii) any Default or Event of Default,
which notice shall specify the nature and status thereof, the period of
existence thereof and what action is proposed to be taken with respect thereto,
(iii) any other development, event, fact, circumstance or condition that could
reasonably be expected to be, have or result in a Material Adverse Effect, in
each case describing the nature and status thereof and the action proposed to be
taken with respect thereto, (iv) any matter(s) in the amount of $500,000 in the
aggregate in any single calendar year, in existence at any one time affecting
the value, enforceability or collectability of any Collateral, (v) any material
notice given by any Credit Party to any other lender of such Person and shall
furnish to Lender a copy of such notice, (vi) receipt of any material notice or
request from any Governmental Authority regarding any liability or claim of
liability in the amount equal to or exceeding $500,000 in the aggregate in any
single calendar year, (vii) receipt of any notice or document by Borrower
regarding any lease of real property of Borrower (and such notice shall include
a copy of the notice or document), (viii) the termination of any senior
executive officer of Ashford or Ashford Hospitality (other than by expiration of
the term of such Person's employment agreement), (ix) provide notice of any
lease of real property entered into by Borrower after the Closing Date, (x) the
filing, recording or assessment of any federal, state, local or foreign tax Lien
against the Collateral, (xi) any action taken or threatened to be taken by any
Governmental Authority (or any notice of any of the foregoing) with respect to
any Credit Party which could reasonably be expected to be, have or result in a
Material Adverse Effect or with respect to any Collateral, (xii) any change in
the corporate name of Borrower or any Foreclosure Subsidiary, (xiii) any
material notices under any Mortgage Loan Document given or received by Borrower
(or, if Borrower is a participant, by the lender thereunder if received by
Borrower) and/or (xiv) the loss, termination or expiration of any contract to
which Borrower is a party or by which its properties or assets are subject or
bound.

            (d) SHAREHOLDER REPORTS AND GOVERNMENT FILINGS. Borrower shall
furnish to Lender, concurrently with the sending or filing thereof, a copy of
any proxy statements, financial statements or reports which Borrower or any
other Credit Party has made available to its shareholders or other equity owners
as a class or any class or series of shareholders or other equity owners as a
class or series and a copy of any regular, periodic and special reports or
registration statements, in each case, which Borrower or any Credit Party files
with the Securities and Exchange Commission, any stock exchange or any
Governmental Authority.

            (e) DEPOSIT ACCOUNTS, OTHER ACCOUNTS AND INVESTMENT PROPERTY.
Borrower and each Foreclosure Subsidiary shall (i) promptly, and in any event
within five (5) Business Days after Borrower or such Foreclosure Subsidiary (A)
establishes any Deposit Account, securities account, money market account or any
similar account, or (B) becomes the owner of any Investment Property, in each
case, on and with respect to which Lender does not have a perfected, first
priority Lien, notify Lender of such, and thereafter (ii) deliver to Lender,
within ten (10) Business Days, documentation to perfect Lender's Lien thereon
and provide Lender control of, in each case in form and substance acceptable to
Lender in its sole discretion. The provisions of this Section 6.1(e) do not
apply to the Residual Proceeds Account or Investment Property excluded pursuant
to Section 2.10(d).

Loan and Security Agreement (Ashford)

                                       38


            (f) INTELLECTUAL PROPERTY. Borrower shall furnish to Lender within
forty-five (45) calendar days after June 30 and December 31 of each year, a
report specifying any material Intellectual Property interests acquired by,
obtained by, or licensed to Borrower or any Foreclosure Subsidiary during the
six-month period then ended, and shall deliver to Lender, within forty-five (45)
calendar days, documentation to perfect Lender's Lien in such Intellectual
Property, subject to the limitations set forth in Section 2.10, in each case in
form and substance acceptable to Lender in its sole discretion. At any time and
from time to time upon Lender's request, Borrower shall provide Lender with: (a)
a detailed listing of all material software, equipment, contracts, licenses,
domain names, and other material rights and property required to maintain the
web-sites owned, operated, or used by Borrower or any Foreclosure Subsidiary in
the conduct of its Business; (b) the names of any domain name registrars for any
domain names used in connection with such web-sites (with a listing of the
domain names corresponding to each such registrar); (c) the names, home
addresses, and telephone numbers of the Borrower's and such Foreclosure
Subsidiary's employees or agents who are (i) responsible for maintenance and
operation of such web-sites, and (ii) the administrative contact, the technical
contact, and the billing contact for any domain names owned in connection with
such web-sites; and (d) the identity of the servers that maintain the web-sites.

            (g) PAYROLL TAXES. Without limiting or being limited by any other
provision of any Loan Document, if Borrower or any Foreclosure Subsidiary is
processing, managing or paying payroll taxes directly and falls one (1) month
behind in such processing, management or payment, Borrower shall, or shall cause
such Person to, retain and use a third-party acceptable to Lender in its sole
discretion to process, manage and pay the payroll taxes of the Borrower and such
Foreclosure Subsidiary. In all cases, Borrower shall cause to be delivered to
Lender within thirty (30) calendar days after the end of each calendar month a
confirmation of the status of the payroll taxes of the Credit Parties for the
immediately preceding calendar month.

      6.2 PAYMENT OF OBLIGATIONS

            Borrower shall make full and timely indefeasible payment in cash of
the principal of and interest on the Loan and all other Obligations when due and
payable (other than indemnity obligations under the Loan Documents that are not
then due and payable or for which any events or claims that would give rise
thereto are not then pending).

      6.3 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE AND ASSETS

            Each of Borrower and each Foreclosure Subsidiary shall (a) conduct
its business in accordance with its current business practices, (b) engage
principally in the same or similar lines of business substantially as heretofore
conducted, (c) collect its Accounts in the ordinary course of business, (d)
maintain all of its material properties, assets and equipment used or useful in
its business in good repair, working order and condition (normal wear and tear
excepted and except as may be disposed of in the ordinary course of business and
in accordance with the terms of the Loan Documents), (e) from time to time make
all necessary repairs, renewals and replacements thereof; (f) maintain and keep
in full force and effect its existence and all material Permits and
qualifications to do business and good standing in its jurisdiction of formation
and each other jurisdiction in which the ownership or lease of property or the
nature of its business makes such Permits or qualification necessary except
where failure to maintain such Permits or

Loan and Security Agreement (Ashford)

                                       39


qualification could reasonably be expected to be, have or result in a Material
Adverse Effect or the necessity of compliance therewith is being contested in
good faith by appropriate proceedings; (g) remain in good standing and maintain
operations in all jurisdictions in which currently located, except where the
failure to remain in good standing or maintain operations would not reasonably
be expected to be, have or result in a Material Adverse Effect, and (h)
maintain, comply with and keep in full force and effect its existence and all
Intellectual Property and Permits necessary to conduct its business, except in
each case where the failure to maintain, comply with or keep in full force and
effect could not reasonably be expected to be, have or result in a Material
Adverse Effect or the necessity of compliance therewith is being contested in
good faith by appropriate proceedings.

      6.4 COMPLIANCE WITH LEGAL AND OTHER OBLIGATIONS

            Each Credit Party (as applicable to such Credit Party) shall (a)
comply with all laws, statutes, rules, regulations, ordinances and tariffs of
all Governmental Authorities applicable to it or its business, assets or
operations, (b) pay all taxes, assessments, fees, governmental charges, claims
for labor, supplies, rent and all other obligations or liabilities of any kind,
except liabilities being contested in good faith and against which adequate
reserves have been established, (c) perform in accordance with its terms each
contract, agreement or other arrangement to which it is a party or by which it
or any of the Collateral is bound, and (d) properly file all reports required to
be filed with any Governmental Authority, except under clauses (a), (b), (c),
and/or (d) where the failure to comply, pay, file or perform would not
reasonably be expected to be, have or result in a Material Adverse Effect.

      6.5 INSURANCE

            Each of Borrower and each Foreclosure Subsidiary shall keep all of
its insurable properties and assets adequately insured in all material respects
against losses, damages and hazards as are customarily insured against by
businesses of similar size engaging in similar activities or lines of business
or owning similar assets or properties and at least the minimum amount required
by this Agreement, applicable law and any agreement to which Borrower is a party
or pursuant to which Borrower or such Foreclosure Subsidiary provides any
services, including, without limitation, liability, errors and omissions and
property and business interruption insurance, as applicable; and maintain
general liability insurance at all times against liability on account of damage
to Persons and property having such limits, deductibles, exclusions and
co-insurance and other provisions as are customary for a business of a similar
size engaged in activities similar to those of Borrower and such Foreclosure
Subsidiary; and (c) maintain insurance under all applicable workers'
compensation laws; all of the foregoing insurance policies and coverage levels
to (i) be as are customary for a business of similar size engaged in activities
similar to those of Borrower and such Foreclosure Subsidiary, (ii) name Lender
as a loss payee or additional insured thereunder, as applicable, and (iii)
expressly provide that such insurance policies and coverage levels cannot be
altered, amended or modified in any manner which is adverse to Lender, or
canceled or terminated without thirty (30) calendar days prior written notice to
Lender, and that they inure to the benefit of Lender, notwithstanding any action
or omission or negligence of or by Borrower or such Foreclosure Subsidiary, or
any insured thereunder.

Loan and Security Agreement (Ashford)

                                       40


      6.6 TRUE BOOKS

            Each of Borrower and each Foreclosure Subsidiary shall (a) keep
true, complete and accurate (in accordance with GAAP, except for the omission of
footnotes and year-end adjustments in interim financial statements) books of
record and account in accordance with commercially reasonable business practices
in which true and correct entries are made of all of its dealings and
transactions in all material respects; and (b) set up and maintain on its books
such reserves as may be required by GAAP with respect to doubtful accounts and
all taxes, assessments, charges, levies and claims and with respect to its
business.

      6.7 INSPECTION; PERIODIC AUDITS; QUARTERLY REVIEW

            Each of Borrower and each Foreclosure Subsidiary shall permit the
representatives of Lender, at the expense of Borrower from time to time during
normal business hours upon reasonable notice, to (a) visit and inspect any of
Borrower's and such Foreclosure Subsidiary's offices or properties or any other
place where Collateral is located to inspect the Collateral and/or to examine
and/or audit all of Borrower's and such Foreclosure Subsidiary's books of
account, records, reports and other papers, (b) make copies and extracts
therefrom, and (c) discuss the Business and Borrower's and such Foreclosure
Subsidiary's operations, prospects, properties, assets, liabilities, condition
and/or Accounts with its officers and independent public accountants (and by
this provision such officers and accountants are authorized to discuss the
foregoing); provided, however, that (x) unless an Event of Default has occurred
and is continuing, Lender shall conduct no more than two (2) such visits,
inspections and discussions per fiscal year and (y) no such notice shall be
required so long as an Event of Default has occurred and is continuing.
Borrower's and each Foreclosure Subsidiary's officers and Lender shall meet, not
less than twice per year (which meeting may take place telephonically if
requested by Lender), to review the Borrower's and such Foreclosure Subsidiary's
business, operations, prospects, properties, assets, liabilities, condition and/
or Accounts.

      6.8 FURTHER ASSURANCES; POST CLOSING

            At Borrower's cost and expense, each Credit Party shall (a) within
five (5) Business Days (or such longer period in the case of actions involving
third parties as determined by Lender in its Permitted Discretion) after
Lender's demand, take such further actions, obtain such consents and approvals
and shall duly execute and deliver such further agreements, assignments,
instructions or documents as Lender may request in its Permitted Discretion (if
necessary) in order to effectuate the purposes, terms and conditions of the Loan
Documents and the consummation of the transactions contemplated thereby, whether
before, at or after the performance and/or consummation of the transactions
contemplated hereby or the occurrence and during the continuation of a Default
or Event of Default, (b) without limiting and notwithstanding any other
provision of any Loan Document, execute and deliver, or cause to be executed and
delivered, such agreements and documents, and take or cause to be taken such
actions, and otherwise perform, observe and comply with such obligations, as are
set forth on Schedule 6.8, and (c) upon the exercise by Lender or any of its
Affiliates of any power, right, privilege or remedy pursuant to any Loan
Document or under applicable law or at equity which requires any consent,
approval, registration, qualification or authorization of such Person
(including, without limitation, any Governmental Authority), execute and
deliver, or cause the

Loan and Security Agreement (Ashford)

                                       41


execution and delivery of, all applications, certificates, instruments and other
documents that may be so required for such consent, approval, registration,
qualification or authorization. Lender may, at any time and from time to time,
request a certificate from an officer of Borrower representing that all
conditions precedent to the making of the Loan contained herein are satisfied.
Lender may, at its option, cease to make any further Advances until Lender has
received such certificate, and, in addition, Lender has determined that such
conditions are satisfied, in its sole and absolute discretion.

      6.9 PAYMENT OF INDEBTEDNESS

            Except as otherwise prescribed in the Loan Documents, each Credit
Party shall pay, discharge or otherwise satisfy when due and payable (subject to
applicable grace periods and, in the case of trade payables, to ordinary course
of payment practices) all of its obligations and liabilities, except when the
amount or validity thereof is being contested in good faith by appropriate
proceedings and such reserves shall have been made in accordance with GAAP
consistently applied and consistent with their past practices.

      6.10 OTHER LIENS

            If Liens other than Permitted Liens exist, Credit Parties
immediately shall take all actions, and execute and deliver all documents and
instruments necessary to release and terminate such Liens or, in the case of any
involuntary Liens, to contest the same in good faith and; provided, that
Borrower shall have established reserves for such Liens in accordance with GAAP.

      6.11 USE OF PROCEEDS

            Borrower shall use the proceeds from Advances under the Loan only
for the purposes set forth in the recitals to this Agreement.

      6.12 COLLATERAL DOCUMENTS; SECURITY INTEREST IN COLLATERAL

            (a) On demand of Lender, each of Borrower and each Foreclosure
Subsidiary shall make available to Lender copies of any and all documents,
instruments, materials and other items that relate to, secure, evidence, give
rise to or generate or otherwise involve Collateral, including, without
limitation, the Accounts of such Person. Each Credit Party shall (i) execute,
obtain, deliver, file, register and/or record any and all financing statements,
continuation statements, stock powers, instruments and other documents, or cause
the execution, filing, registration, recording or delivery of any and all of the
foregoing, that are necessary or required under law or otherwise or reasonably
requested by Lender to be executed, filed, registered, obtained, delivered or
recorded to create, maintain, perfect, preserve, validate or otherwise protect
the pledge of the Collateral to Lender's perfected first priority Lien on the
Collateral (and each Credit Party irrevocably grants Lender the right, at
Lender's option, to file any or all of the foregoing), (ii) maintain, or cause
to be maintained, at all times, the pledge of the Collateral to Lender and
Lender's perfected first priority and perfected Lien on the Collateral, and
(iii) defend the Collateral and Lender's first priority and perfected Lien
thereon against all claims and demands of all Persons at any time claiming the
same or any interest therein adverse to Lender (except for Permitted Liens), and
pay all costs and expenses (including, without limitation, in-

Loan and Security Agreement (Ashford)

                                       42


house documentation and diligence fees and legal expenses and reasonable
attorneys' fees and expenses) in connection with such defense, which may, at
Lender's discretion, be added to the Obligations.

            (b) If, after the date hereof, Borrower or any Foreclosure
Subsidiary shall (i) obtain any domain names, (ii) any registered Trademark,
Patent or Copyright, or apply for any such registration in the United States
Patent and Trademark Office or the United States Copyright Office, as
applicable, or in any similar office or agency in the United States, any state
thereof, any political subdivision thereof or in any other country, or (iii)
becomes the owner of any Trademark, Patent or Copyright registrations or
applications for Trademark, Patent or Copyright registration used in the United
States or any state thereof, political subdivision thereof or in any other
country, the provisions of Section 2.10 hereof shall automatically apply
thereto. Upon the request of Lender, each of Borrower and each Foreclosure
Subsidiary shall, or shall cause the applicable Person to, promptly execute and
deliver to Lender any and all assignments, agreements, instruments, documents
and such other papers as may be requested by Lender in its sole discretion to
evidence the security interest in and conditional assignment of such Trademark,
Patent or Copyright, as the case may be, in favor of Lender. Borrower and each
Foreclosure Subsidiary shall, to the extent consistent with their reasonable
business judgment: (i) prosecute diligently any Trademark, Patent or Copyright
application at any time pending; (ii) make application for registration or
issuance of all new Trademarks, Patents and Copyrights as reasonably deemed
appropriate by Borrower or such Foreclosure Subsidiary; (iii) preserve and
maintain all rights in such Intellectual Property; and (iv) use its best efforts
to obtain any consents, waivers or agreements necessary to enable Lender to
exercise its remedies with respect to such Intellectual Property. Neither
Borrower nor any Foreclosure Subsidiary shall abandon any material right to file
a Trademark, Patent or Copyright application nor shall Borrower abandon any
material pending Trademark, Patent or Copyright application, or material
Trademark, Patent or Copyright without the prior written consent of Lender.

            (c) Without limiting the generality of the foregoing, Borrower
shall, concurrent with the formation of any Foreclosure Subsidiary (i) cause
such Foreclosure Subsidiary to guaranty the Obligations and grant to Lender, a
security interest in all of such Foreclosure Subsidiary's assets as security for
the Obligations and (ii) pledge the equity interests of such Foreclosure
Subsidiary to Lender, as security for the Obligations. In furtherance thereof,
(x) each such Foreclosure Subsidiary shall execute a Joinder Agreement and
become a party to such of the Loan Documents, including this Agreement, as Agent
shall determine and (y) Borrower and such Foreclosure Subsidiary shall deliver
such other documents as requested by Lender in its Permitted Discretion,
including, without limitation, updated schedules, lien searches, certificates
and legal opinions and take such other actions as Lender requests in order to
create a perfected Lien in favor of Lender, in and on the equity interests and
assets of such Foreclosure Subsidiary. Until such time as a Foreclosure
Subsidiary is formed by Borrower in compliance with the terms and conditions of
this Agreement, none of the representations and warranties or covenants
contained in this Agreement relating to a Foreclosure Subsidiary shall be
applicable.

Loan and Security Agreement (Ashford)

                                       43


      6.13 MORTGAGE LOAN DOCUMENTS

            Borrower agrees and covenants that it shall:

            (a) Cause each Mortgage Loan Note and each participation certificate
evidencing a Mortgage Loan to have only one original counterpart;

            (b) Only enter into Mortgage Loan Documents which are on forms that
are in material compliance with applicable state and federal laws;

            (c) Deliver to Custodian (or Lender) the original Mortgage Loan
Documents and all other documentation required by Section 2.11(a); and

            (d) Deliver to Lender such assignment documents if reasonably
requested by Lender from time to time in connection with acquisition of the
Collateral by Lender or its successors and assigns in accordance with this
Agreement while a Default or an Event of Default exists.

      6.14 PORTFOLIO REQUIREMENTS

            At all times during the Term, Borrower shall cause its portfolio of
Eligible Receivables to be in full compliance with the following requirements
(all to be calculated, as of any date of determination, with respect to all
Eligible Receivables of such date, as applicable):

            (a) The average outstanding principal balance of the Eligible
Receivables shall not exceed Fifteen Million Dollars ($15,000,000);

            (b) On and after the six (6) month anniversary of the Closing Date,
Borrower shall at all times have a minimum of three (3) Eligible Receivables;

            (c) The weighted average yield of all Eligible Receivables shall not
be less than ten and one-half percent (10.5%);

            (d) The weighted average Loan-to-Value shall not exceed eighty
percent (80%); and

            (e) On and after January 13, 2005, the maximum dollar weighted
exposure of Borrower to any single Account Debtor shall not exceed forty percent
(40%) of Borrower's portfolio of Eligible Receivables.

      6.15 TAXES AND OTHER CHARGES

            All payments and reimbursements to Lender made by or on account of
any obligation by Borrower under any Loan Document shall be free and clear of
and without deduction for all taxes, levies, imposts, deductions, assessments,
charges or withholdings, and all liabilities with respect thereto of any nature
whatsoever other than Excluded Taxes ("TAXES"). If any Credit Party shall be
required by law to deduct any such amounts from or in respect of any sum payable
under any Loan Document to Lender then the sum payable to Lender shall be

Loan and Security Agreement (Ashford)

                                       44


increased as may be necessary so that, after making all required deductions,
Lender receives an amount equal to the sum it would have received had no such
deductions been made. Notwithstanding any other provision of any Loan Document,
if at any time after the Closing or the making of any Advance (a) any change in
any existing law, regulation, treaty or directive or in the interpretation or
application thereof, (b) any new law, regulation, treaty or directive enacted or
any interpretation or application thereof, or (c) compliance by Lender with any
request or directive (whether or not having the force of law) from any
Governmental Authority: (i) subjects Lender to any tax, levy, impost, deduction,
assessment, charge or withholding of any kind whatsoever with respect to any
Loan Document, or changes the basis of taxation of payments to Lender of any
amount payable thereunder (except for Excluded Taxes), or (c) imposes on Lender
any other condition or increased cost in connection with the transactions
contemplated thereby or participations therein; and the result of any of the
foregoing is to increase the cost to Lender of making or continuing or
maintaining the Loan hereunder or to reduce any amount receivable hereunder,
then, in any such case, Borrower shall promptly pay to Lender any additional
amounts necessary to compensate Lender, on an after-tax basis, for such
additional cost or reduced amount as determined by Lender. If Lender becomes
entitled to claim any additional amounts pursuant to this Section 6.15 it shall
promptly notify Borrower of the event by reason of which Lender has become so
entitled, and each such notice of additional amounts payable pursuant to this
Section 6.15 submitted by Lender to Borrower shall, absent manifest error, be
final, conclusive and binding for all purposes.

      6.16 SPECIAL PURPOSE ENTITY STATUS

            At all times during the Term, Borrower shall, and shall cause each
Foreclosure Subsidiary and the General Partner, to be and to have been, at all
times since their respective formation, Single Purpose Entities and shall be and
cause each Foreclosure Subsidiary and General Partner to continue to be Single
Purpose Entities. As used herein, "SINGLE PURPOSE ENTITY" shall mean a
partnership or limited liability company which exists solely for the purpose of
owning the Collateral (or, in the case of General Partner, its general
partnership interest in Borrower), conducts business only in its own name, does
not engage in any business or have any assets unrelated to the Collateral (or,
in the case of General Partner, such partnership interest) does not have any
Indebtedness other than as permitted by this Agreement (and without limitation
does not assume or guarantee or become obligated for the debts of any other
Person or hold out its credit to be available to satisfy the obligations of any
other Person), has its own separate books, records, and accounts (with no
commingling of assets), holds itself out as being separate and apart from any
other Person (other than for tax purposes), and observes corporate, limited
liability and partnership formalities independent of any other Person. In no
event may any of Borrower, any Foreclosure Subsidiary, or General Partner amend
its certificate of limited partnership or partnership agreement, or articles of
formation or operating agreement, respectively, in any way which would adversely
affect Lender or Borrower's, such Foreclosure Subsidiary's or General Partner's
continued compliance with this Section 6.16, without Lender's prior written
consent in its sole and absolute discretion. Borrower represents and warrants to
Lender that it has delivered to Lender true, correct and complete copies of its
articles of formation and operating agreement and General Partner's certificate
of limited partnership or partnership agreement and true and correct copies of
such documents from each of their respective constituent entities, direct or
indirect. Without limitation, each of Borrower, each Foreclosure Subsidiary and
General Partner has not and shall not:

Loan and Security Agreement (Ashford)

                                       45


            (i) fail to be organized solely for the purpose of (i) acquiring,
      developing, owning, managing or operating the Collateral (or in the case
      of General Partner, its general partnership interest in Borrower), (ii)
      entering into this Agreement and the documents related hereto, and (iii)
      engaging in any activity that is incidental, necessary or appropriate to
      accomplish the foregoing;

            (ii) engage in any business or activity other than the ownership,
      operation and maintenance of the Collateral (or, in the case of General
      Partner, its general partner interest in Borrower), and activities
      incidental thereto;

            (iii) acquire or own any material assets other than (i) the
      Collateral (or, in the case, of General Partner, its general partner
      interest in the Collateral) and (ii) such incidental personal property as
      may be necessary for the operation of the Collateral (or, in the case, of
      General Partner, its general partner interest in the Collateral);

            (iv) merge into or consolidate with any Person or dissolve,
      terminate or liquidate in whole or in part, transfer or otherwise dispose
      of all or substantially all of its assets or change its legal structure;

            (v) fail to preserve its existence as an entity duly organized,
      validly existing and in good standing under the laws of the jurisdiction
      of its organization or formation, and qualification to do business in the
      state where the Collateral is located, if applicable, or without the prior
      written consent of Lender, amend, modify, terminate or fail to comply with
      the provisions of such Person's organizational documents;

            (vi) own, form or acquire any Subsidiary or make any investment in,
      any Person other than, with respect to Borrower, such Foreclosure
      Subsidiary, or as permitted in Section 7.4;

            (vii) commingle its assets with the assets of any of its members,
      general partners, managers, Affiliates, principals or of any other Person
      nor fail to hold all of its assets in its own name;

            (viii) incur any Indebtedness, secured or unsecured, direct or
      contingent (including guaranteeing any obligation), other than the Loan
      and any other Permitted Indebtedness;

            (ix) become insolvent or fail to pay its debts and liabilities from
      its assets as the same shall become due;

            (x) fail to maintain its records, books of account and bank accounts
      separate and apart from those of the members, managers, general partners,
      principals and Affiliates thereof, and any other Person or fail to
      maintain such books and records in the ordinary course of its business;

            (xi) except as expressly provided in the partnership agreement of
      Borrower, the constituent documents of such Foreclosure Subsidiary and the
      operating agreement of General Partner, enter into any contract or
      agreement with any member,

Loan and Security Agreement (Ashford)

                                       46


      manager, general partner, principal or Affiliate of Borrower, Foreclosure
      Subsidiary, General Partner or Guarantor, or any member, partner,
      principal or Affiliate thereof, except as permitted under Section 7.6 and
      upon terms and conditions that are intrinsically fair, commercially
      reasonable and substantially similar to those that would be available on
      an arm's-length basis with third parties;

            (xii) seek to dissolve or wind up in whole, or in part, itself;

            (xiii) fail to correct any known misunderstandings regarding the
      separate identity of each of Borrower, such Foreclosure Subsidiary and
      General Partner, from any member, manager, partner, principal or Affiliate
      thereof or any other Person;

            (xiv) guarantee or become obligated for the debts of any other
      Person or hold out its credit as being able to satisfy the debts of
      another Person;

            (xv) make any loans or advances to any third party, including any of
      its members, managers, partners, principals or Affiliates, or any member,
      manager, partner, principal or Affiliate thereof, nor buy or hold evidence
      of indebtedness issued by any other Person (other than cash, Cash
      Equivalents and the Collateral);

            (xvi) fail to hold itself out to the public as a legal entity
      separate and distinct from any other Person, fail to conduct its business
      solely in its own name, mislead others as to the identity with which such
      other party is transacting business, or suggest that Borrower is
      responsible for the debts of any third party (including any of its
      members, managers, partners, principals or Affiliates, or any member,
      manager, partner, principal or Affiliate thereof);

            (xvii) fail to maintain adequate capital for the normal obligations
      reasonably foreseeable in a business of its size and character and in
      light of its contemplated business operations;

            (xviii) share any common logo with or hold itself out as or be
      considered as a department or division (other than for tax purposes) of
      (i) any of its partners, managers, principals, members or Affiliates, (ii)
      any Affiliate of a partner, manager, principal or member, or (iii) any
      other Person;

            (xix) fail to maintain separate financial statements and accounting
      records, showing its assets and liabilities separate and apart from those
      of any other Person;

            (xx) fail to observe all applicable organizational formalities;

            (xxi) fail to pay the salaries of its own employees (if any) from
      its own funds;

            (xxii) fail to maintain a sufficient number of employees in light of
      its contemplated business operations;

Loan and Security Agreement (Ashford)

                                       47


            (xxiii) fail to allocate fairly and reasonably any overhead expenses
      that are shared with an Affiliate, including paying for office space and
      services performed by any employee of an Affiliate;

            (xxiv) fail to use separate stationery, invoices and checks bearing
      its own name;

            (xxv) pledge its assets for the benefit of any other Person, other
      than in connection with the loan secured hereby;

            (xxvi) acquire the obligations or securities of any member, manager,
      partner, principal or Affiliate, any Guarantor, or any member, manager,
      partner, principal or Affiliate thereof (other than the Collateral);

            (xxvii) fail to maintain its assets in such a manner that it will
      not be costly or difficult to segregate, ascertain or identify its
      individual assets from those of any other Person;

            (xxviii) have any obligation to indemnify its partners, officers,
      directors, managers, or members, as the case may be, or have such an
      obligation only if it is fully subordinated to the Loan and will not
      constitute a claim against it in the event that cash flow in excess of the
      amount required to pay the Loan is insufficient to pay such obligation;

            (xxix) have any of its obligations guaranteed by any member,
      manager, partner, principal or Affiliate except Guarantor; and

            (xxx) take for itself or cause any other Person to take any of the
      following actions without the unanimous consent of its partners, managers
      and members, as applicable which shall include the consent of the
      Independent Manager: (i) file or consent to the filing of any bankruptcy,
      insolvency or reorganization case or proceeding; institute any proceedings
      under any applicable insolvency law or otherwise seek any relief under any
      laws relating to the relief from debts or the protection of debtors
      generally, (ii) seek or consent to the appointment of a receiver,
      liquidator, assignee, trustee, sequestrator, custodian or any similar
      official for itself or any other Person, (iii) make an assignment of its
      assets for the benefit of its creditors or an assignment of the assets of
      another Person for the benefit of such Person's creditors, or (iv) take
      any action in furtherance of the foregoing.

VII. NEGATIVE COVENANTS

            Borrower and each Foreclosure Subsidiary jointly and severally, and
each other Credit Party, as to itself only (and only with respect to those
covenants which specifically relate to such Credit Party, as provided below),
covenants and agrees that, until full performance and satisfaction, and
indefeasible payment in full in cash, of all the Obligations (other than
indemnity obligations under the Loan Documents that are not then due and payable
or for which any events or claims that would give rise thereto are not then
pending) and termination of this Agreement:

Loan and Security Agreement (Ashford)

                                       48


      7.1 FINANCIAL COVENANTS

            Borrower shall not violate, and Borrower shall fully comply with,
the financial covenants set forth on Annex I to this Agreement, which annex is
incorporated herein and made a part hereof.

      7.2 INDEBTEDNESS

            Neither Borrower nor any Foreclosure Subsidiary shall create, incur,
assume or suffer to exist any Indebtedness, except the following ("Permitted
Indebtedness"): (i) Indebtedness under the Loan Documents, (ii) Subordinated
Debt of Borrower to which Lender, in its sole discretion, has granted its prior
consent and (iii) obligations under an Intercreditor Agreement to the extent
such obligations would constitute Indebtedness. Neither Borrower nor any
Foreclosure Subsidiary shall make prepayments on any existing or future
Indebtedness to any Person other than (a) to Lender, (b) to the extent
specifically permitted by the applicable Subordination Agreement or (c) to the
extent either required under any Interecreditor Agreement or determined by
Borrower to be necessary thereunder in order to avoid any material reduction in
the value of Borrower's rights under such Intercreditor Agreement or with
respect to its interest in the Mortgage Loan affected thereby.

      7.3 LIENS

            Neither Borrower nor any Foreclosure Subsidiary shall create, incur,
assume or suffer to exist any Lien upon, in or against, or pledge of, any of the
Collateral or any of its properties or assets or any of its shares, securities
or other equity or ownership interests, whether now owned or hereafter acquired,
except the following (collectively, "PERMITTED LIENS"): (a) Liens under the Loan
Documents or otherwise arising in favor of Lender, (b) Liens imposed by law for
taxes, assessments or charges of any Governmental Authority for claims not yet
due or which are being contested in good faith by appropriate proceedings and
with respect to which adequate reserves or other appropriate provisions are
being maintained by such Person in accordance with GAAP, (c)(i) statutory Liens
of landlords and of carriers, warehousemen, mechanics, workmen, repairmen and/or
materialmen, (ii) other Liens imposed by law or that arise by operation of law
in the ordinary course of business from the date of creation thereof, in each
case only for amounts not yet due or which are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves or other
appropriate provisions are being maintained by such Person in accordance with
GAAP, (iii) zoning, building codes and other land use laws regulating the use or
occupancy of such Person's real property or the activities conducted thereon
which are imposed by any Governmental Authority having jurisdiction over such
real property which are not violated by the current use or occupancy of such
real property or the operation of such Person's Business thereon; and (iv)
easements, covenants, conditions, restrictions and other similar matters of
record affecting title to such real property which do not or would not
materially impair the use or occupancy of such real property in the operation of
the business conducted thereon, (d) deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security benefits, (e) judgment Liens so long as they
and/or the judgment they are securing do not constitute or result in an Event of
Default; (f) any right of set-off granted in favor of any financial institution
in respect of Deposit Accounts opened and maintained in the ordinary course

Loan and Security Agreement (Ashford)

                                       49


of business or pursuant to the requirements of this Agreement; provided, that
with respect to any such Deposit Account, Lender has a perfected Lien and
control agreement each in form, scope and substance satisfactory to Lender in
its sole discretion, and (g) the rights and interests arising under the
Intercreditor Agreements to the extent any of them would constitute a Lien.

      7.4 INVESTMENTS; INVESTMENT PROPERTY; NEW FACILITIES OR COLLATERAL;
SUBSIDIARIES

            Neither Borrower nor any Foreclosure Subsidiary shall, directly or
indirectly, (a) merge with, purchase, own, hold, invest in or otherwise acquire
any obligations or Equity Interests or securities of, or any other interest in,
or all or substantially all of the assets of, any Person or any joint venture
(except as permitted in clauses (ii), (iii) and (iv) of clause (b) below), (b)
purchase, own, hold, invest in or otherwise acquire any Investment Property
(except (i) Deposit Accounts with financial institutions in the ordinary course
of business or as required by this Agreement; provided, that with respect to any
such Deposit Accounts, Lender has a perfected Lien and control agreement each in
form, scope and substance satisfactory to Lender in its sole discretion, (ii)
Cash Equivalents with respect to which, in the case of Borrower and each
Foreclosure Subsidiary, Lender has a perfected, first priority Lien and control
agreement each in form and substance satisfactory to Lender in its sole
discretion; (iii) Eligible Receivables pledged as Collateral hereunder; and (iv)
interests arising under Intercreditor Agreements to the extent they would
constitute investments), or (c) make or permit to exist any loan, advances or
guarantees to or for the benefit of any Person (except as permitted in clauses
(ii), (iii) and (iv) of clause (b) above) or assume, guarantee, endorse,
contingently agree to purchase or otherwise become liable for or upon or incur
any obligation of any Person (other than the endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business. Neither Borrower nor any Foreclosure Subsidiary shall
purchase, lease, own, operate, hold, invest in or otherwise acquire any property
or asset or any Collateral that is located outside of the continental United
States. Borrower shall have no Subsidiaries other than the Foreclosure
Subsidiaries. No Foreclosure Subsidiary shall have any Subsidiaries.

      7.5 DIVIDENDS; REDEMPTIONS; EQUITY

            Neither Borrower nor any Foreclosure Subsidiary shall (a) except in
the absence of an Event of Default, declare, pay or make any dividend or
distribution on any Equity Interests or other securities or ownership interests
(other than, in the case of any Foreclosure Subsidiary, to Borrower), (b) apply
any of its funds, property or assets to the acquisition, redemption or other
retirement of any Equity Interests or other securities or interests or of any
options to purchase or acquire any of the foregoing (except a return of capital
permitted pursuant to Sections 7.5(a) and (c)), (c) except in the absence of an
Event of Default, otherwise make any payments, dividends or Distributions to any
stockholder, director or other equity owner in such Person's capacity as such,
(d) make any payment of any management, service or related or similar fee to any
Person other than pursuant to the Servicing Agreement or the Intercreditor
Agreements, or (e) issue, sell or create any Equity Interests (other than
Permitted Securities).

      7.6 TRANSACTIONS WITH AFFILIATES

            Subject to Section 7.11, neither Borrower nor any Foreclosure
Subsidiary shall enter into or consummate any transaction of any kind with any
of its Affiliates other than: (a) the

Loan and Security Agreement (Ashford)

                                       50


Servicing Agreement, (b) the acquisition by Borrower of Mortgage Loans to the
extent such Mortgage Loan is an Eligible Receivable, (c) the conveyance of
Mortgage Loans by Borrower in accordance with the terms and conditions of this
Agreement and (d) transactions permitted under Sections 6.16(xi), (xv) or
(xxvi), as disclosed in Schedule 5.16 or pursuant to Section 7.16.

      7.7 CHARTER DOCUMENTS; FISCAL YEAR; DISSOLUTION; USE OF PROCEEDS;
INSURANCE POLICIES; DISPOSITION OF COLLATERAL; TAXES; TRADE NAMES

            Neither Borrower nor any Foreclosure Subsidiary shall (a) amend,
modify, restate or change its certificate of incorporation, bylaws or similar
charter or governance documents which would in any way have any adverse effect
upon Lender or Borrower's or any Foreclosure Subsidiary's continuing compliance
with the Special Purpose Entity requirements set forth in Section 6.16, (b)
change its state of organization or change its corporate name without thirty
(30) calendar days prior written notice to Lender, (c) change its fiscal year,
(d) amend, alter, suspend, terminate or make provisional in any material way,
any Permit, the suspension, amendment, alteration or termination of which could
reasonably be expected to be, have or result in a Material Adverse Effect
without the prior written consent of Lender, which consent shall not be
unreasonably withheld, (e) wind up, liquidate or dissolve (voluntarily or
involuntarily) or commence or suffer any proceedings seeking or that would
result in any of the foregoing, (f) use any proceeds of any Loan for
"purchasing" or "carrying" "margin stock" as defined in Regulations T, U or X of
the Board of Governors of the Federal Reserve System for any use not
contemplated or permitted by this Agreement, (g) amend, modify, restate or
change any insurance policy in violation of this Agreement in a manner adverse
to Lender, (h) engage, directly or indirectly, in any business other than the
Business, (i) change its federal tax employer identification number or similar
tax identification number under the relevant jurisdiction or establish new or
additional trade names without providing not less than thirty (30) days advance
written notice to Lender, (j) revoke, alter or amend any Tax Information
Authorization (on IRS Form 8821 or otherwise) or other similar authorization
mandated by the relevant Government Authority given to Lender or (k)
certificate, or cause to have certificated, any Equity Interest that is not
evidenced by a certificate as of the Closing Date that is Collateral subject to
this Agreement, without Lender's prior written consent.

      7.8 TRANSFER OF ASSETS

            Except as expressly permitted pursuant to the terms of this
Agreement, the Intercreditor Agreement executed in connection with the Wyndham
Receivable or any other Intercreditor Agreement hereafter approved by Lender, or
as permitted by Lender in its sole discretion, neither Borrower nor any
Foreclosure Subsidiary shall sell, lease, transfer, pledge, assign or otherwise
dispose of any of its assets or property or any interest therein, or agree to do
any of the foregoing, except for the sale or other disposition of (i) Mortgage
Loans which have been released from the Liens and security interests granted
pursuant to this Agreement in compliance with Section 2.8 hereof; (ii) cash or
other property distributed in compliance with Section 7.5 hereof; and (iii) any
property not constituting Collateral hereunder.

Loan and Security Agreement (Ashford)

                                       51


      7.9 CONTINGENT OBLIGATIONS AND RISKS

            Except as otherwise expressly permitted by this Agreement, neither
Borrower nor any Foreclosure Subsidiary shall enter into any Contingent
Obligations or assume, guarantee, endorse, contingently agree to purchase or
otherwise become liable for or upon or incur any obligation of any Person (other
than indemnities to officers and directors of such Person to the extent
permitted by applicable law); provided, however, that nothing contained in this
Section 7.9 shall prohibit either of them from endorsing checks in the ordinary
course of its business.

      7.10 TRUTH OF STATEMENTS

            No Credit Party shall furnish to Lender any certificate or other
document that contains any untrue statement of a material fact or that omits to
state a material fact necessary to make it not misleading in light of the
circumstances under which it was furnished.

      7.11 PAYMENT ON SUBORDINATED DEBT

            Except to the extent permitted pursuant to the applicable
Subordination Agreements, Borrower shall not (a) make any payment of any part or
all of any Subordinated Debt, including, without limitation, any prepayments,
(b) repurchase, redeem, prepay or retire any instrument evidencing any such
Subordinated Debt prior to maturity, or (c) enter into any agreement (oral or
written) which could in any way be construed to amend, modify or alter in a
manner adverse to Lender, as determined by Lender in its sole discretion, or to
terminate any one or more instruments or agreements evidencing or relating to
any Subordinated Debt. Borrower may make payments on the Subordinated Debt only
in accordance with the provisions of the applicable Subordination Agreements.

      7.12 MODIFICATIONS OF AGREEMENTS

            (a) Borrower shall not make, or agree to make, any modification,
amendment or waiver of any of the terms or provisions of, any documents
evidencing Subordinated Debt, except as approved by Lender.

            (b) Borrower shall not make, or agree to make, any modification,
amendment or waiver of any of the terms or provisions of, and will not fail to
enforce or diligently pursue its remedies under the Servicing Agreement, and

            (c) Neither Borrower nor any Foreclosure Subsidiary shall make or
agree to make, any modification, amendment or waiver of any of the terms or
provisions of any Mortgage Loan Document which, except in respect of the
Mortgage Loans listed on Schedule 7.12 hereto, (i) decreases the interest rate
payable on any Mortgage Loan, (ii) lengthens or shortens the maturity of any
Mortgage Loan, (iii) reduces or waives any principal, interest or fees required
to be paid under any Mortgage Loan, (iv) releases any borrower or guarantor from
its obligations under any Mortgage Loan, (v) modifies the financial covenants of
any Mortgage Loan, (vi) except to the extent such release may be consummated
without the consent of Borrower pursuant to the terms of the applicable
Intercreditor Agreement and Mortgage Loan Documents in respect of the Wyndham
Receivable, releases any Mortgage Loan Collateral, or (vii) except to the extent
such change may be effected without the consent of Borrower pursuant to the
terms of

Loan and Security Agreement (Ashford)

                                       52


the applicable Intercreditor Agreement and Mortgage Loan Documents, changes the
terms of any franchise or management agreement applicable to the related Hotel
without, in each such case, the consent of Lender in its Permitted Discretion.
To the extent consent is required in accordance with this Section 7.12(c), in
the event Borrower modifies, amends or waives any terms or provisions of any
Mortgage Loan Document, and Lender does not provide its consent to such
modification, amendment or waiver, Borrower shall have five (5) Business Days
from Receipt of notice from Lender that Lender does not approve such
modification, amendment or waiver to return the modified or amended Mortgage
Loan Document to its condition prior to such modification or amendment or to
rescind its waiver to any provision of such Mortgage Loan Document.

      7.13 UNDERWRITING GUIDELINES

            Borrower shall not modify its Underwriting Guidelines, as set forth
on Exhibit C attached hereto, without the prior written consent of Lender, which
shall not be unreasonably withheld.

      7.14 PATRIOT ACT

            No Credit Party (i) is currently or will become a Person whose
property or interests in property are blocked or subject to blocking pursuant to
Section 1 of Executive Order 13224 of September 23, 2001 Blocking Property and
Prohibiting Transactions With Persons Who Commit, Threaten to Commit or Support
Terrorism (66 Fed. Reg. 49079(2001)), (ii) will engage in any dealings or
transactions prohibited by Section 2 of such executive order, or be otherwise
associated with any such Person in any manner violative of Section 2 of such
executive order, or (iii) will otherwise become a Person on the list of
Specially Designated Nationals and Blocked Persons or subject to the limitations
or prohibitions under any other regulation or executive order.

      7.15 DEPOSIT ACCOUNTS

            Neither Borrower nor any Foreclosure Subsidiary shall open a Deposit
Account (other than those listed on Schedule 5.18C as of the Closing Date)
without the prior written consent of Lender, except for (a) Deposit Accounts in
which Lender has a perfected, first priority Lien, to the extent required by,
and in accordance with, Section 6.1(g) and (b) the Residual Proceeds Accounts
and any Investment Property excluded in compliance with Section 2.10(d).

      7.16 FORECLOSURE RIGHTS

            Borrower may not commence any Enforcement Action with respect to the
Mortgage Loan Collateral for any Mortgage Loan. In the event a default or event
of default exists under any Mortgage Loan which gives rise to Borrower's right
to commence any Enforcement Action with respect to the Mortgage Loan Collateral
for such Mortgage Loan, prior to commencing any such Enforcement Action,
Borrower shall assign to a Foreclosure Subsidiary, and such Foreclosure
Subsidiary shall assume, the applicable Mortgage Loan and all Mortgage Loan
Documents related thereto and the exercise of all rights and remedies shall
thereafter be conducted through such Foreclosure Subsidiary only. Such
Foreclosure Subsidiary may only commence an Enforcement Action under the
applicable Mortgage Loan Documents in

Loan and Security Agreement (Ashford)

                                       53


accordance with the terms and conditions of Section 2.17(a). Prior to such
Foreclosure Subsidiary's exercise of an Enforcement Action, Lender may elect to
cause Borrower or such Foreclosure Subsidiary to engage an accredited
environmental firm to perform a Phase I environmental study on the underlying
Mortgage Loan Collateral constituting real property. In the event said Phase I
demonstrates that such real property has potential environmental issues, in the
sole determination of Lender, Lender may prohibit the exercise of any
Enforcement Action in respect of such Mortgage Loan Collateral, such Foreclosure
Subsidiary shall not pursue the exercise of any such Enforcement Action in
respect of such Mortgage Loan Collateral and Borrower shall comply with the
mandatory prepayment provisions set forth in Section 2.8(f) with respect to such
Mortgage Loan.

            In the event Borrower directly purchases any senior loan related to
any Mortgage Loan and becomes entitled as a result thereof to assume all of the
obligations of the related senior lender or lenders with respect to such senior
loan, any Enforcement Action in respect of such senior loan shall be governed by
this Section 7.16 (as if the references in the definition of the term
"Enforcement Action" and this Section 7.16 to "Mortgage Loan", "Mortgage Loan
Collateral" and "Mortgage Loan Documents" were to mean and refer to such senior
loan, the collateral therefor and the documents evidencing and securing the
same).

      7.17 GENERAL PARTNER

            General Partner shall not engage in any trade or business, own any
assets (other than the general partnership interest in Borrower), incur any
Indebtedness or Contingent Obligations or otherwise take or omit to take any
action which would result in a violation of Section 6.16.

      7.18 SERVICING AGREEMENT

            Neither Borrower nor any Foreclosure Subsidiary shall terminate the
Servicing Agreement or appoint a successor servicer thereunder without the prior
written consent of Lender.

VIII. EVENTS OF DEFAULT

            The occurrence of any one or more of the following shall constitute
an "EVENT OF DEFAULT":

            (a) Borrower shall fail to pay any amount on the Obligations or
provided for in any Loan Document when due unless paid in accordance with
Section 2.9(b) (in all cases, whether on any payment date, at maturity, by
reason of acceleration, by notice of intention to prepay, by required prepayment
or otherwise); provided, however, with respect to the failure to pay interest on
any Loan, an Event of Default shall occur if such payment has not been made when
such payment shall be due and payable;

            (b) any representation, statement or warranty made or deemed made by
any Credit Party in any Loan Document or in any other certificate, document,
report or opinion delivered in conjunction with any Loan Document to which it is
a party, shall not be true and correct in all material respects or shall have
been false or misleading in any material respect on

Loan and Security Agreement (Ashford)

                                       54


the date when made or deemed to have been made (except to the extent already
qualified by materiality, in which case it shall be true and correct in all
respects and shall not be false or misleading in any respect) except those made
as of a specific date;

            (c) any Credit Party, or any other party thereto, other than Lender,
shall be in violation, breach or default of, or shall fail to perform, observe
or comply with any covenant, obligation or agreement set forth in, or any event
of default occurs under, any Loan Document and such violation, breach, default,
event of default or failure shall not be cured within the period set forth
below; provided, that with respect to the affirmative covenants set forth in
Article VI (other than Sections 6.8(c) and 6.11 for which there shall be no cure
period and Section 6.2 for which there shall be a cure period to the extent
indicated in subsection (a) above), there shall be a thirty (30) calendar day
cure period commencing from the earlier of (i) Receipt by such Person of written
notice of such breach, default, violation or failure, and (ii) the time at which
a Responsible Credit Party Officer had actual knowledge of such failure,
violation, breach or default and resulting Default.

            (d) (i) any of the Loan Documents ceases to be in full force and
effect (other than in accordance with its terms), or (ii) any Lien created
thereunder ceases to constitute a valid first priority perfected Lien on the
Collateral in accordance with the terms thereof, or Lender ceases to have a
valid perfected first priority security interest in any of the Collateral or any
securities pledged to Lender, pursuant to the Security Documents; provided,
that, with respect to non-material breaches or violations that constitute Events
of Default under clause (ii) of Section 8(d), there shall be a five (5) Business
Day cure period commencing from the earlier of (A) Receipt by the applicable
Person of written notice of such breach or violation or of any event, fact or
circumstance constituting or resulting in any of the foregoing, and (B) the time
at which a Responsible Credit Party Officer had actual knowledge of such breach
or violation and resulting Default or of any event, fact or circumstance
constituting or resulting in any of the foregoing), in each case without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by Borrower;

            (e) one or more judgments or decrees is rendered against (i)
Borrower or any Foreclosure Subsidiary in an amount in excess of $50,000
individually or $100,000 in the aggregate or (ii) any other Credit Party in an
amount in excess of $2,500,000 in the aggregate (excluding judgments to the
extent covered by insurance of such Person), which is/are not satisfied, stayed,
vacated or discharged of record within thirty (30) calendar days of being
rendered;

            (f) (i) any default or breach occurs, which is not cured within any
applicable grace period or waived, (x) in the payment of any amount with respect
to any Indebtedness (other than the Obligations) of (1) Borrower or any
Foreclosure Subsidiary, in excess of $100,000 individually or in the aggregate
or (2) any other Credit Party, in excess of $10,000,000 individually or in the
aggregate, (y) in the performance, observance or fulfillment of any provision
contained in any agreement, contract, document or instrument to which any Credit
Party is a party or to which any of their properties or assets are subject or
bound (1) under or pursuant to which with respect to (A) Borrower or any
Foreclosure Subsidiary any Indebtedness in excess of $100,000 individually or in
the aggregate and (B) with respect to any other Credit Party, any Indebtedness
in excess of $10,000,000 individually or in the aggregate, was issued,

Loan and Security Agreement (Ashford)

                                       55


created, assumed, guaranteed or secured and such default or breach continues for
more than any applicable grace period or permits the holder of any such
Indebtedness to accelerate the maturity thereof, or (2) that is between any
Credit Party and Lender or Affiliate of Lender (other than the Loan Documents),
(ii) any Indebtedness of (A) Borrower or any Foreclosure Subsidiary in excess of
$100,000 individually or in the aggregate or (B) any other Credit Party in
excess of $10,000,000 individually or in the aggregate is declared to be due and
payable or is required to be prepaid (other than by a regularly scheduled
payment or a payment due on the voluntary termination of a capital lease) prior
to the stated maturity thereof, or any obligation of such Person for the payment
of Indebtedness in excess of $100,000 individually or in the aggregate in
respect of Borrower or any Foreclosure Subsidiary or $10,000,000 individually or
in the aggregate in respect of any other Credit Party (other than the
Obligations) is not paid when due or within any applicable grace period, or any
such obligation becomes or is declared to be due and payable before the
expressed maturity thereof, or there occurs any event which would cause any such
obligation to become, or allow any such obligation to be declared, due and
payable or (iii) any default or breach by Borrower occurs under any
Intercreditor Agreement or Mortgage Loan Document which is not cured within any
applicable grace period;

            (g) any Credit Party shall (i) be unable to pay its debts generally
as they become due, (ii) file a petition under any insolvency statute, (iii)
make a general assignment for the benefit of its creditors, (iv) commence a
proceeding for the appointment of a receiver, trustee, liquidator or conservator
of itself or of the whole or any substantial part of its property or shall
otherwise be dissolved or liquidated, or (v) file a petition seeking
reorganization or liquidation or similar relief under any Debtor Relief Law or
any other applicable law or statute;

            (h) (i) a court of competent jurisdiction shall (A) enter an order,
judgment or decree appointing a custodian, receiver, trustee, liquidator or
conservator of any Credit Party or the whole or any substantial part of any such
Person's properties, which shall continue unstayed and in effect for a period of
sixty (60) calendar days, (B) shall approve a petition filed against any Credit
Party seeking reorganization, liquidation or similar relief under any Debtor
Relief Law or any other applicable law or statute, which is not dismissed within
sixty (60) calendar days or, (C) under the provisions of any Debtor Relief Law
or other applicable law or statute, assume custody or control of any Credit
Party or of the whole or any substantial part of any such Person's properties,
which is not irrevocably relinquished within sixty (60) calendar days, or (ii)
there is commenced against any Credit Party any proceeding or petition seeking
reorganization, liquidation or similar relief under any Debtor Relief Law or any
other applicable law or statute, which (A) is not unconditionally dismissed
within sixty (60) calendar days after the date of commencement, or (B) is with
respect to which any Credit Party takes any action to indicate its approval or
consent;

            (i) (i) any Change of Control occurs, (ii) any Material Adverse
Effect or Material Adverse Change occurs or (iii) Borrower ceases any material
portion of its business operations as conducted at the Closing Date;

            (j) an event of default occurs under any other Loan Document and
remains un-remedied or uncured for any applicable cure periods;

Loan and Security Agreement (Ashford)

                                       56


            (k) any Credit Party or any of Borrower's directors or senior
officers is criminally indicted or convicted (a) of a felony, or (b) under any
law that could lead to a forfeiture of any material (as determined by Lender in
its sole discretion) Collateral;

            (l) Ashford shall fail to maintain compliance with all financial
covenants contained in Sections 6.13 and 6.14 of the Ashford Credit Facility; or

            (m) the issuance of any process for levy, attachment or garnishment
or execution upon or prior to any judgment against (i) Borrower or any
Foreclosure Subsidiary in an amount in excess of $50,000 individually or
$100,000 in the aggregate or (ii) any other Credit Party in an amount in excess
of $2,500,000 in the aggregate or any of its or their material property or
assets or against any of the Collateral, in each case which is/are not
satisfied, stayed, vacated, dismissed or discharged within thirty (30) calendar
days of being issued or executed.

In any such event, notwithstanding any other provision of any Loan Document, (I)
Lender may, by notice to Borrower (i) terminate its obligations hereunder,
whereupon the same shall immediately terminate, and (ii) declare all or any of
the Loan and/or Notes, all interest thereon and all other Obligations to be due
and payable immediately (except in the case of an Event of Default under Section
8(d), (g), (h) (other than an Event of Default under Section 8(g) or (h) with
respect to any Guarantor) or (j), in which event all of the foregoing shall
automatically and without further act by Lender be due and payable and Lender's
obligations hereunder shall terminate; and (II) effective immediately upon
Receipt of notice from Lender (unless specifically prohibited and provided for
in Article VII, in which case effective immediately upon an Event of Default
without any action of Lender) after any such Event of Default, no action
permitted to be taken under Article VII hereof may be taken.

IX. RIGHTS AND REMEDIES AFTER DEFAULT

      9.1 RIGHTS AND REMEDIES

            (a) In addition to the acceleration provisions set forth in Article
VIII above, upon the occurrence and continuation of an Event of Default, Lender
shall have the right (subject to any applicable limitations set forth in the
Intercreditor Agreements) to exercise any and all rights, options and remedies
provided for in any Loan Document, under the UCC or at law or in equity,
including, without limitation, the right to (i) apply any property of any Credit
Party held by Lender to reduce the Obligations, (ii) foreclose the Liens created
under the Loan Documents, (iii) realize upon, take possession of and/or sell any
Collateral or securities pledged, with or without judicial process, (iv)
exercise all rights and powers with respect to the Collateral as any Credit
Party, as applicable, might exercise, (v) collect and send notices regarding the
Collateral, with or without judicial process, (vi) by its own means or with
judicial assistance, enter any premises at which Collateral and/or pledged
securities are located or dispose of the Collateral and/or pledged securities on
such premises without any liability for rent, storage, utilities, or other sums,
and no Credit Party shall resist or interfere with such action, (vii) at
Borrower's expense, require that all or any part of the Collateral be assembled
and made available to Lender at any place designated by Lender in its sole
discretion, (viii) reduce or otherwise change the Facility Cap, the
Availability, the Borrowing Base and/or any component of the foregoing and/or
(ix) relinquish or abandon its security interest in any Collateral.
Notwithstanding any provision

Loan and Security Agreement (Ashford)

                                       57


of any Loan Document, Lender, in its sole discretion, shall have the right, at
any time that any Credit Party fails to do so, and from time to time, without
prior notice, to: (A) obtain insurance covering any of the Collateral to the
extent required hereunder; (B) pay for the performance of any of the
Obligations; (C) discharge taxes, levies and/or Liens on any of the Collateral
that are in violation of any Loan Document unless such Credit Party is in good
faith with due diligence by appropriate proceedings contesting those items; and
(D) pay for the maintenance, repair and/or preservation of the Collateral. Such
expenses and advances shall be added to the Obligations until reimbursed to
Lender and shall be secured by the Collateral, and such payments by Lender shall
not be construed as a waiver by Lender of any Event of Default or any other
rights or remedies of Lender.

            (b) Credit Parties jointly and severally agree that notice received
by any of them at least ten (10) calendar days before the time of any intended
public sale, or the time after which any private sale or other disposition of
Collateral is to be made, shall be deemed to be reasonable notice of such sale
or other disposition. If permitted by applicable law, any perishable Collateral
which threatens to speedily decline in value or which is sold on a recognized
market may be sold immediately by Lender without prior notice to Credit Parties.
At any sale or disposition of Collateral or securities pledged, Lender may (to
the extent permitted by applicable law) purchase all or any part thereof free
from any right of redemption by any Credit Party which right is hereby waived
and released. Borrower covenants and agrees not to interfere with or impose any
obstacle to Lender's exercise of its rights and remedies with respect to the
Collateral. In dealing with or disposing of the Collateral or any part thereof,
Lender shall not be required to give priority or preference to any item of
Collateral or otherwise to marshal assets or to take possession or sell any
Collateral with judicial process.

      9.2 APPLICATION OF PROCEEDS

            Notwithstanding any other provision of this Agreement (including,
without limitation, Section 2.5 and Section 2.16 hereof), in addition to any
other rights, options and remedies Lender has under the Loan Documents, the UCC,
at law or in equity, all dividends, interest, rents, issues, profits, fees,
revenues, income and other proceeds collected or received from collecting,
holding, managing, renting, selling, or otherwise disposing of all or any part
of the Collateral or any proceeds thereof upon exercise of its remedies
hereunder upon the occurrence and continuation of an Event of Default shall be
applied in the following order of priority: (i) first, to the payment of all
costs and expenses of such collection, storage, lease, holding, operation,
management, sale, disposition or delivery and of conducting Borrower's business
and of maintenance, repairs, replacements, alterations, additions and
improvements of or to the Collateral, and to the payment of all sums which
Lender may be required or may elect to pay, if any, for taxes, assessments,
insurance and other charges upon the Collateral or any part thereof, and all
other payments that Lender may be required or authorized to make under any
provision of this Agreement (including, without limitation, in each such case,
in-house documentation and diligence fees and legal expenses, search, audit,
recording, professional and filing fees and expenses and reasonable attorneys'
fees and all expenses, liabilities and advances made or incurred in connection
therewith); (ii) second, to the payment of all Obligations in such order as
determined by Lender in its sole discretion; (iii) third, to the payment of any
surplus then remaining to Borrower, unless otherwise provided by law or directed
by a court of competent jurisdiction; provided, that Borrower, and each
Guarantor to the extent provided for in

Loan and Security Agreement (Ashford)

                                       58


any Guaranty executed by such Guarantor, shall be liable for any deficiency if
such proceeds are insufficient to satisfy the Obligations (other than indemnity
obligations under the Loan Documents that are not then due and payable or for
which any events or claims that would give rise thereto are not then pending) or
any of the other items referred to in this Section (other than Section 9.2(iii)
to the extent the Obligations (other than indemnity obligations under the Loan
Documents that are not then due and payable or for which any events or claims
that would give rise thereto are not then pending) have been indefeasibly paid
in full in cash).

      9.3 RIGHTS TO APPOINT RECEIVER

            Without limiting and in addition to any other rights, options and
remedies Lender has under the Loan Documents, the UCC, at law or in equity, upon
the occurrence and continuation of an Event of Default, Lender shall have the
right to apply for and have a receiver appointed by a court of competent
jurisdiction in any action taken by Lender to enforce its rights and remedies in
order to manage, protect and preserve the Collateral and continue the operation
of the business of Borrower and to collect all revenues and profits thereof and
apply the same to the payment of all expenses and other charges of such
receivership including the compensation of the receiver and to the payments as
aforesaid until a sale or other disposition of such Collateral shall be finally
made and consummated.

      9.4 ATTORNEY-IN-FACT

            Each Credit Party hereby irrevocably appoints Lender as its
attorney-in-fact for the limited purpose of taking any action permitted under
the Loan Documents that Lender deems necessary or desirable (in Lender's sole
discretion) upon the occurrence and continuation of an Event of Default to
protect and realize upon Lender's Lien in the Collateral, including the
execution and delivery of any and all documents or instruments related to the
Collateral in such Credit Party's name, and said appointment shall create in
Lender a power coupled with an interest.

      9.5 BLOCKED ACCOUNTS

            Without limiting any other provision of any Loan Document and in
addition to any other rights, options and remedies, Lender has under the Loan
Documents, the UCC, at law or in equity, upon the occurrence and continuation of
any Event of Default, Lender shall have the right to require that all amounts in
all Deposit Accounts (except for the Residual Proceeds Account and any
Investment Property excluded from the Collateral in accordance with Section
2.10(d)) of Borrower are paid and delivered directly into a blocked account
under the sole dominion and control of Lender and that all such amounts are
immediately transferred into a depository account or accounts maintained by
Lender or an Affiliate of Lender at such bank as Lender may determine in its
sole discretion.

      9.6 RIGHTS AND REMEDIES NOT EXCLUSIVE

            Lender shall have the right in its sole discretion to determine
which rights, Liens and/or remedies Lender may at any time pursue, relinquish,
subordinate or modify, and such determination will not in any way modify or
affect any of Lender's rights, Liens or remedies under any Loan Document,
applicable law or equity. The enumeration of any rights and

Loan and Security Agreement (Ashford)

                                       59


remedies in any Loan Document is not intended to be exhaustive, and all rights
and remedies of Lender described in any Loan Document are cumulative and are not
alternative to or exclusive of any other rights or remedies which Lender
otherwise may have. The partial or complete exercise of any right or remedy
shall not preclude any other further exercise of such or any other right or
remedy.

X. WAIVERS AND JUDICIAL PROCEEDINGS

      10.1 WAIVERS

            Except as expressly provided for herein, each Credit Party hereby
waives set off, counterclaim, demand, presentment, protest, all defenses with
respect to any and all instruments and all notices and demands of any
description, and the pleading of any statute of limitations as a defense to any
demand under any Loan Document. Each Credit Party hereby waives any and all
defenses and counterclaims it may have or could interpose in any action or
procedure brought by Lender to obtain an order of court recognizing the
assignment of, or Lien of Lender, in and to, any Collateral.

            NOTHING CONTAINED IN THE IMMEDIATELY PRECEEDING SENTENCE SHALL
PREVENT OR PROHIBIT ANY CREDIT PARTY FROM INSTITUTING OR MAINTAINING A SEPARATE
ACTION AGAINST LENDER WITH RESPECT TO ANY ASSERTED CLAIM CONSTITUTING A
MANDATORY COUNTERCLAIM. LENDER HEREBY WAIVES ANY DEFENSE OR OBJECTION TO ANY
CREDIT PARTY INSTITUTING OR MAINTAINING SUCH A SEPARATE ACTION AGAINST LENDER
FOR ANY CLAIM WHICH BORROWER IS PRECLUDED FROM INTERPOSING AS A COUNTERCLAIM IN
ANY PROCEEDING COMMENCED BY LENDER DESCRIBED IN THIS SECTION 10.1, BUT THE
DEFENSES AND OBJECTIONS SO WAIVED ARE LIMITED SOLELY TO DEFENSES AND OBJECTIONS
BASED ON THE ASSERTION OF SUCH CLAIM IN A SEPARATE ACTION AND DO NOT INCLUDE ANY
OTHER DEFENSES OR OBJECTIONS, WHETHER PROCEDURAL OR SUBSTANTIVE.

      10.2 DELAY; NO WAIVER OF DEFAULTS

            No course of action or dealing, renewal, release or extension of any
provision of any Loan Document, or single or partial exercise of any such
provision, or delay, failure or omission on Lender's part in enforcing any such
provision shall affect the liability of any Credit Party or operate as a waiver
of such provision or preclude any other or further exercise of such provision.
No waiver by any party to any Loan Document of any one or more defaults by any
other party in the performance of any of the provisions of any Loan Document
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. Notwithstanding any other provision
of any Loan Document, by completing the Closing under this Agreement and/or by
making Advances, Lender does not waive any breach of any

Loan and Security Agreement (Ashford)

                                       60


representation or warranty of under any Loan Document, and all of Lender's
claims and rights resulting from any such breach or misrepresentation are
specifically reserved.

      10.3 JURY WAIVER

            EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO
TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION ARISING UNDER THE LOAN DOCUMENTS
OR IN ANY WAY CONNECTED WITH OR INCIDENTAL TO THE DEALINGS OF THE PARTIES WITH
RESPECT TO THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY, WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE. EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO
THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH
ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES TO THE WAIVER OF
THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY.

      10.4 AMENDMENT AND WAIVERS

            (a) Except as otherwise provided herein, no amendment, modification,
termination, or waiver of any provision of this Agreement or any Loan Document,
or consent to any departure by Borrower therefrom, shall in any event be
effective unless the same shall be in writing and signed by Lender and Borrower
and the other signatures hereto.

            (b) Each amendment, modification, termination or waiver shall be
effective only in the specific instance and for the specific purpose for which
it was given. No amendment, modification, termination or waiver shall be
required for Lender, to take additional Collateral pursuant to any Loan
Document.

            (c) Any amendment, modification, termination, waiver or consent
effected in accordance with this Section 10.4 shall be binding upon Lender,
Borrower and each other signatory hereto.

XI. EFFECTIVE DATE AND TERMINATION

      11.1 EFFECTIVENESS AND TERMINATION

            Subject to Lender's right to accelerate the Loan and terminate and
cease making and funding Advances upon the occurrence and during the
continuation of any Event of Default, this Agreement shall continue in full
force and effect until the Maturity Date, unless terminated sooner as provided
in this Section 11.1. Borrower may not terminate (i) this Agreement or (ii)
terminate the Loan in full without terminating this entire Agreement and the
Loan. Borrower may terminate this Agreement either (x) in connection with a
voluntary prepayment in full in cash of all Obligations (other than indemnity
obligations under the Loan Documents that are not then due and payable or for
which any events or claims that would give rise thereto are not then pending)
pursuant to Section 2.8(i) or (y) at any time after July 13, 2005, upon not less
than ninety (90) calendar days prior written notice to Lender and upon full
performance and

Loan and Security Agreement (Ashford)

                                       61


indefeasible payment in full in cash of all Obligations (other than indemnity
obligations under the Loan Documents that are not then due and payable or for
which any events or claims that would give rise thereto are not then pending) on
or prior to such 90th calendar day after Receipt by Lender of such written
notice. Upon the Maturity Date, or any such termination by Borrower, the
obligation of the Lender to make Advances under the Loan shall terminate. All of
the Obligations shall be immediately due and payable upon the earlier of the
Maturity Date or any such termination on the Maturity Date or the termination
date stated in the notice of termination, as applicable (the "TERMINATION
DATE"). Notwithstanding the foregoing, any termination notice by Borrower
pursuant to clause (y) of this Section 11.1 shall be revocable; provided, that
any revocation shall be by written notice by Borrower to Lender and to the
extent Borrower wishes to terminate this Agreement after any such revocation it
shall do so only in compliance with the time periods and other requirements of
this Section 11.1 (i.e., once a termination notice is revoked, any subsequent
termination notice shall be subject to the full advance notice and effectiveness
requirements of this Section 11.1). Notwithstanding any other provision of any
Loan Document, no termination of this Agreement shall affect Lender's rights or
any of the Obligations existing as of the effective date of such termination,
and the provisions of the Loan Documents shall continue to be fully operative
until the Obligations (other than indemnity obligations under the Loan Documents
that are not then due and payable or for which any events or claims that would
give rise thereto are not then pending) have been fully performed and
indefeasibly paid in cash in full. The Liens granted to Lender, under the
Security Documents and the financing statements filed pursuant thereto and the
rights and powers of Lender shall continue in full force and effect
notwithstanding the fact that Borrower's borrowings hereunder may from time to
time be in a zero or credit position until all of the Obligations (other than
indemnity obligations under the Loan Documents that are not then due and payable
or for which any events or claims that would give rise thereto are not then
pending) have been fully performed and indefeasibly paid in full in cash.

      11.2 SURVIVAL

            All obligations, covenants, agreements, representations, warranties,
waivers and indemnities made by any Credit Party in any Loan Document shall
survive the execution and delivery of the Loan Documents, the Closing, the
making and funding of the Loan and any termination of this Agreement until all
Obligations (other than indemnity obligations under the Loan Documents that are
not then due and payable or for which any events or claims that would give rise
thereto are not then pending) are fully performed and indefeasibly paid in full
in cash. The obligations and provisions of Sections 3.4, 3.6, 6.15, 10.1, 10.3,
11.1, 11.2, 13.1, 13.3, 13.4, 13.7, 13.9, 13.10 and 13.11 shall survive
termination of the Loan Documents and any payment, in full or in part, of the
Obligations.

XII. GUARANTY

      12.1 GUARANTY

      Each Foreclosure Subsidiary hereby unconditionally and irrevocably
guarantees the punctual payment when due, whether at stated maturity, by
acceleration or otherwise, of all Obligations of Borrower now or hereafter
existing under any Loan Document, whether for principal, interest (including,
without limitation, all interest that accrues after the commencement of any
proceeding of Borrower under any Debtor Relief Laws), fees, commissions, expense

Loan and Security Agreement (Ashford)

                                       62


reimbursements, indemnifications or otherwise (such obligations, to the extent
not paid by any Borrower, the "GUARANTEED OBLIGATIONS"), and agrees to pay any
and all costs, fees and expenses (including reasonable counsel fees and
expenses) incurred by Lender in enforcing any rights under the guaranty set
forth in this Article XII. Without limiting the generality of the foregoing,
each Foreclosure Subsidiary's liability shall extend to all amounts that
constitute part of the Guaranteed Obligations and would be owed by Borrower to
Lender under any Loan Document, but for the fact that they are unenforceable or
not allowable due to the existence of any proceeding under any Debtor Relief
Laws involving Borrower or any other Credit Party.

      12.2 GUARANTY ABSOLUTE

      Each Foreclosure Subsidiary guarantees that the Guaranteed Obligations
will be paid strictly in accordance with the terms of the Loan Documents,
regardless of any law, regulation or order now or hereafter in effect in any
jurisdiction affecting any such terms or the rights of Lender with respect
thereto. The obligations of each Foreclosure Subsidiary under this Article XII
are independent of the Guaranteed Obligations, and a separate action or actions
may be brought and prosecuted against such Foreclosure Subsidiary to enforce
such obligations, irrespective of whether any action is brought against such
Foreclosure Subsidiary or whether such Foreclosure Subsidiary is joined in any
such action or actions. The liability of each Foreclosure Subsidiary under this
Article XII shall be irrevocable, absolute and unconditional irrespective of,
and such Foreclosure Subsidiary hereby irrevocably waives any defenses (other
than the defense of payment in full of the Obligations) it may now or hereafter
have in any way relating to, any or all of the following:

            (a) any lack of validity or enforceability of any Loan Document or
any agreement or instrument relating thereto;

            (b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Guaranteed Obligations, or any other amendment
or waiver of or any consent to departure from any Loan Document, including,
without limitation, any increase in the Guaranteed Obligations resulting from
the extension of additional credit to Borrower, any Credit Party or otherwise;

            (c) any taking, exchange, release or non-perfection of any
Collateral, or any taking, release or amendment or waiver of or consent to
departure from any other guaranty, for all or any of the Guaranteed Obligations;

            (d) any change, restructuring or termination of the limited
liability company or partnership structure or existence of Borrower or such
Foreclosure Subsidiary; or

            (e) any other circumstance (including, without limitation, any
statute of limitations) or any existence of or reliance on any representation by
Lender that might otherwise constitute a defense available to, or a discharge
of, Borrower or such Foreclosure Subsidiary or any other guarantor or surety.

      This Article XII shall continue to be effective or be reinstated, as the
case may be, if at any time any payment of any of the Guaranteed Obligations is
rescinded or must otherwise be returned by Lender or any other Person upon the
insolvency, bankruptcy or reorganization of

Loan and Security Agreement (Ashford)

                                       63


Borrower or any Foreclosure Subsidiary or otherwise, all as though such payment
had not been made.

      12.3 WAIVER

      Each Foreclosure Subsidiary hereby waives promptness, diligence, notice of
acceptance and any other notice with respect to any of the Guaranteed
Obligations and this Article XII and any requirement that Lender exhaust any
right or take any action against Borrower, any other Guarantor or any other
Person or any Collateral. Each Foreclosure Subsidiary acknowledges that it will
receive direct and indirect benefits from the financing arrangements
contemplated herein and that the waiver set forth in this Section 12.3 is
knowingly made in contemplation of such benefits. Each Foreclosure Subsidiary
hereby waives any right to revoke this Article XII, and acknowledges that this
Article XII is continuing in nature and applies to all Guaranteed Obligations,
whether existing now or in the future.

      12.4 CONTINUING GUARANTY; ASSIGNMENTS

      This Article XII is a continuing guaranty and shall (a) remain in full
force and effect until the indefeasible cash payment in full of the Guaranteed
Obligations and all other amounts payable under this Article XII, (b) be binding
upon each Foreclosure Subsidiary, its successors and assigns and (c) inure to
the benefit of, and be enforceable by, Lender and its permitted successors,
pledgees, transferees and assigns.

      12.5 SUBROGATION

      No Foreclosure Subsidiary will exercise any rights that it may now or
hereafter acquire against Borrower or any other Guarantor or that arise from the
existence, payment, performance or enforcement of such Foreclosure Subsidiary's
obligations under this Article XII, including, without limitation, any right of
subrogation, reimbursement, exoneration, contribution or indemnification and any
right to participate in any claim or remedy of Lender against Borrower, any
other Guarantor or any Collateral, whether or not such claim, remedy or right
arises in equity or under contract, statute or common law including, without
limitation, the right to take or receive from Borrower or any other Guarantor,
directly or indirectly, in cash or other property or by set-off or in any other
manner, payment or security solely on account of such claim, remedy or right,
unless and until all of the Guaranteed Obligations and all other amounts payable
under this Article XII shall have been indefeasibly paid in full in cash and all
commitments to lend hereunder shall have terminated if (i) Borrower or any
Guarantor shall make payment to Lender of all or any part of the Guaranteed
Obligations, (ii) all of the Guaranteed Obligations and all other amounts
payable under this Article XII shall be paid in full in cash and (iii) all
Commitments to lend hereunder shall have been terminated, Lender will, at such
Foreclosure Subsidiary's request and expense, execute and deliver to such
Foreclosure Subsidiary appropriate documents, without recourse and without
representation or warranty, necessary to evidence the transfer by subrogation to
such Foreclosure Subsidiary of an interest in the Guaranteed Obligations
resulting from such payment by such Foreclosure Subsidiary.

Loan and Security Agreement (Ashford)

                                       64


XIII. MISCELLANEOUS

      13.1 GOVERNING LAW; JURISDICTION; SERVICE OF PROCESS; VENUE

            The Loan Documents shall be governed by and construed in accordance
with the internal laws of the State of Maryland without giving effect to its
choice of law provisions. Any judicial proceeding against any one or more Credit
Parties with respect to the Obligations, any Loan Document or any related
agreement may be brought in any federal or state court of competent jurisdiction
located in the State of Maryland. By execution and delivery of each Loan
Document to which it is a party, each Credit Party (i) accepts the non-exclusive
jurisdiction of the aforesaid courts and irrevocably agrees to be bound by any
judgment rendered thereby, (ii) waives personal service of process, (iii) agrees
that service of process upon it may be made by certified or registered mail,
return receipt requested, pursuant to Section 13.5 hereof, and (iv) waives any
objection to jurisdiction and venue of any action instituted hereunder and
agrees not to assert any defense based on lack of jurisdiction, venue,
convenience or forum non conveniens. Nothing shall affect the right of any
Credit Party or Lender to serve process in any manner permitted by law or shall
limit the right of Lender to bring proceedings against any Credit Party in the
courts of any other jurisdiction having jurisdiction. Any judicial proceedings
against Lender involving, directly or indirectly, the Obligations, any Loan
Document or any related agreement shall be brought only in a federal or state
court located in the State of Maryland. All parties acknowledge that they
participated in the negotiation and drafting of this Agreement with the
assistance of counsel and that, accordingly, no party shall move or petition a
court construing this Agreement to construe it more stringently against one
party than against any other.

      13.2 SUCCESSORS AND ASSIGNS; ASSIGNMENTS AND PARTICIPATIONS

            (a) Subject to Sections 13.2(f) and (h), Lender may at any time
assign all or a portion of its rights and delegate all or a portion of its
obligations under this Agreement and the other Loan Documents (including all its
rights and obligations with respect to the Loan) to one or more Persons
constituting a Qualified Transferee, Eligible Transferee or Qualified
Institutional Lender (each as defined in the applicable Intercreditor Agreement
(a "TRANSFEREE")); provided, that such assignment shall be in an amount of not
less than $5,000,000; provided, further, that notwithstanding anything to the
contrary in this Agreement (including, without limitation, any limitation set
forth in this Section 13.2(a)), CapitalSource hereby agrees that so long as (A)
any Obligations (other than indemnity obligations under the Loan Documents that
are not then due and payable or for which any events or claims that would give
rise thereto are not then due and payable or for which any events or claims that
would give rise thereto are not then pending) remain outstanding, (B) no Default
or Event of Default has occurred and is continuing, and (C) CapitalSource has
not previously assigned any of its rights during the continuance of a Default or
Event of Default, its aggregate Commitments shall equal at least fifty and
one-tenth of one percent (50.1%) of the total aggregate Commitments.
Notwithstanding anything to the contrary in this Agreement, there shall be no
limitation or restriction on Lender's ability to assign, pledge or otherwise
transfer any Note or other Obligation if an Event of Default shall have
occurred. The Transferee and Lender shall execute and deliver for acceptance and
recording in the Register, a Lender Addition Agreement, which shall be in form
and substance reasonably acceptable to Lender in its sole discretion. Upon such
execution, delivery, acceptance and

Loan and Security Agreement (Ashford)

                                       65


recording, from and after the effective date determined pursuant to such Lender
Addition Agreement, (i) the Transferee thereunder shall be a party hereto and,
to the extent provided in such Lender Addition Agreement, have the same rights,
benefits and obligations as it would if it were a Lender hereunder, (ii) the
assigning Lender shall be relieved of its obligations hereunder with respect to
its Commitment or assigned portion thereof, as the case may be, to the extent
that such obligations shall have been expressly assumed by the Transferee
pursuant to such Lender Addition Agreement (and, in the case of a Lender
Addition Agreement covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such assigning Lender
shall cease to be a party hereto but, with respect to matters occurring before
such assignment, shall nevertheless continue to be entitled to the benefits of
Sections 13.4 and 13.7). Credit Parties hereby acknowledge and agree that any
assignment will give rise to a direct obligation of Credit Parties to the
Transferee and that the Transferee shall be considered to be a "Lender"
hereunder. Credit Parties may not sell, assign or transfer any interest in this
Agreement, any of the other Loan Documents, or any of the Obligations, or any
portion thereof, including Credit Parties' rights, title, interests, remedies,
powers, and duties hereunder or thereunder.

            (b) Lender may at any time sell participations in all or any part of
its rights and obligations under this Agreement and the other Loan Documents
(including all its rights and obligations with respect to the Loan) to one or
more Persons (each, a "PARTICIPANT"); provided, that such sale shall be in an
amount of not less than $5,000,000. In the event of any such sale by Lender of a
participation to a Participant, (i) Lender's obligations under this Agreement to
the other parties to this Agreement shall remain unchanged, (ii) Lender shall
remain solely responsible for the performance thereof, (iii) Lender shall remain
the holder of any such Loan (and any Note evidencing such Loan) for all purposes
under this Agreement and the other Loan Documents, and (iv) Credit Parties and
Lender shall continue to deal solely and directly with Lender in connection with
Lender's rights and obligations under this Agreement and the other Loan
Documents. Any agreement pursuant to which Lender shall sell any such
participation shall provide that Lender shall retain the sole right and
responsibility to exercise Lender's rights and enforce each of Credit Parties'
obligations hereunder, including the right to consent to any amendment,
supplement, modification or waiver of any provision of this Agreement or any of
the other Loan Documents; provided, that such participation agreement may
provide that Lender will not agree, without the consent of the Participant, to
any amendment, supplement, modification or waiver of: (A) any reduction in the
principal amount, interest rate or fees payable with respect to any Loan in
which such holder participates; (B) any extension of the termination date of
this Agreement or the date fixed for any payment of principal, interest or fees
payable with respect to any Loan in which such holder participates; and (C) any
release of all or substantially all of the Collateral (other than in accordance
with the terms of this Agreement or the Loan Documents). Credit Parties hereby
acknowledge and agree that the Participant under each participation shall,
solely for the purposes of Section 13.4 of this Agreement be considered to be a
"Lender" hereunder.

            (c) Lender, on behalf of Credit Parties, shall maintain at its
address referred to in Section 13.5 a copy of each Lender Addition Agreement
delivered to it and the Register. Notwithstanding anything in this Agreement to
the contrary, Lender shall treat each Person whose name is recorded in the
Register as the owner of the Loan, the Notes and the Commitment recorded therein
for all purposes of this Agreement. The Register shall be available for

Loan and Security Agreement (Ashford)

                                       66


inspection by the Credit Parties or any Lender at any reasonable time and from
time to time upon reasonable prior notice.

            (d) Notwithstanding anything in this Agreement to the contrary, no
assignment under Section 13.2(a) of any rights or obligations under or in
respect of the Loan or the Notes evidencing such Loan shall be effective unless
and until Lender shall have recorded the assignment pursuant to Section 13.2(c).
Upon its receipt of a Lender Addition Agreement executed by an assigning Lender
and a Transferee, Lender shall (i) promptly accept such Lender Addition
Agreement and (ii) on the effective date determined pursuant thereto record the
information contained therein in the Register and give prompt notice of such
acceptance and recordation to the Lender and Credit Parties. On or prior to such
effective date, the assigning Lender shall surrender any outstanding Notes held
by it, all or a portion of which are being assigned, and Credit Parties, at
their own expense, shall, upon the request of Lender by the assigning Lender or
the Transferee, as applicable, execute and deliver to Lender, within five (5)
Business Days of any request, new Notes to reflect the interest held by the
assigning Lender and its Transferee.

            (e) Except as otherwise provided in this Section 13.2 Lender shall
not, as between Credit Parties and Lender, be relieved of any of its obligations
hereunder as a result of any sale, assignment, transfer or negotiation of, or
granting of a participation in, all or any part of the Loan or other Obligations
owed to Lender.

            (f) Notwithstanding any other provision set forth in this Agreement,
Lender may at any time create a security interest in all or any portion of its
rights under this Agreement, including, without limitation, the Loan owing to it
and the Notes held by it and the other Loan Documents and Collateral, in favor
of any Federal Reserve Bank in accordance with applicable law.

            (g) Credit Parties agree to use commercially reasonable efforts at
no expense to such Credit Party to assist Lender in assigning or selling
participations, in compliance with the provisions of this Agreement, in all or
any part of any Loan made by Lender to another Person identified by Lender;
provided that no amendments or modifications to the material terms of this
Agreement shall be required of Credit Parties in connection therewith without
their prior consent.

            (h) Notwithstanding anything in the Loan Documents to the contrary,
(i) Lender and its Affiliates shall not be required to execute and deliver a
Lender Addition Agreement in connection with any transaction involving its
Affiliates or lenders, (ii) no lender to or funding or financing source of
Lender or its Affiliates shall be considered a Transferee, (iii) there shall be
no limitation or restriction on Lender's ability to assign or otherwise transfer
any Loan Document to any such Affiliate or lender or funding or financing
source, and (iv) there shall be no limitation or restriction on such Affiliates'
or lenders' or financing or funding sources' ability to assign or otherwise
transfer any Loan Document, Loan, Note or Obligation (or any of its rights
thereunder or interest therein); provided, however, Lender shall continue to be
liable as a "Lender" under the Loan Documents unless such Affiliate or lender or
funding or financing source executes a Lender Addition Agreement and thereby
becomes a "Lender."

Loan and Security Agreement (Ashford)

                                       67


            (i) The Loan Documents shall inure to the benefit of Lender, each
permitted Transferee, Participant (to the extent expressly provided therein
only) and all future permitted holders of the Notes, the Obligations and/or any
of the Collateral, and each of their respective permitted successors and
permitted assigns. Each Loan Document shall be binding upon the Persons other
than Lender that are parties thereto and their respective successors and
assigns, and no such Person may assign, delegate or transfer any Loan Document
or any of its rights or obligations thereunder without the prior written consent
of Lender. No rights are intended to be created under any Loan Document for the
benefit of any third party donee, creditor or incidental beneficiary of any
Credit Party. Nothing contained in any Loan Document shall be construed as a
delegation to Lender of any other Person's duty of performance. BORROWER
ACKNOWLEDGES AND AGREES THAT LENDER AT ANY TIME AND FROM TIME TO TIME MAY (I)
DIVIDE AND REISSUE (WITHOUT SUBSTANTIVE CHANGES OTHER THAN THOSE RESULTING FROM
SUCH DIVISION) THE NOTES, AND/OR (II) SELL, ASSIGN OR GRANT PARTICIPATING
INTERESTS IN OR TRANSFER ALL OR ANY PART OF ITS RIGHTS OR OBLIGATIONS UNDER ANY
LOAN DOCUMENT, NOTE, THE OBLIGATIONS AND/OR THE COLLATERAL TO OTHER PERSONS, IN
EACH CASE ON THE TERMS AND CONDITIONS PROVIDED HEREIN. Each permitted Transferee
shall have all of the rights and benefits with respect to the Obligations,
Notes, Collateral and/or Loan Documents held by it as fully as if the original
holder thereof; provided, that, notwithstanding anything to the contrary in any
Loan Document, no Credit Party shall be obligated to pay under this Agreement to
any Participant any sum in excess of the sum which it would have been obligated
to pay to Lender had such participation not been effected. Lender may disclose
to any Transferee or Participant all information, reports, financial statements,
certificates and documents obtained under any provision of any Loan Document;
provided, that Transferees and Participants shall be subject to the
confidentiality provisions contained herein that are applicable to Lender.

            (j) Subject to Section 13.2(h), to the extent CapitalSource assigns
all or any portion of its obligations under this Agreement and the other Loan
Documents to one or more Transferees after the Closing Date, CapitalSource
agrees to enter into an amendment and restatement of this Agreement for the
purpose of including agency provisions and voting rights typical of those found
in a syndicated loan transaction for a similarly situated borrower.

      13.3 APPLICATION OF PAYMENTS

            To the extent that any payment made or received with respect to the
Obligations is subsequently invalidated, determined to be fraudulent or
preferential, set aside, defeased or required to be repaid to a trustee, debtor
in possession, receiver, custodian or any other Person under any Debtor Relief
Law, common law or equitable cause or any other law, then the Obligations
intended to be satisfied by such payment shall be revived and shall continue as
if such payment had not been received by Lender and the Liens created hereby
shall be revived automatically without any action on the part of any party
hereto and shall continue as if such payment had not been received by Lender.
Except as specifically provided in this Agreement, any payments with respect to
the Obligations received shall be credited and applied in such manner and order
as Lender shall decide in its sole discretion.

Loan and Security Agreement (Ashford)

                                       68


      13.4 INDEMNITY

            Credit Parties, jointly and severally, shall indemnify Lender, its
Affiliates and managers, members, officers, employees, agents, representatives,
successors, assigns, accountants and attorneys (collectively, the "INDEMNIFIED
PERSONS") from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses and disbursements
of any kind or nature whatsoever (including, without limitation, reasonable fees
and disbursements of counsel and in-house documentation and diligence fees and
reasonable legal expenses) which may be imposed on, incurred by or asserted
against any Indemnified Person with respect to or arising out of, or in any
litigation, proceeding or investigation instituted or conducted by any Person
with respect to any aspect of, or any transaction contemplated by, or any matter
related to, any act of or omission by Borrower or any of its officers,
directors, agents, except to the extent any of the foregoing arises out of the
gross negligence or willful misconduct of any Indemnified Person. If any
Indemnified Person uses in-house counsel for any purpose for which Credit
Parties are responsible to pay or indemnify, Credit Parties expressly agree that
their indemnification obligations include reasonable charges for such work
commensurate with the fees that would otherwise be charged by outside legal
counsel selected by such Indemnified Person in its reasonable discretion for the
work performed. Lender agrees to give Credit Parties reasonable notice of any
event of which Lender becomes aware for which indemnification may be required
under this Section 13.4. If Lender notifies any Credit Party of any claim or
proceeding for which the Credit Parties are required to indemnify Lender
hereunder, such Credit Party shall assume on behalf of Lender, with the prior
consent of Lender, the defense thereof with counsel selected by the Credit
Party; provided that Lender shall have the right to be represented by advisory
counsel of its own selection and at the expense of such Credit Party. If the
applicable Credit Party fails to assume promptly the defense of Lender, then
Lender may, upon prior notice to such Credit Party, defend (or settle, with the
Credit Party's prior written consent, such consent not to be unreasonably
withheld or delayed) the claim at the Credit Parties' expense using counsel
selected by the Lender. Any Indemnified Person may, in its reasonable
discretion, take such actions as it deems necessary and appropriate to
investigate, defend or settle any event or take other remedial or corrective
actions with respect thereto as may be necessary for the protection of such
Indemnified Person or the Collateral, subject to Credit Parties' prior approval
of any settlement, which shall not be unreasonably withheld or delayed.
Notwithstanding the foregoing, if any insurer agrees to undertake the defense of
an event (an "INSURED EVENT"), Lender agrees not to exercise its right to select
counsel to defend the event if that would cause Credit Parties' insurer to deny
coverage; provided, however, that Lender reserves the right to retain counsel to
represent any Indemnified Person with respect to an Insured Event at its sole
cost and expense. To the extent that Lender obtains recovery from a third party
other than an Indemnified Person of any of the amounts that Credit Parties have
paid to Lender pursuant to the indemnity set forth in this Section 13.4, then
Lender shall promptly pay to Credit Parties the amount of such recovery. Without
limiting any of the foregoing, Credit Parties, jointly and severally, indemnify
the Indemnified Parties for all claims for brokerage fees or commissions (other
than claims of a broker with whom such Indemnified Party has directly contracted
in writing) which may be made in connection with respect to any aspect of, or
any transaction contemplated by or referred to in, or any matter related to, any
Loan Document or any agreement, document or transaction contemplated thereby.

Loan and Security Agreement (Ashford)

                                       69


      13.5 NOTICE

            Any notice or request under any Loan Document shall be given to any
party to this Agreement at such party's address set forth beneath its signature
on the signature page to this Agreement, or at such other address as such party
may hereafter specify in a notice given in the manner required under this
Section 13.5. Any notice or request hereunder shall be given only by, and shall
be deemed to have been received upon (each, a "RECEIPT"): (i) registered or
certified mail, return receipt requested, on the date on which such received as
indicated in such return receipt, (ii) delivery by a nationally recognized
overnight courier, one (1) Business Day after deposit with such courier, or
(iii) facsimile or electronic transmission, in each case upon telephone or
further electronic communication from the recipient acknowledging receipt
(whether automatic or manual from recipient), as applicable.

      13.6 SEVERABILITY; CAPTIONS; COUNTERPARTS; FACSIMILE SIGNATURES

            If any provision of any Loan Document is adjudicated to be invalid
under applicable laws or regulations, such provision shall be inapplicable to
the extent of such invalidity without affecting the validity or enforceability
of the remainder of the Loan Documents which shall be given effect so far as
possible. The captions in the Loan Documents are intended for convenience and
reference only and shall not affect the meaning or interpretation of the Loan
Documents. The Loan Documents may be executed in one or more counterparts (which
taken together, as applicable, shall constitute one and the same instrument) and
by facsimile transmission, which facsimile signatures shall be considered
original executed counterparts. Each party to this Agreement agrees that it will
be bound by its own facsimile signature and that it accepts the facsimile
signature of each other party.

      13.7 EXPENSES

            Credit Parties jointly and severally shall pay, whether or not the
Closing occurs, all reasonable out-of-pocket fees, costs and expenses incurred
or earned by Lender and/or its Affiliates, including, without limitation,
documentation and diligence costs, fees and expenses, all search, audit,
appraisal, recording, professional and filing fees and expenses and all other
reasonable out-of-pocket charges and expenses (including, without limitation,
UCC and judgment and tax lien searches and UCC filings and fees for post-Closing
UCC and judgment and tax lien searches and wire transfer fees and audit
expenses), and reasonable attorneys' fees and expenses, (i) in any effort to
enforce, protect or collect payment of any Obligation or to enforce any Loan
Document or any related agreement, document or instrument, (ii) in connection
with entering into, negotiating, preparing, reviewing and executing the Loan
Documents and/or any related agreements, documents or instruments, (iii) arising
in any way out of the taking or refraining from taking by Lender of any action
requested by any Credit Party, (iv) in connection with instituting, maintaining,
preserving, enforcing and/or foreclosing on Lender's Liens in any of the
Collateral or securities pledged under the Loan Documents, whether through
judicial proceedings or otherwise, (v) in defending or prosecuting any actions,
claims or proceedings arising out of or relating to Lender's transactions with
Credit Parties, (vi) in seeking, obtaining or receiving any advice with respect
to its rights and obligations under any Loan Document and any related agreement,
document or instrument upon the occurrence and during the continuance of a
Default or Event of Default, (vii) arising out of or relating to any Default or

Loan and Security Agreement (Ashford)

                                       70


Event of Default or occurring thereafter or as a result thereof, (viii) in
connection with all actions, visits, audits and inspections undertaken by Lender
or its Affiliates pursuant to the Loan Documents, and/or (ix) in connection with
any modification, restatement, supplement, amendment, waiver or extension of any
Loan Document and/or any related agreement, document or instrument. All of the
foregoing shall be charged to Borrower's account and shall be part of the
Obligations. If Lender or any of its Affiliates uses in-house counsel for any
purpose under any Loan Document for which Borrower is responsible to pay or
indemnify, Credit Parties expressly agree that the Obligations include
reasonable charges for such work commensurate with the fees that would otherwise
be charged by outside legal counsel selected by Lender or such Affiliate in its
reasonable discretion for the work performed. Without limiting the foregoing,
Credit Parties shall jointly and severally pay all taxes (other than Excluded
Taxes), if any, in connection with the issuance of any Note and the filing
and/or recording of any documents and/or financing statements. Lender
acknowledges receipt of $150,000 from Borrower prior to the date hereof which
shall be applied by Lender toward the fees, costs and expenses owed by Borrower
to Lender under this Agreement.

            Notwithstanding the foregoing, if any litigation is commenced
relating to the interpretation of Section 8(i)(ii), Borrower and Lender shall
each be responsible for their own costs and expenses associated with such
litigation.

      13.8 ENTIRE AGREEMENT

            This Agreement and the other Loan Documents to which Credit Parties
are parties constitute the entire agreement between Credit Parties and Lender
with respect to the subject matter hereof and thereof, and supersede all prior
agreements and understandings (including but not limited to the term sheets
dated on or about April 14, 2004), if any, relating to the subject matter hereof
or thereof. Any promises, representations, warranties or guarantees not herein
contained and hereinafter made shall have no force and effect unless in writing
signed by Borrower and Lender, as appropriate. Except as set forth in and
subject to Section 10.4, no provision of any Loan Document may be changed,
modified, amended, restated, waived, supplemented, discharged, canceled or
terminated orally or by any course of dealing or in any other manner other than
by an agreement in writing signed by Credit Parties and Lender, provided, that
no consent or agreement by Credit Parties shall be required to amend, modify,
change, restate, waive, supplement, discharge, cancel or terminate any provision
of Article XII so long as no additional duties are required to be assumed by
Credit Parties. Each party hereto acknowledges that it has been advised by
counsel in connection with the negotiation and execution of this Agreement and
is not relying upon oral representations or statements inconsistent with the
terms and provisions hereof. The schedules attached hereto may be amended or
supplemented by Credit Parties upon delivery to Lender of such amendments or
supplements and, except as expressly provided otherwise in this Agreement, the
written approval thereof by Lender in its Permitted Discretion.

      13.9 APPROVALS AND DUTIES

            Unless expressly provided herein to the contrary, any approval,
consent, waiver or satisfaction of Lender with respect to any matter that is
subject of any Loan Document may be granted or withheld by Lender, as
applicable, in their sole and absolute discretion, but subject to

Loan and Security Agreement (Ashford)

                                       71


any applicable standard of action, approval or review set forth in the
Intercreditor Agreements. Other than Lender's duty of reasonable care with
respect to Collateral delivered pursuant to the Pledge Agreements, Lender shall
have no responsibility for or obligation or duty with respect to any of the
Collateral or any matter or proceeding arising out of or relating thereto,
including, without limitation, any obligation or duty to collect any sums due in
respect thereof or to protect or preserve any rights pertaining thereto.

      13.10 PUBLICITY; CONFIDENTIALITY

            (a) Credit Parties agree that Lender shall have the right to review
and approve all materials that any Credit Party or any of their respective
Affiliates prepares or proposes to transmit or disclose that contain Lender's
name or describe or refer to any Loan Document, any of the terms thereof or any
of the transactions contemplated thereby. Nothing contained in any Loan Document
is intended to permit or authorize any Credit Party or any of its Affiliates to
contract on behalf of Lender. The parties hereto agree that Lender and its
Affiliates may (i) disclose a general description of transactions arising under
the Loan Documents for advertising, marketing or other similar purposes, and
(ii) use Borrower's name, logo or other indicia germane to such party in
connection with such advertising, marketing or other similar purposes in
accordance with the specifications and restrictions set forth on Schedule 13.10.

            (b) Lender agrees to maintain the confidentiality of the Information
(as defined below), except that Information may be disclosed (i) to Lender's
Affiliates and Lender's and its Affiliates' directors, officer, directors,
employees, agents, legal counsel and other advisors and Lender's and its
Affiliate's lenders and funding or financing sources (it being understood that
the Persons to whom such disclosure is made will be informed of the confidential
nature of such Information and instructed to keep such Information
confidential), (ii) to the extent required by applicable laws or regulations or
by any court order, subpoena or other legal process, (iii) to any other party to
this Agreement, (iv) in connection with the exercise of any remedies hereunder
or any suit, action or proceeding relating to this Agreement, any other Loan
Document or the enforcement of rights hereunder or thereunder, at law or in
equity, (v) in connection with any litigation between or among Lender and
Borrower, (vi) subject to an agreement containing provisions substantially the
same as those of this Section 13.10(b), to any assignee of or participant in, or
any prospective assignee of or participant in, any of Lender's rights or
obligations under this Agreement, (vii) with the consent of Borrower or (viii)
to the extent such Information (x) was or becomes publicly available other than
as a result of a breach of this Section 13.10(b) by the applicable party seeking
to use such information or (y) was or becomes available to Lender on a
non-confidential basis from a source other than the Borrower. For the purposes
of this Section 13.10(b), "Information" means all non-public information
received from Borrower relating to any of the Mortgage Loans or underlying
Hotels relating thereto (or loans proposed by Borrower hereunder to be, but not
accepted as Mortgage Loans for purposes hereof), Collateral, Borrower, any
Credit Party or any of their respective Affiliates or Subsidiaries or any of
their respective businesses.

      13.11 RELEASE OF COLLATERAL

            Subject to Section 13.3, promptly following full performance and
satisfaction and indefeasible payment in full in cash of all Obligations (other
than indemnity obligations under

Loan and Security Agreement (Ashford)

                                       72


the Loan Documents that are not then due and payable or for which any events or
claims that would give rise thereto are not then pending) and the termination of
this Agreement, the Liens created hereby shall terminate and Lender shall
execute and deliver such documents, at Borrower's expense, as are necessary to
release Lender's Liens in the Collateral and shall return the Collateral to
Borrower; provided, however, that the parties agree that, notwithstanding any
such termination or release or the execution, delivery or filing of any such
documents or the return of any Collateral, if and to the extent that any such
payment made or received with respect to the Obligations is subsequently
invalidated, determined to be fraudulent or preferential, set aside, defeased or
required to be repaid to a trustee, debtor in possession, receiver, custodian or
any other Person under any Debtor Relief Law, common law or equitable cause or
any other law, then the Obligations intended to be satisfied by such payment
shall be revived and shall continue as if such payment had not been received by
Lender and the Liens created hereby shall be revived automatically without any
action on the part of any party hereto and shall continue as if such payment had
not been received by Lender. Lender shall not be deemed to have made any
representation or warranty with respect to any Collateral so delivered except
that such Collateral is free and clear, on the date of such delivery, of any and
all Liens arising from such Person's own acts.

        [REMAINDER OF PAGE INTENTIONALLY BLANK; SIGNATURE PAGES FOLLOW]

Loan and Security Agreement (Ashford)

                                       73


            IN WITNESS WHEREOF, each of the parties has duly executed this Loan
and Security Agreement as of the date first written above.

                                    BORROWER:

                                    ASHFORD FINANCE SUBSIDIARY I LP, a
                                    Delaware limited partnership

                                    By: Ashford Finance Subsidiary I GP LLC, a
                                        Delaware limited liability company,
                                        its general partner

                                    By: Ashford Hospitality Finance LP, a
                                        Delaware limited partnership, its sole
                                        member

                                    By: Ashford Hospitality Finance General
                                        Partner LLC, a Delaware limited
                                        liability company, its general partner

                                    By: /s/ DAVID A. BROOKS
                                        ----------------------------------------
                                            David A. Brooks
                                            Vice President and Secretary

                                    14185 Dallas Parkway, Suite 1100
                                    Dallas, Texas 75254
                                    Attention: Douglas A. Kessler
                                    Telephone: (972) 778-9452
                                    Facsimile: (972) 490-9605
                                    Email: dkessler@ahtreit.com

Loan and Security Agreement (Ashford)



                                    With a copy to:

                                    14185 Dallas Parkway, Suite 1100
                                    Dallas, Texas 75254
                                    Attention: David A. Brooks
                                    Telephone: (972) 778-9207
                                    Facsimile: (972) 490-9605
                                    Email: dbrooks@ahtreit.com

                                    Morrison & Foerster LLP
                                    555 West Fifth Street
                                    Suite 3500
                                    Los Angeles, CA 90013-1024
                                    Attention: Thomas R. Fileti
                                    Telephone: (213) 892-5276
                                    Facsimile: (213) 892-5454
                                    Email: tfileti@mofo.com

Loan and Security Agreement (Ashford)



                                    CREDIT PARTIES:

                                    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: Secretary

                                    14185 Dallas Parkway, Suite 1100
                                    Dallas, Texas 75254
                                    Attention: Douglas A. Kessler
                                    Telephone: (972) 778-9452
                                    Facsimile: (972) 490-9605
                                    Email: dkessler@ahtreit.com

                                    With a copy to:

                                    14185 Dallas Parkway, Suite 1100
                                    Dallas, Texas 75254
                                    Attention: David A. Brooks
                                    Telephone: (972) 778-9207
                                    Facsimile: (972) 490-9605
                                    Email: dbrooks@ahtreit.com

                                    Morrison & Foerster LLP
                                    555 West Fifth Street
                                    Suite 3500
                                    Los Angeles, CA 90013-1024
                                    Attention: Thomas R. Fileti
                                    Telephone: (213) 892-5276
                                    Facsimile: (213) 892-5454
                                    Email: tfileti@mofo.com

Loan and Security Agreement (Ashford)



                                    ASHFORD HOSPITALITY TRUST, INC.,
                                    a Maryland corporation

                                    By: /s/ DAVID A. BROOKS
                                        ----------------------------------------
                                    Name: David A. Brooks
                                    Title: Secretary

                                    14185 Dallas Parkway,
                                    Suite 1100
                                    Dallas, Texas 75254
                                    Attention: Douglas A. Kessler
                                    Telephone: (972) 778-9452
                                    Facsimile: (972) 490-9605
                                    Email: dkessler@ahtreit.com

                                    With a copy to:

                                    14185 Dallas Parkway, Suite 1100
                                    Dallas, Texas 75254
                                    Attention: David A. Brooks
                                    Telephone: (972) 778-9207
                                    Facsimile: (972) 490-9605
                                    Email: dbrooks@ahtreit.com

                                    Morrison & Foerster LLP
                                    555 West Fifth Street
                                    Suite 3500
                                    Los Angeles, CA 90013-1024
                                    Attention: Thomas R. Fileti
                                    Telephone: (213) 892-5276
                                    Facsimile: (213) 892-5454
                                    Email: tfileti@mofo.com

Loan and Security Agreement (Ashford)



                                    LENDER:

                                    CAPITALSOURCE FINANCE LLC

                                    By: /s/ PIERRETTE BRADSHAW
                                        ----------------------------------------
                                    Name: Pierette Bradshaw
                                    Title: General Counsel

                                    CapitalSource Finance LLC
                                    4445 Willard Avenue, 12th Floor
                                    Chevy Chase, MD 20815
                                    Attention: Structured Finance Group,
                                               Portfolio Manager
                                    Telephone: (301) 841-2700
                                    Facsimile: (301) 841-2360
                                    E-Mail: bdonaldson@capitalsource.com

Loan and Security Agreement (Ashford)

EX-10.17

                                                                   EXHIBIT 10.17

                                 LOAN AGREEMENT

                          Dated as of September 2, 2004
                                  by and among

                               ASHFORD AUSTIN LP,
                             ASHFORD BLOOMINGTON LP,
                             ASHFORD BUENA VISTA LP,
                              ASHFORD BUFORD I LP,
                              ASHFORD BUFORD II LP,
                              ASHFORD COLUMBUS LP,
                               ASHFORD DALLAS LP,
                               ASHFORD DAYTON LP,
                               ASHFORD DULLES LP,
                            ASHFORD EVANSVILLE I LP,
                            ASHFORD EVANSVILLE II LP,
                           ASHFORD EVANSVILLE III LP,
                             ASHFORD FLAGSTAFF LP,
                             ASHFORD HOLTSVILLE LP,
                             ASHFORD HORSE CAVE LP,
                           ASHFORD JACKSONVILLE II LP,
                              ASHFORD LAS VEGAS LP,
                             ASHFORD LOUISVILLE LP,
                               ASHFORD MOBILE LP,
                               ASHFORD PHOENIX LP,
                              ASHFORD PRINCETON LP,
                              ASHFORD SYRACUSE LP,
                             ASHFORD TERRE HAUTE LP,
                            ASHFORD TIPTON LAKES LP,
                            ASHFORD BUCKS COUNTY LLC,

                          (collectively, as Borrowers)

                                       and

                      MERRILL LYNCH MORTGAGE LENDING, INC.,

    (in its capacity as Note A-1 Holder, Note A-2 Holder and Note A-3 Holder)

                                       and

           MERRILL LYNCH CAPITAL, a Division of Merrill Lynch Business
                            Financial Services, Inc.

                       (in its capacity as Note B Holder)

                            (collectively, as Lender)



                                                                                                                  
ARTICLE 1             CERTAIN DEFINITIONS.......................................................................      1

         Section 1.1.          Definitions......................................................................      1

ARTICLE 2             GENERAL TERMS.............................................................................     26

         Section 2.1.          Amount of the Loan...............................................................     26

         Section 2.2.          Use of Proceeds..................................................................     26

         Section 2.3.          Security for the Loan............................................................     26

         Section 2.4.          Borrowers' Note..................................................................     26

         Section 2.5.          Principal, Interest and Other Payments...........................................     27

         Section 2.6.          Prepayment.......................................................................     28

         Section 2.7.          Application of Payments..........................................................     28

         Section 2.8.          Payment of Debt Service, Method and Place of Payment.............................     28

         Section 2.9.          Taxes; Funding Losses; Changes in Law............................................     29

         Section 2.10.         Extension Options................................................................     29

         Section 2.11.         Central Cash Management..........................................................     30

         Section 2.12.         Security Agreement...............................................................     35

         Section 2.13.         Secondary Market Transactions....................................................     37

         Section 2.14.         Interest Rate Cap................................................................     39

         Section 2.15.         Partial Release..................................................................     40

ARTICLE 3             CONDITIONS PRECEDENT......................................................................     42

         Section 3.1.          Conditions Precedent to the Making of the Loan...................................     42

         Section 3.2.          Form of Loan Documents and Related Matters.......................................     47

ARTICLE 4             REPRESENTATIONS AND WARRANTIES............................................................     47

         Section 4.1.          Representations and Warranties of Borrower and Operating Lessee..................     47

         Section 4.2.          Survival of Representations and Warranties.......................................     56

ARTICLE 5             AFFIRMATIVE COVENANTS.....................................................................     56

         Section 5.1.          Borrower Covenants...............................................................     56

ARTICLE 6             NEGATIVE COVENANTS........................................................................     71

         Section 6.1.          Borrower Negative Covenants......................................................     71

ARTICLE 7             DEFAULTS..................................................................................     73

         Section 7.1.          Event of Default.................................................................     73



                                        i



                                                                                                                  
         Section 7.2.          Remedies.........................................................................     77

         Section 7.3.          Remedies Cumulative..............................................................     77

         Section 7.4.          Lender's Right to Perform........................................................     78

ARTICLE 8             MISCELLANEOUS.............................................................................     78

         Section 8.1.          Survival.........................................................................     78

         Section 8.2.          Lender's Discretion..............................................................     78

         Section 8.3.          Governing Law....................................................................     79

         Section 8.4.          Modification, Waiver in Writing..................................................     80

         Section 8.5.          Delay Not a Waiver...............................................................     80

         Section 8.6.          Notices..........................................................................     80

         Section 8.7.          Trial By Jury....................................................................     81

         Section 8.8.          Headings.........................................................................     82

         Section 8.9.          Assignment.......................................................................     82

         Section 8.10.         Severability.....................................................................     82

         Section 8.11.         Preferences......................................................................     82

         Section 8.12.         Waiver of Notice.................................................................     83

         Section 8.13.         Remedies of Borrower.............................................................     83

         Section 8.14.         Exculpation......................................................................     83

         Section 8.15.         Exhibits Incorporated............................................................     85

         Section 8.16.         Offsets, Counterclaims and Defenses..............................................     85

         Section 8.17.         No Joint Venture or Partnership..................................................     85

         Section 8.18.         Waiver of Marshalling of Assets Defense..........................................     85

         Section 8.19.         Waiver of Counterclaim...........................................................     86

         Section 8.20.         Conflict; Construction of Documents..............................................     86

         Section 8.21.         Brokers and Financial Advisors...................................................     86

         Section 8.22.         Counterparts.....................................................................     86

         Section 8.23.         Estoppel Certificates............................................................     86

         Section 8.24.         Payment of Expenses..............................................................     87

         Section 8.25.         Bankruptcy Waiver................................................................     87

         Section 8.26.         Entire Agreement.................................................................     87

         Section 8.27.         Dissemination of Information.....................................................     88



                                       ii



                                                                                                                  
         Section 8.28.         Limitation of Interest...........................................................     88

         Section 8.29.         Indemnification..................................................................     89

         Section 8.30.         Borrower Acknowledgments.........................................................     89

         Section 8.31.         Publicity........................................................................     89

         Section 8.32.         Cross Collateralization..........................................................     90



Exhibit A         Additional Definitions

Exhibit B         Capital Improvements/Environmental Remediation
Exhibit C         Interest Rate Cap Agreement Requirements
Exhibit D         Individual Properties and Allocated Loan Amounts
Exhibit E         Rate Cap Pledge and Security Agreement
Exhibit F         Managers
Exhibit G         Franchisors
Exhibit H         Operating Budget
Exhibit I         Description of Property Improvement Plans
Exhibit J         Form of Operating Statement
Exhibit K         FF&E Financing
Exhibit L         Organizational Chart
Exhibit M         Pre-Existing Borrowers

                                       iii



                                 LOAN AGREEMENT

                  THIS LOAN AGREEMENT, made as of September 2, 2004, is by and
between MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation (in such
capacity, and together with its successors and assigns "Note A-1 Holder"),
MERRILL LYNCH MORTGAGE LENDING, INC., a Delaware corporation (in such capacity,
and together with its successors and assigns "Note A-2 Holder"), MERRILL LYNCH
MORTGAGE LENDING, INC., a Delaware corporation (in such capacity, and together
with its successors and assigns "Note A-3 Holder") and MERRILL LYNCH CAPITAL, a
Division of Merrill Lynch Business Financial Services, Inc. (in such capacity
and together with its successors and assigns "Note B Holder" and together with
Note A-1 Holder, Note A-2 Holder and Note A-3 Holder, collectively "Lender"),
and Ashford Austin LP, Ashford Bloomington LP, Ashford Buena Vista LP, Ashford
Buford I LP, Ashford Buford II LP, Ashford Columbus LP, Ashford Dallas LP,
Ashford Dayton LP, Ashford Dulles LP, Ashford Evansville I LP, Ashford
Evansville II LP, Ashford Evansville III LP, Ashford Flagstaff LP, Ashford
Holtsville LP, Ashford Horse Cave LP, Ashford Jacksonville II LP, Ashford Las
Vegas LP, Ashford Louisville LP, Ashford Mobile LP, Ashford Phoenix LP, Ashford
Princeton LP, Ashford Syracuse LP, Ashford Terre Haute LP, ashford tipton lakes
lp, each a Delaware limited partnership, and ASHFORD Bucks County LLC, a
Delaware limited liability company (each a "Borrower", and collectively with
each Borrower's successors and assigns, "Borrowers").

                                    RECITALS

                  WHEREAS, Borrowers desire to obtain a loan (the "Loan") from
Lender in the aggregate principal amount of $185,000,000 (the "Loan Amount")
which Loan is evidenced by (a) a certain Amended, Restated and Consolidated
Promissory Note, dated as of the date hereof (as may be modified, amended,
supplemented, extended or consolidated in writing, and any note(s) issued in
exchange therefor or in replacement thereof "Note A-1"), made by the Borrowers,
each as maker, in favor of Note A-1 Holder, as payee in the original principal
amount of $55,000,000, (b) a certain Amended, Restated and Consolidated
Promissory Note, dated as of the date hereof (as may be modified, amended,
supplemented, extended or consolidated in writing, and any note(s) issued in
exchange therefor or in replacement thereof, "Note A-2"), made by the Borrowers,
each as maker, in favor of Note A-2 Holder, as payee in the original principal
amount of $55,000,000, (c) a certain Amended, Restated and Consolidated
Promissory Note, dated as of the date hereof (as may be modified, amended,
supplemented, extended or consolidated in writing, and any note(s) issued in
exchange therefor or in replacement thereof, "Note A-3"), made by the Borrowers,
each as maker, in favor of Note A-3 Holder, as payee in the original principal
amount of $54,000,000, (d) a certain Amended, Restated and Consolidated
Promissory Note, dated as of the date hereof (as may be modified, amended,
supplemented, extended or consolidated in writing, and any note(s) issued in
exchange therefor or in replacement thereof, "Note B" and together with Note
A-1, Note A-2 and Note A-3, collectively,



the "Notes"), made by the Borrowers, each as maker, in favor of Note B Holder,
as payee in the original principal amount of $21,000,000; and

                  WHEREAS, Lender is willing to make the Loan on the condition
that Borrowers join in the execution and delivery of this Agreement which shall
establish the terms and conditions of the Loan.

                  NOW, THEREFORE, in consideration of the making of the Loan by
Lender, and the covenants, agreements, representations and warranties set forth
in this Agreement, the parties hereby covenant, agree, represent and warrant as
follows:

                                    ARTICLE 1

                               CERTAIN DEFINITIONS

         Section 1.1 Definitions

                  For all purposes of this Agreement:

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

                           (b) all accounting terms have the meanings assigned
to them in accordance with GAAP;

                           (c) the words "herein", "hereof", and "hereunder" and
other words of similar import refer to this Agreement as a whole and not to any
particular Article, Section, or other subdivision; and

                           (d) the following terms have the following meanings:

                  "Acceptable Counterparty" means any counterparty to an
Interest Rate Cap Agreement that has and maintains (or whose obligations
thereunder are guaranteed in a manner and by a guarantor that (1) prior to the
date that all or any portion of the Loan is included in a REMIC, is reasonably
acceptable to Lender, or (2) after the date that all or any portion of the Loan
is included in a REMIC, would be acceptable to a prudent commercial lender
making a loan similar to the Loan) (a) (i) a long-term unsecured debt rating or
counterparty rating of "AA-"or higher from S&P, and (ii) a short-term unsecured
debt rating of not less than "A-1+" by S&P, and (b) a long-term unsecured debt
rating of not less than "Aa3" by Moody's, or any other counterparty to an
Interest Rate Cap Agreement with respect to which a Rating Agency Confirmation
is received.

                  "Account Collateral" means the Cash Collateral Account
(including all Sub-Accounts), each Collection Account, all amounts deposited or
held in such accounts, and all Proceeds of any or all of the foregoing.

                                        2


                  "Adjusted Net Operating Income" means, with respect to each
Individual Property, for any period, the Net Operating Income for such period
(Net Operating Income to be calculated for the purposes of this definition of
"Adjusted Net Operating Income" without deduction for actual management fees
paid pursuant to any Management Agreement for such period, actual franchise fees
paid pursuant to any Franchise Agreement for such period, or the Capital Reserve
Amount for such period) for such period reduced by (i) the Capital Reserve
Amount, pro rated for the applicable period, (ii) annual base management fees,
pro rated for the applicable period, equal to the greater of (y) actual base
management fees paid pursuant to the Management Agreement and (z) five percent
(5%) of Gross Revenues, and (iii) annual base franchise fees paid pursuant to
the applicable Franchise Agreement, pro rated for the applicable period, equal
to the greater of (y) actual base franchise fees paid pursuant to the Franchise
Agreement and (z) five percent (5%) of Gross Revenues.

                  "Affiliate" of any specified Person means any other Person
controlling, controlled by or under common control with such specified Person.
For the purposes of this Agreement, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities or other beneficial interests, by contract or otherwise; and the
terms "controls", "controlling" and "controlled" have the meanings correlative
to the foregoing. For the avoidance of doubt, with respect to any Borrower or
Operating Lessee, the definition of "Affiliate" shall not include Remington
Manager.

                  "Agreement" means this Loan Agreement, as the same may from
time to time hereafter be modified, supplemented or amended.

                  "Allocated Loan Amount" means, with respect to each Individual
Property, the amount set forth on Exhibit D attached hereto, as such amounts
shall be adjusted from time to time as hereinafter set forth. Upon each
adjustment in the amount of Indebtedness due to the making of a prepayment of
the Loan in accordance with the terms hereof, each Allocated Loan Amount shall
be decreased by an amount equal to the product of (i) the amount of such payment
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
total of all Allocated Loan Amounts (prior to the adjustment in question).
Notwithstanding the foregoing sentence to the contrary, when the Indebtedness is
reduced as the result of Lender's receipt of proceeds with respect to a
Condemnation or Casualty affecting one hundred percent (100%) of any Individual
Property, the Allocated Loan Amount for such Individual Property with respect to
which the Insurance Proceeds or Condemnation Proceeds were received shall, at
Lender's sole discretion, be reduced to zero (such Allocated Loan Amount prior
to reduction being referred to as the "Withdrawn Allocated Amount"), and each
other Allocated Loan Amount shall, if the Withdrawn Allocated Amount exceeds
such proceeds (such excess being referred to as the "Proceeds Deficiency"), be
increased by an amount equal to the product of (1) the Proceeds Deficiency and
(2) 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 Withdrawn Allocated Amount.

                                        3


                  "Appraisal" means an appraisal of any Individual Property
prepared in accordance with the requirements of FIRREA prepared by an
independent third party appraiser holding an MAI designation, who is state
licensed or state certified if required under the laws of the state where such
Individual Property is located, who meets the requirements of FIRREA and who is
otherwise reasonably satisfactory to Lender.

                  "Approved Budget" has the meaning provided in Section
5.1(Q)(x).

                  "Appurtenant Rights" means, collectively, "Appurtenant Rights"
as defined in each Mortgage.

                  "Assignment of Agreements" shall mean, with respect to each
Individual Property, a first priority Assignment of Management Agreement and
Agreements Affecting Real Estate, in form and substance satisfactory to Lender,
dated as of the Closing Date, from each applicable Borrower, as assignor, to
Lender, as assignee, as the same may thereafter from time to time be
supplemented, amended, modified or extended by one or more written agreements
supplemental thereto.

                  "Assignment of Leases" shall mean, with respect to each
Individual Property, a first priority Assignment of Leases and Rents, in form
and substance satisfactory to Lender, dated as of the Closing Date from the
applicable Borrower and Operating Lessee, as assignor, to Lender, as assignee,
assigning to Lender all of such Borrower's and Operating Lessee's right, title
and interest in and to the Leases and the Rents, as the same may thereafter from
time to time be supplemented, amended, modified or extended by one or more
written agreements supplemental thereto.

                  "Base Adjusted NOI" means the amount shown on Exhibit A.

                  "Basic Carrying Costs" means the following costs with respect
to each Individual Property: (i) Impositions applicable to such Property; (ii)
insurance premiums for policies of insurance required or permitted to be
maintained by the applicable Borrower pursuant to this Agreement or the other
Loan Documents; and (iii) all Monthly Assessments and Special Assessments (as
such terms are defined in the Declaration).

                  "Basic Carrying Costs Monthly Installment" means,
collectively, with respect to all Individual Properties, Lender's reasonable and
good faith estimate of one-twelfth (1/12th) of the annual amount of the
aggregate Basic Carrying Costs for all Individual Properties (provided, that
Lender may calculate reasonably and in good faith the monthly amount to assure
that funds are reserved in sufficient amounts to enable the payment of all
Impositions, including, without limitation, taxes and insurance premiums thirty
(30) days prior to their respective due dates). If the Basic Carrying Costs for
any Individual Property for the then current Fiscal Year or payment period are
not ascertainable by Lender at the time a monthly deposit is required to be
made, the Basic Carrying Costs Monthly Installment with respect to such
Individual Property shall be Lender's reasonable and good faith estimate based
on one-twelfth (1/12th) of the aggregate Basic Carrying Costs for such
Individual Property for the prior Fiscal Year or payment period, with

                                        4


reasonable adjustments as determined by Lender. As soon as the Basic Carrying
Costs are fixed for the then current Fiscal Year or period, the next ensuing
Basic Carrying Costs Monthly Installment shall be adjusted to reflect any
deficiency or surplus in prior Basic Carrying Costs Monthly Installments.

                  "Basic Carrying Costs Sub-Account" means the Sub-Account of
the Cash Collateral Account established and maintained pursuant to Section 2.11
relating to the payment of Basic Carrying Costs.

                  "Borrower" has the meaning provided in the preamble to this
Agreement.

                  "Business Day" means any day other than a Saturday, a Sunday
or a legal holiday on which national banks are not open for general business in
(i) the State of Kansas, (ii) the state where the corporate trust office of the
any trustee in connection with a Secondary Market Transaction is located, or
(iii) the state where the servicing offices of the any servicer in connection
with a Secondary Market Transactions are located.

                  "Capital Improvement Costs" means, collectively, with respect
to each Individual Property, the costs incurred by Borrowers in connection with
(a) capital improvements to the Individual Properties, and (b) the financing of
furniture, fixture and equipment leases or purchases in the ordinary course of
operating the Individual Properties in the manner each is operated as of the
Closing Date.

                  "Capital Reserve Amount" means, with respect to each
Individual Property, an amount equal to four percent (4%) of projected annual
Gross Revenue set forth in the then current Approved Budget.

                  "Capital Reserve True-Up Amount" means an amount as of
December 31 of each calendar year equal to the difference between (i) 4% of
actual Gross Revenue for such calendar year and (ii) the Capital Reserve Amount
for such calendar year; provided that for the period ending December 31, 2004
such amount shall be calculated using the prorated period from the Closing Date
through and including December 31, 2004.

                  "Capital Reserve Monthly Installment" means an amount equal to
one twelfth (1/12th) of the aggregate Capital Reserve Amounts for all Individual
Properties.

                  "Capital Reserve Sub-Account" means the Sub-Account of the
Cash Collateral Account established and maintained pursuant to Section 2.11
relating to the payment of Capital Improvement Costs.

                  "Cash Collateral Account" has the meaning provided in Section
2.11(b).

                  "Cash Collateral Account Agreement" has the meaning provided
in Section 2.12(c).

                                        5


                  "Cash Collateral Account Bank" means the bank chosen by Lender
to hold the Cash Collateral Account, or any successor bank hereafter selected by
Lender in accordance with the terms hereof.

                  "Cash Management Fee Sub-Account" means the Sub-Account of the
Cash Collateral Account established and maintained pursuant to Section 2.11
relating to the payment of fees payable to the Cash Collateral Account Bank.

                  "Cash Trap Cure Event" means (a) with respect to an event
described in subsection (i) of the definition of "Cash Trap Trigger Event", an
Event of Default no longer exists, or (b) with respect to an event described in
subsection (ii) of the definition of "Cash Trap Trigger Event", the Debt Service
Coverage Ratio (calculated as of the last day of a calendar month), projected
reasonably and in good faith by Lender for the subsequent twelve (12) calendar
months, and calculated as if (1) the LIBOR Interest Rate for each Note for such
period was equal to the LIBOR Interest Rate for each Note applicable to the
immediately preceding Interest Accrual Period, and (2) the LIBOR Interest Rate
(as defined in the Mezzanine Loan Agreement) for the Mezzanine Loan for such
period was equal to the LIBOR Interest Rate (as defined in the Mezzanine Loan
Agreement) for the Mezzanine Loan applicable to the immediately preceding
Interest Accrual Period (as defined in the Mezzanine Loan Agreement), and (3)
the Indebtedness was reduced by the face amount of any Letter of Credit posted
by Borrower pursuant to the terms of Section 2.11(k) hereof, shall equal or
exceed 1.40 for a period of three (3) consecutive months.

                  "Cash Trap Period" means the period commencing on a Cash Trap
Trigger Event and ending on a Cash Trap Cure Event.

                  "Cash Trap Trigger Event" means the earlier to occur of (i) an
Event of Default and (ii) the Debt Service Coverage Ratio (calculated as of the
last day of a calendar month), projected reasonably and in good faith by Lender
(a) for the subsequent twelve (12) calendar months, and (b) calculated as if (1)
the LIBOR Interest Rate for each Note for such period was equal to the LIBOR
Interest Rate for each Note applicable to the immediately preceding Interest
Accrual Period, and (2) the LIBOR Interest Rate (as defined in the Mezzanine
Loan Agreement) for the Mezzanine Loan for such period was equal to the LIBOR
Interest Rate (as defined in the Mezzanine Loan Agreement) for the Mezzanine
Loan applicable to the immediately preceding Interest Accrual Period (as defined
in the Mezzanine Loan Agreement) shall be equal to or less than 1.25.

                  "Closing Date" means the date of this Agreement.

                  "Code" means the Internal Revenue Code of 1986, as amended,
and as it may be further amended from time to time, any successor statutes
thereto, together with applicable U.S. Department of Treasury regulations issued
pursuant thereto in temporary or final form.

                  "Collateral" means, collectively, the "Collateral" as defined
in each Mortgage.

                                        6


                  "Collection Account" has the meaning provided in Section
2.11(a).

                  "Collection Account Agreement" has the meaning set forth in
Section 2.11(b).

                  "Collection Account Bank" shall mean, with respect to each
Individual Property, the collection bank for such Individual Property and any
successor bank hereafter selected by each applicable Borrower which owns such
Individual Property and approved by Lender in accordance with each Collection
Account Agreement.

                  "Collection Account Bank Escrow Account" has the meaning set
forth in Section 2.11 (b).

                  "Combined Debt Service" means, for any period, the sum of (a)
Debt Service, and (b) Mezzanine Debt Service.

                  "Condemnation Proceeds" has the meaning, with respect to each
Individual Property, provided in the Mortgage for such Individual Property.

                  "Contingent Obligation" means any obligation of any Borrower
guaranteeing any indebtedness, leases, dividends or other obligations ("primary
obligations") of any other Person (the "primary obligor") in any manner, whether
directly or indirectly, including, without limitation, any obligation of any
Borrower, whether or not contingent; (i) to purchase any such primary
obligation, or any property constituting direct or indirect security therefor;
(ii) to advance or supply funds (x) for the purchase or payment of any such
primary obligation or (y) to maintain working capital or equity capital of the
primary obligor; (iii) to purchase property, securities or services primarily
for the purpose of assuring the owner or obligee under any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation; or (iv) otherwise to assure or hold harmless the owner or obligee
under such primary obligation against loss in respect thereof. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
anticipated liability in respect thereof (assuming that the applicable Borrower
is required to perform thereunder) as determined by Lender in good faith.

                  "Costs of Uncollectible Drafts" means (a) fees or charges
regularly and customarily charged by Morgan Collection Bank to its customers
with respect to any items deposited by or on behalf of the Borrowers or
Operating Lessee into a Collection Account which is returned for insufficient or
uncollected funds ("Uncollectible Drafts"), and (b) the amount represented by
such Uncollectible Draft if such amount has actually been credited by Morgan
Collection Bank to the Cash Collateral Account prior to Morgan Collection Bank
effecting final payment thereof.

                  "Current Interest Accrual Period" has the meaning provided in
Section 2.11(d).

                                        7


                  "Debt Service" means, for any period, the aggregate of all
principal, interest payments, Default Rate interest, Late Charges, Prepayment
Premiums and other amounts that accrue or are due and payable in accordance with
the Loan Documents during such period.

                  "Debt Service Coverage Ratio" means, for any period, the
quotient obtained by dividing (1) the aggregate Adjusted Net Operating Income
for all Individual Properties for the specified period by (2) the aggregate
amount of the Combined Debt Service due for such period.

                  "Debt Service Payment Sub-Account" means the Sub-Account of
the Cash Collateral Account established and maintained pursuant to Section 2.11
relating to the payment of Debt Service.

                  "Declaration" means, collectively, that certain Declaration of
Condominium - Bucks Hotel Office Condominium and the by laws, plats and plans
and rules and regulations described therein.

                  "Deed of Trust Trustee" means, with respect to each Individual
Property, the trustee, if any, under the Mortgage for such Individual Property.

                  "Default" means the occurrence of any event which, but for the
giving of notice or the passage of time, or both, would be an Event of Default.

                  "Default Collateral" has the meaning provided in Section 8.14.

                  "Default Rate" means (a) with respect to Note A-1, the per
annum interest rate equal to the lesser of (i) the Maximum Amount or (ii) five
percent (5%) plus the LIBOR Interest Rate for Note A-1; (b) with respect to Note
A-2, the per annum interest rate equal to the lesser of (i) the Maximum Amount
or (ii) five percent (5%) plus the LIBOR Interest Rate for Note A-2; (c) with
respect to Note A-3, the per annum interest rate equal to the lesser of (i) the
Maximum Amount or (ii) five percent (5%) plus the LIBOR Interest Rate for Note
A-3; and, (d) with respect to Note B, the per annum interest rate equal to the
lesser of (i) the Maximum Amount or (ii) five percent (5%) plus the LIBOR
Interest Rate for Note B, and (e) with respect to all other amounts due under
any Loan Document, five percent (5%) plus the weighted average LIBOR Interest
Rate (calculated based upon the then outstanding principal balances for each of
the Notes.

                  "Eligible Account" means (i) an account maintained with a
federal or state chartered depository institution or trust company whose (x)
commercial paper, short-term debt obligations or other short-term deposits are
rated at least A-1 by S&P and the equivalent by each other Rating Agency if the
deposits in such account are to be held in such account for thirty (30) days or
less or (y) long-term unsecured debt obligations are rated at least A by S&P and
the equivalent by each other Rating Agency if the deposits in such account are
to be held in such account for more than thirty (30) days; or (ii) a segregated
trust account maintained with the trust department of a federal or state
chartered depository institution or trust company acting in its fiduciary
capacity which institution or trust company is subject to regulations regarding
fiduciary

                                        8


funds on deposit substantially similar to 12 C.F.R. Section 9.10(b); or (iii) an
account otherwise acceptable to each Rating Agency, 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 security issued in
connection with a Secondary Market Transaction.

                  "Embargoed Person" has the meaning provided in Section
4.1(MM).

                  "Engineer" means any reputable Independent engineer, properly
licensed in the relevant jurisdiction and approved by Lender in Lender's
reasonable discretion.

                  "Engineering Report(s)" means, with respect to each Individual
Property, the structural engineering report(s) with respect to such Individual
Property (i) prepared by an Engineer, (ii) addressed to or permitted by such
preparer to be relied upon by Lender, (iii) prepared based on a scope of work
determined by Lender in Lender's discretion, and (iv) in form and content
acceptable to Lender in Lender's discretion, together with any amendments or
supplements thereto.

                  "Entity" means a (a) corporation, if the applicable Borrower
is listed as a corporation in the preamble to this Agreement, (b) limited
partnership, if the applicable Borrower is listed as a limited partnership in
the preamble to this Agreement or (c) limited liability company, if the
applicable Borrower is listed as a limited liability company in the preamble to
this Agreement.

                  "Environmental Guaranty" means the Environmental Indemnity
Agreement in form and substance satisfactory to Lender dated as of the Closing
Date from Borrower to Lender relating to all Individual Properties, as the same
may thereafter be from time to time supplemented, amended, modified or extended
by one or more agreements supplemental thereto.

                  "Environmental Indemnified Parties" includes Lender, any
Person who is or will have been involved with the servicing of the Loan, Persons
who may hold or acquire or will have held a full or partial interest in the Loan
(including, but not limited to, Investors or prospective Investors, as well as
custodians, trustees and other fiduciaries who hold or have held a full or
partial interest in the Loan for the benefit of third parties) as well as the
respective directors, officers, shareholders, partners, employees, agents,
servants, representatives, contractors, subcontractors, affiliates,
subsidiaries, participants, successors and assigns of any and all of the
foregoing (including but not limited to any other Person who holds or acquires
or will have held a participation or other full or partial interest in the Loan
or the collateral therefor, whether during the term of the Loan or as a part of
or following a foreclosure of the collateral for the Loan and including, but not
limited to, any successors by merger, consolidation or acquisition of all or a
substantial portion of Lender's assets and business).

                  "Environmental Law" means any present and future federal,
state and local laws, statutes, ordinances, rules, regulations and the like, as
well as common law, relating to protection of human health or the environment,
relating to Hazardous Substances, relating to liability for or costs of other
actual or threatened danger to human health or the environment, including,
without

                                        9


limitation, the following statutes, as amended, any successor thereto, and any
regulations promulgated pursuant thereto, and any state or local statutes,
ordinances, rules, regulations and the like addressing similar issues: the
Comprehensive Environmental Response, Compensation and Liability Act; the
Emergency Planning and Community Right-to-Know Act; the Hazardous Substances
Transportation Act; the Resource Conservation and Recovery Act (including but
not limited to Subtitle I relating to underground storage tanks); the Solid
Waste Disposal Act; the Clean Water Act; the Clean Air Act; the Toxic Substances
Control Act; the Safe Drinking Water Act; the Occupational Safety and Health
Act; the Federal Water Pollution Control Act; the Federal Insecticide, Fungicide
and Rodenticide Act; the Endangered Species Act; the National Environmental
Policy Act; and the River and Harbors Appropriation Act, and including, without
limitation, any present and future federal, state and local laws, statutes
ordinances, rules, regulations and the like, as well as common law: requiring
notification or disclosure of Releases of Hazardous Substances or other
environmental condition of any or all of the Individual Properties to any
Governmental Authority or other Person, whether or not in connection with
transfer of title to or interest in any or all of the Individual Properties.

                  "Environmental Liens" means, with respect to each Individual
Property, all liens and other encumbrances imposed on any Borrower which owns
such Individual Property pursuant to any Environmental Law, whether due to any
act or omission of any Borrower or any other person.

                  "Environmental Report(s)" means, with respect to each
Individual Property, environmental audit report(s) (i) prepared by a reputable
environmental Engineer approved by Lender in Lender's discretion, (ii) addressed
to or permitted by such environmental Engineer to be relied upon by Lender (iii)
prepared based on a scope of work determined by Lender in Lender's discretion,
and (iv) in form and content acceptable to Lender in Lender's discretion,
together with any amendments or supplements thereto delivered to Lender.

                  "Equity Interests" means (i) if the applicable Borrower is a
limited partnership, limited partnership interests in Borrower, or (ii) if the
applicable Borrower is a limited liability company, membership interests in
Borrower; or (iii) if the applicable Borrower is a corporation, the share or
stock interests in the applicable Borrower; provided, however, Equity Interests
shall not include any direct or indirect legal or beneficial ownership interest,
or any other interest of any nature or kind whatsoever, of any SPE Equity Owner
in any Borrower or in any other SPE Equity Owner, as applicable.

                  "ERISA" means 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
Agreement and, as of the relevant date, any subsequent provisions of ERISA,
amendatory thereof, supplemental thereto or substituted therefor.

                  "ERISA Affiliate" means any corporation or trade or business
that is a member of any group of organizations (i) described in Section 414(b)
or (c) of the Code, of which any Borrower is a member, and (ii) solely for
purposes of potential liability under Section 302(c)(11)

                                       10


of ERISA and Section 412(c)(11) of the Code and the lien created under Section
302(f) of any ERISA and Section 412(n) of the Code, described in Section 414(m)
or (o) of the Code, of which any Borrower is a member.

                  "Event of Default" has the meaning set forth in Section 7.1.

                  "Exchange Act" has the meaning set forth in Section 2.13.

                  "Extension Interest Rate Cap Agreement" means, a confirmation
(together with the definitions, ISDA master agreement and schedules relating
thereto) between the applicable Acceptable Counterparty and each Borrower,
relating to the applicable Extension Term, satisfying the requirements set forth
in Exhibit C.

                  "Extension Term" has the meaning set forth in Section 2.10.

                  "Extra Funds" has the meaning set forth in Section 2.11(f).

                  "FF&E Financing" shall mean, with respect to an Individual
Property, the personal property leases and personal property financing set forth
with respect to such Individual Property on Exhibit K, attached hereto and
incorporated herein and all renewals, amendments and extensions thereof.

                  "FIRREA" shall mean the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, as the same may be amended from time to
time.

                  "First Extended Maturity Date" has the meaning set forth in
Section 2.10.

                  "First Extension Term" has the meaning set forth in Section
2.10.

                  "Fiscal Year" means the 12-month period ending on December 31
of each year or such other fiscal year of Borrowers as Borrowers may select from
time to time with the prior written consent of Lender, such consent not to be
unreasonably withheld or delayed.

                  "Franchise Agreement" shall mean, individually or
collectively, as the context may require, each franchise or similar agreement
entered into by and between the applicable Borrower and/or Operating Lessee and
Franchisor pursuant to which the applicable Borrower and/or Operating Lessee is
permitted to operate the applicable Individual Property under the "flag" or
other trade name that is the subject thereof, as the same may be amended,
restated, replaced, supplemented or otherwise modified in accordance with the
terms hereof.

                  "Franchisor" shall mean, individually or collectively, as the
context may require, each franchisor under a Franchise Agreement. As of the date
hereof, each Franchisor of each Individual Property is set forth on Exhibit G
attached hereto. No replacement or substitute Franchisor shall be selected,
approved or consented to by any Borrower or Operating Lessee other than in
accordance with the terms hereof.

                                       11


                  "Franchisor's Subordination" means, with respect to each
Individual Property, a Franchisor's Consent and Subordination Agreement, comfort
letter or similar agreement in form and substance satisfactory to Lender, dated
as of the Closing Date, executed by the relevant Franchisor and others as the
same may thereafter from time to time be supplemented, amended, modified or
extended by one or more written agreements supplemental thereto.

                  "Funding Losses" means, collectively, all losses, costs and
expenses incurred or sustained (or expected to be incurred or sustained) by
Lender in liquidating or re-employing funds from third parties to effect or
maintain the Loan or any part thereof as a consequence of (a) if the Loan, or
any portion thereof, is repaid for any reason whatsoever on any date other than
a Payment Date (including, without limitation, from Insurance Proceeds or
Condemnation Proceeds); (b) any default in the payment or prepayment of the
Principal Indebtedness or any part thereof or interest accrued thereon, as and
when due and payable (at the date thereof or otherwise, and whether by
acceleration or otherwise); (c) intentionally omitted; (d) any losses, expenses
or increased costs incurred or sustained by Lender due to the determination of
the "LIBOR Rate" other than pursuant to the first sentence of the definition
thereof; (e) the reduction of any amounts received or receivable from any
Borrower, in either case, due to the introduction of, or any change in, law or
applicable regulation or treaty (including the administration or interpretation
thereof), whether or not having the force of law, or due to the compliance by
Lender with any directive, whether or not having the force of law, or request
from any central bank or domestic or foreign governmental authority, agency or
instrumentality have jurisdiction; and/or (f) any other set of circumstances not
attributable to Lender's acts.

                  "GAAP" means generally accepted accounting principles
consistently applied in the United States of America as of the date of the
applicable financial report.

                  "Governmental Authority" means any foreign, national, federal,
state, regional or local government, or any other political subdivision of any
of the foregoing, in each case with jurisdiction over any Borrower, all or any
portion of the Collateral, or any SPE Equity Owner, or any Person with
jurisdiction over any Borrower, any Individual Property or any SPE Equity Owner,
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.

                  "Gross Revenue" means, with respect to each Individual
Property, the total dollar amount of all income and receipts whatsoever received
by the Borrower, Operating Lessee or any Manager or any agent thereof which
owns, operates or manages the applicable Individual Property.

                  "Ground Lease" shall mean means that certain Amended and
Restated Air Space and Air Rights Lease Agreement dated March 23, 1995, but
effective January 1, 1995, between Ground Lessor and Ashford Columbus LP, a
Delaware limited partnership, a memorandum of which was recorded in Official
Records of Franklin County, Ohio in Volume 28829, Page I-08.

                  "Ground Lessor" means Huntington Center Associates, an Ohio
general partnership.

                                       12


                  "Ground Rent" means all ground rents, square footage rents,
percentage rents or any other payments or rents owing under each Ground Lease.

                  "Ground Rents Monthly Installment" means the portion of the
Ground Rents which, if reserved on a monthly basis, would assure that funds are
reserved in sufficient amounts to enable the payment of Ground Rents on their
due date (as set forth in each Ground Lease).

                  "Ground Rents Sub-Account" means the Sub-Account of the Cash
Collateral Account established and maintained pursuant to Section 2.11 hereof
relating to the payment of the Ground Rents.

                  "Hazardous Substance" means, without limitation, any and all
substances (whether solid, liquid or gas) defined, listed, or otherwise
classified as pollutants, toxic or hazardous wastes, toxic or hazardous
substances, toxic or hazardous materials, extremely hazardous wastes, or words
of similar meaning or regulatory effect under any present or future
Environmental Laws including but not limited to petroleum and petroleum
products, asbestos and asbestos-containing materials, polychlorinated biphenyls,
lead, radon, radioactive materials, flammables and explosives, but excluding
substances of kinds and in small amounts ordinarily and customarily used or
stored in similar properties for the purposes of cleaning or other maintenance
or operations and otherwise in compliance with all Environmental Laws.

                  "Hotel Operations Sub-Account" shall have the meaning provided
in Section 2.11(c).

                  "Impositions" means, collectively, "Impositions" as defined in
each Mortgage.

                  "Indebtedness" means, at any given time, the Principal
Indebtedness, together with all accrued and unpaid interest thereon and all
other obligations and liabilities due or to become due to Lender pursuant
hereto, under the Notes or in accordance with any of the other Loan Documents,
and all other amounts, sums and expenses paid by or payable to Lender hereunder
or pursuant to the Notes or any of the other Loan Documents.

                  "Indemnified Party" shall have the meaning set forth in
Section 2.13.

                  "Independent" means, when used with respect to any Person, a
Person who: (i) does not have any direct financial interest or any material
indirect financial interest in any Borrower or in any Affiliate of any Borrower
(including, without limitation, in any SPE Equity Owner), (ii) is not connected
with any Borrower or any Affiliate of any Borrower (including, without
limitation, any SPE Equity Owner), as an officer, employee, promoter,
underwriter, trustee, partner, member, manager, creditor, director or person
performing similar functions (other than in his or her capacity as Independent
Director), and (iii) is not a member of the immediate family of a Person defined
in (i) or (ii) above.

                  "Independent Director" means, with respect to each Borrower, a
duly appointed member of the board of directors (or with respect to a Single
Member LLC, the board of

                                       13


managers) of the relevant entity who shall not have been, at the time of such
appointment or at any time while serving as a director or manager of the
relevant entity and may not have been at any time in the preceding five years
(except in a capacity as an "Independent Director" for one or more Affiliates
otherwise satisfying the requirements of this definition), (a) a direct or
indirect legal or beneficial owner in such entity or any of its affiliates or
any Borrower or any of their respective affiliates, (b) a creditor, supplier,
employee, officer, director (other than in its capacity as Independent
Director), family member, manager, or contractor of such entity or any of its
affiliates or any Borrower or any of their respective affiliates, or (c) a
Person who controls (directly, indirectly, or otherwise) such entity or any of
its affiliates or any Borrower or any of their respective affiliates or any
creditor, supplier, employee, officer, director, family member, manager, or
contractor of such Person or any of its affiliates or any Borrower or any of
their respective affiliates.

                  "Individual Properties" shall mean, collectively, each and
every Individual Property.

                  "Individual Property" shall mean, with respect to each
individual property described on Exhibit D attached hereto, "Property" as
defined in the related Mortgage for such individual property.

                  "Initial Basic Carrying Costs Amount" means the amount shown
as such on Exhibit A.

                  "Initial Capital Reserve Amount" means the amount shown as
such on Exhibit A.

                  "Initial Ground Rents Amount" means the amount shown as such
on Exhibit A.

                   "Initial Interest Rate Cap Agreement" means a confirmation
(together with the definitions, ISDA master agreement and schedules relating
thereto) between the applicable Acceptable Counterparty and each Borrower,
relating to the initial term of the Loan, satisfying the requirements set forth
in Exhibit C.

                  "Initial Maturity Date" means September 29, 2006.

                  "Initial PIP Amount" means the amount shown as such on Exhibit
A.

                  "Insurance Proceeds" has the meaning, with respect to each
Individual Property, provided in the Mortgage for such Individual Property.

                  "Insurance Requirements" has the meaning, with respect to each
Individual Property, provided in the Mortgage for such Individual Property.

                  "Interest Accrual Period" shall mean, with respect to any
Payment Date, a period commencing on the first (1st) Business Day of the
calendar month in which such Payment Date occurs and ending on the day
immediately prior to the first (1st) Business Day of the next

                                       14


calendar month. The first Interest Accrual Period shall commence on the Closing
Date and continue through and including the day immediately prior to the first
Business Day of the calendar month following the month in which the Closing Date
occurs.

                  "Interest Rate" means, for any Interest Accrual Period, the
LIBOR Interest Rate for the applicable Note or the Default Rate for the
applicable Note, as and when applicable pursuant to this Agreement.

                  "Interest Rate Adjustment Date" shall mean the second LIBOR
Business Day prior to the first day of an Interest Accrual Period; provided that
the Interest Rate Adjustment Date for the first Interest Accrual Period shall be
the Closing Date or such other date selected by Lender. The LIBOR Rate set on
the Interest Rate Adjustment Date shall be in effect for the Interest Accrual
Period immediately following such Interest Rate Adjustment Date.

                  "Interest Rate Cap Agreement" means any Initial Interest Rate
Cap Agreement or Extension Interest Rate Cap Agreement.

                  "Investor" has the meaning provided in Section 8.27.

                  "Land" means, collectively, "Land" as defined in each
Mortgage.

                  "Late Charge" means the lesser of (i) five percent (5%) of any
unpaid amount and (ii) the maximum late charge permitted to be charged under the
laws of the State of New York.

                  "Leases" means, collectively, "Leases" as defined in each
Mortgage.

                  "Legal Requirements" means all statutes, laws, rules, orders,
regulations, ordinances, judgments, orders, decrees and injunctions of
Governmental Authorities affecting any Borrower, the Loan Documents, the
Collateral or any part thereof, or the ownership, construction, use, alteration
or operation thereof, or any part thereof, enacted or entered and in force as of
the relevant date, and all Permits and regulations relating thereto, and all
covenants, agreements, restrictions and encumbrances contained in any
instruments, either of record or known to any Borrower, at any time in force
affecting the Collateral or any part thereof, including, without limitation, any
which (i) may require repairs, modifications, or alterations in or to the
Collateral or any part thereof, or (ii) in any way limit the use and enjoyment
thereof, and further including, without limitation, all Environmental Laws and
the Americans with Disabilities Act, as they may be amended from time to time,
together with all regulations promulgated pursuant thereto or in connection
therewith.

                  "Lender" has the meaning provided in the preamble to this
Agreement.

                  "Liabilities" has the meaning set forth in Section 2.13.

                  "LIBOR Business Day" means any day on which banks are open for
dealing in foreign currency and exchange in London, England.

                                       15


                  "LIBOR Interest Rate" means, for any Interest Accrual Period,
the LIBOR Rate for such Interest Accrual Period plus (a) with respect to Note
A-1, the Note A-1 Spread, (b) with respect to Note A-2, the Note A-2 Spread, (c)
with respect to Note A-3, the Note A-3 Spread, and (d) with respect to Note B,
the Note B Spread.

                  "LIBOR Rate" shall mean the London interbank offered rate for
thirty (30) day United States Dollar deposits in an amount of $1,000,000 or more
that appears on Telerate Page 3750 (or on such page as may replace Telerate Page
3750 on that service or such other service or services as may be nominated by
the British Bankers' Association for the purposes of displaying such rate all as
determined by Lender in its sole but good faith discretion) as of 11:00 a.m.,
London time, on the applicable Interest Rate Adjustment Date to the extent
available. If such rate does not appear on Telerate Page 3750 (or on such page
as may replace Telerate Page 3750 on that service or such other service or
services as may be nominated by the British Bankers' Association for the
purposes of displaying such rate all as determined by Lender in its sole but
good faith discretion) as of 11:00 a.m., London time, on the applicable Interest
Rate Adjustment Date, the LIBOR Rate will be the arithmetic mean of the offered
rates (expressed as a percentage per annum) for deposits in U.S. Dollars for a
one (1) month period that appear on the Reuters Screen LIBO Page as of 11:00
a.m., London time, on the applicable Interest Rate Adjustment Date, if at least
two such offered rates so appear. If fewer than two such offered rates appear on
the Reuters Screen LIBO Page as of 11:00 a.m., London time, on the applicable
Interest Rate Adjustment Date, Lender will request the principal London office
of any four (4) major reference banks in the London interbank market selected by
Lender in its sole discretion to provide such bank's offered quotation
(expressed as a percentage per annum) to prime banks in the London interbank
market for deposits in U.S. Dollars for one (1) month period as of approximately
11:00 a.m., London time, on such Interest Rate Adjustment Date for amounts of
not less than $1,000,000. If at least two such offered quotations are so
provided, the LIBOR Rate will be the arithmetic mean of such quotations. If
fewer than two such quotations are so provided, Lender will request any three
(3) major banks in New York City selected by Lender in its sole discretion to
provide such banks' rate (expressed as a percentage per annum) for loans in U.S.
Dollars to leading European banks for a one (1) month period as of approximately
11:00 a.m. New York City time, on the applicable Interest Rate Adjustment Date
for amounts of not less than $1,000,000. If at least two such rates are so
provided, the LIBOR Rate will be the arithmetic mean of such rates. If fewer
than two such rates are so provided, the then LIBOR Rate will be the LIBOR Rate
in effect on the preceding Interest Rate Adjustment Date. The LIBOR Rate for any
Interest Accrual Period shall be adjusted from time to time, by increasing the
rate thereof to compensate Lender for any aggregate reserve requirements
(including, without limitation, all basic, supplemental, marginal and other
reserve requirements and taking into account any transactional adjustments or
other scheduled changes in reserve requirements during any Interest Accrual
Period) which are required to be maintained by Lender with respect to
"Eurodollar liabilities" (as presently defined in Regulation D of the Board of
Governors of the Federal Reserve System) of the same term under said Regulation
D, or any other regulations of a Governmental Authority having jurisdiction over
Lender. The establishment of the LIBOR Rate on each Interest Rate Adjustment
Date by the Lender and the Lender's calculation of the rate of interest
applicable to this Note shall (in the absence of manifest error) be final and
binding.

                                       16


                  "Lien" means any mortgage, deed of trust, deed to secure debt,
lien (statutory or other), pledge, easement, restrictive covenant,
hypothecation, assignment, preference, priority, security interest, or any other
encumbrance or charge on or affecting any portion of the Collateral or any
Borrower, or any interest in any of the foregoing, including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, the filing of any financing statement or similar instrument under the
UCC or comparable law of any other jurisdiction, domestic or foreign, and
mechanic's, materialmen's and other similar liens and encumbrances.

                  "Loan" has the meaning provided in the Recitals hereto.

                  "Loan Amount" has the meaning provided in the Recitals hereto.

                  "Loan Documents" means, collectively, this Agreement, the
Notes, the Mortgages, the Assignments of Leases, the Assignments of Agreements,
the Manager's Subordinations, the Franchisor's Subordinations, the
Subordination, Attornment and Security Agreements, the Environmental Guaranty,
the PIP Guaranty, the Cash Collateral Account Agreement, the Collection Account
Agreements, all Interest Rate Cap Agreements, all Rate Cap Pledge and Security
Agreements from Borrowers to Lender, the PIP Guaranty and all other agreements,
instruments, certificates and documents executed or delivered by or on behalf of
Borrower or any Affiliate to evidence or secure the Loan or otherwise in
satisfaction of the requirements of this Agreement, any Mortgage or the other
documents listed above.

                  "Losses" means any losses, actual damages, costs, fees,
expenses, claims, suits, judgments, awards, liabilities (including but not
limited to strict liabilities), obligations, debts, fines, penalties, charges,
costs of Remediation (whether or not performed voluntarily), amounts paid in
settlement, litigation costs, reasonable attorneys' fees, engineers' fees,
environmental consultants' fees, and investigation costs (including but not
limited to costs for sampling, testing and analysis of soil, water, air,
building materials, and other materials and substances whether solid, liquid or
gas), of whatever kind or nature, and whether or not incurred in connection with
any judicial or administrative proceedings, actions, claims, suits, judgments or
awards.

                  "Management Agreement" means the Management Agreement entered
into between Manager and each Borrower or Operating Lessee pertaining to the
management of each Individual Property in the form attached to the Manager's
Subordinations.

                  "Manager" means, individually or collectively, as the context
may require, each manager under a Management Agreement, or any successor or
assignee, provided that each successor or assignee shall be acceptable to Lender
in Lender's discretion. As of the date hereof, the Manager of each Individual
Property is set forth on Exhibit F attached hereto.

                  "Manager's Subordination" means, with respect to each
Individual Property, the Manager's Consent and Subordination of Management
Agreement in form and substance satisfactory to Lender, dated as of the Closing
Date, executed by the applicable Manager, each applicable Borrower which owns
the Individual Property, Operating Lessee and Lender, as the

                                       17


same may thereafter from time to time be supplemented, amended, modified or
extended by one or more written agreements supplemental thereto.

                  "Material Adverse Effect" means a material adverse effect upon
(i) the business or the financial position or results of operation of any
Borrower, (ii) the ability of any Borrower to perform, or of Lender to enforce,
any of the Loan Documents or (iii) the value of (x) the Collateral with respect
to any Individual Property taken as a whole or (y) any Individual Property.

                  "Material Lease" means, collectively, (a) any "Material Lease"
as defined in each Mortgage, (b) each Operating Lease, and (c) each Ground
Lease.

                  "Maturity Date" means Initial Maturity Date or such earlier
date resulting from acceleration of the Indebtedness by Lender.

                  "Maximum Amount" means the maximum rate of interest designated
by applicable laws relating to payment of interest and usury.

                  "Mezzanine Borrower" shall mean Ashford Mezz Borrower LLC, a
Delaware limited liability company.

                  "Mezzanine Debt Service" shall mean, with respect to any
particular period of time, scheduled principal and/or interest payments and all
other amounts that accrue or are due and payable under the Mezzanine Loan for
such period.

                  "Mezzanine Debt Service Payment Sub-Account" shall have the
meaning provided in Section 2.11(c).

                  "Mezzanine Lender" shall mean the entity making the Mezzanine
Loan, its successors and assigns.

                  "Mezzanine Loan" shall mean that certain mezzanine loan made
on the date hereof in the original principal amount of $25,000,000 to Mezzanine
Borrower.

                  "Mezzanine Loan Documents" shall mean all agreements,
instruments, certificates and documents executed or delivered by or on behalf of
Mezzanine Borrower or any Affiliate thereof to evidence or secure the Mezzanine
Loan.

                  "Mezzanine Release Price" shall have the definition of
"Release Price" set forth in the Mezzanine Loan Agreement.

                  "Mold" means any mold or fungus in violation of Legal
Requirements present at or in any Individual Property.

                  "Mortgage" means, with respect to each Individual Property,
the first priority Mortgage or Deed of Trust, Assignment of Rents, Security
Agreement and Fixture Filing or such

                                       18


other comparable document which is customarily used by prudent lenders in the
jurisdiction in which such Individual Property is located, in form and substance
satisfactory to Lender in Lender's discretion, dated as of the Closing Date,
granted by each applicable Borrower which owns such Individual Property to
Lender (or, in the case of a Deed of Trust, to Deed of Trust Trustee for the
benefit of Lender) with respect to such Individual Property as security for the
Loan, as the same may thereafter from time to time be supplemented, amended,
modified or extended by one or more written agreements supplemental thereto.

                  "Mortgaged Property" means, collectively, or individually (as
the context requires), the "Mortgaged Property" or the "Trust Estate" as defined
in the Mortgage for each Individual Property.

                  "Morgan Collection Bank" means JP Morgan Chase Bank.

                  "Multiemployer Plan" means a multiemployer plan defined as
such in Section 3(37) of ERISA to which contributions have been made by Borrower
or any ERISA Affiliate and which is covered by Title IV of ERISA.

                  "Net Operating Income" means, with respect to each Individual
Property, for any period the excess, if any, of Operating Income for such period
over Operating Expenses for such period.

                  "Note A-1" shall have the meaning set forth in the Recitals
hereto.

                  "Note A-2" shall have the meaning set forth in the Recitals
hereto.

                  "Note A-3" shall have the meaning set forth in the Recitals
hereto.

                  "Note B" shall have the meaning set forth in the Recitals
hereto.

                  "Note A-1 Holder" shall have the meaning set forth in the
Recitals hereto.

                  "Note A-2 Holder" shall have the meaning set forth in the
Recitals hereto.

                  "Note A-3 Holder" shall have the meaning set forth in the
Recitals hereto.

                  "Note B Holder" shall have the meaning set forth in the
Recitals hereto.

                  "Note A-1 Spread" means 0.95%.

                  "Note A-2 Spread" means 0.95%.

                  "Note A-3 Spread" means 0.95%.

                  "Note B Spread" means 3.50%.

                                       19


                  "Notes" means, collectively, Note A-1, Note A-2, Note A-3 and
Note B.

                  "OFAC List" means 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 any other similar
list maintained by the U.S. Treasury Department, Office of Foreign Assets
Control pursuant to any Legal Requirements (or is such list does not exist, the
similar list then being maintained by the United States, including, without
limitation, trade embargo, economic sanctions, or other prohibitions imposed by
Executive Order of the President of the United States. The OFAC List currently
is accessible through the internet website at www.treas.gov/ofac/t11sdn.pdf.

                  "Officer's Certificate" means, with respect to each Borrower,
a certificate of such Borrower which is signed by the managing equity owner of
such Borrower.

                  "Operating Expenses" means, with respect to each Individual
Property, for any period, all expenditures by the Borrower which owns the
Individual Property or the Operating Lessee, as and to the extent required to be
expensed under GAAP during such period in connection with the ownership,
operation, maintenance, repair or leasing of such Individual Property,
including, without limitation or duplication expenses in connection with
cleaning, repair, replacement, painting and maintenance; wages, benefits,
payroll taxes, uniforms, insurance costs and all other related expenses for
employees of such Borrower, Operating Lessee or any Affiliate engaged in repair,
operation, maintenance of such Individual Property or service to tenants,
patrons or guests of such Individual Property, as applicable; any management and
franchise fees and expenses; the cost of all electricity, oil, gas, water,
steam, heat, ventilation, air conditioning and any other energy, utility or
similar item and overtime services; the cost of cleaning supplies; Impositions;
business interruption, liability, casualty and fidelity insurance premiums;
legal, accounting and other professional fees and expenses incurred in
connection with the ownership, leasing or operation of any Individual Property,
including, without limitation, collection costs and expenses; costs and expenses
of security and security systems; trash removal and exterminating costs and
expenses; advertising and marketing costs; costs of environmental audits and
monitoring, environmental, investigation, remediation or other response actions
or any other expenses incurred with respect to compliance with Environmental
Laws; and all other ongoing expenses which in accordance with GAAP are required
to be or are included in such Borrower's or Operating Lessee's annual financial
statements as operating expenses of such Individual Property. Operating Expenses
shall be calculated in accordance with GAAP.

                  Notwithstanding the foregoing, Operating Expenses shall not
include (v) Capital Improvement Costs, (w) any taxes imposed on the applicable
Borrower's or Operating Lessee's net income, (x) depreciation or amortization of
intangibles (y) Debt Service and other payments in connection with the
Indebtedness, or (z) any rental or other payments due and payable to Borrower by
Operating Lessee pursuant to the terms of any Operating Lease.

                  "Operating Income" means, with respect to each Individual
Property, for any period, for Borrower which owns the Individual Property, all
revenue derived from the

                                       20


ownership and operation of each Individual Property from whatever source,
including, without limitation: all amounts payable as Rents and all other
amounts payable under Leases (other than the Operating Lease) or other third
party agreements relating to the ownership and operation of such Individual
Property; business interruption insurance proceeds; and all other amounts which
in accordance with GAAP are required to be or are included in such Borrower's or
Operating Lessee's annual financial statements as operating income of such
Individual Property but excluding any lease termination payments, use and
occupancy or other taxes on receipts required to be accounted for by Borrower to
any Governmental Authority, refunds on uncollectible accounts, sales of
furniture, fixtures and equipment, Insurance Proceeds (other than business
interruption insurance), Condemnation Proceeds, rents, revenues and receipts
received by tenants and concessionaires located at the Individual Properties,
unforfeited security deposits, utility and other similar deposits and any
disbursements to Borrower from the Cash Collateral Account and any Sub-Accounts.
Operating Income shall not include any rental or other payments due and payable
to Borrower by Operating Lessee pursuant to the terms of any Operating Lease.

                  "Operating Lease" shall mean, individually or collectively, as
the context may require, the operating lease or similar agreement entered into
by and between the applicable Borrower and the Operating Lessee, which governs
the operation of one of more of the Individual Properties as the same may be
amended, restated, replaced, supplemented or modified from time to time, in
accordance with the terms hereof.

                  "Operating Lessee" shall mean, individually or collectively,
as the context may require, any operating lessee under an Operating Lease, which
is an Affiliate of the Borrowers and which is a Special Purpose Entity, provided
that such operating lessee shall be selected in accordance with the terms
hereof. As of the date hereof, the term Operating Lessee is Ashford TRS Lessee
LLC, a Delaware limited liability company, the current operating lessee of each
Individual Property, and an Affiliate of the Borrowers.

                  "Other Borrowings" means, without duplication (but not
including the Indebtedness or any Transaction Costs payable in connection with
the Transactions), (i) all indebtedness of any Borrower for borrowed money or
for the deferred purchase price of property or services, (ii) all indebtedness
of any Borrower evidenced by a note, bond, debenture or similar instrument,
(iii) the face amount of all letters of credit issued for the account of any
Borrower and, without duplication, all unreimbursed amounts drawn thereunder,
(iv) all indebtedness of any Borrower secured by a Lien on any property owned by
any Borrower whether or not such indebtedness has been assumed, (v) all
Contingent Obligations of any Borrower, and (vi) all payment obligations of any
Borrower under any interest rate protection agreement (including, without
limitation, any interest rate swaps, caps, floors, collars or similar
agreements) and similar agreements.

                  "Payment Date" shall mean the last Business Day of each month
commencing on October 29, 2004 and continuing to and including the Maturity Date
(or, if the Maturity Date is not on a Business Day, the immediately preceding
Business Day).

                                       21


                  "PBGC" means the Pension Benefit Guaranty Corporation
established under ERISA, or any successor thereto.

                  "Partial Release" shall have the meaning set forth in Section
2.15.

                  "Permits" means, collectively, "Permits" as defined in each
Mortgage.

                  "Permitted Encumbrances" means, with respect to each
Individual Property, (i) the Lien created by the Mortgage for such Individual
Property or the other Loan Documents, (ii) all Liens and other matters disclosed
in the Title Insurance Policy concerning the Individual Property, or any part
thereof which have been approved by Lender in Lender's discretion, (iii) Liens,
if any, for Impositions with respect to imposed by any Governmental Authority
not yet due or delinquent or being contested in good faith and by appropriate
proceedings in accordance with the Mortgage for such Individual Property, (iv)
without limiting the foregoing, any and all governmental, public utility and
private restrictions, covenants, reservations, easements, licenses or other
agreements of an immaterial nature which may hereafter be granted by each
applicable Borrower which owns the Individual Property after the Closing Date
and which do not materially and adversely affect (a) the ability of any Borrower
to pay any of its obligations to any Person as and when due, (b) the
marketability of title to such Individual Property, (c) the fair market value of
such Individual Property, or (d) the use or operation of such Individual
Property as of the Closing Date and thereafter, (v) 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 Loan Documents, (vi) the
Operating Leases, (vii) FF&E Financing applicable to the Individual Property,
(viii) liens in favor of Mortgagee, and, (ix) with respect to the Individual
Property owned by Ashford Bucks County LLC only, the Declaration.

                  "Permitted Investments" has the meaning provided in the Cash
Collateral Account Agreement.

                  "Permitted Transfers" shall mean, (A) with respect to each
Individual Property and each Borrower: (i) provided that no Event of Default has
occurred and is continuing, Permitted Encumbrances (other than Permitted
Encumbrances arising prior to the occurrence of such Event of Default); (ii)
provided that no Event of Default has occurred and is continuing, all transfers
of worn out or obsolete furnishings, fixtures or equipment that are (if deemed
necessary or advisable by the applicable Borrower or Operating Lessee)
reasonably promptly replaced with property of equivalent value and functionality
in the ordinary course of the Borrowers' or Operating Lessees operation of each
Individual Property; (iii) provided that no Event of Default has occurred and is
continuing, all Leases which are not Material Leases (other than Material Leases
entered into prior to the occurrence of such Event of Default); (iv) all
Material Leases which have been approved by Lender in writing pursuant to the
terms of this Agreement; (v) the pledge of the Equity Interests in the Operating
Lessee by Ashford TRS Corporation as security for the Mezzanine Loan and the
pledge of Equity Interests in the Borrowers and the direct ownership interest in
SPE Equity Owner by Mezzanine Borrower pursuant to and in accordance with the
terms of the Mezzanine Loan Documents; (vi) provided that no Event of Default
has occurred and is continuing, transfers of Equity Interests which in the
aggregate during the term

                                       22


of the Loan (a) do not exceed forty-nine percent (49%) of the total interests in
any Borrower and (b) do not result in any partner's, member's or other Person's
interest in any Borrower exceeding forty-nine percent (49%) of the total
interests in any Borrower; (vii) provided that no Event of Default has occurred
and is continuing, any other transfer of Equity Interests provided that (a)
prior to any Secondary Market Transaction, Lender shall have consented to such
transfer or transfers, (b) after any Secondary Market Transaction, (1) Lender
shall have consented to such transfer or transfers and (2) the Rating Agencies
shall have confirmed in writing that such transfer or transfers shall not result
in a downgrade, withdrawal or qualification of any securities issued in
connection with such Secondary Market Transaction, (c) acceptable opinions
relating to such transfer or transfers shall have been delivered by Borrowers to
Lender and the Rating Agencies (including, without limitation, tax and
bankruptcy opinions), and (d) Borrowers pay all reasonable expenses incurred by
Lender in connection with such transfer or transfers; (viii) transfers,
issuance, conversions, pledges and redemptions of stock, membership interests
and partnership interests in Ashford Hospitality Trust, Inc., a Maryland
corporation (or its successors), Ashford OP General Partner LLC, a Delaware
limited liability company, Ashford OP Limited Partner LLC, a Delaware limited
liability company, or Ashford Hospitality Limited Partnership, a Delaware
limited partnership, and (ix) the merger or consolidation of Ashford Hospitality
Trust, Inc. (or its successors), and (B) with respect to Operating Lessee, (i)
provided that no Event of Default has occurred and is continuing, transfers of
direct or indirect equity interests in Operating Lessee which in the aggregate
during the term of the Loan (a) do not exceed forty-nine percent (49%) of the
total interests in Operating Lessee, and (b) do not result in any partner's,
member's or other Person's interest in any Operating Lessee exceeding forty-nine
percent (49%) of the total interests in Operating Lessee; (ii) provided that no
Event of Default has occurred and is continuing, any other transfer of direct or
indirect equity interests in Operating Lessee provided that (a) prior to any
Secondary Market Transaction, Lender shall have consented to such transfer or
transfers, (b) after any Secondary Market Transaction, (1) Lender shall have
consented to such transfer or transfers and (2) the Rating Agencies shall have
confirmed in writing that such transfer or transfers shall not result in a
downgrade, withdrawal or qualification of any securities issued in connection
with such Secondary Market Transaction, (c) acceptable opinions relating to such
transfer or transfers shall have been delivered by Operating Lessee or the
Borrowers to Lender and the Rating Agencies (including, without limitation, tax
and bankruptcy opinions), and (d) Operating Lessee or the Borrowers pay all
reasonable expenses incurred by Lender in connection with such transfer or
transfers; (iii) transfers, issuance, conversions, pledges and redemptions of
stock, membership interests and partnership interests in Ashford Hospitality
Trust, Inc., a Maryland corporation (or its successors), Ashford OP General
Partner LLC, a Delaware limited liability company, Ashford OP Limited Partner
LLC, a Delaware limited liability company, or Ashford Hospitality Limited
Partnership, a Delaware limited partnership; and (iv) the merger or
consolidation of Ashford Hospitality Trust, Inc. (or its successors).

                  "Person" means any individual, corporation, limited liability
company, partnership, joint venture, estate, trust, unincorporated association,
or any other entity, 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.

                                       23


                  "PIP Costs" means the costs described on Exhibit I.

                  "PIP Guaranty" means the PIP Guaranty in form and substance
satisfactory to Lender dated as of the Closing Date from Ashford Hospitality
Limited Partnership to Lender, as the same may thereafter be from time to time
supplemented, amended, modified or extended by one or more agreements
supplemental thereto.

                  "PIP Reserve Amount" means the amount shown on Exhibit A.

                  "PIP Reserve Sub-Account" means the Sub-Account of the Cash
Collateral Account established and maintained pursuant to Section 2.11 relating
to the payment of PIP Costs.

                  "PIP Work" has the meaning set forth in Section 5.1(W).

                  "Plan" means an employee benefit or other plan established or
maintained by any Borrower or any ERISA Affiliate and that is covered by Title
IV of ERISA, other than a Multiemployer Plan.

                  "Principal Indebtedness" means the principal amount of the
entire Loan outstanding as the same may be increased or decreased, as a result
of prepayment or otherwise, from time to time.

                  "Prepayment Premium" means, with respect to any prepayment of
the Principal Indebtedness, or acceleration of the Loan, in either case, made
prior to or on September 1, 2006, an amount equal to one percent (1.00%) of the
Principal Indebtedness being prepaid (it being understood that Borrower shall
not be permitted to voluntarily prepay all or any part of the Loan prior to
October 1, 2005).

                  "Proceeds" means all "proceeds," as such term is defined in
the UCC, and, to the extent not included in such definition, all proceeds
whether cash or non-cash, movable or immovable, tangible or intangible
(including all Insurance Proceeds, all Condemnation Proceeds and proceeds of
proceeds), from the Collateral, including, without limitation, those from the
sale, exchange, transfer, collection, loss, damage, disposition, substitution or
replacement of any of the Collateral and all income, gain, credit, distributions
and similar items from or with respect to the Collateral.

                  "Rate Cap Pledge and Security Agreement" means that certain
form of Rate Cap Pledge and Security Agreement attached hereto as Exhibit E.

                  "Rating Agencies" means Fitch, Inc., Moody's Investors
Service, Inc., S&P, and Dominion Bond Rating Service Limited, or any successor
thereto, and any other nationally recognized statistical rating organization but
only to the extent that any of the foregoing have been or will be engaged by
Lender or its designees in connection with or in anticipation of a Secondary
Market Transaction (each, individually a "Rating Agency").

                                       24


                  "Rating Agency Confirmation" means a written confirmation from
each of the Rating Agencies rating any securities issued in connection with a
Secondary Market Transaction that an action shall not result in a downgrade,
withdrawal or qualification of any securities issued in connection with a
Secondary Market Transaction.

                  "Recourse Distributions" has the meaning provided in Section
8.14.

                  "Release" with respect to any Hazardous Substance includes but
is not limited to any release, deposit, discharge, emission, leaking, leaching,
spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping,
dumping, disposing or other movement of Hazardous Substances.

                  "Release Price" shall have the meaning as set forth in Section
2.15(b).

                  "Remediation" (and its correlative terms) includes but is not
limited to any response, remedial, removal, or corrective action; any activity
to clean up, detoxify, decontaminate, contain or otherwise remediate any
Hazardous Substance; any actions to prevent, cure or mitigate any Release of any
Hazardous Substance; any action to comply with any Environmental Laws or with
any permits issued pursuant thereto; any inspection, investigation, study,
monitoring, assessment, audit, sampling and testing, laboratory or other
analysis, or evaluation relating to any Hazardous Substances or to anything
referred to herein, including the preparation of any plans, studies, reports or
documents with respect thereto.

                  "REMIC" means a real estate mortgage investment conduit as
defined under Section 860D of the Code.

                  "Remington Manager" means Remington Lodging & Hospitality LP,
a Delaware limited partnership.

                  "Rents means, collectively, "Rents" as defined in each
Mortgage.

                  "Required Debt Service Payment" means, on any Payment Date,
the Debt Service then due and payable by Borrowers.

                  "Reuters Screen LIBO Page" means the display page designated
as "LIBO" on the Reuters Monitor Money Rates Service.

                  "S&P" means Standard & Poor's Ratings Services, a division of
The McGraw Hill Companies, Inc.

                  "Second Extended Maturity Date" has the meaning set forth in
Section 2.10.

                  "Second Extension Term" has the meaning set forth in Section
2.10.

                  "Secondary Market Transaction" shall have the meaning set
forth in Section 2.13.

                                       25


                  "Secretary's Certificate" means, with respect to each
Borrower, Operating Lessee and Remington Manager, the certificate in form and
substance satisfactory to Lender in Lender's discretion dated as of the Closing
Date.

                  "Securities Act" has the meaning provided in Section 2.13.

                  "Single Member LLC" means a limited liability company that (i)
is either (a) a single member limited liability company or (b) a multiple member
limited liability company that does not have a Single-Purpose Entity that owns
at least one percent (1%) of the equity interests in such limited liability
company as its managing member, and (ii) is organized under the laws of the
State of Delaware.

                  "Single-Purpose Entity" means a corporation, limited
partnership, or limited liability company which, at all times since its
formation and thereafter (i) was and will be organized solely for the purpose of
(w) owning, leasing, operating, managing, financing and maintaining any or all
of the Individual Properties or (x) acting as an operating lessee pursuant to
the terms of an Operating Lease or (y) acting as the managing member of the
limited liability company which owns any or all of the Individual Properties or
(z) acting as the general partner of a limited partnership which owns any or all
of the Individual Property, (ii) has not and will not engage in any business
unrelated to (x) the ownership, leasing, operating, managing, financing and
maintaining of any or all of the Individual Properties or (y) acting as a member
of a limited liability company which owns any or all of the Individual
Properties or (z) acting as a general partner of a limited partnership which
owns any or all of the Individual Properties, (iii) has not and will not have
any assets other than (x) those related to any or all of the Individual
Properties or (y) its member interest in the limited liability company which
owns any or all of the Individual Properties or (z) its general partnership
interest in the limited partnership which owns any or all of the Individual
Properties, as applicable, (iv) has not and will not engage in, seek or consent
to any dissolution, winding up, liquidation, consolidation or merger, and,
except as otherwise expressly permitted by this Agreement, has not and will not
engage in, seek or consent to any asset sale, transfer of partnership or
membership or shareholder interests, or amendment of its limited partnership
agreement, articles of incorporation, articles of organization, certificate of
formation or operating agreement (as applicable), (v) if such entity is a
limited partnership, has and will have at all times while the Loan is
outstanding as its only general partners, general partners which are and will be
Single-Purpose Entities which are corporations or a Single Member LLC, (vi) if
such entity is a corporation or a Single Member LLC, at all relevant times while
the Loan is outstanding, has and will have at least two Independent Directors,
(vii) the board of directors of such entity (or if such entity is a Single
Member LLC, the entity, each member, each director, each manager, the board of
managers, if any, and all other Persons on behalf of such entity), has not taken
and will not take any action requiring the unanimous affirmative vote of one
hundred percent (100%) of the members and all directors and managers, as
applicable, unless all of the directors or managers, as applicable, including,
without limitation, all Independent Directors, shall have participated in such
vote, (viii) has not and will not fail to correct any known misunderstanding
regarding the separate identity of such entity, (ix) if such entity is a limited
liability company (other than a Single Member LLC), has and will have at least

                                       26


one member that is and will be a Single-Purpose Entity which is and will be a
corporation, and such corporation is and will be the managing member of such
limited liability company, (x) without the unanimous consent of all of the
partners, directors or managers (including, without limitation, all Independent
Directors) or members, as applicable, has not and will not with respect to
itself or to any other entity in which it has a direct or indirect legal or
beneficial ownership interest (w) file a bankruptcy, insolvency or
reorganization petition or otherwise institute insolvency proceedings or
otherwise seek any relief under any laws relating to the relief from debts or
the protection of debtors generally; (x) seek or consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator, custodian or any similar
official for such entity or such entity's properties; (y) make any assignment
for the benefit of such entity's creditors; or (z) take any action that might
cause such entity to become insolvent, (xi) has maintained and will maintain its
accounts, books and records separate from any other Person or entity, (xii) has
maintained and will maintain its books, records, resolutions and agreements as
official records, (xiii) has not commingled and will not commingle its funds or
assets with those of any other entity except as permitted by the Loan Documents,
(xiv) has held and will hold its assets in its own name, (xv) has conducted and
will conduct its business in its name and will not permit its name, identity or
type of entity to be changed, (xvi) has maintained and will maintain its
financial statements, accounting records and other entity documents separate
from any other Person or entity, except to the extent that such Person or entity
is required to file consolidated tax returns by law; provided, that any such
consolidated financial statement shall contain a footnote indicating that
separate assets and liabilities are neither available to pay the debts of the
consolidated entity nor constitute obligations of the consolidated entity,
(xvii) has paid and will pay its own liabilities out of its own funds and
assets, (xviii) has observed and will observe all partnership, corporate or
limited liability company formalities as applicable, (xix) has maintained and
will maintain an arms-length relationship with its Affiliates, (xx) if (x) such
entity owns all of any portion of any or all of the Individual Properties, has
and will have no indebtedness other than the Indebtedness, unsecured trade
payables in the ordinary course of business relating to the ownership and
operation of such Individual Property which (1) are not evidenced by a
promissory note (2) when aggregated with the unsecured trade payables of all
other Borrowers and Operating Lessee do not exceed, at any time, a maximum
amount of two and one-half percent (2.5%) of the original Loan Amount and (3)
are paid within 60 days of the date incurred (unless same are being contested in
accordance with the terms of this Agreement), or other indebtedness that has
been fully discharged on or prior to the date hereof, or (y) if such entity acts
as the general partner of a limited partnership which owns such Individual
Property, has and will have no indebtedness other than unsecured trade payables
in the ordinary course of business relating to acting as general partner of the
limited partnership which owns such Individual Property which (1) do not exceed,
at any time, $10,000 and (2) are paid within 60 days of the date incurred, or
(z) if such entity acts as a managing member of a limited liability company
which owns such Individual Property, has and will have no indebtedness other
than unsecured trade payables in the ordinary course of business relating to
acting as a member of the limited liability company which owns such Individual
Property which (1) do not exceed, at any time, $10,000 and (2) are paid within
60 days of the date incurred, (xxi) has not and will not assume or guarantee or
become obligated for the debts of any other entity or hold out its credit as
being available to satisfy the obligations of any other entity except for the
Indebtedness, (xxii) has not

                                       27


acquired and will not acquire obligations or securities of its partners, members
or shareholders, (xxiii) has allocated and will allocate fairly and reasonably
shared expenses, including, without limitation, shared office space and use
separate stationery, invoices and checks, (xxiv) except pursuant hereto, has not
and will not pledge its assets for the benefit of any other person or entity,
(xxv) has held and identified itself and will hold itself out and identify
itself as a separate and distinct entity under its own name and not as a
division or part of any other person or entity, (xxvi) has not made and will not
make loans to any person or entity, (xxvii) has not and will not identify its
partners, members or shareholders, or any affiliates of any of them as a
division or part of it, (xxviii) if such entity is a limited liability company
(other than a Single Member LLC), such entity shall dissolve only upon the
bankruptcy of the managing member, and such entity's articles of organization,
certificate of formation and/or operating agreement, as applicable, shall
contain such provision, (xxix) has not entered and will not enter into or be a
party to, any transaction with its partners, members, shareholders or its
affiliates except in the ordinary course of its business and on terms which are
intrinsically fair and are no less favorable to it than would be obtained in a
comparable arms-length transaction with an unrelated third party and which are
fully disclosed to Lender in writing in advance, (xxx) has paid and will pay the
salaries of its own employees from its own funds, (xxxi) has maintained and
intends to maintain adequate capital in light of its contemplated business
operations, (xxxii) if such entity is a limited liability company (other than a
Single Member LLC) or limited partnership, and such entity has one or more
managing members or general partners, as applicable, then such entity shall
continue (and not dissolve) for so long as a solvent managing member or general
partner, as applicable, exists and such entity's organizational documents shall
contain such provision, (xxxiii) if such entity is a Single Member LLC, its
organizational documents shall provide that, as long as any portion of the
Indebtedness remains outstanding, upon the occurrence of any event that causes
the last remaining member of such Single Member LLC to cease to be a member of
such Single Member LLC (other than (y) upon an assignment by such member of all
of its limited liability company interest in such Single Member LLC and the
admission of the transferee, if permitted pursuant to the organizational
documents of such Single Member LLC and the Loan Documents, or (z) the
resignation of such member and the admission of an additional member of such
Single Member LLC, if permitted pursuant to the organizational documents of such
Single Member LLC and the Loan Documents), the individuals acting as the
Independent Directors of such Single Member LLC shall, without any action of any
Person and simultaneously with the last remaining member of the Single Member
LLC ceasing to be a member of the Single Member LLC, automatically be admitted
as non-economic members of the Single Member LLC (the "Special Member") and
shall preserve and continue the existence of the Single Member LLC without
dissolution, and (xxxiv) if such entity is a Single Member LLC, its
organizational documents shall provide that for so long as any portion of the
Indebtedness is outstanding, no Special Member may resign or transfer its rights
as Special Member unless (y) a successor Special Member has been admitted to
such Single Member LLC as a Special Member, and (z) such successor Special
Member has also accepted its appointment as the Independent Director.

                  "Special Member" has the meaning provided in the definition of
"Single-Purpose Entity."

                                       28


                  "SPE Equity Owner" means, (a) with respect to each Borrower
other than Ashford Bucks County LLC, Ashford Senior General Partner LLC, a
Delaware limited liability company, and (b) with respect to Ashford Bucks County
LLC, (i) Ashford Mezz Borrower LLC, a Delaware limited liability company, and
(ii) Bucks County Member LLC, a Delaware limited liability company.

                  "SPE Equity Owner's Certificate" means the SPE Equity Owner's
Certificate in form and substance satisfactory to Lender dated as of the Closing
Date.

                  "Start-Up Day" means the "start-up day," within the meaning of
Section 860G(a)(9) of the Code, of any REMIC that holds the Notes.

                  "Strike Rate" means 6% per annum.

                  "Sub-Account" shall have the meaning provided in Section
2.11(c).

                  "Subordination, Attornment and Security Agreement" shall mean
for each Operating Lease, a Subordination, Attornment and Security Agreement or
other similar agreement among Lender, the applicable Borrower and the Operating
Lessee, in form and substance acceptable to Lender, as the same may be amended,
restated, replaced, supplemented or otherwise modified in accordance with the
terms hereof.

                  "Survey" means, with respect to each Individual Property, a
survey of such Individual Property satisfactory to Lender, (i) prepared by a
registered Independent surveyor satisfactory to Lender and Title Insurer and
containing a surveyor's certification satisfactory to Lender, (ii) together with
a metes and bounds or platted lot/block legal description of the land
corresponding with the survey, and (iii) prepared based on a scope of work
determined by Lender in Lender's discretion.

                  "Taking" has the meaning, with respect to each Individual
Property, provided in the Mortgage for such Individual Property.

                  "Tax Fair Market Value" means, with respect to each Individual
Property, the fair market value of such Individual Property, and (x) shall not
include the value of any personal property or other property that is not an
"interest in real property" within the meaning of Treasury Regulation Sections
1.860G-2 and 1.856-3(c), or is not "qualifying real property" within the meaning
of Treasury Regulation Section 1.593-11(b)(iv), and (y) shall be reduced by the
"adjusted issue price" (within the meaning of Code Section 1272(a)(4)) (the "Tax
Adjusted Issue Price") of any indebtedness, other than the Loan, secured by a
Lien affecting such Individual Property, which Lien is prior to or on a parity
with the Lien created under the Mortgage for such Individual Property.

                  "Third Extended Maturity Date" has the meaning set forth in
Section 2.10.

                  "Third Extension Term" has the meaning set forth in Section
2.10.

                                       29


                  "Title Instruction Letter" means an instruction letter in form
and substance satisfactory to Lender in Lender's discretion.

                  "Title Insurance Policy" means, with respect to each
Individual Property, a loan policy of title insurance for such Individual
Property issued by Title Insurer with respect to such Individual Property in an
amount acceptable to Lender and insuring the first priority lien in favor of
Lender created by the Mortgage for such Individual Property, in each case
acceptable to Lender in Lender's discretion.

                  "Title Insurer" means Chicago Title Insurance Company and
First American Title Insurance Company, as co-insurers.

                  "Transaction Costs" means all fees, costs, expenses and
disbursements of Lender relating to the Transactions, including, without
limitation, all appraisal fees, legal fees, accounting fees and the costs and
expenses described in Section 8.24.

                  "Transactions" means the transactions contemplated by the Loan
Documents.

                  "Transfer" means any conveyance, transfer (including, without
limitation, any transfer of any direct or indirect legal or beneficial interest
(including, without limitation, any profit interest) in any Borrower, Operating
Lessee or any SPE Equity Owner), any sale, any Lease (including, without
limitation, any amendment, extension, modification, waiver or renewal thereof),
or any Lien, whether by law or otherwise, of, on or affecting any Collateral,
any Borrower, Operating Lessee or any SPE Equity Owner, other than a Permitted
Transfer.

                  "UCC" means, with respect to any Collateral, the Uniform
Commercial Code in effect in the jurisdiction in which the relevant Collateral
is located.

                  "UCC Searches" has the meaning provided in Section 3.1.

                  "U.S. Obligations" means obligations or securities not subject
to prepayment, call or early redemption which are direct obligations of, or
obligations fully guaranteed as to timely payment by, the United States of
America or any agency or instrumentality of the United States of America, the
obligations of which are backed by the full faith and credit of the United
States of America.

                                    ARTICLE 2

                                  GENERAL TERMS

         Section 2.1. Amount of the Loan Lender shall lend to Borrowers a total
aggregate amount equal to the Loan Amount.

         Section 2.2 Use of Proceeds Proceeds of the Loan shall be used for the
following purposes: (a) to pay the refinancing costs for each Individual
Property owned by Borrower, (b)

                                       30


to fund any upfront reserves or escrow amounts required hereunder, and (c) to
pay any Transaction Costs. Any excess will be available to Borrowers (and
appointed at Borrower's request) and may be used for any lawful purpose.

         Section 2.3 Security for the Loan The Notes and each Borrower's
obligations hereunder and under the other Loan Documents shall be secured by all
Mortgages, the Assignments of Leases, the Assignments of Agreements, the
Manager's Subordinations, and the security interests and Liens granted in this
Agreement and in the other Loan Documents.

         Section 2.4 Borrowers' Notes

                           (a) Each Borrowers' obligation to pay the principal
of and interest on the Loan (including Late Charges, Default Rate interest, and
the Prepayment Premium, if any), shall be evidenced by this Agreement and by the
Notes, duly executed and delivered by all Borrowers. The Note shall be payable
as to principal, interest, Late Charges, Default Rate interest and Prepayment
Premium, if any, as specified in this Agreement, with a final maturity on the
Maturity Date. Borrowers shall pay all outstanding Indebtedness on the Maturity
Date.

                           (b) Lender is hereby authorized, at its option, to
endorse on a schedule attached to the Notes (or on a continuation of such
schedule attached to the Notes and made a part thereof) an appropriate notation
evidencing the date and amount of each payment of principal, interest, Late
Charges, Default Rate interest and Prepayment Premium, if any, in respect
thereof, which schedule shall be made available to Borrowers, at Borrowers' sole
cost and expense on reasonable advance notice, for examination at Lender's
offices.

         Section 2.5 Principal, Interest and Other Payments

                           (a) Accrual of Interest. Interest shall accrue on the
outstanding principal balance of the Notes and all other amounts due to Lender
under the Loan Documents at the applicable LIBOR Interest Rate.

                           (b) Monthly Payments of Interest at the LIBOR
Interest Rate. On each Payment Date, Borrowers shall pay to Lender interest on
the unpaid Principal Indebtedness calculated under each Note at the applicable
LIBOR Interest Rate which has accrued and will accrue under such Note through
the last day of the Interest Accrual Period in which such Payment Date occurs.

                           (c) Payment Dates. All payments required to be made
pursuant to paragraph (b) above shall be made beginning on the first Payment
Date; provided, however, that Borrower shall pay interest for the first Interest
Accrual Period on the Closing Date.

                           (d) Calculation of Interest. Interest shall accrue on
the outstanding principal balance of the Loan and all other amounts due to
Lender under the Loan Documents commencing upon the Closing Date. Interest shall
be computed on the actual number of days elapsed, based on a 360 day year.

                                       31


                           (e) Default Rate Interest. Upon the occurrence and
during the continuance of an Event of Default, and at the sole option of Lender
and without need for notice to the Borrowers, the entire unpaid amount
outstanding hereunder and under the Notes will bear interest at the Default
Rate.

                           (f) Late Charge. If Borrowers fail to make any
payment of any sums due under the Loan Documents on the date when the same is
due, Borrowers shall pay a Late Charge.

                           (g) Other Payments. On each Payment Date, Borrowers
shall pay to Lender (for allocation as set forth herein) the Basic Carry Costs
Monthly Installment, the Ground Rents Monthly Installment, the Required Debt
Service Payment, the Capital Reserve Monthly Installment and any and all fees
and other amounts then due to the Cash Collateral Account Bank, all for the then
Current Interest Accrual Period.

                           (h) Maturity Date. On the Maturity Date, Borrowers
shall pay to Lender all amounts owing under the Loan Documents including,
without limitation, interest, principal, Late Charges, Default Rate interest and
any Prepayment Premium.

                           (i) Prepayment Premium. Upon any repayment or
prepayment of the Principal Indebtedness, including, without limitation, in
connection with an acceleration of the Loan, but excluding a prepayment made in
connection with Section 2.6(b) hereof, Borrowers shall pay to Lender on the date
of such repayment, prepayment or acceleration of the Loan the Prepayment Premium
applicable thereto. All Prepayment Premium payments hereunder shall be deemed
earned by Lender upon the funding of the Loan.

         Section 2.6 Prepayment

                           (a) Provided that no Event of Default has occurred
and is continuing hereunder, Borrowers may prepay the Indebtedness in full (or
in part solely in connection with the consummation of a Partial Release) at any
time after October 1, 2005, provided, (i) that simultaneously therewith,
Mezzanine Borrower shall make a prepayment of principal of the Mezzanine Loan,
(ii) that such prepayment of the Indebtedness shall bear the same proportion to
the Principal Amount of the Loan immediately prior to such prepayment as the
prepayment of the Mezzanine Loan bears to the principal amount of the Mezzanine
Loan immediately prior to such prepayment, and (ii) in the event that such
prepayment is not made on a Payment Date, simultaneously therewith, the
Borrowers pay to Lender all interest accrued on the amount of the Loan prepaid
through the last day of the Interest Accrual Period during which such prepayment
occurs.

                           (b) At any time during the term of the Loan, if any
Borrower is required by Lender under the provisions of any Mortgage to prepay
the Loan or any portion thereof in the event of damage to or destruction of, or
a Taking of any Individual Property, such Borrower shall pay any Insurance
Proceeds or Condemnation proceeds in the following manner and order of priority
(i) first, to prepay the Loan to the full extent of the Insurance Proceeds or

                                       32


the Condemnation Proceeds, as applicable, to the extent of the Allocated Loan
Amount for the applicable Individual Property, (ii) second, to prepay the
Mezzanine Loan to the full extent of the Mezzanine Allocated Loan Amount (as
defined in the Mezzanine Loan Agreement) for the applicable Individual Property,
(iii) third, to Lender and Mezzanine Lender pro rata to prepay the Loan and
Mezzanine Loan to the extent of the positive difference between the sum of the
Release Price and the Mezzanine Release Price for such Individual Property and
the combined Allocated Loan Amount (for the Loan and the Mezzanine Loan) for
such Individual Property; and (iv) to the Borrowers.

                           (c) All prepayments of the Indebtedness made pursuant
to this Section shall be applied by Lender in accordance with the provisions of
Section 2.7 hereof.

                           (d) No Borrower shall be permitted at any time to
prepay all or any part of the Loan except as expressly provided in this Section.

         Section 2.7 Application of Payments

                  At all times, all proceeds of repayment, including without
limitation any payment or recovery on the Collateral and any prepayments on the
Loan, shall be applied among the Notes and to such amounts payable by Borrowers
under the Loan Documents and in such order and in such manner as Lender shall
elect in Lender's discretion.

         Section 2.8 Payment of Debt Service, Method and Place of Payment

                           (a) Except as otherwise specifically provided herein,
all payments and prepayments under this Agreement and the Notes shall be made to
Lender not later than 12:00 noon, New York City time, on the date when due, and
shall be made in lawful money of the United States of America in federal or
other immediately available funds to an account specified to Borrower by Lender
in writing, and any funds received by Lender after such time, for all purposes
hereof, shall be deemed to have been paid on the next succeeding Business Day.

                           (b) All payments made by any Borrower hereunder or by
any Borrower under the other Loan Documents, shall be made irrespective of, and
without any deduction for, any set-offs or counterclaims.

         Section 2.9 Taxes; Funding Losses; Changes in Law

                           (a) All payments made by any Borrower under this
Agreement and under the other Loan Documents shall be made free and clear of,
and without deduction or withholding for or on account of, any present or future
income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions
or withholdings, and all liabilities with respect thereto, now or hereafter
imposed, levied, collected, withheld or assessed by any Governmental Authority
(all such non-excluded taxes, levies, imposts, duties, charges, fees,
deductions, withholdings and liabilities, collectively, "Applicable Taxes"). If
any Borrower shall be required by law to deduct any Applicable Taxes from or in
respect of any sum payable hereunder to

                                       33


Lender, the following shall apply: (i) such Borrower shall make all such
required deductions, (ii) the sum payable to Lender shall be increased as may be
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.9(a)), Lender
receives an amount equal to the sum Lender would have received had no such
deductions been made and (iii) such Borrower shall pay the full amount deducted
to the relevant taxing authority or other authority in accordance with
applicable law. Payments made pursuant to this Section 2.9(a) shall be made
within ten (10) Business Days after Lender makes written demand therefor.

                           (b) Borrowers shall pay to Lender all Funding Losses
incurred from time to time by Lender upon demand. Lender shall deliver to
Borrowers a statement for any such sums to which Lender is entitled to receive
pursuant to this Section 2.9(b), which statement shall be binding and conclusive
absent manifest error. Payment of Funding Losses hereunder shall be in addition
to any obligation to pay a Prepayment Premium in circumstances where such
Prepayment Premium would be due and owing.

         Section 2.10 Extension Options. Borrowers have the right to extend the
term of the Loan for three additional terms of twelve (12) months each (each, an
"Extension Term"), with the first additional term ("First Extension Term")
having a maturity date that is the date that is the twelfth Payment Date
following the Initial Maturity Date ("First Extended Maturity Date"), the second
additional term ("Second Extension Term") having a maturity date that is the
date that is the twelfth Payment Date following the First Extended Maturity Date
("Second Extended Maturity Date") and the third additional term ("Third
Extension Term") having a maturity date that is the date that is the twelfth
Payment Date following the Second Extended Maturity Date ("Third Extended
Maturity Date"). Borrowers shall exercise the right to exercise any extension
option under this Section 2.10 by giving Lender notice of such election at least
ninety (90) days prior to (i) the Initial Maturity Date, in the case of
exercising the option to extend the term of the Loan to the First Extended
Maturity Date, (ii) the First Extended Maturity Date, in the case of exercising
the option to extend the term of the Loan to the Second Extended Maturity Date
and (ii) the Second Extended Maturity Date, in the case of the option to extend
the term of the Loan to the Third Extended Maturity Date. Upon receipt of any
such request by Borrowers to extend the term of the Loan, Lender will notify
Borrowers whether or not the term of the Loan will be so extended, which
extension shall be granted upon satisfaction of each of the following conditions
in Lender's sole discretion:

                           (a) No Event of Default exists as of the date of
Borrowers' extension option election notice to Lender and as of the Initial
Maturity Date, the First Extended Maturity Date or the Second Extended Maturity
Date, as applicable, and the Borrowers deliver Lender Officer's Certificates
confirming same;

                           (b) No "Event of Default" (as such terms are defined
in the Mezzanine Loan Agreement) by Mezzanine Borrower exists under the
Mezzanine Loan Agreement, the Mezzanine Note or any of the other Mezzanine Loan
Documents as of the date of Borrowers' extension option election notice to
Lender and as of the Initial Maturity Date, the First Extended

                                       34


Maturity Date or the Second Extended Maturity Date, as applicable, and the
Borrowers deliver Lender Officer's Certificates confirming same;

                           (c) On or prior to the Initial Maturity Date, the
First Extended Maturity Date or the Second Extended Maturity Date, as
applicable, Borrowers either (A) extends the term of the Initial Interest Rate
Cap Agreement to a date not earlier than the First Extended Maturity Date, the
Second Extended Maturity Date, or the Third Extended Maturity Date as
applicable, or (B) obtain an Extension Interest Rate Cap Agreement for the
applicable Extension Term with a LIBOR Rate strike price equal to the Strike
Price and collaterally assigned such Extension Interest Rate Cap Agreement to
Lender pursuant to an assignment of interest rate cap agreement in the same form
as the Interest Rate Cap Assignment.

                  If any of the foregoing conditions are not satisfied in
Lender's sole discretion, Lender shall have no obligation to extend the term of
the Loan. Upon Borrowers' exercise of its rights under this Section 2.10 and
Lender's extension of the term of the Loan in connection therewith, the defined
term "Maturity Date" shall be deemed to be the First Extended Maturity Date the
Second Extended Maturity Date or the Third Extended Maturity Date, as
applicable.

         Section 2.11 Central Cash Management

                           (a) Collection Account.

                                    (i) Each applicable Borrower or Operating
         Lessee shall open and maintain at a Collection Account Bank a trust
         account (a "Collection Account" with respect to each Individual
         Property).

                                    (ii) Each of the Collection Accounts shall
         be assigned an identification number by the related Collection Account
         Bank and shall be opened and maintained in the name "Merrill Lynch
         Mortgage Lending, Inc. and Merrill Lynch Capital, a Division of Merrill
         Lynch Business Financial Services, Inc. as Mortgagee/Pledgee (as
         applicable) of the applicable Borrower or Operating Lessee." None of
         any Borrower, Operating Lessee or any Manager shall have any right of
         withdrawal from any Collection Account. Borrowers shall, on a
         twice-weekly basis, cause all Rents and all other items of Gross
         Revenue to be deposited or transferred directly into the related
         Collection Account. Without in any way limiting Borrowers' obligations
         pursuant to the preceding sentence, Borrowers, Operating Lessee and
         each Manager shall deposit or cause the transfer of directly into the
         relevant Collection Account all Rents, other items of Gross Revenue and
         all Credit Card Receivables received by any Borrower, Operating Lessee
         and each Manager in violation or contradiction of the preceding
         sentence within one (1) Business Day after receipt thereof.

                                    (iii) Any breach of this Section by any
         Borrower shall be an Event of Default.

                                       35


                           (b) Cash Collateral Account. Pursuant to each
Collection Account Agreement among each Collection Account Bank, the applicable
Borrowers, Operating Lessee and Lender (the "Collection Account Agreement")
Borrowers will authorize and direct each Collection Account Bank to transfer on
a daily basis all funds deposited in the Collection Account for such Borrower's
Individual Property to a cash collateral account that is an Eligible Account
established by Lender in Lender's name (the "Cash Collateral Account"). Lender
may elect to change the financial institution at which the Cash Collateral
Account shall be maintained. Lender shall give Borrowers not less than thirty
(30) days prior notice of each change. The Cash Collateral Account shall be
under the sole dominion and control of Lender. No Borrower or Operating Lessee
shall have any right of withdrawal in respect to the Cash Collateral Account.

                           (c) Establishment of Sub-Accounts. The Cash
Collateral Account shall contain a Debt Service Payment Sub-Account, a Basic
Carrying Costs Sub-Account, a Capital Reserve Sub-Account, a PIP Reserve
Sub-Account, a Cash Management Fee Sub-Account, a Ground Rents Sub-Account, a
Hotel Operations Sub-Account and a Mezzanine Debt Service Payment Sub-Account,
each of which accounts (individually, a "Sub-Account" and collectively, the
"Sub-Accounts") shall be an Eligible Account to which certain funds shall be
allocated and from which disbursements shall be made pursuant to the terms of
this Loan Agreement.

                           (d) Monthly Funding of Sub-Accounts. During each
Interest Accrual Period and, except as provided below, during the term of the
Loan commencing with the Interest Accrual Period in which the Closing Date
occurs (each, the "Current Interest Accrual Period"), Lender shall allocate all
funds then on deposit in the Cash Collateral Account among the Sub-Accounts as
follows and in the following priority:

                                    (i) first, to the Ground Rents Sub-Account,
         until an amount equal to the Ground Rents Monthly Installment for the
         Current Interest Accrual Period has been allocated to the Ground Rents
         Sub-Account;

                                    (ii) second, to the Basic Carrying Costs
         Sub-Account, until an amount equal to the Basic Carrying Costs Monthly
         Installment for the Current Interest Accrual Period has been allocated
         to the Basic Carrying Costs Sub-Account;

                                    (iii) third, to the Debt Service Payment
         Sub-Account, until an amount equal to the Required Debt Service Payment
         for the Payment Date immediately after the Current Interest Accrual
         Period has been allocated to the Debt Service Payment Sub-Account;

                                    (iv) fourth, to the Capital Reserve
         Sub-Account, until an amount equal to the Capital Reserve Monthly
         Installment for the Current Interest Accrual Period has been allocated
         to the Capital Reserve Sub-Account (and, upon calculation of the
         Capital Reserve True-Up Amount, if the Capital Reserve True-Up Amount
         is a positive number, until an amount equal to the Capital Reserve
         True-Up Amount has been

                                       36


         allocated to the Capital Reserve Sub-Account; and if a negative number,
         the Capital Reserve True-Up Amount shall be credited to the Capital
         Reserve Monthly Installment becoming due until fully credited);

                                    (v) fifth, funds sufficient to pay the
         amounts then due Cash Collateral Account Bank shall be deposited in the
         Cash Management Fee Sub-Account;

                                    (vi) sixth, to the Hotel Operations
         Sub-Account, until an amount equal to the amount of operating expenses
         for such Interest Accrual Period as set forth on the Approved Budget
         has been allocated to the Hotel Operations Sub-Account (provided,
         however, that such amounts shall be deemed inclusive of any amounts
         disbursed in accordance with Section 2.11(f) below);

                                    (vii) seventh, for the benefit of the
         Mezzanine Borrower, to the Mezzanine Debt Service Payment Sub-Account,
         until an amount equal to the scheduled monthly interest payment portion
         of Mezzanine Debt Service for the Payment Date (as defined in the
         Mezzanine Loan Agreement) for the Current Interest Accrual Period (as
         defined in the Mezzanine Loan Agreement) has been allocated to the
         Mezzanine Debt Service Payment Sub-Account;

                                    (viii) eighth, to the Hotel Operations
         Sub-Account, until an amount equal to any Extra Funds approved pursuant
         to Section 2.11(f) has been allocated to such Sub-Account;

                                    (ix) ninth, during any Cash Trap Period, to
         an interest-bearing reserve account established by Lender (the "Cash
         Trap Reserve Account"), to be held by Lender as additional security for
         the Loan and, upon the occurrence of a Cash Trap Cure Event, Lender
         shall release all funds held in the Cash Trap Reserve Account to an
         account designated by the Borrowers. Notwithstanding the foregoing, in
         the event that a Cash Trap Period shall exist for a period of six (6)
         consecutive months, Lender shall have the option in its sole and
         absolute discretion, to apply all funds held in the Cash Trap Reserve
         Account against the Loan, whether or not then due or accelerated;

                                    (x) tenth, funds sufficient to pay amounts
         equal to any Costs of Uncollectible Drafts then due to the Morgan
         Collection Account Bank shall be deposited with the Morgan Collection
         Account Bank; and

                                    (xi) eleventh, provided that (i) no Event of
         Default has occurred and is continuing and no Cash Trap Period exists
         and (ii) Lender has received all financial information described in
         Section 5.1(Q) for the most recent periods for which the same are due,
         Lender agrees that in each Current Interest Accrual Period any amounts
         deposited into or remaining in the Cash Collateral Account after the
         minimum amounts set forth in clauses (i) through (x), inclusive, above,
         have been satisfied with respect to the Current Interest Accrual Period
         and any periods prior thereto shall be disbursed by Lender on a weekly
         basis, at Borrowers' expense, to (a) at any time while the Mezzanine

                                       37


         Loan is outstanding, the Mezzanine Deposit Account, and (b) at any time
         after the Mezzanine Loan has been repaid in full, to such account that
         Borrowers may request in writing. Lender and its agents shall not be
         responsible for monitoring Borrowers' use of any funds disbursed from
         the Cash Collateral Account or any of the Sub-Accounts. If an Event of
         Default has occurred and is continuing or a Cash Trap Period exists,
         any amounts deposited into or remaining in the Cash Collateral Account
         shall be for the account of Lender and may be withdrawn by Lender to be
         applied in any manner at any time to amounts owing under the Loan
         Documents as Lender may elect in Lender's discretion or maintained in
         the Cash Collateral Account as security for the Indebtedness.

                  If an Event of Default has occurred and exists or if on any
Payment Date the balance in any Sub-Account is insufficient to make the required
payment due from such Sub-Account, Lender may, in its sole discretion, in
addition to any other rights and remedies available hereunder, withdraw funds
from any other Sub-Account to (a) pay such deficiency, or (b) apply to payment
of the Indebtedness. If Lender elects to apply funds of any such Sub-Account to
pay any Required Base Debt Service Payment, Borrowers shall, upon demand, repay
to Lender the amount of such withdrawn funds to replenish such Sub-Account, and
if Borrowers fail to repay such amounts within one five (5) days after notice of
such withdrawal, an Event of Default shall exist hereunder. Notwithstanding the
foregoing, on the Closing Date Borrowers shall deposit (i) the Initial Basic
Carrying Costs Amount into the Basic Carrying Costs Sub-Account, (ii) the
Initial Ground Rents Amount into the Ground Rent Reserve Sub-Account, (iii) the
Initial Capital Reserve Amount into the Capital Reserve Sub-Account, and (iv)
the Initial PIP Amount into the PIP Reserve Sub-Account.

                           (e) Payment of Basic Carrying Costs, Debt Service,
Capital Improvement Costs, Cash Collateral Account Bank Fees, and Ground Rents.

                                    (i) Payment of Basic Carrying Costs.

                                    (x) At least five (5) Business Days prior to
the due date of any Basic Carrying Cost payment, and not more frequently than
once each Interest Accrual Period, Borrowers shall notify Lender in writing and
request that Lender make such Basic Carrying Cost payment on behalf of the
applicable Borrowers on or prior to the due date thereof. Together with each
such request, Borrowers shall furnish Lender with copies of bills and other
documentation as may be reasonably required by Lender to establish that such
Basic Carrying Cost payment is then due. Lender shall be entitled to
conclusively rely on all bills or other documentation received from any
Borrower, in each case without independent investigation or verification. Lender
shall make such payments out of the Basic Carrying Cost Sub-Account before the
same shall be delinquent to the extent that there are funds available in the
Basic Carrying Cost Sub-Account and Lender has received appropriate
documentation to establish the amount(s) due and the due date(s) as and when
provided above.

                                    (y) Except to the extent that Lender is
obligated to pay Basic Carrying Costs from the Basic Carrying Costs Sub-Account
pursuant to the terms of this Section, Borrowers shall pay all Basic Carrying
Costs with respect to itself and the Individual Properties

                                       38


in accordance with the provisions of the Mortgages. Borrowers' obligation to pay
(or enable Lender to pay) Basic Carrying Costs pursuant to this Agreement shall
include, to the extent permitted by applicable law, Impositions resulting from
future changes in law which impose upon Lender or any Deed of Trust Trustee an
obligation to pay any property taxes or other Impositions or which otherwise
adversely affect Lender's or the Deed of Trust Trustee's interests. (In the
event such a change in law prohibits any Borrower from assuming liability for
payment of any such Imposition, the outstanding Indebtedness shall, at the
option of Lender, become due and payable on the date that is one hundred twenty
(120) days after such change in law; and failure to pay such amounts on the date
due shall be an Event of Default.) If an Event of Default has occurred, the
proceeds on deposit in the Basic Carrying Costs Sub-Account may be applied by
Lender in any manner as Lender in its discretion may determine.

                                    (ii) Payment of Debt Service. At or before
         12:00 noon, New York City time, on each Payment Date during the term of
         the Loan, Lender shall transfer to Lender's own account from the Debt
         Service Payment Sub-Account an amount equal to the Required Debt
         Service Payment for the applicable Payment Date. Borrowers shall be
         deemed to have timely made the Required Debt Service Payment pursuant
         to Section 2.8 regardless of the time Lender makes such transfer as
         long as sufficient funds are on deposit in the Debt Service Payment
         Sub-Account at 12:00 noon, New York City time on the applicable Payment
         Date. At all times after such Payment Date Lender may, at its option,
         transfer amounts in the Debt Service Payment Sub-Account to Lender's
         own account, provided that Borrowers shall receive credit against the
         Required Debt Service Payment in the amounts so transferred to Lender
         such that in any given Current Interest Accrual Period Borrowers shall
         not be required to deposit into the Debt Service Payment Sub-Account
         any amounts in excess of the aggregate amount of the Required Debt
         Service Payment for such Current Interest Accrual Period.

                                    (iii) Payment of Capital Improvement Costs.
         Not more frequently than once each Interest Accrual Period, and
         provided that no Default or Event of Default has occurred and is
         continuing, Borrowers may notify Lender in writing and request that
         Lender release to a Borrower or its designee funds from the Capital
         Reserve Sub-Account, to the extent funds are available therein, for
         payment of Capital Improvement Costs. Together with each such request,
         Borrowers shall furnish Lender with copies of bills and other
         documentation as may be reasonably required by Lender to establish that
         such Capital Improvement Costs are reasonable (provided such Capital
         Improvement Costs shall be deemed reasonable if such Capital
         Improvement Costs are reflected in the Approved Budget), that the work
         relating thereto has been completed and that such amounts are then due
         or have been paid. Lender shall approve or disapprove such request,
         within ten (10) Business Days after Lender's receipt of such request,
         provided such request shall be deemed approved if no response is
         received from Lender within twenty (20) Business Days after Lender's
         receipt of such request and related documentation, and, if approved or
         deemed approved, Lender shall release the funds to each applicable
         Borrower or such Borrower's designee within ten (10) Business Days
         after Lender's approval.

                                       39


                                    (iv) PIP Costs. Not more frequently than
         twice each Interest Accrual Period, and provided that no Default or
         Event of Default has occurred and is continuing, Borrowers may notify
         Lender in writing and request that Lender release to a Borrower or its
         designee funds from the PIP Reserve Sub-Account, to the extent funds
         are available therein, for payment of PIP Costs. Together with each
         such request, Borrowers shall furnish Lender with an Officer's
         Certificate certifying that such PIP Costs are reasonable, that the
         work relating thereto has been completed and that such amounts are then
         due or have been paid in accordance with the applicable Property
         Improvement Plan. Lender shall release the funds to each applicable
         Borrower or such Borrower's designee within ten (10) Business Days
         after Lender's receipt of such Officer's Certificate.

                                    (v) Payment of Cash Collateral Account Bank
         Fees. Not more frequently than once each Interest Accrual Period,
         Lender shall transfer to the Cash Collateral Account Bank an amount
         equal to the amount of the monthly fee payable to the Cash Collateral
         Account Bank under the Cash Collateral Account Agreement.

                                    (vi) Payment of Ground Rents. On or before
         each due date under each Ground Lease, from the amounts allocated to
         the Ground Rents Sub-Account, Lender shall pay to the ground lessor
         under each Ground Lease the Ground Rents pursuant to written
         instructions received from Borrower. Borrower shall provide Lender and
         the Cash Collateral Account Bank with written notice of any changes in
         any Ground Rents sixty (60) days prior to the effective date of such
         change. Borrower shall at all times ensure that (i) there are
         sufficient funds in the Ground Rents Sub-Account to pay all Ground
         Rents on time and (ii) that Lender and Cash Collateral Account Bank
         have received sufficient instructions and information (including,
         without limitation, the address to which payments are to be sent, the
         amount of payments and the manner in which payments are to be sent) to
         ensure timely payment of all Ground Rents in strict compliance with the
         terms of each Ground Lease. If an Event of Default has occurred and is
         continuing, the proceeds on deposit in the Ground rents Sub-Account may
         be applied to Lender in any manner as Lender in its sole discretion may
         determine.

                           (f) Payment of Certified Hotel Operating Expenses.

                                    (i) Provided that no Event of Default has
         occurred and is continuing, and provided that all amounts required to
         be deposited into the Sub-Accounts set forth in Sections 2.11(d)(i)
         through (vii) (or on a Payment Date, provided that all amounts required
         to be deposited set forth in Sections 2.1(d)(i) through (vi)) for the
         Current Interest Accrual Period have been deposited therein, Lender
         shall transfer within two Business Days thereafter at Borrowers' sole
         cost and expense, to an account designated by the Borrowers, all
         amounts contained in the Hotel Operating Sub-Accounts up to an amount
         equal to the amount set forth in the Approved Budget for such Interest
         Accrual Period provided, however, that the aggregate withdrawals from
         the Hotel Operating Sub-Account pursuant to this Section 2.11(f)(i) for
         any Interest Accrual Period

                                       40


         shall not exceed the amount set forth in the Approved Budget for such
         Interest Accrual Period (except to the extent set forth in subsection
         (ii), below).

                                    (ii) Provided that no Event of Default has
         occurred and is continuing, if in a given Interest Accrual Period,
         Borrowers require amounts in excess of the amounts set forth in the
         Approved Budget for such Interest Accrual Period for Hotel Operating
         Expenses ("Extra Funds"), Borrowers may deliver a written request to
         Lender to allocate an amount equal to Extra Funds to the Hotel
         Operating Expense Sub-Account as set forth in Section 2.11(d)(viii) and
         for a disbursement of Extra Funds stating (1) the amount of such Extra
         Funds and (2) the purpose for which such amount is intended with
         attachments of copies of bills and other documentation as may be
         required by Lender to establish that such Operating Expenses are
         reasonable and that such amounts are then due or expected to become due
         in that month. Lender shall approve or disapprove such request, within
         ten (10) Business Days after Lender's receipt of such request and
         related documentation, provided such request shall be deemed approved
         if no response is received from Lender within ten (10) Business Days
         after Lender's receipt of such request and related documentation, and,
         if approved or deemed approved, Lender shall release the funds to each
         applicable Borrower or such Borrower's designee within five (5)
         Business Days after Lender's approval.

                           (g) Payment of Mezzanine Debt Service. At or before
12:00 noon, New York City time, on each Payment Date during the term of the
Loan, Lender shall transfer to Mezzanine Lender's account from the Mezzanine
Debt Service Payment Sub-Account an amount equal to the Mezzanine Debt Service
for the applicable Payment Date.

                           (h) Permitted Investments. Upon the written request
of Borrowers, which request may be made once per Interest Accrual Period, Lender
shall direct the Cash Collateral Account Bank to invest and reinvest any balance
in the Cash Collateral Account from time to time in Permitted Investments as
instructed by Borrowers; provided, however, that: (i) if Borrowers fail to so
instruct Lender, or if a Default or an Event of Default shall have occurred and
is continuing, Lender shall direct the Cash Collateral Account Bank to invest
and reinvest such balance in Permitted Investments as Lender shall determine in
Lender's discretion; (ii) the maturities of the Permitted Investments on deposit
in the Cash Collateral Account shall, to the extent such dates are
ascertainable, be selected and coordinated to become due not later than the day
before any disbursements from the Sub-Accounts must be made; (iii) all such
Permitted Investments shall be held in the name and be under the sole dominion
and control of Lender; (iv) no Permitted Investment shall be made unless Lender
shall retain a first priority perfected Lien in such Permitted Investment and
all filings and other actions necessary to ensure the validity, perfection, and
priority of such Lien have been taken; (v) Lender shall only be required to
follow the written investment instructions which were most recently received by
Lender and Borrowers shall be bound by such last received investment
instructions; and (vi) any request from Borrowers containing investment
instructions shall contain an Officer's Certificate from Borrowers (which may be
conclusively relied upon by Lender and its agents) that any such investments
constitute Permitted Investments. It is the intention of the parties hereto that
all

                                       41


amounts deposited in the Cash Collateral Account shall at all times be invested
in Permitted Investments. All funds in the Cash Collateral Account that are
invested in a Permitted Investment are deemed to be held in such Cash Collateral
Account for all purposes of this Agreement and the other Loan Documents. Lender
shall have no liability for any loss in investments of funds in the Cash
Collateral Account that are invested in Permitted Investments (unless invested
contrary to Borrowers' request other than after the occurrence of a Default or
an Event of Default) and no such loss shall affect Borrowers' obligation to
fund, or liability for funding, the Cash Collateral Account and each
Sub-Account, as the case may be. Borrowers and Lender agree that Borrowers shall
include all such earnings and losses (other than those for Lender's account in
accordance with the immediately preceding sentence) on the Cash Collateral
Account as income of the applicable Borrowers for federal and applicable state
tax purposes. Borrowers shall be responsible for any and all fees, costs and
expenses with respect to Permitted Investments.

                           (i) Interest on Accounts. All interest paid or other
earnings on the Permitted Investments made hereunder shall be income of the
applicable Borrower and applied in the manner and priority set forth in Section
2.11(d) hereof.

                           (j) Termination of Central Cash Management. The
obligations of Borrowers under Section 2.11 and Section 2.12 to maintain and
fund the Collection Accounts and the Cash Collateral Account shall terminate in
their entirety and be of no further force or effect upon the satisfaction of
each of the following conditions: (i) no Default or Event of Default shall have
occurred and be continuing; (ii) the release of all Mortgages by Lender in
accordance with the provisions of this Agreement and the other Loan Documents;
and (iii) Borrowers' receipt of Lender's written acknowledgment that the
conditions described in (i) and (ii) above have been satisfied to Lender's
satisfaction.

                           (k) Cash Trap Event Collateral. In the event that a
Cash Trap Event shall occur, the Borrowers shall have the right to post, as
additional security for the Loan, an irrevocable, unconditional letter of credit
(payable on sight draft) in an amount sufficient to cause a Cash Trap Cure Event
to occur ("Letter of Credit"), naming Lender as the sole beneficiary thereof.
Any Letter of Credit shall: (a) be perpetual or for a term of one year with
automatic renewals unless Lender receives written notice of non-renewal from the
issuing financial institution at least sixty (60) days prior to the expiration
of the then current Letter of Credit; (b) be issued by a domestic financial
institution that is not an Affiliate of the Borrowers and that has a long-term
senior debt rating by S&P of not less than "AA" or such other credit rating as
is acceptable to Lender; (c) permit full or partial draws without condition or
charge to the beneficiary of the Letter of Credit; (d) be freely transferable by
the beneficiary of the Letter of Credit (and each successor as beneficiary)
without restriction or charge and (e) otherwise in a form (1) prior to the date
that all or any portion of the Loan is included in a REMIC, reasonably
acceptable to Lender, and (2) after the date that all or any portion of the Loan
is included in a REMIC, that would be reasonably acceptable to a prudent lender
originating commercial mortgage loans for securitization similar to the Loan in
the State where the Individual Properties are located. The Borrowers shall cause
any Letter of Credit to remain valid and effective at all

                                       42


times prior to the date that the Debt Service Coverage Ratio (calculated as of
the last day of a calendar month), projected reasonably and in good faith by
Lender (a) for the subsequent twelve (12) calendar months, and (b) calculated as
if (1) the LIBOR Interest Rate for each Note for such period was equal to the
LIBOR Interest Rate for each Note applicable to the immediately preceding
Interest Accrual Period, and (2) the LIBOR Interest Rate (as defined in the
Mezzanine Loan Agreement) for the Mezzanine Loan for such period was equal to
the LIBOR Interest Rate (as defined in the Mezzanine Loan Agreement) for the
Mezzanine Loan applicable to the immediately preceding Interest Accrual Period
(as defined in the Mezzanine Loan Agreement), shall equal or exceed 1.40 for a
period of three (3) consecutive months unless and to the extent such Letter of
Credit is drawn upon by Lender and paid in the amount of such draw. Lender shall
have the right to draw in full or in part upon the Letter of Credit: (i) upon
the occurrence of and during the continuance of an Event of Default; (ii) if
Lender has not received, at least thirty (30) days prior to the date on which
the then outstanding Letter of Credit is scheduled to expire, a renewal or
replacement Letter of Credit that satisfies all requirements of this Section
2.11(k); or (iii) if Lender has not received within ten (10) business days of
Lender's notice to the Borrowers that the financial institution issuing the
Letter of Credit ceases to meet the rating requirement set forth in this Section
2.11(k) a replacement Letter of Credit that satisfies all requirements of this
Section 2.11(k). Lender shall be entitled to charge the Borrowers a reasonable
processing fee for administering and reviewing any renewal, replacement or
release of the Letter of Credit which the Borrowers are required to provide
pursuant to this Agreement. Lender shall return any Letter of Credit posted by
the Borrowers pursuant to the terms of this Section 2.11(k) promptly following
the date when such Letter of Credit is no longer required to remain valid and
effective pursuant to the terms of this Section and will cooperate in obtaining
its cancellation.

         Section 2.12. Security Agreement

                           (a) Pledge of Accounts. To secure the full and
punctual payment and performance of all of the Indebtedness, each Borrower
hereby sells, assigns, conveys, pledges and transfers to Lender and grants to
Lender a first priority and continuing Lien on and security interest in and to
its Account Collateral.

                           (b) Covenants. Each Borrower covenants that (i) all
Rents and all other items of Gross Revenue shall be deposited or transferred
into the relevant Collection Account, in accordance with Section 2.11(a), and
(ii) so long as any portion of the Indebtedness is outstanding, no Borrower
shall open (nor permit any Manager or any Person to open) any other account for
the collection of any Rents or any other items of Gross Revenue, other than (A)
a replacement Collection Account approved by Lender in Lender's discretion, and
(B) any account held by Borrower in the locality where the applicable Individual
Property is located for the purposes of the collection of any Rents or any other
items of Gross Revenue prior to the time such Rents or items of Gross Revenue
are deposited in the Collection Account pursuant to the terms of this Agreement.

                                       43


                           (c) Instructions and Agreements. On or before the
Closing Date, each applicable Borrower or Operating Lessee will submit to the
Collection Account Bank for each related Individual Property a Collection
Account Agreement to be executed by the Collection Account Bank. On or before
the Closing Date, Borrowers, Operating Lessee and the Cash Collateral Account
Bank will execute and deliver a Cash Collateral Account Agreement in form and
substance satisfactory to Lender in Lender's discretion (the "Cash Collateral
Account Agreement"). Each Borrower and Operating Lessee agrees that prior to the
payment in full of the Indebtedness, the Cash Collateral Account Agreement shall
be irrevocable by any Borrower or Operating Lessee without the prior written
consent of Lender.

                           (d) Financing Statements; Further Assurances. Each
Borrower hereby authorizes Lender to file a financing statement or statements in
connection with the Account Collateral in the form required to properly perfect
Lender's security interest in the Account Collateral to the extent that it may
be perfected by such a filing. Each Borrower agrees that at any time and from
time to time, at the expense of Borrowers, such Borrower shall promptly execute
and deliver all further instruments, and take all further action, that Lender
may reasonably request, in order to perfect and protect the pledge, security
interest and Lien granted or purported to be granted hereby, or to enable Lender
to exercise and enforce Lender's rights and remedies hereunder with respect to,
the Account Collateral.

                           (e) Transfers and Other Liens. Each Borrower agrees
that it will not sell or otherwise dispose of any of the Account Collateral
other than pursuant to the terms hereof and of the other Loan Documents, or
create or permit to exist any Lien upon or with respect to all or any of the
Account Collateral, except for the Liens granted to Lender under this Agreement.

                           (f) Lender's Reasonable Care. Beyond the exercise of
reasonable care in the custody thereof, Lender shall not have any duty as to any
Account Collateral or any income thereon in Lender's possession or control or in
the possession or control of any agents for, or of Lender, or the preservation
of rights against any Person or otherwise with respect thereto. Lender shall be
deemed to have exercised reasonable care in the custody of the Account
Collateral in Lender's possession if the Account Collateral is accorded
treatment substantially equal to that which Lender accords Lender's own
property, it being understood that Lender shall not be liable or responsible for
(i) any loss or damage to any of the Account Collateral, or for any diminution
in value thereof from a loss of, or delay in Lender's acknowledging receipt of,
any wire transfer from the Collection Account Bank or (ii) any loss, damage or
diminution in value by reason of the act or omission of Lender, or Lender's
agents, employees or bailees, except for any loss, damage or diminution in value
resulting from the gross negligence, fraud or willful misconduct of Lender, its
agents or employees.

                           (g) Lender Appointed Attorney-In-Fact. Each Borrower
hereby irrevocably constitutes and appoints Lender as such Borrower's true and
lawful attorney-in-fact, with full power of substitution, at any time after the
occurrence and during the continuance of an Event of Default to execute,
acknowledge and deliver any instruments and to exercise and enforce every right,
power, remedy, option and privilege of such Borrower with respect to the

                                       44


Account Collateral, and do in the name, place and stead of such Borrower, all
such acts, things and deeds for and on behalf of and in the name of such
Borrower with respect to the Account Collateral, which such Borrower could or
might do or which Lender may deem necessary or desirable to more fully vest in
Lender the rights and remedies provided for herein with respect to the Account
Collateral and to accomplish the purposes of this Agreement. The foregoing
powers of attorney are irrevocable and coupled with an interest.

                           (h) Continuing Security Interest; Termination. This
Section shall create a continuing pledge of, Lien on and security interest in
the Account Collateral and shall remain in full force and effect until payment
in full of the Indebtedness. Upon payment in full of the Indebtedness, each
applicable Borrower shall be entitled to the return, upon such Borrower's
written request and at Borrowers' expense, of such of the Account Collateral as
shall not have been sold or otherwise applied pursuant to the terms hereof, and
Lender shall execute such instruments and documents as may be reasonably
requested by such Borrower in writing to evidence such termination and the
release of the pledge and Lien hereof, provided, however, that such Borrower
shall pay on demand all of Lender's expenses in connection therewith.

         Section 2.13. Secondary Market Transactions

                           (a) Each Borrower hereby acknowledges that Lender may
in one or more transactions (i) sell or securitize the Loan or portions thereof
in one or more transactions through the issuance of securities, which securities
may be rated by one or more of the Rating Agencies, (ii) sell or otherwise
transfer the Loan or any portion thereof one or more times, (iii) sell
participation interests (including without limitation, senior and subordinate
participation interests) in the Loan one or more times, (iv) re-securitize the
securities issued in connection with any securitization, or (v) further divide
the Loan into more separate notes or components or change the principal balances
(but not increase the aggregate principal balance) or interest rates of the
Notes (including, without limitation, senior and subordinate notes or
components) (the transactions referred to in clauses (i) through (v), each a
"Secondary Market Transaction" and collectively "Secondary Market
Transactions").

                           (b) With respect to any Secondary Market Transaction
described in Section 2.13(a)(v) above, such notes or note components may be
assigned different interest rates, so long as, at such time the weighted average
of the relevant interest rates equals the LIBOR Interest Rate for Note A-1, Note
A-2, Note A-3 and Note B; provided, that after an Event of Default each Borrower
recognizes that, in the case of prepayments, the weighted average interest rate
of the Loan may increase because Lender shall have the right to apply principal
payments to one or more notes or components with lower rates of interest before
applying principal payments to one or more notes or components with higher rates
of interest and provided, further, that the aggregate principal balance of the
Notes shall not change. Lender shall have the same rights to sell or otherwise
transfer, participate or securitize one or more of the divided, amended,
modified or otherwise changed notes or components, individually or collectively,
as Lender has with respect to the Loan.

                                       45


                           (c) Each Borrower agrees that it shall cooperate with
Lender and use such Borrower's commercially reasonably efforts to facilitate the
consummation of each Secondary Market Transaction including, without limitation,
by: (i) amending or causing the amendment of this Agreement and the other Loan
Documents, and executing such additional documents, instruments and agreements
including amendments to such Borrower's organizational documents and preparing
financial statements as requested by the Rating Agencies to conform the terms of
the Loan to the terms of similar loans underlying completed or pending secondary
market transactions having or seeking ratings similar to those then being sought
in connection with the relevant Secondary Market Transaction; (ii) promptly and
reasonably providing such information (including, without limitation, financial
information) as may be requested in connection with the preparation of a private
placement memorandum, prospectus or a registration statement required to
privately place or publicly distribute the securities in a manner which does not
conflict with federal or state securities laws; (iii) providing in connection
with each of (A) a preliminary and a final private placement memorandum or other
offering documents or (B) a preliminary and final prospectus, as applicable, an
indemnification certificate (x) certifying that such Borrower has carefully
examined such private placement memorandum, prospectus, registration statement
or other offering document, as applicable, including, without limitation, the
sections entitled "Special Considerations," "Description of the Mortgage Loan,"
"The Underlying Mortgaged Property," "The Manager," "Borrower" and "Certain
Legal Aspects of the Mortgage Loan," and such sections (and any other sections
requested) insofar as they relate to a Borrower, its Affiliates, the Loan or any
Individual Property does not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements made, in
the light of the circumstances under which they were made, not misleading;
provided, however, that such Borrower shall not be required to indemnify Lender
for any losses relating to untrue statements or omissions which such Borrower
identified to Lender in writing at the time of such Borrower's examination of
such memorandum or prospectus, as applicable, and (y) indemnifying (i) Lender
and each of its affiliates and their respective successors and assigns
(including their respective officers, directors, partners, employees, attorneys,
accountants, professionals and agents and each other person, if any, controlling
Lender or any of its affiliates within the meaning of either Section 15 of the
Securities Act of 1933, as amended (the "Securities Act"), or Section 20 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (each,
including Lender, an "Indemnified Party") and the (ii) party that has filed the
registration statement relating to the Secondary Market Transaction (the
"Registration Statement"), each of its directors and officers who have signed
the Registration Statement and each Person that controls such Party within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
(collective, the "Underwriter Group"), for any losses, claims, damages, costs,
expenses or liabilities (including, without limitation, all liabilities under
all applicable federal and state securities laws) (collectively, the
"Liabilities") to which any of them may become subject (a) insofar as the
Liabilities arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact relating to any Borrower, its Affiliates,
the Loan, any Individual Property, any Manager, the Mezzanine Borrower, the
Mezzanine Loan and the Operating Lessee contained in such sections 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 sections or necessary in order to
make the statements

                                       46


in such sections, in light of the circumstances under which they were made, not
misleading or (b) as a result of any untrue statement of material fact in any of
the financial statements of any Borrower incorporated into any placement
memorandum, prospectus, registration statement or other document connected with
the issuance of securities or the failure to include in such financial
statements or in any placement memorandum, prospectus, registration statement or
other document connected with the issuance of securities any material fact
relating to any Borrower, its Affiliates, any Individual Property, the Loan, any
Manager, the Mezzanine Borrower, the Mezzanine Loan and the Operating Lessee
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading; and (z) agreeing to reimburse the
Indemnified Party and the Underwriter Group for any legal or other expenses
reasonably incurred by the Indemnified Party and the Underwriter Group in
connection with investigating or defending the Liabilities; (iv) causing to be
rendered such customary opinion letters as shall be requested by the Rating
Agencies for other secondary market or transactions having or seeking ratings
comparable to that then being sought for the relevant Secondary Market
Transaction; (v) making such representations, warranties and covenants, as may
be reasonably requested by the Rating Agencies and comparable to those required
in other secondary market transactions having or seeking the same rating as is
then being sought for the Secondary Market Transaction; (vi) providing such
information regarding the Collateral as may be reasonably requested by the
Rating Agencies or otherwise required in connection with the formation of a
REMIC; and (vii) providing any other information and materials required in the
Secondary Market Transaction.

                           (d) Each Borrower agrees to participate and cooperate
in any meetings with the Rating Agencies or Investors, and providing any other
information and materials reasonably required in the Secondary Market
Transaction to make the certificates offered in such Secondary Market
Transaction saleable in the secondary market and to obtain ratings from two or
more rating agencies.

                           (e) Each Borrower acknowledges and agrees that the
Lender may, at any time on or after the Closing Date, assign its duties, rights
or obligations hereunder or under any Loan Document in whole, or in part, to a
servicer and/or a trustee in Lender's discretion. Nothing herein shall in any
way limit Lender's right to sell all or a portion of the Loan in a transaction
which is not a Secondary Market Transaction.

                           (f) Lender shall reimburse the Borrowers for all
reasonable out-of-pocket costs incurred by the Borrowers in connection with
complying with their obligations set forth in this Section 2.13; provided,
however, that the Borrowers shall remain responsible for all of Borrower's
reasonable and customary legal and accounting fees not to exceed $10,000 and all
indemnity and related obligations incurred by the Borrowers or its Affiliates.

                           (g) Notwithstanding anything to the contrary
contained herein or in any other Loan Document, Lender reserves the right to
increase, decrease, or otherwise re-allocate the outstanding principal balances
of any and all of Note A-1, Note A-2, Note A-3, Note B and the Mezzanine Note,
and each Borrower and Operating Lessee covenants and agrees to

                                       47


execute amendments to the Notes, this Agreement, and the other Loan Documents,
the Mezzanine Loan Documents and the Borrowers' or Operating Lessee's
organizational documents reasonably requested by Lender or Mezzanine Lender in
connection with any such re-allocation, provided that such modification shall
not (a) increase the aggregate outstanding principal balance of Note A-1, Note
A-2, Note A-3, Note B and the Mezzanine Note, (b) increase the weighted average
interest rate of the Loan and the Mezzanine Loan existing on the date of such
modification, (c) change the stated maturity date of the Loan as set forth
herein, or (d) modify or amend any other economic or other term of the Loan.

         Section 2.14. Interest Rate Cap Agreement

                           (a) On the Closing Date, Borrowers shall obtain, and
thereafter maintain in effect, the Initial Interest Rate Cap Agreement, which
shall be coterminous with the Initial Maturity Date and have a notional amount
equal to the Loan Amount. The Initial Interest Rate Cap Agreement shall have a
LIBOR strike rate equal to or less than the Strike Rate.

                           (b) If Borrowers exercise any option to extend the
term of the Loan pursuant to Section 2.10, then on or prior to the commencement
of the applicable Extension Term, Borrowers shall obtain an Extension Interest
Rate Cap Agreement having (x) a term coterminous with such Extension Term, (y) a
notional amount at least equal to the Principal Indebtedness as of the first day
of such Extension Term, and (z) a LIBOR strike rate equal to or less than the
Strike Rate.

                           (c) Each Borrower shall collaterally assign to Lender
pursuant to the Rate Cap Pledge and Security Agreement all of its right, title
and interest in any and all payments under each Interest Rate Cap Agreement and
shall deliver to Lender an executed counterpart of such Rate Cap Pledge and
Security Agreement and obtain the consent of the Acceptable Counterparty to such
collateral assignment (as evidenced by the Acceptable Counterparty's execution
of a separate acknowledgment to such Rate Cap Pledge and Security Agreement).

                           (d) Each Borrower shall comply with all of its
obligations under the terms and provisions of each Interest Rate Cap Agreement.
All amounts paid under an Interest Rate Cap Agreement shall be deposited
directly into the Cash Collateral Account. Each Borrower shall take all actions
reasonably requested by Lender to enforce Lender's rights under the Rate Cap
Pledge and Security Agreement in the event of a default by the counterparty
thereunder and shall not waive, amend or otherwise modify any of its rights
thereunder without Lender's reasonable consent (which consent may be conditioned
on receipt of a Rating Agency Confirmation).

         Section 2.15. Partial Release. Provided that no Event of Default has
occurred and is continuing under any of the Loan Documents, at any time after
October 1, 2005, each Borrower, may obtain the release of such Individual
Property (a "Partial Release") from the lien of the applicable Mortgage (and
other Loan Documents ) and the release of such Borrower's and Operating Lessee's
ongoing obligations under the Notes and other Loan Documents with respect

                                       48


to such Individual Property (other than those expressly stated to survive), so
long as all of the following conditions shall have been satisfied:

                           (a) the applicable Borrower shall have provided
Lender with no less than thirty (30) days, but no more than ninety (90) days,
prior written notice of its request to obtain a release of the applicable
Individual Property;

                           (b) Lender shall have received a prepayment of the
Loan in an amount equal to the greater of (a) in the event that the Partial
Release will result in an aggregate prepayment of forty four million forty seven
thousand six hundred twenty dollars ($44,047,620) or less, 100% of the Allocated
Loan Amount of the Individual Property sold or (b) in the event that the Partial
Release will result in an aggregate prepayment of greater than forty four
million forty seven thousand six hundred twenty dollars ($44,047,620), 115% of
the Allocated Loan Amount for the Individual Property sold (either (a), or (b),
the "Release Price"), which prepayment shall be accompanied by (i) all accrued
and unpaid interest allocable to the portion of the Principal Indebtedness being
prepaid as of the date of such prepayment, (ii) if such prepayment is not made
on a Payment Date, the interest which would have accrued thereon to the next
monthly Payment Date with respect to the amount prepaid, (iii) the applicable
Prepayment Premium on the Principal Indebtedness being prepaid pursuant to such
Partial Release, if any, and (iv) any and all other sums due under the Loan
Documents in connection with a partial prepayment of the Loan;

                           (c) Mezzanine Lender shall have received a prepayment
of the Mezzanine Loan simultaneously with the prepayment described in the
immediately preceding subsection (b) equal to the Mezzanine Release Price for
the Individual Property;

                           (d) the applicable Borrower shall have submitted to
Lender, not less than ten (10) Business Days prior to the date of such Partial
Release, all necessary and appropriate documentation concerning the release of
the lien of the applicable Mortgage (and other Loan Documents) for such
Individual Property and the applicable Borrower and Operating Lessee, for
execution by Lender. Such release documentation shall be in a form appropriate
in the State in which such Individual Property is located and shall contain
standard provisions, if any, protecting the rights of Lender. In addition, the
applicable Borrower shall provide any and all other documentation (1) that prior
to the date that all or any portion of the Loan is included in a REMIC, is
reasonably acceptable to Lender, and (2) that after the date that all or any
portion of the Loan is included in a REMIC, would be reasonably acceptable to a
prudent lender originating commercial mortgage loans for securitization similar
to the Loan in the State where the applicable Individual Property is located, to
be delivered by such Borrower in connection with such Partial Release, together
with an officer's certificate certifying that (i) such documentation is in
compliance with all Legal Requirements in all material respects, and (ii) the
Partial Release will not impair or otherwise adversely affect the lien, security
interest and other rights of Lender under the Loan Documents (except with regard
to the release of the applicable Borrower, Operating Lessee and the lien on the
applicable Individual Property);

                                       49


                           (e) the Borrowers shall execute (i) amendments to the
Loan Documents to the extent necessary (as determined (1) prior the date that
all or any portion of the Loan is included in a REMIC, by Lender, and (2) after
the date that all or any portion of the Loan is included in a REMIC, as would be
reasonably required by a prudent lender originating commercial mortgage loans
for securitization similar to the Loan in the State where the applicable
Individual Property is located) and shall agree to corresponding adjustments of
the reserves and escrow accounts with respect to the remaining Individual
Properties as would be reasonably acceptable to a prudent lender originating
commercial mortgage loans for securitization similar to the Loan in the State
where the applicable Individual Property is located (with all excess reserve and
escrow amounts applicable to the Individual Properties subject to such Partial
Release to be released to the applicable Borrower promptly upon the consummation
of such Partial Release), and (ii) amendments to the Operating Lease or any
other document related to the Release Property to the extent necessary (as would
be reasonably acceptable to a prudent lender originating commercial mortgage
loans for securitization similar to the Loan in the State where the applicable
Individual Property is located) to ensure that (y) such Operating Lease or other
document shall not continue to govern or relate to the Individual Property that
is to be released and any other Individual Property which shall act as
collateral for the Loan from and after the date of the Partial Release and (z)
the Operating Lessee will not be the tenant of such Individual Property
following the release of such Individual Property from the Lien of the related
Mortgage;

                           (f) After giving effect to the Partial Release and
the partial prepayment of the Loan, the Debt Service Coverage Ratio based upon
the remaining Individual Properties projected reasonably and in good faith by
Lender (a) for the subsequent twelve (12) calendar months, and (b) calculated as
if (1) the LIBOR Interest Rate for each Note for such period was equal to the
LIBOR Interest Rate for each Note applicable to the immediately preceding
Interest Accrual Period, and (2) the LIBOR Interest Rate (as defined in the
Mezzanine Loan Agreement) for the Mezzanine Loan for such period was equal to
the LIBOR Interest Rate (as defined in the Mezzanine Loan Agreement) for the
Mezzanine Loan applicable to the immediately preceding Interest Accrual Period
(as defined in the Mezzanine Loan Agreement) shall be equal to or greater than
(i) the Debt Service Coverage Ratio based upon the Individual Properties serving
as collateral for the Loan immediately prior to the consummation of the Partial
Release for the same subsequent twelve (12) month period projected by Lender,
and (ii) the Debt Service Coverage Ratio as of the Closing Date;

                           (g) Intentionally Omitted;

                           (h) Lender shall have received reimbursement in full
of all of Lender's fees, costs and expenses, including without limitation,
reasonable legal counsel fees and disbursements incurred in connection with the
Partial Release, and the review and approval of all documents and information
required to be delivered in connection therewith; and

                           (i) Borrower shall have distributed to Mezzanine
Borrower and Mezzanine Borrower shall have paid any amounts required to be paid
under the Mezzanine Loan

                                       50


Agreement to Mezzanine Lender in connection with the release of the Individual
Property and shall have satisfied all conditions for the release of such
Individual Property set forth in the Mezzanine Loan Documents.

                                    ARTICLE 3

                              CONDITIONS PRECEDENT

         Section 3.1. Conditions Precedent to the Making of the Loan

                           (a) As a condition precedent to the making of the
Loan, each Borrower shall have satisfied the following conditions (unless waived
by Lender in accordance with Section 8.4) on or before the Closing Date:

                                    (A) Loan Documents.

                                             (i) Loan Agreement. Each Borrower
         shall have executed and delivered this Agreement to Lender.

                                             (ii) Notes. Each Borrower shall
         have executed and delivered to Lender the Notes.

                                             (iii) Mortgage. Each applicable
         Borrower shall have executed and delivered to Lender the Mortgages and
         the Mortgages shall have been irrevocably delivered to an authorized
         title agent for the Title Insurer for recordation in the appropriate
         filing offices in the jurisdiction in which the applicable Individual
         Properties are located.

                                             (iv) Supplemental Mortgage
         Affidavits. The Liens to be created by each Mortgage are intended to
         encumber the applicable Individual Property described therein to the
         full extent of each Borrower's obligations under the Loan Documents. As
         of the Closing Date, each Borrower shall have paid all state, county
         and municipal recording and all other taxes imposed upon the execution
         and recordation of the Mortgages.

                                             (v) Assignment of Leases. Each
         applicable Borrower and each applicable Operating Lessee shall have
         executed and delivered to Lender the Assignments of Leases, and the
         Assignments of Leases shall have been irrevocably delivered to an
         authorized title agent for the Title Insurer for such recordation in
         the appropriate filing offices in the jurisdiction in which the
         applicable Individual Property is located.

                                             (vi) Assignment of Agreements. Each
         applicable Borrower shall have executed and delivered to Lender the
         Assignments of Agreements, and the Assignments of Agreements shall, to
         the extent prudent pursuant to local practice,

                                       51


         have been irrevocably delivered to an authorized title agent for the
         Title Insurer for such recordation in the appropriate filing offices in
         the jurisdiction in which the applicable Individual Property is
         located.

                                             (vii) Financing Statements. Each
         applicable Borrower and its partners or members (and their
         shareholders), as applicable, shall have authorized Lender to file all
         financing statements required by Lender and such financing statements
         shall have been irrevocably delivered to an authorized title agent for
         the Title Insurer for such recordation in the appropriate filing
         offices in each of the appropriate jurisdictions.

                                             (viii) Manager's Subordination.
         Each Manager and each applicable Borrower shall have executed and
         delivered to Lender the Manager's Subordinations.

                                             (ix) Franchisor Subordinations. The
         Borrowers shall have delivered to Lender (1) certified copies of each
         Franchise Agreement and (2) the Franchisor's Subordinations.

                                             (x) Subordination, Attornment and
         Security Agreement. Operating Lessee and each applicable Borrower shall
         have executed and delivered to Lender (1) a certified copy of each
         Operating Lease, and (2) each applicable Subordination, Attornment and
         Security Agreement.

                                             (xi) REA Estoppels. Borrower shall
         have delivered to Lender an executed REA estoppel letter, which shall
         be in form and substance satisfactory to Lender, from each party to any
         REA required by Lender with respect to any Individual Property.

                                             (xii) Environmental Guaranty. Each
         Borrower shall have executed and delivered to Lender the Environmental
         Guaranty.

                                             (xiii) Collection Account
         Agreement. Each applicable Borrower, the Operating Lessee, each Manager
         and the relevant Collection Account Banks shall have executed and
         delivered the Collection Account Agreements and shall have delivered an
         executed copy of such Agreement to Lender.

                                             (xiv) Cash Collateral Account
         Agreement. Each Borrower, the Operating Lessee, each Manager and Cash
         Collateral Account Bank shall have executed and delivered the Cash
         Collateral Account Agreement and shall have delivered an executed copy
         of such Cash Collateral Account Agreement to Lender.

                                    (B) Opinions of Counsel. Lender shall have
received from counsel satisfactory to Lender, legal opinions in form and
substance satisfactory to Lender in Lender's discretion (including, without
limitation, a bankruptcy opinion). All such legal opinions will be addressed to
Lender and the Rating Agencies, dated as of the Closing Date, and

                                       52


in form and substance satisfactory to Lender, the Rating Agencies and their
counsel. Each applicable Borrower hereby instructs any of the foregoing counsel,
to the extent that such counsel represents such Borrower, to deliver to Lender
such opinions addressed to Lender and the Rating Agencies.

                                    (C) Secretary's Certificates and SPE Equity
Owner's Certificate. Lender shall have received a Secretary's Certificate
acceptable to Lender with respect to each applicable Borrower's managing equity
owner and each Remington Manager and each applicable SPE Equity Owner's
Certificate with respect to the applicable Borrower.

                                    (D) Insurance. Lender shall have received
certificates of insurance demonstrating insurance coverage in respect of each
Individual Property as required by and in accordance with the Mortgages.

                                    (E) Lien Search Reports. Lender shall have
received satisfactory reports of UCC (collectively, the "UCC Searches"), federal
tax lien, bankruptcy, state tax lien, judgment and pending litigation searches
conducted by a search firm reasonably acceptable to Lender. Such searches shall
have been received in relation to each Borrower and each equity owner in each
Borrower, the Operating Lessee and each Manager. Such searches shall have been
conducted in each of the locations designated by Lender in Lender's reasonable
discretion and shall have been dated not more than fifteen (15) days prior to
the Closing Date.

                                    (F) Title Insurance Policy. Lender shall
have received (i) a Title Insurance Policy for each Individual Property or a
marked-up commitment (in form and substance satisfactory to Lender) from Title
Insurer to issue a Title Insurance Policy for each Individual Property and (ii)
a fully executed copy of the Title Instruction Letter from the Title Insurer.

                                    (G) Environmental Matters. Lender shall have
received an Environmental Report with respect to each Individual Property.

                                    (H) Consents, Licenses, Approvals. Lender
shall have received copies of all consents, licenses and approvals, if any,
required in connection with the execution, delivery and performance by each
Borrower under, and the validity and enforceability of, the Loan Documents, and
such consents, licenses and approvals shall be in full force and effect.

                                    (I) Additional Matters. Lender shall have
received such other Permits, certificates (including certificates of occupancy
reflecting the permitted uses of the Individual Properties as of the Closing
Date), opinions, documents and instruments (including, without limitation,
written proof from the appropriate Governmental Authority regarding the zoning
of each Individual Property in form and substance satisfactory to Lender in
Lender's discretion) relating to the Loan as may be required by Lender and all
other documents and all legal matters in connection with the Loan shall be
satisfactory in form and substance to Lender. Each Borrower shall provide Lender
with information reasonably satisfactory to Lender regarding Basic Carrying
Costs on or before the Closing Date.

                                       53


                                    (J) Representations and Warranties. The
representations and warranties herein and in the other Loan Documents shall be
true and correct in all material respects.

                                    (K) No Injunction. No law or regulation
shall have been adopted, no order, judgment or decree of any Governmental
Authority shall have been issued or entered, and no litigation shall be pending
or threatened, which in the judgment of Lender would have a Material Adverse
Effect.

                                    (L) Survey. Lender shall have received a
Survey for each Individual Property.

                                    (M) Engineering Report. Lender shall have
received an Engineering Report for each Individual Property.

                                    (N) Appraisal. Lender shall have received an
Appraisal satisfactory to Lender with respect to each Individual Property which
shall be (i) prepared by an Appraiser approved by Lender in Lender's reasonable
discretion, (ii) prepared based on a scope of work determined by Lender in
Lender's reasonable discretion and (iii) in form and content acceptable to
Lender in Lender's reasonable discretion.

                                    (O) Security Deposits. Borrowers shall be in
compliance with all applicable Legal Requirements relating to all security
deposits held for any Leases.

                                    (P) Service Contracts and Permits. Borrowers
shall have delivered to Lender true, correct and complete copies of all material
contracts and Permits relating to each Individual Property.

                                    (Q) Site Inspection. Unless waived by Lender
in accordance with Section 8.4, Lender shall have performed, or caused to be
performed on its behalf, an on-site due diligence review of each Individual
Property to be acquired or refinanced with the Loan, the results of which shall
be satisfactory to Lender in Lender's discretion.

                                    (R) Use. Each Individual Property shall be
operating and operated only as a hotel of the same class and in a similar manner
as each such Individual Property is operated on the Closing Date.

                                    (S) Financial Information. Lender shall have
received all financial information (which financial information shall be
satisfactory to Lender in Lender's discretion) relating to each Individual
Property including, without limitation, audited financial statements of each
Borrower and Operating Lessee for the calendar year ending December 31, 2003 and
other financial reports requested by Lender in Lender's reasonable discretion.
Such financial information shall be (i) prepared by an accounting firm approved
by Lender in Lender's reasonable discretion, (ii) prepared based on a scope of
work determined by Lender in Lender's

                                       54


reasonable discretion and (iii) in form and content acceptable to Lender in
Lender's reasonable discretion.

                                    (T) Management Agreement. Lender shall have
received the Management Agreement.

                                    (U) Leases; Tenant Estoppels; Subordination,
Nondisturbance and Attornment Agreements. With respect to each Individual
Property, Borrowers shall have delivered a true, complete and correct rent roll
and a copy of each of the Leases identified in such rent roll, and each Lease
shall be satisfactory to Lender in Lender's reasonable discretion.

                                    (V) Subdivision. Evidence satisfactory to
Lender (including title endorsements) that the Land relating to each Individual
Property constitutes a separate lot for conveyance and real estate tax
assessment purposes.

                                    (W) Transaction Costs. Borrowers shall have
paid or caused to be paid all Transaction Costs.

                                    (X) Ground Lease. The Borrowers shall have
delivered to Lender (1) certified copies of each Ground Lease, and (2) executed
estoppel certificates in form and substance acceptable to Lender from the lessor
under each Ground Lease.

                           (b) Lender shall not be obligated to make the Loan
unless and until each of the applicable conditions precedent set forth in this
Section 3.1 is satisfied and until Borrower provides any other information
reasonably required by Lender.

                           (c) In connection with the Loan, Borrower shall
execute and/or deliver to Lender all additions, amendments, modifications and
supplements to the items set forth in this Article III, including, without
limitation, amendments, modifications and any supplements to the Notes, any
Mortgage, any Assignment of Leases, any Assignment of Agreements, and Manager's
Subordination, if reasonably requested by Lender to effectuate the provisions
hereof, and to provide Lender with the full benefit of the security intended to
be provided under the Loan Documents. Without in any way limiting the foregoing,
such additions, modifications and supplements shall include those deemed
reasonably desirable by Lender's counsel in the jurisdiction in which the
applicable Individual Property is located.

                           (d) The making of the Loan shall constitute, without
the necessity of specifically containing a written statement to such effect, a
confirmation, representation and warranty by Borrower to Lender that all of the
applicable conditions to be satisfied in connection with the making of the Loan
have been satisfied (unless waived by Lender in accordance with Section 8.4 or
otherwise made known to Lender by the Borrowers,) and that all of the
representations and warranties of Borrowers set forth in the Loan Documents are
true and correct as of the date of the making of the Loan.

         Section 3.2. Form of Loan Documents and Related Matters

                                       55


                  The Loan Documents and all of the certificates, agreements,
legal opinions and other documents and papers referred to in this Article III,
unless otherwise specified, shall be delivered to Lender, and shall be in form
and substance satisfactory to Lender.

                                    ARTICLE 4

                         REPRESENTATIONS AND WARRANTIES

         Section 4.1. Representations and Warranties of Borrower and Operating
Lessee. Each Borrower and Operating Lessee represents, warrants and covenants as
follows as to all Borrowers, Operating Lessee, and all Individual Properties:

                                    (A) Organization. That each Borrower and
Operating Lessee (i) is a duly organized and validly existing Entity in good
standing under the laws of the State of its formation, (ii) is duly qualified as
a foreign Entity in each jurisdiction in which the nature of its business, the
applicable Individual Properties or any of the Collateral makes such
qualification necessary or desirable, (iii) has the requisite Entity power and
authority to carry on its business as now being conducted, and (iv) has the
requisite Entity power to execute and deliver, and perform its obligations
under, the Loan Documents.

                                    (B) Authorization. The execution and
delivery by each applicable Borrower and Operating Lessee of the Loan Documents,
each Borrower's and Operating Lessee's performance of its obligations thereunder
and the creation of the security interests and Liens provided for in the Loan
Documents (i) have been duly authorized by all requisite Entity action on the
part of each Borrower and Operating Lessee, (ii) will not violate any provision
of any applicable Legal Requirements, any order, writ, decree, injunction or
demand of any court or other Governmental Authority, any organizational document
of any Borrower or Operating Lessee or any indenture or agreement or other
instrument to which any Borrower or Operating Lessee is a party or by which
Borrower or Operating Lessee is bound except, with respect to violations of any
such indentures, agreements or other instruments, where such violation would not
have a Material Adverse Effect, (iii) will not be in conflict with, result in a
breach of, or constitute (with due notice or lapse of time or both) a default
under, or result in the creation or imposition of any Lien of any nature
whatsoever upon any of the property or assets of any Borrower or Operating
Lessee pursuant to, any indenture or agreement or instrument, and (iv) have been
duly executed and delivered by each Borrower or Operating Lessee, as applicable.
Except for those obtained or filed on or prior to the Closing Date, no Borrower
or Operating Lessee 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 the Loan Documents. The Loan Documents to which any Borrower,
Operating Lessee or any Manager is a party have been duly authorized, executed
and delivered by such parties.

                                    (C) Single-Purpose Entity.

                                       56


                                             (i) Each Borrower, each SPE Equity
         Owner and Operating Lessee has been, and will continue to be, a duly
         formed and existing Entity, and a Single-Purpose Entity provided that
         certain of the Borrowers identified on Schedule M (the "Pre-Existing
         Borrowers") were organized prior to the transactions contemplated
         herein, and they did not originally have covenants or undertakings with
         respect to the Special Purpose Entity criteria in their organizational
         documents and did not have Independent Directors. However, each
         Pre-Existing Borrower hereby certifies, represents and warrants that
         since organization it has never owned any property other than its
         current respective Individual Property, that it has engaged in no
         business other than the ownership and operation of its respective
         Individual Property, that it has timely paid all taxes, and that it has
         complied in all material respects with the Single Purpose Entity
         criteria; except that certain of the Pre-Existing Borrowers had
         indebtedness secured by their respective Individual Property or allowed
         their Individual Property to secure obligations of an affiliate, but
         the related lender has executed a release, which includes an
         acknowledgement that such Pre-Existing Borrower's obligation to lender
         has been terminated and discharged in full, and that lender may not
         look to the Pre-Existing Borrower or its assets for satisfaction of the
         obligations of any affiliate of Ashford Hospitality Limited Partnership
         under the related credit facility.

                                             (ii) Each SPE Equity Owner at all
         times since its formation has been, and will continue to be, a duly
         formed and existing limited liability company or a limited partnership
         in good standing under the laws of the jurisdiction of its formation
         and a Single-Purpose Entity, is duly qualified as a foreign entity in
         each other jurisdiction in which the nature of its business or any of
         the Collateral makes such qualification necessary or desirable, and no
         Borrower will take action to cause any SPE Equity Owner not to be a
         duly formed and existing limited liability company in good standing
         under the laws of the jurisdiction of its formation and a
         Single-Purpose Entity.

                                             (iii) Each Borrower and Operating
         Lessee at all times since its formation has complied, and will, at all
         times while the Loan is outstanding, continue to comply, with the
         provisions of all of its organizational documents, and the laws of the
         state in which such Borrower and Operating Lessee was formed relating
         to the Entity.

                                    (D) Litigation. Except as disclosed on
Schedule 1 attached hereto, there are no actions, suits or proceedings at law or
in equity by or before any Governmental Authority or other agency now pending
and served or, to the knowledge of any Borrower and Operating Lessee, threatened
against any Borrower, Operating Lessee, any SPE Equity Owner, any Manager or any
Individual Property which, if determined against the Borrowers, Operating
Lessee, SPE Equity Owner, Manager or Individual Property could reasonably be
expected to have a Material Adverse Affect.

                                    (E) Agreements. No Borrower or Operating
Lessee is a party to any agreement or instrument or subject to any restriction
which is likely to have a Material

                                       57


Adverse Effect. Each applicable Borrower and Operating Lessee is not in default
in any material respect in the performance, observance or fulfillment of any of
the obligations, covenants or conditions contained in any indenture, agreement
or instrument to which it is a party or by which such Borrower, Operating Lessee
or the applicable Individual Property is bound which could reasonably be
expected to have a Material Adverse Affect.

                                    (F) No Bankruptcy Filing. No Borrower or
Operating Lessee is contemplating either the filing of a petition under any
state or federal bankruptcy or insolvency laws or the liquidation of all or a
major portion of any Borrower's assets or property, and no Borrower or Operating
Lessee has any knowledge of any Person contemplating the filing of any such
petition against any Borrower or Operating Lessee.

                                    (G) Full and Accurate Disclosure. No
statement of fact made by Borrower or Operating Lessee in the Loan Documents
contains any untrue statement of a material fact or omits to state any material
fact necessary to make statements contained herein or therein not misleading.
There is no fact presently known to any Borrower or Operating Lessee which has
not been disclosed to Lender which materially adversely affects, nor as far as
any Borrower or Operating Lessee can foresee, might materially adversely affect
the business, operations or condition (financial or otherwise) of any Borrower
or Operating Lessee.

                                    (H) Management Agreements. Each Management
Agreement is valid, binding and enforceable and in full force and effect and has
not been modified and there are no material defaults under any of them, nor (a)
to Borrowers' or Operating Lessee's knowledge has any event occurred that with
the passage of time, the giving of notice or both would result in such a
material default under the terms of each Management Agreement with any Manager
other than Remington Manager, and (b) with respect to any Management Agreement
with Remington Manager, has any event occurred that with the passage of time,
the giving of notice or both would result in such a material default under the
terms of such Management Agreement.

                                    (I) Compliance. Except as expressly
disclosed in the Engineering Reports, the Environmental Reports, the PZR zoning
reports or the Surveys delivered to Lender by Borrower, each applicable
Borrower, Operating Lessee, each Individual Property and each applicable
Borrower's or Operating Lessee's use thereof as a hotel and operations thereat
comply in all material respects with all applicable Legal Requirements and all
Insurance Requirements. No Borrower is in default or violation of any order,
writ, injunction, decree or demand of any Governmental Authority, the violation
of which is reasonably likely to have a Material Adverse Effect.

                                    (J) Other Debt and Obligations. No Borrower
or Operating Lessee has any financial obligation under any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to which any
Borrower or Operating Lessee is a party, or by which Borrower, Operating Lessee
or any Individual Property is bound, other than (a) unsecured trade payables
incurred in the ordinary course of business relating to the ownership and
operation of an Individual Property which are not evidenced by a promissory note
and when aggregated

                                       58


with the unsecured trade payables of all other Borrowers and Operating Lessee,
do not exceed a maximum amount of two and one-half percent (2.5%) of the Loan
Amount and are paid within sixty (60) days of the date incurred (unless same are
being contested in accordance with the terms of this Agreement), and (b)
obligations under the Mortgage and the other Loan Documents. No Borrower or
Operating Lessee has borrowed or received other debt financing that has not been
heretofore repaid in full and no Borrower has any known material contingent
liabilities.

                                    (K) ERISA. (a) Each Plan and, to the
knowledge of any Borrower or Operating Lessee, each Multiemployer Plan, is in
compliance in all material respects 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 federal or state law, and no event or condition
has occurred as to which any Borrower or Operating Lessee would be under an
obligation to furnish a report to Lender under Section 5.1(S).

                                             (b) As of the date hereof and
throughout the term of the Loan (a) no Borrower or Operating Lessee is or will
be an "employee benefit plan," as defined in Section 3(3) of ERISA, subject to
Title I of ERISA, or a "plan," as defined in Section 4975(e)(1) of the Code,
subject to Code Section 4975, (b) no Borrower or Operating Lessee is or will be
a "governmental plan" within the meaning of Section 3(32) of ERISA, (c) none of
the assets of any Borrower or Operating Lessee constitutes or will constitute
"plan assets" of one or more of any such plans under 29 C.F.R. Section
2510.3-101 or otherwise, and (d) transactions by or with each Borrower or
Operating Lessee do not and will not violate state statutes regulating
investment of, and fiduciary obligations with respect to, governmental plans and
such state statutes do not in any manner affect the ability of the Borrower or
Operating Lessee to perform its obligations under the Loan Documents or the
ability of Lender to enforce any and all of its rights under the Loan Agreement.

                                    (L) Solvency. No Borrower or Operating
Lessee has entered into this Loan Agreement or any Loan Document with the actual
intent to hinder, delay, or defraud any creditor, and each Borrower and
Operating Lessee has received reasonably equivalent value in exchange for its
obligations under the Loan Documents. Giving effect to the transactions
contemplated hereby and the agreements set forth herein, the fair saleable value
of each of Borrower's and Operating Lessee's assets exceeds and will,
immediately following the execution and delivery of this Agreement, exceed such
Borrower's or Operating Lessee's, as applicable, total liabilities, including,
without limitation, subordinated, unliquidated, or disputed liabilities or
Contingent Obligations. The fair saleable value of each Borrower's or Operating
Lessee's assets is and will, immediately following the execution and delivery of
this Agreement, be greater than such Borrower's or Operating Lessee's, as
applicable, probable liabilities, including the maximum amount of its Contingent
Obligations or its debts as such debts become absolute and matured. No
Borrower's or Operating Lessee's assets do and, immediately following the
execution and delivery of this Agreement, will, constitute unreasonably small
capital to carry out its business as conducted or as proposed to be conducted.
No Borrower or Operating Lessee intends to, or believes that it will, incur
debts and liabilities (including, without

                                       59


limitation, Contingent Obligations and other commitments) beyond its ability to
pay such debts as they mature (taking into account the timing and amounts to be
payable on or in respect of obligations of each Borrower).

                                    (M) Not Foreign Person. No Borrower or
Operating Lessee is a "foreign person" within the meaning of Section 1445(f)(3)
of the Code.

                                    (N) Investment Company Act; Public Utility
Holding Company Act. No Borrower or Operating Lessee is (i) an "investment
company" or a company "controlled" by an "investment company," within the
meaning of 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.

                                    (O) No Defaults. No Event of Default or, to
Borrower's knowledge, Default exists under or with respect to any Loan Document.

                                    (P) Labor Matters. No Borrower or Operating
Lessee is a party to any collective bargaining agreements.

                                    (Q) Title to the Property. Each Borrower
owns either good, indefeasible, marketable and insurable fee simple or leasehold
title to the applicable Individual Properties which it owns, free and clear of
all Liens, other than the Permitted Encumbrances applicable to such Individual
Property. There are no outstanding options to purchase or rights of first
refusal affecting any Individual Property. The Permitted Encumbrances do not and
are not likely to materially and adversely affect (i) the ability of any
Borrower to pay in full all sums due under the Notes or any of its other
obligations in a timely manner or (ii) the use of any Individual Property for
the use currently being made thereof, the operation of such Individual Property
as currently being operated or the value of any Individual Property.

                                    (R) Use of Proceeds; Margin Regulations.
Each Borrower will use the proceeds of the Loan for the purposes described in
Section 2.2. No part of the proceeds of the Loan will be used for the purpose of
purchasing or acquiring any "margin stock" within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System or for any other purpose
which would be inconsistent with such Regulation U or any other Regulations of
such Board of Governors, or for any purposes prohibited by applicable Legal
Requirements.

                                    (S) Financial Information. All historical
financial data concerning any Borrower, Operating Lessee or any Individual
Property (including without limitation all rent rolls and operating statements)
that has been delivered by any Borrower or Operating Lessee to Lender is true,
complete and correct in all material respects. Since the delivery of such data,
except as otherwise disclosed in writing to Lender, there has been no material
adverse change in the financial position of any Borrower, Operating Lessee or

                                       60


Individual Property, or in the results of operations of any Borrower or
Operating Lessee. No Borrower or Operating Lessee has incurred any obligation or
liability, contingent or otherwise, not reflected in such financial data which
might materially adversely affect its business operations or any Individual
Property.

                                    (T) Condemnation. No Taking has been
commenced or, to any Borrower's or Operating Lessee's knowledge, is contemplated
with respect to all or any portion of any Individual Property or for the
relocation of roadways providing access to any Individual Property.

                                    (U) Utilities and Public Access. Each
Individual Property has adequate rights of access to public ways and is served
by adequate water, sewer, sanitary sewer and storm drain facilities as are
adequate for full utilization of such Individual Property for its current
purpose. Except as otherwise disclosed by the Surveys, all public utilities
necessary to the continued use and enjoyment of each Individual Property as
presently used and enjoyed are located in the public right-of-way abutting the
premises, and all such utilities are connected so as to serve each Individual
Property either (i) without passing over other property or, (ii) if such
utilities pass over other property, pursuant to valid easements. All roads
necessary for the full utilization of each Individual Property for its current
purpose have been completed and dedicated to public use and accepted by all
Governmental Authorities or are the subject of access easements for the benefit
of such Individual Property.

                                    (V) Environmental Compliance. Except as
disclosed in the Environmental Reports, each of Borrower and Operating Lessee
represents, warrants and covenants, as to itself and its applicable Individual
Property: (a) there are no Hazardous Substances or underground storage tanks in,
on, or under such Individual Property, except those that are both (i) in
compliance with all Environmental Laws and with permits issued pursuant thereto
and (ii) which do not require Remediation; (b) there are no past, present or
threatened Releases of Hazardous Substances in, on, under, from or affecting any
Individual Property which have not been fully Remediated in accordance with
Environmental Law; (c) there is no Release or threat of any Release of Hazardous
Substances which has or is migrating to any Individual Property; (d) there is no
past or present non-compliance with Environmental Laws, or with permits issued
pursuant thereto, in connection with any Individual Property which has not been
fully Remediated in accordance with Environmental Law; (e) such Borrower and
Operating Lessee does not know of, and has not received, any written or oral
notice or other communication from any Person (including but not limited to a
governmental entity) relating to Hazardous Substances or the Remediation
thereof, of possible liability of any Person pursuant to any Environmental Law,
other environmental conditions in connection with any Individual Property, or
any actual or potential administrative or judicial proceedings in connection
with any of the foregoing; and (f) such Borrower or Operating Lessee has
truthfully and fully provided to Lender, in writing, any and all information
relating to conditions in, on, under or from each Individual Property that is
known to such Borrower or Operating Lessee and that is contained in files and
records of such Borrower or Operating Lessee, including but not limited to any
reports

                                       61


relating to Hazardous Substances in, on, under or from such Individual Property
and/or to the environmental condition of each Individual Property.

                                    (W) No Joint Assessment; Separate Lots. No
Borrower or Operating Lessee has or shall suffer, permit or initiate the joint
assessment of any applicable Individual Property (i) with any other real
property constituting a separate tax lot, and (ii) with any portion of any
Individual 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 any Individual
Property as a single lien. Each Individual Property is comprised of one or more
parcels, each of which constitutes a separate tax lot and none of which
constitutes a portion of any other tax lot.

                                    (X) Assessments. Except as disclosed in the
Title Insurance Policy, there are no pending or, to the knowledge of any
Borrower or Operating Lessee, proposed special or other assessments for public
improvements or otherwise affecting any Individual Property, nor, to the
knowledge of any Borrower or Operating Lessee, are there any contemplated
improvements to any Individual Property that may result in such special or other
assessments.

                                    (Y) Mortgage and Other Liens. The Mortgages
create valid and enforceable first mortgage Liens on each Individual Property as
security for the repayment of the Indebtedness, subject only to the Permitted
Encumbrances applicable to such Individual Property. Each security agreement,
assignment, pledge, grant or other hypothecation which is contained in any Loan
Document establishes and creates a valid and enforceable lien on and a security
interest in, or claim to, the rights and property described therein. All
property covered by each such security agreement, assignment, pledge, grant or
other hypothecation is subject to a UCC financing statement filed and/or
recorded, as appropriate, in all places necessary to perfect a valid first
priority lien with respect to the rights and property that are the subject of
such security agreement, assignment, pledge, grant or other hypothecation to the
extent governed by the UCC to the extent such a security interest in such
property is perfectible by the filing of a UCC financing statement. All
continuations and any assignments of any such financing statements have been or
will be timely filed or refiled, as appropriate, in the appropriate recording
offices.

                                    (Z) Enforceability. The Loan Documents
executed by each applicable Borrower or Operating Lessee in connection with the
Loan are the legal, valid and binding obligations of each such Borrower or
Operating Lessee, enforceable against each such Borrower or Operating Lessee in
accordance with their terms, subject only to bankruptcy, insolvency and other
limitations on creditors' rights generally and to equitable principles. Such
Loan Documents are, as of the Closing Date, not subject to any right of
rescission, set-off, counterclaim or defense by any Borrower or Operating
Lessee, including the defense of usury, nor will the operation of any of the
terms of the Notes, any Mortgage, or such other Loan Documents, or the exercise
of any right thereunder, render any Mortgage unenforceable against any Borrower
or Operating Lessee, in whole or in part, or subject to any right of rescission,
set-

                                       62


off, counterclaim or defense by any Borrower or Operating Lessee, including the
defense of usury, and no Borrower or Operating Lessee has asserted any right of
rescission, set-off, counterclaim or defense with respect thereto.

                                    (AA) No Liabilities. No Borrower or
Operating Lessee has any liabilities or obligations including, without
limitation, Contingent Obligations (and including, without limitation,
liabilities or obligations in tort, in contract, at law, in equity, pursuant to
a statute or regulation, or otherwise) other than those liabilities and
obligations expressly permitted by this Agreement.

                                    (BB) No Prior Assignment. As of the Closing
Date, (i) Lender is the assignee of each Borrower's or Operating Lessee's
interest under the Leases, and (ii) there are no prior assignments of the Leases
or any portion of the Rents due and payable or to become due and payable which
are presently outstanding.

                                    (CC) Certificate of Occupancy. Borrowers and
Operating Lessee have obtained (in their own name) all Permits necessary to use
and operate the Individual Property for the use described in Section 3.1(R), and
all such Permits are in full force and effect. The use being made of each
Individual Property is in conformity in all material respects with the
certificate of occupancy and/or Permits for each such Individual Property and
any other restrictions, covenants or conditions affecting each such Individual
Property. Each such Individual Property contains all equipment necessary to use
and operate each such Individual Property in a first-class manner.

                                    (DD) Flood Zone. Except as shown on a
Survey, no Individual Property is located in a flood hazard area as designated
by the Federal Emergency Management Agency.

                                    (EE) Physical Condition. Except as disclosed
in an Engineering Report, each Individual Property is free of material
structural defects and all building systems contained therein are in good
working order in all material respects subject to ordinary wear and tear.

                                    (FF) Intellectual Property. All trademarks,
trade names and service marks owned by any Borrower or Operating Lessee or that
are pending, or under which any Borrower or Operating Lessee is licensed, are in
good standing and uncontested. There is no right under any trademark, trade name
or service mark necessary to the business of any Borrower or Operating Lessee as
presently conducted or as Borrower or Operating Lessee contemplates conducting
its business. No Borrower or Operating Lessee has infringed, is infringing, or
has received notice of infringement with respect to asserted trademarks, trade
names and service marks of others. To Borrower's or Operating Lessee's
knowledge, there is no infringement by others of trademarks, trade names and
service marks of any Borrower or Operating Lessee.

                                    (GG) Intentionally Omitted.

                                       63


                                    (HH) Title Insurance. Each Individual
Property is covered by either an American Land Title Association (ALTA)
mortgagee's title insurance policy, or a commitment to issue such a title
insurance policy, insuring a valid first lien on such Individual Property, which
is in full force and effect and is freely assignable to and will inure to the
benefit of Lender and any successor or assignee of Lender, including but not
limited to the trustee in a Securitization, subject only to the Permitted
Encumbrances.

                                    (II) Tax Fair Market Value. The Allocated
Loan Amount with respect to each Individual Property does not exceed the Tax
Fair Market Value of such Individual Property. The Loan Amount does not exceed
the aggregate Tax Fair Market Values of the Individual Properties. If any Note
is significantly modified prior to the closing date of a Secondary Market
Transaction so as to result in a taxable exchange under Code Section 1001,
Borrowers will, if requested by Lender, represent that the amount of such Note
does not exceed the aggregate Tax Fair Market Value of the applicable Individual
Property as of the date of such significant modification.

                                    (JJ) Leases. (a) Each Borrower or Operating
Lessee is the sole owner of the entire lessor's interest in the Leases; (b) the
Leases are the valid, binding and enforceable obligations of the applicable
Borrowers or Operating Lessee and the applicable tenant or lessee thereunder;
(c) the terms of all alterations, modifications and amendments to the Leases are
reflected in the certified rent roll statement delivered to and approved by
Lender; (d) no Rents reserved in any Leases have been assigned or otherwise
pledged or hypothecated; (e) no Rents have been collected for more than one (1)
month in advance; (f) the premises demised under the Leases have been completed
and the tenants under the Leases have accepted the same and have taken
possession of the same on a rent-paying basis; (g) there exists no offset or
defense to the payment of any portion of any Rents; (h) no Lease contains an
option to purchase, right of first refusal to purchase, expansion right, or any
other similar provision; and (i) no Person has any possessory interest in, or
right to occupy, any Individual Property except under and pursuant to a Lease.

                                    (KK) Bank Holding Company. No Borrower or
Operating Lessee is a "bank holding company" or a direct or indirect subsidiary
of a "bank holding company" as defined in the Bank Holding Company Act of 1956,
as amended, and Regulation Y thereunder of the Board of Governors of the Federal
Reserve System.

                                    (LL) Embargoed Person. None of the funds or
other assets of any Borrower, Operating Lessee, or any SPE Equity Owner
constitute property of, or are beneficially owned, directly or indirectly, by
any person, entity or government subject to trade restrictions under federal
law, including, without limitation, the International Emergency Economic Powers
Act, 50 U.S.C. Sections 1701 et seq., The Trading with the Enemy Act, 50 U.S.C.
App. 1 et seq. , and any executive orders or regulations promulgated thereunder,
with the result that (i) the investment in any Borrower, Operating Lessee, any
SPE Equity Owner, as applicable (whether directly or indirectly), is prohibited
by law, or (ii) the Loan made by the Lender is in violation of law ("Embargoed
Person"); (b) no Embargoed Person has any interest of any nature

                                       64


whatsoever in any Borrower, Operating Lessee, any SPE Equity Owner, as
applicable (whether directly or indirectly), with the result that (i) the
investment in any Borrower, Operating Lessee, any SPE Equity Owner, as
applicable (whether directly or indirectly) is prohibited by law, or (ii) the
Loan is in violation of law; and (c) none of the funds of any Borrower,
Operating Lease, any SPE Equity Owner, as applicable, have been derived from any
unlawful activity with the result that (i) the investment in any Borrower,
Operating Lessee, any SPE Equity Owner, as applicable (whether directly or
indirectly) is prohibited by law, or (ii) the Loan is in violation of law.

                                    (MM) Illegal Activity. No portion of any of
each Individual Property has been or will be purchased, improved, equipped or
furnished with proceeds of any illegal activity.

                                    (NN) Compliance. No Borrower or Operating
Lessee, and to the best of each Borrower's and Operating Lessee's knowledge
after due and diligent inquiry, neither (a) any Person owning an interest in a
Borrower, Operating Lessee or any SPE Equity Owner, (b) each Manager, and (c)
any tenant at each Individual Property: (i) is currently identified on the OFAC
List ("OFAC List"), and (ii) is not a Person with whom a citizen of the United
States is prohibited to engage in transactions by any trade embargo, economic
sanction, or other prohibition of any Legal Requirement (including the September
24, 2001, Executive Order Blocking Property and Prohibiting Transactions With
Person Who Commit, Threaten to Commit, or Support Terrorism), and (iii) is not
in violation of the U.S. Federal Bank Secrecy Act, as amended, and its
implementing regulations (31 C.F.R. part 103), the Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001, Public Law 107-56 and the regulations promulgated
thereunder, any order issued with respect to anti-money laundering by the U.S.
Department of the Treasury's Office of Foreign Assets Control, or any other
anti-money laundering law. Each Borrower and Operating Lessee has implemented
procedures, and will consistently apply those procedures throughout the term of
the Loan, to ensure the foregoing representations and warranties remain true and
correct during the term of the Loan.

                                    (OO) Franchise Agreements. Each Franchise
Agreement is in full force and effect, there is no material default thereunder
by any party thereto and to the best of Borrower's and Operating Lessee's
knowledge and except as set forth on Schedule 2 hereof, no event has occurred
that, with the passage of time and/or the giving of notice would constitute a
default thereunder, and no fees under any Franchise Agreement are accrued and
unpaid.

                                    (PP) Operating Budget. Attached hereto as
Exhibit H is a true, complete and correct copy of the operating budget for each
Borrower's or Operating Lessee's Individual Property for the period between the
Closing Date and December 31, 2004, which Operating Budget has been approved by
Lender pursuant to the terms of this Agreement.

                                    (QQ) Property Improvement Plans. Attached
hereto as Exhibit I is (a) a true, complete and correct list of all property
improvement plans or similar agreements affecting each Individual Property
(each, a "Property Improvement Plan"), and (b) a true,

                                       65


complete and correct description of the amounts to be expended and time frames
for required expenditure pursuant to each Property Improvement Plan.

                                    (RR) Georgia Zoning Compliance. Each hotel
room located the Individual Properties owned by Ashford Buford I LP and Ashford
Buford II LP contains at least three hundred square feet (300 sq. ft.).

                                    (SS) Organizational Chart. Attached hereto
as Exhibit L is a true, complete and correct copy of the Borrowers'
organizational chart.

         Section 4.2. Survival of Representations and Warranties

                  Each Borrower and Operating Lessee agrees that (i) all of the
representations and warranties of each Borrower set forth in this Agreement and
in the other Loan Documents delivered on the Closing Date are made as of the
Closing Date (except as expressly otherwise provided) and (ii) all
representations and warranties made by each Borrower shall survive the delivery
of the Notes and continue for so long as any amount remains owing to Lender
under this Agreement, the Notes or any of the other Loan Documents; provided,
however, that the representations, warranties and covenants set forth in Section
4.1(V), Section 4.1(LL), Section 4.1(NN) and Sections 5.1(D) through 5.1(G),
inclusive, shall survive in perpetuity and shall not be subject to the
exculpation provisions of Section 8.14. All representations, warranties,
covenants and agreements made in this Agreement or in the other Loan Documents
shall be deemed to have been relied upon by Lender notwithstanding any
investigation heretofore or hereafter made by Lender or on its behalf. Without
limiting any other provision of this Agreement, with respect to each Secondary
Market Transaction, within 3 days of receipt of Lender's request, each Borrower
or Operating Lessee shall deliver to Lender a certification (a) remaking all of
the representations and warranties contained in this Agreement as of the date of
such Secondary Market Transaction, or (y) otherwise specifying any changes in or
qualifications to such representations and warranties as of such date as may be
necessary to make such representations consistent with the facts as they exist
on such date.

                                    ARTICLE 5

                              AFFIRMATIVE COVENANTS

         Section 5.1. Borrower Covenants

                  Each Borrower and Operating Lessee covenants and agrees that,
from the date hereof and until payment in full of the Indebtedness:

                                    (A) Existence; Compliance with Legal
Requirements; Insurance. Each Borrower and Operating Lessee shall do or cause to
be done all things necessary to preserve, renew and keep in full force and
effect its Entity existence, rights, licenses, Permits and franchises necessary
for the conduct of its business and comply in all material respects with all
applicable Legal Requirements and Insurance Requirements applicable

                                       66


to it and each Individual Property. Each Borrower and Operating Lessee shall
notify Lender promptly of any written notice or order that such Borrower or
Operating Lessee receives from any Governmental Authority relating to such
Borrower's or Operating Lessee's failure to comply with such applicable Legal
Requirements relating to such Borrower's or Operating Lessee's applicable
Individual Property and promptly take any and all actions necessary to bring its
operations at such Individual Property into compliance with such applicable
Legal Requirements (and shall fully comply with the requirements of such Legal
Requirements that at any time are applicable to its operations at any Individual
Property) provided, that such Borrower or Operating Lessee at its expense may,
after prior notice to the Lender, contest by appropriate legal, administrative
or other proceedings conducted in good faith and with due diligence, the
validity or application, in whole or in part, of any such applicable Legal
Requirements as long as (i) neither the applicable Collateral nor any part
thereof or any interest therein, will be sold, forfeited or lost or subject to a
continuing Lien if such Borrower or Operating Lessee pays the amount or
satisfies the condition being contested, and such Borrower or Operating Lessee
would have the opportunity to do so, in the event of such Borrower's or
Operating Lessee's failure to prevail in the contest, (ii) Lender would not, by
virtue of such permitted contest, be exposed to any risk of any civil liability
or criminal liability, and (iii) such Borrower or Operating Lessee shall have
furnished to the Lender additional security in respect of the claim being
contested or the loss or damage that may result from such Borrower's or
Operating Lessee's failure to prevail in such contest in such amount as may be
reasonably requested by Lender but in no event less than one hundred twenty-five
percent (125%) of the amount of such claim. Each Borrower and Operating Lessee
shall at all times maintain, preserve and protect all franchises and trade names
and preserve all the remainder of its property necessary for the continued
conduct of its business and keep the applicable Individual Properties in good
repair, working order and condition, except for reasonable wear and use, and
from time to time make, or cause to be made, all necessary repairs, renewals,
replacements, betterments and improvements thereto, all as more fully provided
in the Mortgages. Borrowers and Operating Lessee shall keep their Individual
Properties insured at all times, as provided in the Mortgages.

                                    (B) Impositions and Other Claims. Subject to
Section 2.11(e)(i)(x) hereof, Borrowers and Operating Lessee shall pay and
discharge or cause to be paid and discharged all Impositions, as well as all
lawful claims for labor, materials and supplies or otherwise, which could become
a Lien, all as more fully provided in, and subject to any rights to contest
contained in, the Mortgages.

                                    (C) Litigation. Each Borrower and Operating
Lessee shall give prompt written notice to Lender of any litigation or
governmental proceedings pending or threatened against such Borrower or
Operating Lessee which is reasonably likely to have a Material Adverse Effect.

                                    (D) Environmental.

                                             (i) Borrowers and Operating Lessee
         covenant and agree that: (a) all uses and operations on or of the
         Individual Properties, whether by any

                                       67


         Borrower, Operating Lessee or any other Person, shall be in compliance
         with all Environmental Laws and permits issued pursuant thereto; (b)
         there shall be no Releases of Hazardous Substances in, on, under or
         from any Individual Property; (c) there shall be no Hazardous
         Substances used, present or Released in, on, under or from any
         Individual Property, except those that are (i) in compliance in all
         material respects with all Environmental Laws and with permits issued
         pursuant thereto; (ii) fully disclosed to Lender in writing; and (iii)
         which do not require Remediation, (d) Borrowers and Operating Lessee
         shall keep each Individual Property free and clear of all Environmental
         Liens; (e) Borrowers and Operating Lessee shall, at its sole cost and
         expense, fully and expeditiously cooperate in all activities pursuant
         to Section 5.1(E) of this Agreement, including but not limited to
         providing all relevant information and making knowledgeable Persons
         available for interviews; (f) intentionally omitted; (g) such Borrower
         or Operating Lessee shall, at its sole cost and expense, (i) effectuate
         Remediation of any condition (including but not limited to a Release of
         a Hazardous Substance or violation of Environmental Laws) in, on, under
         or from each Individual Property for which Remediation is legally
         required; (ii) comply with all Environmental Laws; (iii) comply with
         any directive from any governmental authority; and (iv) take any other
         reasonable action necessary or appropriate for protection of human
         health or the environment; (h) Borrowers and Operating Lessee shall not
         do or allow any tenant or other user of any Individual Property to do
         any act that materially increases the dangers to human health or the
         environment, poses an unreasonable risk of harm to any Person (whether
         on or off any Individual Property), impairs or may impair the value or
         marketability of any Individual Property, is contrary to any
         requirement of any insurer, constitutes a public or private nuisance,
         constitutes waste, or violates any covenant, condition, agreement or
         easement applicable to any Individual Property; (i) Borrowers and
         Operating Lessee shall immediately notify Lender in writing of (A) any
         unlawful presence or Releases or threatened Releases of Hazardous
         Substances in, on, under, from or migrating towards any Individual
         Property; (B) any material non-compliance with any Environmental Laws
         related in any way to any Individual Property; (C) any actual or
         potential Environmental Lien; (D) any Remediation of environmental
         conditions relating to any Individual Property required by
         Environmental Laws; and (E) any written notice or other communication
         of which any Borrower or Operating Lessee becomes aware from any source
         whatsoever (including but not limited to a governmental entity)
         relating in any way to Release, presence, or Release or threatened
         Release of Hazardous Substances in violation of Environmental Laws or
         the Remediation thereof, Law, other environmental conditions in
         connection with any Individual Property, or any actual or potential
         administrative or judicial proceedings in connection with anything
         referred to in this Agreement; and (j) without limiting the foregoing,
         upon becoming aware of the presence of or potential for Mold in
         violation of applicable Environmental Laws on any Individual Property,
         at its sole cost and expense Borrowers and Operating Lessee shall (i)
         undertake or cause an investigation to identify the source(s) of such
         Mold, including any water intrusion, and develop and implement a plan
         for the Remediation of any Mold required under applicable Environmental
         Laws; (ii) perform, or cause to be performed, all acts required under
         applicable Environmental Laws for the Remediation of the Mold in a

                                       68


         timely manner given the circumstances; (iii) properly dispose in
         accordance with all applicable Environmental Laws of any materials
         generated as a result of or in connection with the foregoing items (i)
         and (ii); and (iv) provide Lender with evidence of Borrower's or
         Operating Lessee's compliance with the requirements of each of the
         foregoing to Lender's reasonable satisfaction.

                                    (E) Environmental Cooperation and Access. In
the event the Environmental Indemnified Parties have reason to believe that an
environmental condition exists on any Individual Property that, in the
discretion of the Lender, could endanger any tenants or other occupants of any
Individual Property or their guests or the general public or materially and
adversely affects the value of any Individual Property, upon reasonable notice
from the Lender, Borrowers shall, at any Borrowers' sole cost and expense,
promptly cause an engineer or consultant satisfactory to the Lender to conduct
any environmental assessment or audit (the scope of which shall be determined in
the sole and absolute discretion of Lender) and take any samples of soil,
groundwater or other water, air, or building materials or any other invasive
testing reasonably requested by Lender and promptly deliver the results of any
such assessment, audit, sampling or other testing; provided, further, that such
Borrowers, the Environmental Indemnified Parties and any other Person designated
by the Environmental Indemnified Parties, including but not limited to any
receiver, any representative of a governmental entity, and any environmental
consultant, shall have the right, but not the obligation, to enter upon such
Individual Property at all reasonable times (without materially interfering with
the business conducted at the Individual Property) to assess any and all aspects
of the environmental condition of such Individual Property and its use,
including but not limited to conducting any environmental assessment or audit
(the scope of which shall be determined in the reasonable discretion of Lender)
and taking samples of soil, groundwater or other water, air, or building
materials, and reasonably conducting other invasive testing (which shall be at
Borrowers' sole cost and expense if Borrowers fail to conduct or deliver an
assessment or audit as required pursuant to this Section), Borrowers shall
cooperate with and provide the Environmental Indemnified Parties and any such
Person designated by the Environmental Indemnified Parties with access to each
Individual Property.

                                    (F) Environmental Indemnity. Borrowers
covenant and agree, at their sole cost and expense, to protect, defend,
indemnify, release and hold Environmental Indemnified Parties harmless from and
against any and all Losses imposed upon or incurred by or asserted against any
Environmental Indemnified Parties and directly or indirectly arising out of or
in any way relating to any one or more of the following (other than Losses
imposed upon or incurred by or asserted against any Environmental Indemnified
Parties to the extent that the Borrowers can prove (1) that such Losses were
caused exclusively by actions, conditions or events that occurred entirely after
the date that Lender (or Lender's designee or transferee by reason of exercise
of remedies) actually acquired title to the applicable Individual Property, and
(2) that such Losses were not caused or occasioned by the actions or inactions
of any Borrower, any Manager, Operating Lessee or any agent, employee,
contractor or any Affiliate of any of the foregoing): (a) any presence or use of
any Hazardous Substances in, on, above, under, from or affecting any Individual
Property; (b) any past, present or threatened Release of Hazardous

                                       69


Substances in, on, above, under, from or affecting any Individual Property; (c)
any activity by any Borrower, any Person affiliated with any Borrower, and any
tenant or other user of such Individual Property in connection with any actual,
proposed or threatened use, treatment, storage, holding, existence, disposition
or other Release, generation, production, manufacturing, processing, refining,
control, management, abatement, removal, handling, transfer or transportation to
or from such Individual Property of or exposure to any Hazardous Substances at
any time located in, under, on or above such Individual Property; (d) any
activity by any Borrower, any Person affiliated with any Borrower, and any
tenant or other user of such Individual Property in connection with any actual
or proposed Remediation of any Hazardous Substances at any time located in,
under, on, above or affecting such Individual Property, whether or not such
Remediation is voluntary or pursuant to court or administrative order, including
but not limited to any removal, remedial or corrective action; (e) any past,
present or threatened non-compliance or violations of any Environmental Laws (or
permits issued pursuant to any Environmental Law) in connection with such
Individual Property or operations thereon, including but not limited to any
failure by any Borrower, any Person affiliated with any Borrower, and any tenant
or other user of any Individual Property to comply with any order of any
governmental authority in connection with any Environmental Laws; (f) the
imposition, recording or filing or the threatened imposition, recording or
filing of any Environmental Lien encumbering any Individual Property; (g) any
administrative processes or proceedings or judicial proceedings in any way
connected with any matter addressed in this Agreement; (h) any past, present or
threatened injury to, destruction of or loss of natural resources in any way
connected with any Individual Property, including but not limited to costs to
investigate and assess such injury, destruction or loss; (i) any acts of such
Borrower, any Person affiliated with any Borrower, and any tenant or other user
of any Individual Property in arranging for disposal or treatment, or arranging
with a transporter for transport for disposal or treatment, of Hazardous
Substances at any facility or incineration vessel containing such or similar
Hazardous Substances; (j) any acts of such Borrower, any Person affiliated with
any such Borrower, and any tenant or other user of such Individual Property in
accepting any Hazardous Substances for transport to disposal or treatment
facilities, incineration vessels or sites from which there is a Release, or a
threatened Release of any Hazardous Substance which causes the incurrence of
costs for Remediation; (k) any personal injury, wrongful death, or property or
other damage arising under any statutory or common law or tort law theory,
including but not limited to damages assessed for private or public nuisance or
for the conducting of an abnormally dangerous activity on or near such
Individual Property; and (l) any misrepresentation or inaccuracy in any
representation or warranty or material breach or failure to perform any
covenants or other obligations pursuant to this Agreement or any other Loan
Document. IT IS EXPRESSLY ACKNOWLEDGED AND AGREED BY EACH BORROWER THAT THE
INDEMNITY (AND/OR THE RELEASE) CONTAINED IN THIS SECTION 5.1(F) PROTECTS LENDER
FROM THE CONSEQUENCES OF LENDER'S ACTS OR OMISSIONS, INCLUDING WITHOUT
LIMITATION, THE NEGLIGENT ACTS OR OMISSIONS OF LENDER TO THE EXTENT PERMITTED BY
LAW; PROVIDED, HOWEVER, THAT NOTHING CONTAINED HEREIN SHALL BE DEEMED TO RELIEVE
THE LENDER FROM LIABILITY DUE TO ITS GROSS NEGLIGENCE.

                                       70


                                    (G) Duty to Defend. Upon written request by
any Environmental Indemnified Party, Borrowers shall defend same (if requested
by any Environmental Indemnified Party, in the name of the Environmental
Indemnified Party) by attorneys and other professionals reasonably approved by
the Environmental Indemnified Parties. Borrowers shall, within five Business
Days of receipt thereof, give written notice to Lender of (i) any notice, advice
or other communication from any governmental entity or any source whatsoever
with respect to Hazardous Substances on, from or affecting any Individual
Property, and (ii) any legal action brought against any party or related to any
Individual Property, with respect to which any Borrower may have liability under
this Agreement. Such notice shall comply with the provisions of Section 8.6
hereof.

                                    (H) Operating Lease.

                                             (i) Each Borrower shall (a)
         promptly perform and observe all of the covenants required to be
         performed and observed by it under the Operating Leases and do all
         things necessary to preserve and to keep unimpaired its material rights
         thereunder; (b) promptly notify Lender of any material default under
         any Operating Lease of which it is aware; (c) promptly deliver to
         Lender a copy of any notice of default or other material notice under
         any Operating Lease delivered to any Operating Lessee by Borrower; (d)
         promptly give notice to Lender of any notice or information that
         Borrower receives which indicates that an Operating Lessee is
         terminating its Operating Lease or that any Operating Lessee is
         otherwise discontinuing its operation of the applicable Individual
         Property; and (e) promptly enforce the performance and observance of
         all of the material covenants required to be performed and observed by
         the Operating Lessee under the applicable Operating Lease.

                                             (ii) If at any time, (A) an
         Operating Lessee shall become insolvent or a debtor in a bankruptcy
         proceeding or (B) Lender or its designee has taken title to an
         Individual Property by foreclosure or deed in lieu of foreclosure, has
         become a mortgagee-in-possession, has appointed a receiver with respect
         to the applicable Individual Property or has otherwise taken title to
         such Individual Property, Lender shall have the absolute right to (and
         Borrower and Operating Lessee shall reasonably cooperate and not in any
         way hinder, delay or otherwise interfere with Lender's right to),
         immediately terminate the applicable Operating Lease under and in
         accordance with the terms of the applicable Subordination, Attornment
         and Security Agreement.

                                             (iii) Borrower shall not, without
         the prior written consent of Lender, which consent shall not be
         unreasonably withheld: (a) surrender, terminate or cancel any Operating
         Lease or otherwise replace any Operating Lessee or enter into any other
         operating lease with respect to any Individual Property, provided,
         however, at the end of the term of each Operating Lease, the applicable
         Borrower may renew such Operating Lease or enter into a replacement
         Operating Lease with Operating Lessee on substantially the same terms
         as the expiring Operating Lease except that

                                       71


         Lender shall have the right to approve any material change thereto; (b)
         reduce or consent to the reduction of the term of any Operating Lease;
         or (c) enter into, renew, amend, modify, waive any provisions of,
         reduce Rents under, or shorten the term of any Operating Lease.

                                    (I) Franchise Agreements.

                           (a) Each Individual Property shall be operated under
the terms and conditions of the applicable Franchise Agreement. Each Borrower
shall or shall cause the applicable Operating Lessee to (i) pay all sums
required to be paid by the franchisee under each Franchise Agreement, (ii)
diligently perform, observe and enforce all of the terms, covenants and
conditions of each Franchise Agreement on the part of the franchisee thereunder
to be performed, observed and enforced to the end that all things shall be done
which are necessary to keep unimpaired the rights of said franchisee under each
Franchise Agreement, (iii) promptly notify Lender of the giving of any notice to
any Borrower and/or Operating Lessee of any default by the franchisee in the
performance or observance of any of the terms, covenants or conditions of any
Franchise Agreement on the part of the franchisee thereunder 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 expenditure plan, notice of a default under the Franchise Agreement,
report regarding operations at the related Individual Property, estimates of any
monetary nature and any other items reasonably requested by Lender, in each case
received by any Borrower or Operating Lessee under any Franchise Agreement.

                           (b) No Borrower shall (and shall not cause or permit
any Operating Lessee to), without the prior consent of the Lender (which consent
shall not be unreasonably withheld), surrender any Franchise Agreement or
terminate or cancel any Franchise Agreement or modify, change, supplement, alter
or amend any Franchise Agreement, in any respect, either orally or in writing,
and each Borrower hereby assigns to Lender as further security for the payment
of the Indebtedness and for the performance and observance of the terms,
covenants and conditions of this Loan Agreement, any and all rights, privileges
and prerogatives of each Borrower to surrender any Franchise Agreement or to
terminate, cancel, modify, change, supplement, alter or amend any Franchise
Agreement in any respect, and any such surrender of any Franchise Agreement or
termination, cancellation, modification, change, supplement, alteration or
amendment of any Franchise Agreement without the prior consent of Lender (which
consent shall not be unreasonably withheld) shall be void and of no force and
effect.

                           (c) If any franchisee shall default in the
performance or observance of any material term, covenant or condition of any
Franchise Agreement on the part of the franchisee thereunder to be performed or
observed, then, without limiting the generality of the other provisions of this
Agreement, and without waiving or releasing any 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 such Franchise
Agreement on the part of the franchisee to be performed or observed to be
promptly performed or observed on behalf of such Borrower, to the

                                       72


end that the rights of said franchisee (and/or such Borrower and/or Operating
Lessee) in, to and under such Franchise Agreement shall be kept unimpaired and
free from default. Any such amounts so advanced by Lender together with interest
thereon from the date expended by Lender of the Default Rate shall be part of
the Indebtedness and Borrower shall immediately repay such amounts to Lender
upon demand. Pursuant to the terms of the applicable Subordination Attornment
and Security Agreement and/or Assignment of Management Agreement, Lender and any
person designated by Lender shall have, and are hereby granted, the right to
enter upon the applicable Individual Property at any time and from time to time
for the purpose of taking any such action. If any Franchisor shall deliver to
Lender a copy of any notice sent to any Borrower and/or Operating Lessee of any
default under any Franchise Agreement, such notice shall constitute full
protection to Lender for any action taken or omitted to be taken by Lender in
good faith, in reliance thereon.

                           (d) Each Borrower shall (or shall cause the
applicable Operating Lessee to) exercise each individual option, if any, to
extend or renew the term of each Franchise Agreement upon demand by Lender made
at any time within ninety (90) days prior to the last day upon which any such
option may be exercised, and each Borrower hereby expressly authorizes and
appoints Lender as its attorney-in-fact to exercise (or cause the applicable
Operating Lessee to exercise) any such option in the name of and upon behalf of
such Borrower should such Borrower fail to do so, which power of attorney shall
be irrevocable and shall be deemed to be coupled with an interest.

                           (e) Any sums expended by Lender pursuant to this
Section shall bear interest at the Default Rate from the date such cost is
incurred to the date of payment to Lender, shall be deemed to constitute a
portion of the Indebtedness, shall be secured by the lien of the Mortgage and
the other Loan Documents and shall be immediately due and payable within two
Business Days after demand by Lender therefor.

                           (f) Each Borrower shall, promptly upon request of
Lender, but no more than two (2) times in any calendar year during the term of
the Loan (unless (i) an Event of Default has occurred and is continuing or (ii)
such request is occasioned in connection with a Secondary Market Transaction)
use its diligent best efforts to obtain and deliver (or cause to be delivered)
an estoppel certificate from each Franchisor stating that (i) each applicable
Franchise Agreement is in full force and effect and has not been modified,
amended or assigned, (ii) neither such Franchisor nor the franchisee named
thereunder is in default under any of the terms, covenants or provisions of each
applicable Franchise Agreement and such Franchisor knows of no event which, but
for the passage of time or the giving of notice or both, would constitute an
event of default under each applicable Franchise Agreement, (iii) neither such
Franchisor nor the franchisee thereunder has commenced any action or given or
received any notice for the purpose of terminating any applicable Franchise
Agreement and (iv) all sums due and payable to such Franchisor under each
applicable Franchise Agreement have been paid in full.

                           (g) Upon the termination of any Franchise Agreement,
each Borrower shall (or shall cause Operating Lessee to) promptly enter into a
new Franchise Agreement with a

                                       73


replacement Franchisor, which shall deliver a comfort or similar letter to and
in favor of Lender, all upon terms and conditions acceptable to Lender in its
discretion.

                                    (J) Access to Property. Each Borrower and
Operating Lessee shall permit agents, representatives and employees of Lender to
inspect their Individual Properties or any part thereof at such reasonable times
as may be requested by Lender upon reasonable advance written notice and without
materially interfering with the business conducted at the Individual Property.

                                    (K) Notice of Default. Each Borrower and
Operating Lessee shall promptly advise Lender of any material adverse change in
such Borrower's or Operating Lessee's condition, financial or otherwise, or of
the occurrence of any Default or Event of Default.

                                    (L) Cooperate in Legal Proceedings. Except
with respect to any claim by any Borrower against Lender, such Borrower and
Operating Lessee shall cooperate with Lender with respect to any proceedings
before any Governmental Authority which may in any way affect the rights of
Lender hereunder or any rights obtained by Lender under any of the Loan
Documents and, in connection therewith, not prohibit Lender, at its election,
from participating in any such proceedings.

                                    (M) Perform Loan Documents. Borrowers and
Operating Lessee shall observe, perform and satisfy all the terms, provisions,
covenants and conditions required to be observed, performed or satisfied by
them, and shall pay when due all costs, fees and expenses required to be paid by
them, under the Loan Documents executed and delivered by such Borrower or
Operating Lessee.

                                    (N) Insurance Benefits; Condemnation Claims.
Each Borrower and Operating Lessee shall cooperate with Lender in settling any
insurance or condemnation claim and/or obtaining for Lender the benefits of any
Insurance Proceeds and/or Condemnation Proceeds lawfully or equitably payable to
Lender in connection with any Individual Property, and Lender shall be
reimbursed for any expenses incurred in connection therewith (including
reasonable attorneys' fees and disbursements) and the payment by any Borrower or
Operating Lessee of the expense of an Appraisal on behalf of Lender in case of a
fire or other casualty affecting any Individual Property or any part thereof out
of such Insurance Proceeds and/or Condemnation Proceeds, all as more
specifically provided in the Mortgages.

                                    (O) Further Assurances. Borrowers shall, at
Borrowers' sole cost and expense:

                                             (i) upon Lender's request therefor
         given from time to time after the occurrence of any Event of Default
         pay for (a) reports of UCC, federal tax lien, state tax lien, judgment
         and pending litigation searches with respect to any Borrower and (b)
         searches of title to any Individual Property, each such search to be
         conducted by

                                       74


         search firms reasonably designated by Lender in each of the locations
         reasonably designated by Lender.

                                             (ii) furnish to Lender all
         instruments, documents, boundary surveys, footing or foundation
         surveys, certificates, plans and specifications, appraisals, title and
         other insurance reports and agreements, and each and every other
         document, certificate, agreement and instrument required to be
         furnished pursuant to the terms of the Loan Documents;

                                             (iii) execute and deliver to Lender
         such documents, instruments, certificates, assignments and other
         writings, and do such other acts necessary, to evidence, preserve
         and/or protect the Collateral at any time securing or intended to
         secure the Notes, as Lender may require in Lender's discretion; and

                                             (iv) do and execute all and such
         further lawful acts, conveyances and assurances for the better and more
         effective carrying out of the intents and purposes of this Agreement
         and the other Loan Documents, as Lender shall require from time to time
         in its discretion.

                                    (P) Management of Property. Each Individual
Property will be managed at all times by the applicable Manager pursuant to a
Management Agreement unless terminated as herein provided. Each Borrower and
Operating Lessee shall comply with the terms of and enforce its rights under the
Management Agreement. The Management Agreement shall be terminated by Borrowers
or Operating Lessee, at Lender's request, upon thirty (30) days prior written
notice to Borrowers, Operating Lessee and the applicable Manager (i) upon the
occurrence of an Event of Default, (ii) if the applicable Manager commits any
act which would permit termination by any Borrower or Operating Lessee under the
Management Agreement, or (iii) the applicable Manager commits any act which
constitutes an act of fraud, material misrepresentation, intentional
misrepresentation, gross negligence, willful misconduct, misappropriation of
funds, or physical waste of any Individual Property. If a manager is terminated
pursuant hereto, Borrowers and Operating Lessee shall promptly seek to appoint a
replacement manager acceptable to Lender in Lender's discretion, and Borrowers'
or Operating Lessee's failure to appoint an acceptable manager within thirty
(30) days after Lender's request of Borrowers to terminate the Management
Agreement shall constitute an immediate Event of Default. Borrowers or Operating
Lessee may from time to time appoint a successor manager to manage the
Individual Property, which successor manager shall be approved in writing by
Lender in Lender's discretion. Notwithstanding the foregoing, any successor
manager selected hereunder by Lender, any Borrower or Operating Lessee to serve
as Manager (i) shall be either (A) the Remington Manager provided, that the
Remington Manager shall manage the applicable Individual Property pursuant to
the terms of the master management agreement by and among the Borrowers and the
Remington Manager, or (B) a reputable management company having at least seven
(7) years' experience in the management of commercial properties with similar
uses as the Individual Properties and in the jurisdiction in which the
Individual Properties are located

                                       75


and (ii) shall not be paid management fees in excess of fees which are market
fees for comparable managers of comparable properties in the same geographic
area.

                                    (Q) Financial Reporting.

                                             (i) Each Borrower and Operating
Lessee shall keep and maintain or shall cause to be kept and maintained, on a
Fiscal Year basis, in accordance with GAAP, books, records and accounts
reflecting in reasonable detail all of the financial affairs of such Borrower or
Operating Lessee, as applicable, and all items of income and expense in
connection with the operation of the applicable Individual Properties and in
connection with any services, equipment or furnishings provided in connection
with the operation of such Individual Properties. Lender, at Lender's cost and
expense, whether such income or expense may be realized by the applicable
Borrower, Operating Lessee or by any other Person whatsoever, shall have the
right from time to time and at all times during normal business hours upon
reasonable prior written notice to such Borrower or Operating Lessee to examine
such books, records and accounts at the office of such Borrower, Operating
Lessee or other Person maintaining such books, records and accounts and to make
such copies or extracts thereof as Lender shall desire. After the occurrence of
an Event of Default, Borrowers and Operating Lessee shall pay any costs and
expenses incurred by Lender to examine any and all of such Borrower's or
Operating Lessee's books, records and accounts as Lender shall determine in
Lender's discretion to be necessary or appropriate in the protection of Lender's
interest.

                                             (ii) Borrower shall furnish to
Lender annually within ninety (90) days following the end of each Fiscal Year, a
true, complete, correct and accurate copy of the consolidated financials of
Ashford Hospitality Trust, Inc. audited by a "Big Four" accounting firm or other
firm reasonably acceptable to Lender accompanied by an unqualified opinion from
an Independent certified public accountant acceptable to Lender in Lender's
discretion, and each Borrower and Operating Lessee shall furnish financial
statements and all such financial statements above shall (a) be in form and
substance reasonably acceptable to Lender, (b) be prepared in accordance with
GAAP, (c) include or be accompanied by without limitation, a statement of
operations (profit and loss), a statement of cash flows, a calculation of Net
Operating Income for all applicable Individual Properties, a balance sheet, an
aged accounts receivable report and such other information or reports as shall
be requested by Lender or any applicable Rating Agency, (d) be accompanied by an
Officer's Certificate from a senior executive of such Borrower or Operating
Lessee, as applicable, certifying as of the date thereof (x) that such statement
is true, correct, complete and accurate, and fairly reflects the results of
operations and financial condition of such Borrower or Operating Lessee for the
relevant period, and (y) notice of whether there exists an Event of Default or
Default, and if such Event of Default or Default exists, the nature thereof, the
period of time it has existed and the action then being taken to remedy same.

                                             (iii) Intentionally Omitted.

                                       76


                                             (iv) Each Borrower and Operating
Lessee shall furnish to Lender within twenty (20) days following the end of each
calendar month, a true, correct, complete and accurate monthly unaudited
financial statement which shall (a) be in form and substance reasonably
acceptable to Lender, (b) be prepared in accordance with GAAP, (c) include,
without limitation, a statement of operations (profit and loss), a statement of
cash flows, a calculation of Net Operating Income for all applicable Individual
Properties, a consolidated balance sheet, an aged accounts receivable report and
such other information or reports as shall be requested by Lender or any
applicable Rating Agency and (d) be accompanied by an Officer's Certificate from
a senior executive of such Borrower or Operating Lessee, as applicable,
certifying as of the date thereof (x) that such statement is true, correct,
complete and accurate and fairly reflects the results of operations and
financial condition of such Borrower or Operating Lessee for the relevant
period, and (y) notice of whether there exists an Event of Default or Default,
and if such Event of Default or Default exists, the nature thereof, the period
of time it has existed and the action then being taken to remedy same.

                                             (v) Each Borrower and Operating
Lessee shall furnish to Lender, within twenty (20) days following the end of
each calendar month:

                                                       (1) a true, complete,
correct and accurate rent roll and occupancy report and such other occupancy and
rate statistics as Lender shall reasonably request;

                                                       (2) operating statements
for each Individual Property, in "Microsoft Excel" format and in form and
substance substantially similar to the form set forth on Exhibit J, (a)
containing monthly, year-to-date and trailing-twelve-month results compared to
the results for the prior year for the same periods for each Individual
Property, and (b) containing monthly, year-to-date and trailing-twelve-month
results compared to the results for the prior year for the same periods for the
Individual Properties on a consolidated basis;

                                                       (3) Smith Travel Star
Reports for the applicable month for each Individual Property in "Microsoft
Excel" format (if available);

                                                       (4) updated quality
scores for the applicable month for each Individual Property, including detailed
criteria and thresholds (if any);

                                                       (5) summary reports of
franchise terminations, defaults, reflagging efforts and conversions for each
Individual Property (if applicable);

Each such document shall (a) be delivered to Lender in electronic form and in
form and substance otherwise reasonably acceptable to Lender, and (b) be
accompanied by an Officer's Certificate from a senior executive of each Borrower
and Operating Lessee, as applicable, certifying as of the date thereof (x) that
such statement is true, correct, complete and accurate and

                                       77


(y) notice of whether there exists an Event of Default or Default, and if such
Event of Default or Default exists, the nature thereof, the period of time it
has existed and the action then being taken to remedy same.

                                             (vi) Each Borrower and Operating
         Lessee shall furnish to Lender, within twenty (20) days after request,
         such further information with respect to the operation of all
         applicable Individual Properties and the financial affairs of such
         Borrower or Operating Lessee, as applicable, as may be reasonably
         requested by Lender including, without limitation, all business plans
         prepared for such Borrower or Operating Lessee and for the operation of
         all such Individual Properties.

                                             (vii) Each Borrower and Operating
         Lessee shall furnish to Lender, within twenty (20) days after request,
         such further information regarding any Plan or Multiemployer Plan and
         any reports or other information required to be filed under ERISA as
         may be requested by Lender.

                                             (viii) Each Borrower and Operating
         Lessee shall, concurrently with such Borrower's or Operating Lessee's
         delivery to Lender, provide a copy of the items required to be
         delivered to Lender under this Section 5.1(Q) to the Rating Agencies,
         the trustee, and any servicer and/or special servicer that may be
         retained in conjunction with the Loan or any Secondary Market
         Transaction. Each Borrower and Operating Lessee shall furnish to Lender
         written notice, within two (2) Business Days after receipt by such
         Borrower or Operating Lessee, as applicable, of any Rents or other
         items of Gross Revenue that any Borrower or Operating Lessee is not
         required by this Agreement to deposit in any Collection Account, Cash
         Collateral Account, together with such other documents and materials
         relating to such Rents or other items of Gross Revenue as Lender
         reasonably requests.

                                             (ix) Each Borrower and Operating
         Lessee shall provide Lender with updated information (reasonably
         satisfactory to Lender) concerning its related Basic Carrying Costs for
         the next succeeding Fiscal Year prior to the termination of each Fiscal
         Year.

                                             (x) Each Borrower and Operating
         Lessee shall furnish to Lender annually no less than thirty (30) days
         prior to the beginning of each Fiscal Year, a true, complete, correct
         and accurate copy of such Borrower's or Operating Lessee's draft annual
         capital and operating budget for each such Borrower's or Operating
         Lessee's Individual Property (each, an "Approved Budget"), which
         Approved Budgets shall be subject to Lender's prior review and
         approval, which may be granted or withheld in Lender's sole and
         absolute discretion. Borrowers and Operating Lessee shall promptly
         revise and resubmit to Lender, for Lender's review and approval, any
         draft annual capital and operating budget to which Lender has objected
         and requested revisions. Until such time that Lender approves or is
         deemed to have approved an Approved Budget, the most recently approved
         Approved Budget shall apply; provided

                                       78


         that such approved Approved Budget shall be adjusted to reflect (x)
         matters in the proposed Approved Budget approved by Lender, (y) as to
         matters in the proposed Approved Budget not yet approved by Lender (i)
         increases for expenses actually incurred which vary in relation to
         gross revenues to the extent of increases in such gross revenues
         ("Variable Expenses"), and (ii) expenditures actually incurred which
         are beyond the reasonable control of Borrower such as taxes, utilities
         and insurance ("Uncontrollable Expenses"). Notwithstanding anything
         contained in the Loan Documents to the contrary, expenditures shall be
         deemed in compliance with and made pursuant to the Approved Budget even
         though such expenditures exceed the amount budgeted therefore in the
         Approved Budget if such expenditures are for Variable Expenses or
         Uncontrollable Expenses.

                                             (xi) Each Borrower and Operating
         Lessee shall furnish to Lender such other financial information with
         respect to such Borrower or Operating Lessee or the applicable Manager
         as Lender may, from time to time reasonably request.

                                    (R) Conduct of Business. Each Borrower and
Operating Lessee shall cause the operation of the Individual Properties to be
conducted at all times in a manner consistent with the following:

                                             (i) to maintain or cause to be
         maintained the standard of operations at each Individual Property at
         all times at a level necessary to insure a level of quality for each
         such Individual Property consistent with similar facilities in the same
         competitive market;

                                             (ii) to operate or cause to be
         operated each Individual Property in a prudent manner in compliance in
         all material respects with applicable Legal Requirements and Insurance
         Requirements relating thereto and cause all licenses, Permits, and any
         other agreements necessary for the continued use and operation of each
         Individual Property to remain in effect except to the extent the
         failure thereof would not have a Material Adverse Affect; and

                                             (iii) to maintain or cause to be
         maintained sufficient inventory and equipment of types and quantities
         at each Individual Property to enable Borrowers or the applicable
         Manager to operate the Individual Properties.

                                    (S) ERISA.

                                             (a) Each Borrower and Operating
Lessee shall deliver to Lender as soon as possible, and in any event within ten
(10) days after such Borrower or Operating Lessee knows or has reason to believe
that any of the events or conditions specified below with respect to any Plan or
Multiemployer Plan has occurred or exists, a statement signed by a senior
financial officer of such Borrower setting forth details respecting such event
or condition and the action, if any, that such Borrower, Operating Lessee or its
ERISA Affiliate proposes to take with respect thereto (and a copy of any report
or notice required to be filed with

                                       79


or given to PBGC by such Borrower, Operating Lessee or an ERISA Affiliate with
respect to such event or condition):

                                             (ii) any reportable event, as
         defined in Section 4043(b) 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 30 days of the occurrence of such event (provided
         that a failure to meet the minimum funding standard of Section 412 of
         the Code or 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 or 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;

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

                                             (iv) 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 any
         Borrower, Operating Lessee 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;

                                             (v) the complete or partial
         withdrawal from a Multiemployer Plan by any Borrower, Operating Lessee
         or any ERISA Affiliate that results in 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 any Borrower,
         Operating Lessee 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;

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

                                             (vii) 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 any Borrower, Operating Lessee or
         an ERISA Affiliate fails to timely provide security to the Plan in
         accordance with the provisions of said Sections; and

                                             (viii) the imposition of a lien or
         a security interest in connection with a Plan.

                                       80


                                             (b) No Borrower or Operating Lessee
shall engage in any transaction which would cause any obligation, or action
taken or to be taken, hereunder (or the exercise by Lender of any of its rights
under the Notes, this Agreement or the other Loan Documents) to be a non-exempt
(under a statutory or administrative class exemption) prohibited transaction
under the Employee Retirement Income Security Act of 1974, as amended ("ERISA").

                                             (c) Each applicable Borrower and
Operating Lessee hereby certifies and shall deliver to Lender such
certifications or other evidence from time to time throughout the term of the
Loan, as reasonably requested by Lender, that (A) such Borrower or Operating
Lessee is not an "employee benefit plan" as defined in Section 3(3) of ERISA,
which is subject to Title I of ERISA, a "plan" as defined in Section 4975 of the
Code, which is subject to Section 4975 of the Code, or a "governmental plan"
within the meaning of Section 3(32) of ERISA; (B) such Borrower or Operating
Lessee is not subject to state statutes regulating investments and fiduciary
obligations with respect to governmental plans or, if such Borrower is subject
to such statutes, such statutes do not in any manner affect the ability of the
such Borrower or Operating Lessee to perform its obligations under the Loan
Documents or the ability of Lender to enforce any and all of its rights under
the Loan Agreement; and (C) one or more of the following circumstances is true:
(i) Equity interests in such Borrower or Operating Lessee are publicly offered
securities, within the meaning of 29 C.F.R. Section 2510.3-101(b)(2); (ii) Less
than twenty-five percent of each outstanding class of equity interests in such
Borrower or Operating Lessee are held by "benefit plan investors" within the
meaning of 29 C.F.R. Section 2510.3-101(f)(2); or (iii) such Borrower or
Operating Lessee qualifies as an "operating company" within the meaning of 29
C.F.R. Section 2510.3-101(c).

                                             (d) If an investor or equity owner
in any Borrower or Operating Lessee is (directly or indirectly) a plan that is
not subject to Title I of ERISA or Section 4975 of the Code, but is subject to
the provisions of any federal, state, local, non-U.S. or other laws or
regulations that are similar to those portions of ERISA or the Code
(collectively, "Other Plan Laws"), the assets of such Borrower or Operating
Lessee shall not constitute the assets of such plan under such Other Plan Laws.

                                    (T) Single Purpose Entity. Each Borrower,
each SPE Equity Owner and Operating Lessee shall at all times be a
Single-Purpose Entity, subject to the qualifications set forth in Section 4.1(C)
regarding Pre-Existing Borrowers.

                                    (U) Trade Indebtedness. Each Borrower and
Operating Lessee will pay its trade payables within sixty (60) days of the date
incurred, unless such Borrower or Operating Lessee is in good faith contesting
such Borrower's obligation to pay such trade payables in a manner reasonably
satisfactory to Lender (which may include Lender's requirement that such
Borrower or Operating Lessee post security with respect to the contested trade
payable).

                                    (V) Capital Improvements and Environmental
Remediation. Borrowers shall, within time periods set forth on Exhibit B hereto,
perform the repairs and

                                       81


environmental remediation to the Individual Properties itemized on Exhibit B
hereto. Furthermore, Borrowers shall diligently perform, or cause to be
performed, in a timely and workmanlike manner all repairs, maintenance and
capital improvements contemplated by and itemized in the Approved Budget.

                                    (W) PIP Requirements. Borrowers shall,
within the time periods set forth on Exhibit I attached hereto, complete all
work required to be performed in the Property Improvement Plans existing on the
Closing Date for each Individual Property (collectively, the "PIP Work"). In the
event that all PIP Work is not fully completed on the date that is 9 calendar
months following the Closing Date, in addition to and without limiting any other
right or remedy of Lender pursuant to any Loan Document, Borrowers shall pay to
Lender on such date for deposit in the PIP Reserve Sub-Account an amount that,
when added to the funds already in the PIP Reserve Sub-Account at such time, is
equal to the aggregate PIP Costs for the PIP Work that has not been completed in
all material respects.

                                    (X) Compliance with Anti-Terrorism, Embargo,
Sanctions and Anti-Money Laundering Laws. Each Borrower and Operating Lessee
shall comply with all Legal Requirements relating to money laundering,
anti-terrorism, trade embargoes and economic sanctions, now or hereafter in
effect. Upon Lender's request from time to time during the term of the Loan,
each Borrower and Operating Lessee shall certify in writing to Lender that such
Borrower's or Operating Lessee's, as applicable, representations, warranties and
obligations under Section 4.1(OO) and this Section remain true and correct and
have not been breached. Each Borrower and Operating Lessee shall immediately
notify Lender in writing if any representations, warranties or covenants are no
longer true or have been breached or if such Borrower or Operating Lessee has a
reasonable basis to believe that they may no longer be true or have been
breached. In connection with such an event, such Borrower or Operating Lessee
shall comply with all Legal Requirements and directives of Governmental
Authorities and, at Lender's request, provide to Lender copies of all notices,
reports and other communications exchanged with, or received from, Governmental
Authorities relating to such an event. Borrowers and Operating Lessee shall also
promptly reimburse to Lender any and all costs and expenses incurred by Lender
in evaluating the effect of such an event on the Loan and Lender's interest in
the collateral for the Loan, in obtaining any necessary license from
Governmental Authorities as may be necessary for Lender to enforce its rights
under the Loan Documents, and in complying with all Legal Requirements
applicable to Lender as the result of the existence of such an event and for any
penalties or fines imposed upon Lender as a result thereof.

                                    ARTICLE 6

                               NEGATIVE COVENANTS

         Section 6.1. Borrower Negative Covenants

                                       82


                  Each Borrower and Operating Lessee covenants and agrees that,
until payment in full of the Indebtedness, it will not do, directly or
indirectly, any of the following unless Lender consents thereto in writing:

                                    (A) Liens on the Property. Incur, create,
assume, become or be liable in any manner with respect to, or permit to exist,
any Lien with respect to any Individual Property or any portion thereof, except:
(i) Liens in favor of Lender, and (ii) the Permitted Encumbrances.

                                    (B) Transfer. Except as expressly permitted
by or pursuant to this Agreement, any Mortgage or the other Loan Documents
(except as otherwise approved by Lender in writing in Lender's discretion),
allow any Transfer to occur or modify, change, supplement, alter, amend, fail to
comply with or terminate the Management Agreement or any Operating Lease, or
enter into a new Management Agreement or any Operating Lease, with respect to
any Individual Property except as permitted under this Agreement.

                                    (C) Other Borrowings. Incur, unsecured trade
payables (not evidenced by a promissory note) incurred in the ordinary course of
business relating to the ownership and operation of the applicable Borrower's
and Operating Lessee's Individual Properties which when aggregated with the
unsecured trade payables of all other Borrowers and Operating Lessee do not
exceed, at any time, a maximum amount of two and one-half percent (2.5%) of the
Loan Amount and are paid within sixty (60) days of the date incurred, create,
assume, become or be liable in any manner with respect to Other Borrowings.

                                    (D) Change In Business. Cease to be a
Single-Purpose Entity or make any material change in the scope or nature of its
business objectives, purposes or operations, or undertake or participate in
activities other than the continuance of its present business.

                                    (E) Debt Cancellation. Cancel or otherwise
forgive or release any material claim or debt owed to the Borrower by any
Person, except for adequate consideration or in the ordinary course of such
Borrower's and Operating Lessee's business or otherwise if such cancellation,
release or forgiveness is prudent and commercially reasonable.

                                    (F) Affiliate Transactions. Except as
otherwise permitted under the Loan Documents, enter into, or be a party to, any
transaction with an Affiliate of any Borrower or Operating Lessee, except in the
ordinary course of business and on terms which are no less favorable to such
Borrower, Operating Lessee or such Affiliate than would be obtained in a
comparable arm's length transaction with an unrelated third party, and, if the
amount to be paid to the Affiliate pursuant to the transaction or series of
related transactions is greater than Fifty Thousand Dollars ($50,000.00)
(determined annually on an aggregate basis) fully disclosed to Lender in
advance.

                                    (G) Creation of Easements. Create, or permit
any Individual Property or any part thereof to become subject to, any easement,
license or restrictive covenant,

                                       83


other than a Permitted Encumbrance. Without limiting the generality of the
immediately preceding sentence, no Borrower shall enter into, consent to, grant,
amend, modify, restate or supplement any document, instrument or agreement
affecting, related to or impacting upon any Individual Property, the title
thereto or any portion or aspect thereof, including, without limitation, any
easement, reciprocal easement agreement, or any declaration of easements or
covenants other than a Permitted Encumbrance.

                                    (H) Certain Restrictions. Enter into any
agreement which expressly restricts the ability of any Borrower or Operating
Lessee to enter into amendments, modifications or waivers of any of the Loan
Documents.

                                    (I) Issuance of Equity Interests. Issue or
allow to be created any stocks or shares or shareholder, partnership or
membership interests, as applicable, or other ownership interests other than the
stocks, shares, shareholder, partnership or membership interests and other
ownership interests which are outstanding or exist on the Closing Date or any
security or other instrument which by its terms is convertible into or
exercisable or exchangeable for stock, shares, shareholder, partnership or
membership interests or other ownership interests in any Borrower or Operating
Lessee. No Borrower or Operating Lessee shall allow to be issued or created any
stock in any Borrower's or Operating Lessee's general partner or managing
member, as applicable, other than the stock which is outstanding or existing on
the Closing Date or any security or other instrument which by its terms is
convertible into or exercisable or exchangeable for any stock in such Borrower's
general partner or managing member, as applicable.

                                    (J) Assignment of Licenses and Permits.
Assign or transfer any of its interest in any Permits pertaining to any
Individual Property, or assign, transfer or remove or permit any other Person to
assign, transfer or remove any records pertaining to any Individual Property
without Lender's prior written consent which consent may be granted or refused
in Lender's discretion.

                                    (K) Place of Business. Change its chief
executive office or its principal place of business or place where its books and
records are kept without giving Lender at least thirty (30) days' prior written
notice thereof and promptly providing Lender such information as Lender may
reasonably request in connection therewith.

                                    ARTICLE 7

                                    DEFAULTS

         Section 7.1. Event of Default

                  The occurrence of one or more of the following events shall be
an "Event of Default" hereunder:

                                    (i) if on any Payment Date the funds in the
         Debt Service Payment Sub-Account are insufficient to pay the Required
         Debt Service Payment due on

                                       84


         such Payment Date and the Borrowers fail to pay such insufficiency on
         such Payment Date; provided that Borrowers shall have an additional two
         Business Days past the related Payment Date to make any such payment,
         but only once during any twelve month period;

                                    (ii) intentionally omitted;

                                    (iii) if the Borrowers fail to pay the
         outstanding Indebtedness on the Maturity Date;

                                    (iv) if on any Payment Date the Borrowers
         fail to pay the Basic Carrying Costs Monthly Installment, the Capital
         Reserve Monthly Installment, the Cash Collateral Account Bank Fees or
         the Ground Rents Monthly Installment due on such Payment Date; provided
         that Borrowers shall have an additional two Business Days past the
         related Payment Date to make any such payment, but only once during any
         twelve month period;

                                    (v) if on the date any payment of a Basic
         Carrying Cost would become delinquent, the funds in the Basic Carrying
         Costs Sub-Account together with any funds in the Cash Collateral
         Account not allocated to another Sub-Account are insufficient to make
         such payment and Borrower has not otherwise paid such Basic Carrying
         Cost or funded such shortfall to Lender; provided that Borrowers shall
         have an additional two Business Days past the related Payment Date to
         make any such payment, but only once during any twelve month period;

                                    (vi) the occurrence of the events identified
         elsewhere in the Loan Documents as constituting an "Event of Default";

                                    (vii) any breach of Sections 2.11(a),
         2.11(b), 2.11(e), Section 2.14, Section 5.1(T), Section 5.1(V), Section
         5.1(W), Section 5.1(X), Section 6.1(B);

                                    (viii) intentionally omitted;

                                    (ix) if any material event of default shall
         continue beyond the expiration of any applicable notice or cure period
         with respect to Ashford Bucks County LLC's obligations under the
         Declaration;

                                    (x) if any Borrower fails to pay any other
         amount payable pursuant to this Agreement or any other Loan Document
         within two (2) Business Days of the date when due and payable in
         accordance with the provisions hereof or thereof, as the case may be;

                                    (xi) if any representation or warranty made
         herein by Borrowers or Operating Lessee or in any other Loan Document,
         or in any report, certificate, financial statement or other Instrument,
         agreement or document furnished by any

                                       85


         Borrower or Operating Lessee in connection with this Agreement, the
         Notes or any other Loan Document executed and delivered by such
         Borrower or Operating Lessee, as applicable, shall be false in any
         material respect as of the date such representation or warranty was
         made or remade;

                                    (xii) if any Borrower, any of such
         Borrower's partners or members, as applicable, Operating Lessee, or any
         SPE Equity Owner makes an assignment for the benefit of creditors;

                                    (xiii) if a receiver, liquidator or trustee
         shall be appointed for any Borrower, any of such Borrower's partners,
         members or shareholders, as applicable, or any SPE Equity Owner or if
         any Borrower, any of such Borrower's partners, members or shareholders,
         as applicable, Operating Lessee or any SPE Equity Owner shall be
         adjudicated as 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 such Borrower, any of
         such Borrower's partners, members or shareholders, as applicable,
         Operating Lessee or any SPE Equity Owner or if any proceeding for the
         dissolution or liquidation of such Borrower, any of such Borrower's
         partners, members or shareholders, as applicable, Operating Lessee or
         any SPE Equity Owner shall be instituted; provided, however, that if
         such appointment, adjudication, petition or proceeding was involuntary
         and not consented to by such Borrower, any of such Borrower's partners,
         members or shareholders, as applicable, Operating Lessee or any SPE
         Equity Owner as the case may be, upon the same not being discharged,
         stayed or dismissed within ninety (90) days; or if such Borrower, any
         of such Borrower's partners, members or shareholders, as applicable,
         Operating Lessee or any SPE Equity Owner shall generally not be paying
         its debts as they become due;

                                    (xiv) if any Borrower or Operating Lessee
         attempts to delegate its obligations or assign its rights under this
         Agreement, any of the other Loan Documents or any interest herein or
         therein;

                                    (xv) if any provision of any organizational
         document of any Borrower, Operating Lessee or any SPE Equity Owner is
         amended or modified in any respect, or if any Borrower, Operating
         Lessee, any SPE Equity Owner or any of their respective partners,
         members, or shareholders as applicable, fails to perform or enforce the
         provisions of such organizational documents or attempts to dissolve any
         Borrower, Operating Lessee or any SPE Equity Owner; or if any Borrower,
         Operating Lessee or any SPE Equity Owner or any of their respective
         partners, members or shareholders, as applicable, breaches any of the
         covenants set forth in Sections 5.1(T), or 6.1(D);

                                    (xvi) if any Borrower, SPE Equity Owner or
         Operating Lessee enters into any interest rate cap protection
         agreement, interest rate swap, interest rate hedge agreement or any
         similar agreement other than the Interest Rate Cap Agreement or unless
         consented to by Lender in its sole discretion;

                                       86


                                    (xvii) if an event or condition specified in
         Section 5.1(S) shall occur or exist with respect to any Plan,
         Multiemployer Plan or plan and, as a result of such event or condition,
         together with all other such events or conditions, Borrower or any
         ERISA Affiliate or any affiliate shall incur or in the opinion of
         Lender shall be reasonably likely to incur a liability to a Plan, a
         Multiemployer Plan, PBGC or plan (or any combination of the foregoing)
         which would constitute, in the determination of Lender, a Material
         Adverse Effect;

                                    (xviii) if without Lender's prior written
         consent (A) any Manager resigns or is removed or is replaced, (B)
         intentionally omitted, (C) any Management Agreement is entered into for
         any Individual Property or (D) there is any change in or termination of
         any Management Agreement for any Individual Property;

                                    (xix) if without Lender's prior written
         consent (A) any Franchisor resigns or is removed or is replaced, or (B)
         any Franchise Agreement is entered into for any Individual Property or
         (C) there is any material change in or termination of any Franchise
         Agreement for any Individual Property;

                                    (xx) if without Lender's prior written
         consent (A) any Operating Lessee resigns or is removed or is replaced,
         (B) intentionally omitted, (C) any Operating Lease is entered into for
         any Individual Property or (D) there is any change in or termination of
         any Operating Lease;

                                    (xxi) if any Borrower or Operating Lessee
         shall be in default under any of the other obligations, agreements,
         undertakings, terms, covenants, provisions or conditions of this
         Agreement, the Notes, any Mortgage or the other Loan Documents, not
         otherwise referred to in this Section 7.1, for ten (10) days after
         written notice to any Borrower from Lender or its successors or
         assigns, in the case of any default which can be cured by the payment
         of a commercially reasonable sum of money or for thirty (30) days after
         written notice from Lender or its successors or assigns, in the case of
         any other default (unless otherwise provided herein or in such other
         Loan Document); provided, however, that if such non-monetary default
         under this subparagraph is susceptible of cure but cannot reasonably be
         cured within such thirty (30) day period and provided further that such
         Borrower shall have commenced to cure such default within such thirty
         (30) day period and thereafter diligently and expeditiously proceeds to
         cure the same, such thirty (30) day period shall be extended for such
         time as is reasonably necessary for such Borrower in the exercise of
         due diligence to cure such default, but in no event shall such period
         exceed ninety (90) days after the original notice from Lender;

                                    (xxii) if any Operating Lessee is in default
         beyond any applicable notice or cure period under the applicable
         Operating Lease;

                                    (xxiii) if an "Event of Default" shall occur
         under any Subordination, Attornment and Security Agreement; and

                                       87


                                    (xxiv) if (A) Subject to Section 2.11(e)(v)
         hereof, Borrower shall fail in the payment of any Ground Rents as and
         when such rent or other charge is payable (unless waived by the lessor
         under the applicable Ground Lease), (B) there shall occur any default
         after the expiration of any notice and cure periods contained in the
         applicable Ground Lease by Borrower, as tenant under any Ground Lease,
         in the observance or performance of any term, covenant or condition of
         any Ground Lease on the part of Borrower, to be observed or performed
         (unless waived by the lessor under the applicable Ground Lease), (C) if
         any one or more of the events referred to in any Ground Lease shall
         occur which would cause such Ground Lease to terminate without notice
         or action by the lessor under such Ground Lease or which would entitle
         the lessor to terminate such Ground Lease and the term thereof by
         giving notice to Borrower, as tenant thereunder (unless waived by the
         lessor under the applicable Ground Lease), (D) if the leasehold estate
         created by any Ground Lease shall be surrendered or such Ground Lease
         shall be terminated or canceled for any reason or under any
         circumstances or (E) if any of the terms, covenants or conditions of
         any Ground Lease shall in any manner be modified, changed,
         supplemented, altered, or amended without the prior written consent of
         Lender.

                                    (xxv) if any of the assumptions set forth in
         that certain non-consolidation opinion from the Borrowers' counsel to
         Lender dated as of the date hereof shall be untrue in any material
         respect.

                                    (xxvi) Borrower's failure to complete all
         PIP Work in all material respects on or before the earlier of (i) the
         date that is 15 calendar months from the Closing Date and (ii) the date
         any franchisor under any Franchise Agreement declares an event of
         default in connection with Borrower's PIP Work.

         Section 7.2. Remedies

                           (a) Upon the occurrence and during the continuance of
an Event of Default, all or any one or more of the rights, powers and other
remedies available to Lender against Borrowers or any Borrower under this
Agreement, the Notes, any Mortgages or any of the other Loan Documents, or at
law or in equity may be exercised by Lender at any time and from time to time
(including, without limitation, the right to accelerate and declare the
outstanding principal amount, unpaid interest, Default Rate interest, Late
Charges, Prepayment Premium and any other amounts owing by such Borrower to be
immediately due and payable), without notice or demand, whether or not all or
any portion of the Indebtedness shall be declared due and payable, and whether
or not Lender shall have commenced any foreclosure proceeding or other action
for the enforcement of its rights and remedies under any of the Loan Documents
with respect to all or any portion of the Collateral. Any such actions taken by
Lender shall be cumulative and concurrent and may be pursued independently,
singly, successively, together or otherwise, at such time and in such order as
Lender may determine in its discretion, to the fullest extent permitted by law,
without impairing or otherwise affecting the other rights and remedies of Lender
permitted by law, equity or contract or as set forth herein or in the other Loan
Documents. Notwithstanding anything contained to the contrary herein, the
outstanding

                                       88


principal amount, unpaid interest, Default Rate interest, Late Charges,
Prepayment Premium and any other amounts owing by any Borrower shall be
accelerated and immediately due and payable, without any election by Lender upon
the occurrence of an Event of Default described in Section 7.1(xii) or Section
7.1 (xiii). Notwithstanding that this Agreement may refer to a continuing Event
of Default, and without limiting any Borrower's right to cure a Default which
may, with the passage of time, become an Event of Default, no Borrower shall
have any right pursuant to this Agreement to cure any Event of Default unless
permitted by Lender in writing.

         Section 7.3. Remedies Cumulative

                  The rights, powers and remedies of Lender under this Agreement
shall be cumulative and not exclusive of any other right, power or remedy which
Lender may have against any Borrower or any other Person pursuant to this
Agreement or the other Loan Documents executed by or with respect to any
Borrower or any other Person, or existing at law or in equity or otherwise.
Lender's rights, powers and remedies may be pursued singly, concurrently or
otherwise, at such time and in such order as Lender may determine in Lender's
discretion. No delay or omission to exercise any remedy, right or power accruing
upon an Event of Default shall impair any such remedy, right or power or shall
be construed as a waiver thereof, but any such remedy, right or power may be
exercised from time to time and as often as may be deemed expedient. A waiver of
any Default or Event of Default shall not be construed to be a waiver of any
subsequent Default or Event of Default or to impair any remedy, right or power
consequent thereon. Any and all of Lender's rights with respect to the
Collateral shall continue unimpaired, and each Borrower shall be and remain
obligated in accordance with the terms hereof, notwithstanding (i) the release
or substitution of Collateral at any time, or of any rights or interest therein
or (ii) any delay, extension of time, renewal, compromise or other indulgence
granted by Lender in the event of any Default or Event of Default with respect
to the Collateral or otherwise hereunder. Notwithstanding any other provision of
this Agreement, but subject to Section 8.14 hereof, Lender reserves the right to
seek a deficiency judgment or preserve a deficiency claim, in connection with
the foreclosure of any or all Mortgages, to the extent necessary to foreclose on
other parts of the Collateral.

         Section 7.4. Lender's Right to Perform

                  If any Borrower fails to perform any covenant or obligation
contained herein and such failure shall continue for a period of (5) five
Business Days after such Borrower's receipt of written notice thereof from
Lender, without in any way limiting Section 7.1 hereof, Lender may, but shall
have no obligation to, itself perform, or cause performance of, such covenant or
obligation, and the expenses of Lender incurred in connection therewith shall be
payable by Borrowers to Lender upon demand. Notwithstanding the foregoing,
Lender shall have no obligation to send notice to such Borrower of any such
failure.

                                    ARTICLE 8

                                  MISCELLANEOUS

                                       89


         Section 8.1. Survival

                  Subject to Section 4.2, this Agreement and all covenants,
agreements, representations and warranties made herein and in the certificates
delivered pursuant hereto shall survive the execution and delivery of this
Agreement and the execution and delivery by Borrowers to Lender of the Notes,
and shall continue in full force and effect so long as any portion of the
Indebtedness is outstanding and unpaid. Whenever in this Agreement any of the
parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of any such party. All covenants, promises and agreements
in this Agreement contained, by or on behalf of Borrower, shall inure to the
benefit of the respective successors and assigns of Lender. Nothing in this
Agreement or in any other Loan Document, express or implied, shall give to any
Person other than the parties and the holder(s) of the Notes and the other Loan
Documents, and their legal representatives, successors and assigns, any benefit
or any legal or equitable right, remedy or claim hereunder.

         Section 8.2. Lender's Discretion

                  Whenever pursuant to this Agreement or any other Loan
Document, Lender exercises any right, option or election given to Lender to
approve or disapprove, or consent or withhold consent, or any arrangement or
term is to be satisfactory to Lender or is to be in Lender's discretion, the
decision of Lender to approve or disapprove, consent or withhold consent, or to
decide whether arrangements or terms are satisfactory or not satisfactory or
acceptable or not acceptable to Lender in Lender's discretion, shall (except as
is otherwise specifically herein provided) be in the sole and absolute
discretion of Lender. Whenever pursuant to this Agreement or any other Loan
Document (a) the Rating Agencies are given any right to approve or disapprove,
(b) confirmation is required from the Rating Agencies that an action will not
result in a downgrade or withdrawal of the ratings in a Secondary Market
Transaction or (c) any arrangement or term is to be satisfactory to the Rating
Agencies, the approval of Lender shall be substituted therefore prior to the
date that all or any portion of the Loan is included in a REMIC, among other
things, Lender's reasonable determination of Rating Agency criteria.

         Section 8.3. Governing Law

                           (a) The proceeds of the Notes delivered pursuant
hereto 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 limitation, matters of
construction, validity and performance, this Agreement 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. To the fullest
extent permitted by law, each Borrower hereby unconditionally and irrevocably
waives any claim to assert that the law of any other jurisdiction governs this
Agreement and the Notes, and this Agreement and the Notes shall be governed by
and construed in accordance with the laws of the State of New York pursuant to
Section 5-1401 of the New York General Obligations Law.

                                       90


                           (b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST ANY
BORROWER ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE INSTITUTED IN ANY
FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, PURSUANT TO SECTION 5-1402 OF THE
NEW YORK GENERAL OBLIGATIONS LAW OR IN ANY FEDERAL OR STATE COURT IN THE
JURISDICTION IN WHICH THE COLLATERAL IS LOCATED, AND EACH BORROWER WAIVES ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY EACH
SUIT, ACTION OR PROCEEDING, AND EACH BORROWER HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY EACH COURT IN ANY SUIT, ACTION OR PROCEEDING. EACH BORROWER
DOES HEREBY DESIGNATE AND APPOINT CSC NETWORKS, 500 CENTRAL AVENUE, ALBANY, NEW
YORK, 12206-2290, AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS
BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY EACH SUIT,
ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT AND AGREES THAT SERVICE OF
PROCESS UPON SAID AGENT AT SAID ADDRESS (OR AT EACH OTHER OFFICE AS MAY BE
DESIGNATED BY EACH BORROWER FROM TIME TO TIME IN ACCORDANCE WITH THE TERMS
HEREOF) WITH A COPY TO EACH BORROWER AT ITS PRINCIPAL EXECUTIVE OFFICES,
ATTENTION: GENERAL COUNSEL AND WRITTEN NOTICE OF SAID SERVICE OF EACH BORROWER
MAILED OR DELIVERED TO EACH BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE
DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWER, IN ANY EACH
SUIT, ACTION OR PROCEEDING. EACH BORROWER (I) SHALL GIVE PROMPT NOTICE TO LENDER
OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY TIME
AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT (WHICH OFFICE
SHALL BE DESIGNATED AS THE ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL
PROMPTLY DESIGNATE EACH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN
OFFICE OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.

         Section 8.4. Modification, Waiver in Writing

                  No modification, amendment, extension, discharge, termination
or waiver of any provision of this Agreement, the Notes or any other Loan
Document, or consent to any departure by any Borrower therefrom, shall in any
event be effective unless the same shall be in a writing signed by the party
against whom enforcement is sought, and then such waiver or consent shall be
effective only in the specific instance, and for the purpose, for which given.
Except as otherwise expressly provided herein, no notice to or demand on any
Borrower shall entitle such Borrower to any other or future notice or demand in
the same, similar or other circumstances.

         Section 8.5. Delay Not a Waiver

                  Neither any failure nor any delay on the part of Lender in
insisting upon strict performance of any term, condition, covenant or agreement,
or exercising any right, power,

                                       91


remedy or privilege hereunder, or under the Notes, or of any other Loan
Document, or any other instrument given as security herefore, shall operate as
or constitute a waiver thereof, nor shall a single or partial exercise thereof
preclude any other future exercise, or the exercise of any other right, power,
remedy or privilege. In particular, and not by way of limitation, by accepting
payment after the due date of any amount payable under this Agreement, the Notes
or any other Loan Document, Lender shall not be deemed to have waived any right
either to require prompt payment when due of all other amounts due under this
Agreement, the Notes or the other Loan Documents, or to declare a default for
failure to effect prompt payment of any such other amount.

         Section 8.6. Notices

                  All notices, consents, approvals and requests required or
permitted hereunder or under any other Loan Document shall be given in writing
and shall be effective for all purposes if hand delivered or sent by (a) hand
delivery, with proof of attempted delivery, (b) certified or registered United
States mail, postage prepaid, (c) expedited prepaid delivery service, either
commercial or United States Postal Service, with proof of attempted delivery, or
(d) by telecopier (with answerback acknowledged) provided that such telecopied
notice must also be delivered by one of the means set forth in (a), (b) or (c)
above, addressed to the parties as follows:

                  If to Lender:             Merrill Lynch Mortgage Lending, Inc.
                                            4 World Financial Center, 16th Floor
                                            New York, New York 10080
                                            Attn: Robert Spinna
                                            Telecopier: 212-449-7684

                  If to Lender:             Merrill Lynch Capital, a Division of
                                            Merrill Lynch Business Financial
                                            Services, Inc.
                                            222 North LaSalle Street
                                            16th Floor
                                            Chicago, IL 60601
                                            Attn: Vice President,
                                                  Real Estate Portfolio Manager
                                            Telecopier:  312-499-3026

                  with a copy to:           Dechert LLP
                                            One Market Street
                                            Spear Tower, Suite 1600
                                            San Francisco, CA 94105
                                            Attn: Joseph B. Heil, Esquire
                                            Telecopier: 415-262-4555

                  If to Borrower:           [Applicable Borrower]
                                            c/o Ashford Hospitality Trust

                                       92


                                            14185 Dallas Parkway
                                            Suite 1100
                                            Dallas, TX 75254
                                            Attn: David Brooks, Esquire
                                            Telecopier: (972) 490-9605

                                     with a copy to:

                                                Andrews Kurth LLP
                                                1717 Main Street, Suite 3700
                                                Dallas, Texas 75201
                                                Attn: Brigitte Kimichik, Esquire
                                                Telecopier: (214) 659-4764

                  A party receiving a notice which does not comply with the
technical requirements for notice under this Section 8.6 may elect to waive any
deficiencies and treat the notice as having been properly given. A notice shall
be deemed to have been given: (a) in the case of hand delivery, at the time of
delivery; (b) in the case of registered or certified mail, when delivered or the
first attempted delivery on a Business Day; (c) in the case of expedited prepaid
delivery upon the first attempted delivery on a Business Day; or (d) in the case
of telecopier, upon receipt of answerback confirmation, provided that such
telecopied notice was also delivered as required in this Section 8.6. All
notices given by Lender hereunder that are effective against any Borrower shall
be deemed effective against all Borrowers. Any notice given to Lender by any
Borrower hereunder shall be deemed binding against all Borrowers.

         Section 8.7. Trial By Jury

                  EACH BORROWER AND LENDER, TO THE FULLEST EXTENT THAT THEY MAY
LAWFULLY DO SO, HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING,
INCLUDING, WITHOUT LIMITATION, ANY TORT ACTION, BROUGHT BY ANY PARTY HERETO WITH
RESPECT TO THIS AGREEMENT, THE NOTE OR THE OTHER LOAN DOCUMENTS.

         Section 8.8. Headings

                  The Article and Section headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.

         Section 8.9. Assignment

                  Lender shall have the right to assign in whole or in part this
Agreement and/or any of the other Loan Documents and the obligations hereunder
or thereunder to any Person and to participate all or any portion of the Loan
evidenced hereby, including without limitation, any servicer or trustee in
connection with a Secondary Market Transaction. Lender shall provide any

                                       93


Borrower with written notice of any such assignment; provided, however, that
such notice shall not be a condition of Lender's right to assign this Agreement
and/or any of the Loan Documents and the failure to deliver such notice shall
not constitute a default under this Loan Agreement. At the option of Lender, the
Loan may be serviced by a servicer and\or trustee selected by Lender and Lender
may delegate all or any portion of its responsibilities under this Agreement and
the other Loan Documents to such servicer and\or trustee pursuant to a servicing
agreement between Lender and such servicer and\or trustee.

         Section 8.10. Severability

                  Wherever possible, each provision of this Agreement shall be
interpreted in such 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 law, 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 8.11. Preferences

                  Lender shall have no obligation to marshal any assets in favor
of any Borrower or any other party or against or in payment of any or all of the
obligations of any Borrower pursuant to this Agreement, the Notes or any other
Loan Document. Lender shall have the continuing and exclusive right to apply or
reverse and reapply any and all payments by any Borrower to any portion of the
obligations of any Borrower hereunder. To the extent any Borrower makes a
payment or payments to Lender for any Borrower's benefit, which payment or
proceeds or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, state or federal law,
common law or equitable cause, then, to the extent of such payment or proceeds
received, the obligations hereunder or part thereof intended to be satisfied
shall be revived and continue in full force and effect, as if such payment or
proceeds had not been received by Lender.

         Section 8.12. Waiver of Notice

                  No Borrower shall be entitled to any notices of any nature
whatsoever from Lender except with respect to matters for which this Agreement
or the other Loan Documents specifically and expressly provide for the giving of
notice by Lender to such Borrower and except with respect to matters for which
such Borrower is not, pursuant to applicable Legal Requirements, permitted to
waive the giving of notice. Each Borrower hereby expressly waives the right to
receive any notice from Lender with respect to any matter for which this
Agreement or the other Loan Documents does not specifically and expressly
provide for the giving of notice by Lender to such Borrower.

         Section 8.13. Remedies of Borrower

                                       94


                  In the event that a claim or adjudication is made that Lender
or its agents, has acted unreasonably or unreasonably delayed acting in any case
where by law or under this Agreement, the Notes, any Mortgage or the other Loan
Documents, Lender or such agent, as the case may be, has an obligation to act
reasonably or promptly, Borrower agrees that neither Lender nor its agents,
shall be liable for any monetary damages, and each Borrower's sole remedies
shall be limited to commencing an action seeking injunctive relief or
declaratory judgment. The parties hereto agree that any action or proceeding to
determine whether Lender has acted reasonably shall be determined by an action
seeking declaratory judgment.

     Section 8.14. Exculpation

                  Except as otherwise set forth in this Section 8.14 and Section
4.2 to the contrary, Lender shall not enforce the liability and obligation of
any Borrower or Operating Lessee to perform and observe the obligations
contained in this Agreement, the Notes, any Mortgage or any of the other Loan
Documents executed and delivered by any Borrower or Operating Lessee except that
Lender may pursue any power of sale, bring a foreclosure action, action for
specific performance, action for money judgment, or other appropriate action or
proceeding (including, without limitation, to obtain a deficiency judgment)
against any or all Borrowers, or Operating Lessee or any other Person solely for
the purpose of enabling Lender to realize upon (a) any Collateral, and (b) any
Rents to the extent (x) received by any Borrower or any Manager (or any of their
affiliates), after the occurrence of an Event of Default or (y) distributed to
any Borrower, Operating Lessee or any Manager, or their respective shareholders,
or partners or members, as applicable, or affiliates during or with respect to
any period for which Lender did not receive the full amounts it was entitled to
receive as prepayments of the Loan pursuant to Section 2.6(b) (all Rents covered
by clauses (x) and (y) being hereinafter referred to as the "Recourse
Distributions") and (c)) any other collateral given to Lender under the Loan
Documents ((a), (b), and (c) collectively, the "Default Collateral"); provided,
however, that any judgment in any action or proceeding shall be enforceable only
to the extent of any Default Collateral. The provisions of this Section 8.14
shall not, however, (a) impair the validity of the Indebtedness evidenced by the
Loan Documents or in any way affect or impair the Liens of any Mortgage or any
of the other Loan Documents or the right of Lender to foreclose any Mortgage
following an Event of Default; (b) impair the right of Lender to name any Person
as a party defendant in any action or suit for judicial foreclosure and sale
under any Mortgage; (c) affect the validity or enforceability of the Notes, any
Mortgage or the other Loan Documents; (d) impair the right of Lender to obtain
the appointment of a receiver; (e) impair the right of Lender to bring suit for
and recover against any Person any damages, losses, expenses, liabilities or
costs resulting from fraud, willful misrepresentation, waste of all or any
portion of any Individual Property, or wrongful removal or disposal of all or
any portion of any Individual Property by any Person in connection with this
Agreement, the Notes, any Mortgage or the other Loan Documents; (f) impair the
right of Lender to obtain the Recourse Distributions received by any Person; (g)
impair the right of Lender to bring suit for and recover against any Person with
respect to any misappropriation of security deposits or Rents collected more
than one (1) month in advance; (h) impair the right of Lender to obtain
Insurance Proceeds or Condemnation Proceeds due to Lender pursuant to any
Mortgage; (i) impair the right of Lender to enforce the provisions of

                                       95


Sections 4.1(V) or 5.1(D) through 5.1(G), inclusive of this Agreement, Section
2.8 of each Mortgage or the Environmental Guaranty even after repayment in full
by any Borrower of the Indebtedness; (j) 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 Notes as provided in the Loan Documents; (k) impair the
right of Lender to bring suit for and recover against any person with respect to
any misapplication of any funds (including, without limitation, insurance
proceeds and condemnation proceeds); (l) impair the right of Lender to sue for,
seek or demand a deficiency judgment against any Person solely for the purpose
of foreclosing on any Collateral or any part thereof, or realizing upon the
Default Collateral, or (m) impair the right of Lender to bring suit for and
recover against any Person any damages, losses, expenses, liabilities or costs
in the event that Borrower or any Operating Lessee shall take any action of any
kind or nature whatsoever, either directly or indirectly to oppose, impede,
obstruct, challenge, hinder, frustrate, enjoin or otherwise interfere with (A)
Lender's termination of any Operating Lease with any Operating Lessee, (B)
Lender or the party acquiring any Individual Property following the occurrence
of a foreclosure or deed in lieu thereof (in full substitution of the applicable
Operating Lessee) being deemed the "Owner" under the Management Agreement, (C)
the execution, delivery or effectiveness of a new Management Agreement directly
between Lender or the party acquiring any Individual Property following a
foreclosure or deed in lieu thereof and applicable Manager or (D) any payment or
other transfer by any Manager of funds which would otherwise be paid to any
Operating Lessee under any Operating Lease directly to Lender or the party
acquiring any Individual Property following the occurrence of a foreclosure or
deed in lieu thereof, in each case after or as a result of any automatic
termination of the applicable Operating Lease or of Lender exercising its right
to terminate the Operating Lease, in each case pursuant to the applicable
Subordination, Attornment and Security Agreement and this Agreement, or shall,
either directly or indirectly, cause or permit any other person to take any
action which, if taken by such Operating Lessee would constitute an event
described in this Section 8.14(m); provided, however, that any deficiency
judgment referred to in this Section 8.14(m) shall be enforceable only to the
extent of any of the Default Collateral. The preceding provisions of this
Section shall be inapplicable to any Person if (i) any petition for bankruptcy,
reorganization or arrangement pursuant to federal or state law against any
Borrower or Operating Lessee shall be filed by any Borrower, Operating Lessee,
or any Affiliate of any Borrower or Operating Lessee, (ii) if an involuntary
bankruptcy or other insolvency proceeding is commenced against any Borrower or
Operating Lessee (by a party other than Lender) but only if such Borrower has
consented or acquiesced to such proceeding or if Borrower, Operating Lessee or
any Affiliate of Borrower or Operating Lessee has acted in concert with,
colluded or conspired with the party to cause the filing thereof or has
consented to or acquiesced thereto, (iii) if any Borrower or Operating Lessee
shall institute any proceeding for the dissolution or liquidation of any
Borrower or Operating Lessee, (iv) if any Borrower or Operating Lessee shall
make an assignment for the benefit of creditors, (v) if any Borrower or
Operating Lessee shall breach any representation, warranty or covenant in
Section 2.14, Section 4.1(C) (such that such breach was considered by a court as
a factor in the court's finding for a consolidation of the assets of a Borrower
or Operating Lessee with the assets of another person or entity or as a result
thereof Lender suffers any material damage, cost, liability or expense;
provided, however, that in the absence of an actual

                                       96


consolidation, recourse may be had against Borrower or Operating Lessee only to
the extent of losses for such breach), 4.1(V), 4.1(AA), 5.1(T) (such that such
breach was considered by a court as a factor in the court's finding for a
consolidation of the assets of a Borrower or Operating Lessee with the assets of
another person or entity or as a result thereof Lender suffers any material
damage, cost, liability or expense; provided, however, that in the absence of an
actual consolidation, recourse may be had against Borrower or Operating Lessee
only to the extent of losses for such breach), or 5.1(X) (v) if any Borrower or
Operating Lessee allows any Transfer to occur in violation of Section 6.1(B)
hereof or otherwise fails to obtain Lender's prior written consent to any
Transfer to the extent any consent is required in the Loan Documents (vi) any
Borrower or Operating Lessee interferes with Lender's exercise of any of its
rights or remedies hereunder or (vii) if any Borrower or Operating Lessee
breaches any representation or warranty contained in Section 4.1(S).

         Section 8.15. Exhibits Incorporated

                  The information set forth on the cover, heading and recitals
hereof, and the Exhibits attached hereto, are hereby incorporated herein as a
part of this Agreement with the same effect as if set forth in the body hereof.

         Section 8.16. Offsets, Counterclaims and Defenses

                  Any assignee of Lender's interest in and to this Agreement,
the Notes, any Mortgage and the other Loan Documents shall take the same free
and clear of all offsets, counterclaims or defenses which are unrelated to the
Loan, this Agreement, the Notes, any Mortgage and the other Loan Documents which
any Borrower may otherwise have against any assignor, and no such unrelated
counterclaim or defense shall be interposed or asserted by any Borrower in any
action or proceeding brought by any such assignee upon this Agreement, the
Notes, any Mortgage and other Loan Documents 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 each Borrower.

         Section 8.17. No Joint Venture or Partnership

                  Each Borrower and Lender intend that the relationship created
hereunder be solely that of borrower and lender. Nothing herein is intended to
create a joint venture, partnership, tenants-in-common, or joint tenancy
relationship between any Borrower and Lender nor to grant Lender any interest in
any Individual Property other than that of mortgagee or lender.

         Section 8.18. Waiver of Marshalling of Assets Defense

                  To the fullest extent that each Borrower may legally do so,
each Borrower waives all rights to a marshalling of the assets of each such
Borrower, and others with interests in such Borrower, and of any Individual
Property, or to a sale in inverse order of alienation in the event of
foreclosure of the interests hereby created, and agrees not to assert any right
under any laws

                                       97


pertaining to the marshalling of assets, the sale in inverse order of
alienation, homestead exemption, the administration of estates of decedents, or
any other matters whatsoever to defeat, reduce or affect the right of Lender
under the Loan Documents to a sale of any Individual Property for the collection
of the Indebtedness without any prior or different resort for collection, or the
right of Lender or Deed of Trust Trustee to the payment of the Indebtedness in
preference to every other claimant whatsoever.

         Section 8.19. Waiver of Counterclaim

                  Each Borrower hereby waives the right to assert a
counterclaim, other than compulsory counterclaim, in any action or proceeding
brought against Borrower by Lender or Lender's agents.

         Section 8.20. Conflict; Construction of Documents

                  In the event of any conflict between the provisions of this
Agreement and the provisions of the Notes, any Mortgage or any of the other Loan
Documents, the provisions of this Agreement shall prevail. The parties hereto
acknowledge that they were represented by counsel in connection with the
negotiation and drafting of the Loan Documents and that the Loan Documents shall
not be subject to the principle of construing their meaning against the party
which drafted same.

         Section 8.21. Brokers and Financial Advisors

                  Borrower and Lender hereby represent that they have dealt with
no financial advisors, brokers, underwriters, placement agents, agents or
finders in connection with the transactions contemplated by this Agreement. Each
Borrower hereby agrees to indemnify and hold Lender harmless from and against
any and all claims, liabilities, costs and expenses of any kind in any way
relating to or arising from a claim by any Person, that such Person acted on
behalf of any Borrower in connection with the transactions contemplated herein.
The provisions of this Section shall survive the expiration and termination of
this Agreement and the repayment of the Indebtedness.

         Section 8.22. Counterparts

                  This Agreement may be executed in any number of counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument.

         Section 8.23. Estoppel Certificates

                  Each Borrower and Lender each hereby agree at any time and
from time to time upon not less than fifteen (15) days prior written notice by
any Borrower or Lender (but no more than four (4) times per year unless (i) an
Event of Default has occurred and is continuing or (ii) such request is
occasioned in connection with a Secondary Market Transaction) to execute,

                                       98


acknowledge and deliver to the party specified in such notice, a statement, in
writing, certifying that this Agreement is unmodified and in full force and
effect (or if there have been modifications, that the same, as modified, is in
full force and effect and stating the modifications hereto), and stating whether
or not, to the knowledge of such certifying party, any Default or Event of
Default has occurred, and, if so, specifying each such Default or Event of
Default; provided, however, that it shall be a condition precedent to Lender's
obligation to deliver the statement pursuant to this Section, that Lender shall
have received, together with Borrower's request for such statement, an Officer's
Certificate stating that no Default or Event of Default exists as of the date of
such certificate (or specifying such Default or Event of Default).

         Section 8.24. Payment of Expenses

                  Borrowers shall, whether or not the Transactions are
consummated, pay all Transaction Costs, which shall include, without limitation,
reasonable out-of-pocket fees, costs, expenses, and disbursements of Lender and
its attorneys, local counsel, accountants and other contractors in connection
with (i) the negotiation, preparation, execution and delivery of the Loan
Documents and the documents and instruments referred to therein, (ii) the
creation, perfection or protection of Lender's Liens in the Collateral
(including, without limitation, fees and expenses for title and lien searches
and filing and recording fees, intangibles taxes, personal property taxes,
mortgage recording taxes, due diligence expenses, travel expenses, and
accounting firm fees, costs of the Appraisals, Environmental Reports (and an
environmental consultant), Surveys and the Engineering Reports), (iii) the
negotiation, preparation, execution and delivery of any amendment, waiver or
consent relating to any of the Loan Documents, (iv) the review and approval of
each replacement Interest Rate Cap Agreement required hereunder, and (v) the
preservation of rights under and enforcement of the Loan Documents and the
documents and instruments referred to therein, including any restructuring or
rescheduling of the Indebtedness, to the extent expressly required hereunder.

         Section 8.25. Bankruptcy Waiver

                  Each Borrower hereby agrees that, in consideration of the
recitals and mutual covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, if
any Borrower (i) files with any bankruptcy court of competent jurisdiction or be
the subject of any petition under Title 11 of the U.S. Code, as amended, (ii) is
the subject of any order for relief issued under Title 11 of the U.S. Code, as
amended, (iii) files or is the subject of any petition seeking any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any present or law relating to bankruptcy, insolvency or
other relief of debtors, (iv) has sought or consents to or acquiesces in the
appointment of any trustee, receiver, conservator or liquidator or (v) is the
subject of any order, judgment or decree entered by any court of competent
jurisdiction approving a petition filed against such party for any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any present or future federal or state act or law
relating to bankruptcy, insolvency or other relief for debtors, the automatic
stay provided by the Federal Bankruptcy Code shall be modified and annulled as
to Lender, so as to

                                       99


permit Lender to exercise any and all of its rights and remedies, upon request
of Lender made on notice to any Borrower and any other party in interest but
without the need of further proof or hearing. Neither Borrower nor any Affiliate
of any Borrower shall contest the enforceability of this Section.

         Section 8.26. Entire Agreement

                  This Agreement, together with the Exhibits hereto and the
other Loan Documents constitutes the entire agreement among the parties hereto
with respect to the subject matter contained in this Agreement, the Exhibits
hereto and the other Loan Documents and supersedes all prior agreements,
understandings and negotiations between the parties.

         Section 8.27. Dissemination of Information

                  If Lender determines at any time to participate in a Secondary
Market Transaction, Lender may forward to each purchaser, transferee, assignee,
servicer, participant or investor in such securities (collectively, the
"Investor"), any Rating Agency rating such securities, any organization
maintaining databases on the underwriting and performance of commercial loans,
trustee, counsel, accountant, and each prospective Investor, all documents and
information which Lender now has or may hereafter acquire relating to the Loan,
any Borrower, any direct or indirect equity owner of any Borrower, any
guarantor, any indemnitor and each Individual Property, which shall have been
furnished by such Borrower any Affiliate of any Borrower, any guarantor, any
indemnitor, or any party to any Loan Document, or otherwise furnished in
connection with the Loan, as Lender in its discretion determines necessary or
desirable.

         Section 8.28. Limitation of Interest

                  It is the intention of each Borrower and Lender to conform
strictly to applicable usury laws. Accordingly, if the transactions contemplated
hereby would be usurious under applicable law, then, in that event,
notwithstanding anything to the contrary in any Loan Document, it is agreed as
follows: (i) the aggregate of all consideration which constitutes interest under
applicable law that is taken, reserved, contracted for, charged or received
under any Loan Document or otherwise in connection with the Loan shall under no
circumstances exceed the maximum amount of interest allowed by applicable law,
and any excess shall be credited to principal by Lender (or if the Loan shall
have been paid in full, refunded to any Borrower); and (ii) in the event that
maturity of the Loan is accelerated by reason of an election by Lender resulting
from any default hereunder or otherwise, or in the event of any required or
permitted prepayment, then such consideration that constitutes interest may
never include more than the maximum amount of interest allowed by applicable
law, and any interest in excess of the maximum amount of interest allowed by
applicable law, if any, provided for in the Loan Documents or otherwise shall be
cancelled automatically as of the date of such acceleration or prepayment and,
if theretofore prepaid, shall be credited to principal (or if the principal
portion of the Loan and any other amounts not constituting interest shall have
been paid in full, refunded to any Borrower.)

                                      100


                  In determining whether or not the interest paid or payable
under any specific contingency exceeds the maximum amount allowed by applicable
law, Lender shall, to the maximum extent permitted under applicable law (a)
exclude voluntary prepayments and the effects thereof, and (b) amortize,
prorate, allocate and spread, in equal parts, the total amount of interest
throughout the entire contemplated term of the Loan so that the interest rate is
uniform throughout the entire term of the Loan; provided, that if the Loan is
paid and performed in full prior to the end of the full contemplated term
hereof, and if the interest received for the actual period of existence thereof
exceeds the maximum amount allowed by applicable law, Lender shall refund to any
Borrower the amount of such excess, and in such event, Lender shall not be
subject to any penalties provided by any laws for contracting for, charging or
receiving interest in excess of the maximum amount allowed by applicable law.

         Section 8.29. Indemnification

                  Borrowers shall indemnify and hold Lender and each of its
affiliates and their respective successors and assigns (including their
respective officers, directors, partners, employees, attorneys, accountants,
professionals and agents and each other person, if any, controlling Lender or
any of its affiliates within the meaning of either Section 15 of the Securities
Act of 1933, as amended, or Section 20 of the Securities Exchange Act of 1934,
as amended) (each, including Lender, an "Indemnified Party") harmless against
any and all losses, claims, damages, costs, expenses (including the fees and
disbursements of outside counsel retained by any such person) or liabilities in
connection with, arising out of or as a result of the transactions and matters
referred to or contemplated by this Agreement, except to the extent that it is
finally judicially determined that any such loss, claim, damage, cost, expense
or liability resulted directly and solely from the gross negligence, fraud or
willful misconduct of such Indemnified Party. If any Indemnified Party becomes
involved in any action, proceeding or investigation in connection with any
transaction or matter referred to or contemplated in this Agreement, Borrowers
shall periodically reimburse any Indemnified Party upon demand herefore in an
amount equal to its reasonable legal and other expenses (including the costs of
any investigation and preparation) incurred in connection therewith to the
extent such legal or other expenses are the subject of indemnification
hereunder. IT IS EXPRESSLY ACKNOWLEDGED AND AGREED BY EACH BORROWER THAT THE
INDEMNITY (AND/OR THE RELEASE) CONTAINED IN THIS SECTION 8.29 PROTECTS LENDER
FROM THE CONSEQUENCES OF LENDER'S ACTS OR OMISSIONS, INCLUDING WITHOUT
LIMITATION, THE NEGLIGENT ACTS OR OMISSIONS OF LENDER TO THE EXTENT PERMITTED BY
LAW; PROVIDED, HOWEVER, THAT NOTHING CONTAINED HEREIN SHALL BE DEEMED TO RELIEVE
THE LENDER FROM LIABILITY DUE TO ITS GROSS NEGLIGENCE.

         Section 8.30. Borrower Acknowledgments

                  Each Borrower hereby acknowledges to and agrees with Lender
that (i) the scope of Lender's business is wide and includes, but is not limited
to, financing, real estate financing, investment in real estate and other real
estate transactions which may be viewed as adverse to or

                                      101


competitive with the business of such Borrower or its Affiliates and (ii) such
Borrower has been represented by competent legal counsel and such Borrower has
consulted with such counsel prior to executing this Loan Agreement and of the
other Loan Documents.

         Section 8.31. Publicity

                  Lender shall have the right to issue press releases,
advertisements and other promotional materials describing Lender's participation
in the origination of the Loan or the Loan's inclusion in any Secondary Market
Transaction effectuated or to be effectuated by Lender. All news releases,
publicity or advertising by any Borrower or their affiliates through any media
intended to reach the general public which refers to the Loan Documents or the
financing evidenced by the Loan Documents, to the Lender, Merrill Lynch or any
of their affiliates shall be subject to the prior written approval of Lender and
Merrill Lynch Mortgage Lending, Inc., except for disclosures required by law
which shall not require Lender approval but which shall require prior written
notice to Lender.

         Section 8.32. Cross Collateralization

                  Without limitation to any other right or remedy provided to
Lender in this Agreement or any of the other Loan Documents, each Borrower and
each Manager covenants and agrees that (i) Lender shall have the right to pursue
all of its rights and remedies in one proceeding, or separately and
independently in separate proceedings which it, as Lender, in its sole and
absolute discretion, shall determine from time to time, (ii) Lender is not
required to either marshall assets, sell any or all of the Collateral in any
inverse order or alienation, or be subjected to any "one action" or "election of
remedies" law or rule, (iii) the exercise by Lender of any remedies against any
of the Collateral will not impede Lender from subsequently or simultaneously
exercising remedies against any other Collateral, (iv) all Liens and other
rights, remedies and privileges provided to Lender in this Agreement and/or any
other Loan Documents otherwise shall remain in full force and effect until
Lender has exhausted all of its remedies against the Collateral and all the
Collateral has been foreclosed, sold and/or otherwise realized upon and (v) each
Individual Property and all Collateral shall be security for the performance of
all of each relevant Borrower's obligations hereunder and each relevant
Borrower's obligations under all of the other Loan Documents. Each Borrower
acknowledges and agrees that it shall be jointly and severally liable for the
obligations of all Borrowers under the Loan Documents.

         Section 8.33. Contribution. As a result of the transactions
contemplated by this Agreement, each Borrower will benefit, directly and
indirectly, from each Borrower's obligation to pay the Indebtedness and perform
its obligations hereunder and under the other Loan Documents and in
consideration therefore each Borrower desires to enter into an allocation and
contribution agreement among themselves as set forth in this Section 8.33 to
allocate such benefits among themselves and to provide a fair and equitable
agreement to make contributions among each of Borrowers in the event any payment
is made by any individual Borrower hereunder to Lender (such payment being
referred to herein as a "Contribution", and for purposes of this Section,
includes any exercise of recourse by Lender against any Collateral of a

                                      102


Borrower and application of proceeds of such Collateral in satisfaction of such
Borrower's obligations, to Lender under the Loan Documents).

                           (a) Each Borrower shall be liable hereunder with
respect to the Indebtedness only for such total maximum amount (if any) that
would not render its Indebtedness hereunder or under any of the Loan Documents
subject to avoidance under Section 548 of the Federal Bankruptcy Code or any
comparable provisions of any state law.

                           (b) In order to provide for a fair and equitable
contribution among Borrowers in the event that any Contribution is made by an
individual Borrower (a "Funding Borrower"), such Funding Borrower shall be
entitled to a reimbursement Contribution ("Reimbursement Contribution") from all
other Borrowers for all payments, damages and expenses incurred by that Funding
Borrower in discharging any of the Indebtedness, in the manner and to the extent
set forth in this Section.

                           (c) For purposes hereof, the "Benefit Amount" of any
individual Borrower as of any date of determination shall be the net value of
the benefits to such Borrower from extensions of credit made by Lender to (i)
such Borrower and (ii) to the other Borrowers hereunder and the Loan Documents.

                           (d) Each Borrower shall be liable to a Funding
Borrower in an amount equal to the greater of (i) the (A) ratio of the Benefit
Amount of such Borrower to the total amount of Indebtedness, multiplied by (B)
the amount of Indebtedness paid by such Funding Borrower, or (ii) ninety-five
percent (95%) of the excess of the fair saleable value of the property of such
Borrower over the total liabilities of such Borrower (including the maximum
amount reasonably expected to become due in respect of contingent liabilities)
determined as of the date on which the payment made by a Funding Borrower is
deemed made for purposes hereof (giving effect to all payments made by other
Funding Borrowers as of such date in a manner to maximize the amount of such
Contributions).

                           (e) In the event that at any time there exists more
than one Funding Borrower with respect to any Contribution (in any such case,
the "Applicable Contribution"), then Reimbursement Contributions from other
Borrowers pursuant hereto shall be allocated among such Funding Borrowers in
proportion to the total amount of the Contribution made for or on account of the
other Borrowers by each such Funding Borrower pursuant to the Applicable
Contribution. In the event that at any time any Borrower pays an amount
hereunder in excess of the amount calculated pursuant to this Section 8.33
above, that Borrower shall be deemed to be a Funding Borrower to the extent of
such excess and shall be entitled to a Reimbursement Contribution from the other
Borrowers in accordance with the provisions of this Section.

                           (f) Each Borrower acknowledges that the right to
Reimbursement Contribution hereunder shall constitute an asset in favor of such
Borrower to which such Reimbursement Contribution is owing.

                                      103


                           (g) No Reimbursement Contribution payments payable by
a Borrower pursuant to the terms of this Section 8.33 shall be paid until all
amounts then due and payable by all of Borrowers to Lender, pursuant to the
terms of the Loan Documents, are paid in full in cash. Nothing contained in this
Section 8.33 shall limit or affect in any way the Indebtedness of any Borrower
to Lender under the Notes or any other Loan Documents.

                           (h) Each Borrower waives:

                                    (i) any right to require Lender to proceed
         against any other Borrower or any other person or to proceed against or
         exhaust any security held by Lender at any time or to pursue any other
         remedy in Lender's power before proceeding against Borrower;

                                    (ii) any defense based upon any legal
         disability or other defense of any other Borrower, any guarantor of any
         other person or by reason of the cessation or limitation of the
         liability of any other Borrower or any guarantor from any cause other
         than full payment of all sums payable under the Notes, this Agreement
         and any of the other Loan Documents;

                                    (iii) any defense based upon any lack of
         authority of the officers, directors, partners or agents acting or
         purporting to act on behalf of any other Borrower or any principal of
         any other Borrower or any defect in the formation of any other Borrower
         or any principal of any other Borrower;

                                    (iv) any defense based upon any statute or
         rule of law which provides that the obligation of a surety must be
         neither larger in amount nor in any other respects more burdensome than
         that of a principal;

                                    (v) any defense based upon any failure by
         Lender to obtain collateral for the Indebtedness or failure by Lender
         to perfect a lien on any Collateral;

                                    (vi) presentment, demand, protest and notice
         of any kind;

                                    (vii) any defense based upon any failure of
         Lender to give notice of sale or other disposition of any collateral to
         any other Borrower or to any other person or entity or any defect in
         any notice that may be given in connection with any sale or disposition
         of any Collateral;

                                    (viii) any defense based upon any failure of
         Lender to comply with applicable laws in connection with the sale or
         other disposition of any Collateral, including any failure of Lender to
         conduct a commercially reasonable sale or other disposition of any
         Collateral;

                                    (ix) any defense based upon any use of cash
         collateral under Section 363 of the Federal Bankruptcy Code;

                                      104


                                    (x) any defense based upon any agreement or
         stipulation entered into by Lender with respect to the provision of
         adequate protection in any bankruptcy proceeding;

                                    (xi) any defense based upon any borrowing or
         any grant of a security interest under Section 364 of the Federal
         Bankruptcy Code;

                                    (xii) any defense based upon the avoidance
         of any security interest in favor of Lender for any reason;

                                    (xiii) any defense based upon any
         bankruptcy, insolvency, reorganization, arrangement, readjustment of
         debt, liquidation or dissolution proceeding, including any discharge
         of, or bar or stay against collecting, all or any of the obligations
         evidenced by the Notes or owing under any of the Loan Documents;

                                    (xiv) any defense or benefit based upon such
         Borrower's, or any other party's, resignation of the portion of any
         obligation secured by the Mortgages to be satisfied by any payment from
         any other Borrower or any such party;

                                    (xv) all rights and defenses arising out of
         an election of remedies by Lender even though the election of remedies,
         such as non-judicial foreclosure with respect to security for the Loan
         or any other amounts owing under the Loan Documents, has destroyed
         Borrower's rights of subrogation and reimbursement against any other
         Borrower;

                                    (xvi) all rights and defenses that such
         Borrower may have because any of Indebtedness is secured by real
         property. This means, among other things: (1) Lender may collect from
         such Borrower without first foreclosing on any real or personal
         property collateral pledged by any other Borrower, (2) if Lender
         forecloses on any real property collateral pledged by any other
         Borrower, (I) the amount of the Indebtedness may be reduced only by the
         price for which that collateral is sold at the foreclosure sale, even
         if the collateral is worth more than the sale price, (II) Lender may
         collect from such Borrower even if any other Borrower, by foreclosing
         on the real property collateral, has destroyed any right such Borrower
         may have to collect from any other Borrower. This is an unconditional
         and irrevocable waiver of any rights and defenses such Borrower may
         have because any of the Indebtedness is secured by real property; and

                                    (xvii) except as may be expressly and
         specifically permitted herein, any claim or other right which such
         Borrower might now have or hereafter acquire against any other Borrower
         or any other person that arises from the existence or performance of
         any obligations under the Notes, this Agreement or the other Loan
         Documents, including any of the following: (i) any right of
         subrogation, reimbursement, exoneration, contribution, or
         indemnification; or (ii) any right to participate in any claim or
         remedy of Lender against any other Borrower or any collateral security
         [ ] herefore,

                                      105


         whether or not such claim, remedy or right arises in equity or under
         contract, statute or common law.

         Section 8.34. Each Borrower and Lender agrees that time is of the
essence with regard to all obligations under this Agreement and the other Loan
Documents.

         Section 8.35. FINAL AGREEMENT. THE WRITTEN LOAN DOCUMENTS TO WHICH THIS
NOTICE RELATES REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

         Section 8.36. Subject to the terms of Section 8.14 hereof, Lender may
proceed directly against any general partner of each Borrower, as the case may
be, without first exhausting its remedies against any Borrower. In connection
herewith, the Lender and each Borrower hereby agree that the Lender is not
required to comply with Section 3.05(d) of the Texas Revised Partnership Act
(VACS 6132b-1.01 et seq). Lender and each Borrower agree that this paragraph is
intended to comply with the provisions of Section 3.05(e)(2) of the Texas
Revised Partnership Act.

         Section 8.37. Each Borrower hereby waives, to the fullest extent
permitted by law, any and all rights under Sections 51.003 and 51.004 of the
Texas Property Code.

         Section 8.38. Each of Note A-1 Holder, Note A-2 Holder, Note A-3 Holder
and Note B Holder and the Borrowers hereby agree that one entity (including,
without limitation, its designees and servicers) shall act on behalf of Lender
and shall be the sole Lender to whom notices, requests and other communications
shall be addressed and the sole party authorized to grant or withhold consents
hereunder on behalf of the Lenders, to receive such notices, requests and other
communications and/or to grant or withhold consents, as the case may be and to
be the sole Lender to designate the account to which payments shall be made by
the Borrowers to the Lenders hereunder (or its designees or servicers);
provided, however, that the Borrowers acknowledge and agree that such Lender may
be obligated to consent, withhold its consent or otherwise take any action upon
the direction of or with the consent or concurrence of any or all of Note A-1
Holder, Note A-2 Holder, Note A-3 Holder or Note B Holder, as applicable,
pursuant to separate agreement(s) among Note A-1 Holder, Note A-2 Holder, Note
A-3 Holder and Note B Holder.

                       [Signatures on the following pages]

                                      106


                  IN WITNESS WHEREOF, the parties hereto have caused this Loan
Agreement to be duly executed by their duly authorized representatives, all as
of the day and year first above written.

                                    LENDER:

                                             MERRILL LYNCH MORTGAGE LENDING,
                                             INC. a Delaware corporation, in its
                                             capacity as Note A-1 Holder, Note
                                             A-2 Holder, and Note A-3 Holder

                                             By: /s/ ROBERT SPINNA
                                                 -----------------
                                                 Name: Robert Spinna
                                                 Title:

                                             MERRILL LYNCH CAPITAL, a
                                             Division of Merrill Lynch
                                             Business Financial Services, Inc.

                                             By: /s/ CYNTHIA M. LOZANO
                                                 ---------------------
                                             Name: Cynthia M. Lozano
                                             Title: Assistant Vice President

                    [signatures continued on following page]

                                      107


                                    BORROWERS:

                           ASHFORD DALLAS LP, a Delaware limited partnership

                           By: Ashford Senior General Partner, LLC, a Delaware
                               limited liability company, its general partner

                             By: /s/ DAVID A. BROOKS
                                 ---------------------
                                  David A. Brooks
                                  Vice President

                           ASHFORD AUSTIN LP, a Delaware limited partnership

                           By: Ashford Senior General Partner, LLC,
                               a Delaware limited liability company,
                               its general partner

                               By: /s/ DAVID A. BROOKS
                                   -------------------
                                    David A. Brooks
                                    Vice President

                           ASHFORD HOLTSVILLE LP, a Delaware limited partnership

                           By: Ashford Senior General Partner, LLC,
                               a Delaware limited liability company,
                               its general partner

                               By: /s/ DAVID A. BROOKS
                                   -------------------
                                    David A. Brooks
                                    Vice President

                                      108


                           ASHFORD DULLES LP, a Delaware limited partnership

                           By: Ashford Senior General Partner, LLC,
                               a Delaware limited liability company,
                               its general partner

                               By: /s/ DAVID A. BROOKS
                                   -------------------
                                    David A. Brooks
                                    Vice President

                           ASHFORD PHOENIX LP, a Delaware limited partnership

                           By: Ashford Senior General Partner, LLC,
                               a Delaware limited liability company,
                               its general partner

                               By: /s/ DAVID A. BROOKS
                                   -------------------
                                    David A. Brooks
                                    Vice President

                           ASHFORD FLAGSTAFF LP, a Delaware limited partnership

                           By: Ashford Senior General Partner, LLC,
                               a Delaware limited liability company,
                               its general partner

                               By: /s/ DAVID A. BROOKS
                                   -------------------
                                    David A. Brooks
                                    Vice President

                                      109


                           ASHFORD DAYTON LP, a Delaware limited partnership

                           By: Ashford Senior General Partner, LLC,
                               a Delaware limited liability company,
                               its general partner

                               By: /s/ DAVID A. BROOKS
                                   -------------------
                                    David A. Brooks
                                    Vice President

                           ASHFORD COLUMBUS LP, a Delaware limited partnership

                           By: Ashford Senior General Partner, LLC,
                               a Delaware limited liability company,
                               its general partner

                               By: /s/ DAVID A. BROOKS
                                   -------------------
                                    David A. Brooks
                                    Vice President

                           ASHFORD SYRACUSE LP, a Delaware limited partnership

                           By: Ashford Senior General Partner, LLC,
                               a Delaware limited liability company,
                               its general partner

                               By: /s/ DAVID A. BROOKS
                                   -------------------
                                    David A. Brooks
                                    Vice President

                                      110


                           ASHFORD BUFORD I LP, a Delaware limited partnership

                           By: Ashford Senior General Partner, LLC,
                               a Delaware limited liability company,
                               its general partner

                               By: /s/ DAVID A. BROOKS
                                   -------------------
                                    David A. Brooks
                                    Vice President

                           ASHFORD BUFORD II LP, a Delaware limited partnership

                           By: Ashford Senior General Partner, LLC,
                               a Delaware limited liability company,
                               its general partner

                               By: /s/ DAVID A. BROOKS
                                   -------------------
                                    David A. Brooks
                                    Vice President

                           ASHFORD EVANSVILLE I LP, a Delaware limited
                           partnership

                           By: Ashford Senior General Partner, LLC,
                               a Delaware limited liability company,
                               its general partner

                               By: /s/ DAVID A. BROOKS
                                   -------------------
                                    David A. Brooks
                                    Vice President

                                      111


                           ASHFORD EVANSVILLE II LP, a Delaware limited
                           partnership

                           By: Ashford Senior General Partner, LLC,
                               a Delaware limited liability company,
                               its general partner

                               By: /s/ DAVID A. BROOKS
                                   -------------------
                                    David A. Brooks
                                    Vice President

                           ASHFORD BLOOMINGTON LP, a Delaware limited
                           partnership

                           By: Ashford Senior General Partner, LLC,
                               a Delaware limited liability company,
                               its general partner

                               By: /s/ DAVID A. BROOKS
                                   -------------------
                                    David A. Brooks
                                    Vice President

                           ASHFORD TERRE HAUTE LP, a Delaware limited
                           partnership

                           By: Ashford Senior General Partner, LLC,
                               a Delaware limited liability company,
                               its general partner

                               By: /s/ DAVID A. BROOKS
                                   -------------------
                                    David A. Brooks
                                    Vice President

                                      112


                           ASHFORD TIPTON LAKES LP, a Delaware limited
                           partnership

                           By: Ashford Senior General Partner, LLC,
                               a Delaware limited liability company,
                               its general partner

                               By: /s/ DAVID A. BROOKS
                                   -------------------
                                    David A. Brooks
                                    Vice President

                           ASHFORD HORSE CAVE LP,
                           a Delaware limited partnership

                           By: Ashford Senior General Partner, LLC,
                               a Delaware limited liability company,
                               its general partner

                               By: /s/ DAVID A. BROOKS
                                   -------------------
                                    David A. Brooks
                                    Vice President

                           ASHFORD PRINCETON LP, a Delaware limited partnership

                           By: Ashford Senior General Partner, LLC,
                               a Delaware limited liability company,
                               its general partner

                               By: /s/ DAVID A. BROOKS
                                   -------------------
                                    David A. Brooks
                                    Vice President

                                      113


                           ASHFORD LOUISVILLE LP,
                           a Delaware limited partnership

                           By: Ashford Senior General Partner, LLC,
                               a Delaware limited liability company,
                               its general partner

                               By: /s/ DAVID A. BROOKS
                                   -------------------
                                    David A. Brooks
                                    Vice President

                           ASHFORD JACKSONVILLE II LP, a Delaware limited
                           partnership

                           By: Ashford Senior General Partner, LLC,
                               a Delaware limited liability company,
                               its general partner

                               By: /s/ DAVID A. BROOKS
                                   -------------------
                                    David A. Brooks
                                    Vice President

                           ASHFORD LAS VEGAS LP, a Delaware limited partnership

                           By: Ashford Senior General Partner, LLC,
                               a Delaware limited liability company,
                               its general partner

                               By: /s/ DAVID A. BROOKS
                                   -------------------
                                    David A. Brooks
                                    Vice President

                                      114


                           ASHFORD MOBILE LP, a Delaware limited partnership

                           By: Ashford Senior General Partner, LLC,
                               a Delaware limited liability company,
                               its general partner

                               By: /s/ DAVID A. BROOKS
                                   -------------------
                                    David A. Brooks
                                    Vice President

                           ASHFORD BUENA VISTA LP, a Delaware limited
                           partnership

                           By: Ashford Senior General Partner, LLC,
                               a Delaware limited liability company,
                               its general partner

                               By: /s/ DAVID A. BROOKS
                                   -------------------
                                    David A. Brooks
                                    Vice President

                           ASHFORD BUCKS COUNTY LLC, a
                           Delaware limited liability company

                               By: /s/ DAVID A. BROOKS
                                   -------------------
                                    David A. Brooks
                                    Vice President

                                      115


                           ASHFORD EVANSVILLE III LP, a Delaware limited
                           partnership

                           By: Ashford Senior General Partner, LLC,
                               a Delaware limited liability company,
                               its general partner

                               By: /s/ DAVID A. BROOKS
                                   -------------------
                                    David A. Brooks
                                    Vice President

                               OPERATING LESSEE:

                               Acknowledged and agreed to with respect to its
                               obligations set forth in Articles 4, 5 and 6
                               hereof and Section 2.13(g):

                               ASHFORD TRS LESSEE LLC, a Delaware limited
                               liability company

                                   by: /s/ DAVID J. KIMICHIK
                                       ---------------------
                                   Name: David Kimichik
                                   Title: President

                                      116

EX-10.17.1

                                                                 EXHIBIT 10.17.1

                            MEZZANINE LOAN AGREEMENT

                          Dated as of September 2, 2004

                                 by and between

                           ASHFORD MEZZ BORROWER LLC,
                      a Delaware limited liability company

                                  (as Borrower)

                                       and

                             MERRILL LYNCH CAPITAL,
          a Division of Merrill Lynch Business Financial Services, Inc.

                                   (as Lender)



                                TABLE OF CONTENTS



                                                                                                                  PAGE
                                                                                                               
ARTICLE 1.            CERTAIN DEFINITIONS.......................................................................     1

         Section 1.1.          Definitions......................................................................     1

ARTICLE 2.            GENERAL TERMS.............................................................................    25

         Section 2.1.          Amount of the Loan...............................................................    25
         Section 2.2.          Use of Proceeds..................................................................    25
         Section 2.3.          Security for the Loan............................................................    25
         Section 2.4.          Borrower's Note..................................................................    25
         Section 2.5.          Principal and Interest Payments..................................................    25
         Section 2.6.          Prepayment.......................................................................    26
         Section 2.7.          Application of Payments..........................................................    28
         Section 2.8.          Payment of Debt Service, Method and Place of Payment.............................    28
         Section 2.9.          Taxes; Funding Losses; Changes in Law............................................    28
         Section 2.10.         Extension Options................................................................    29
         Section 2.11.         Central Cash Management..........................................................    30
         Section 2.12.         Security Agreement...............................................................    33
         Section 2.13.         Secondary Market Transactions....................................................    35
         Section 2.14.         Interest Rate Cap Agreement......................................................    37
         Section 2.15.         Partial Release..................................................................    38

ARTICLE 3.            CONDITIONS PRECEDENT......................................................................    39

         Section 3.1.          Conditions Precedent to the Making of the Loan...................................    39
         Section 3.2.          Form of Loan Documents and Related Matters.......................................    44

ARTICLE 4.            REPRESENTATIONS AND WARRANTIES............................................................    44

         Section 4.1.          Representations and Warranties of Borrower.......................................    44
         Section 4.2.          Survival of Representations and Warranties.......................................    54

ARTICLE 5.            AFFIRMATIVE COVENANTS.....................................................................    54

         Section 5.1.          Borrower Covenants...............................................................    54

ARTICLE 6.            NEGATIVE COVENANTS........................................................................    70

         Section 6.1.          Borrower Negative Covenants......................................................    70

ARTICLE 7.            DEFAULTS..................................................................................    74

         Section 7.1.          Event of Default.................................................................    74
         Section 7.2.          Remedies.........................................................................    77
         Section 7.3.          Remedies Cumulative..............................................................    78
         Section 7.4.          Lender's Right to Perform........................................................    78
         Section 7.5.          Sale.............................................................................    79
         Section 7.6.          Partial Foreclosure..............................................................    79
         Section 7.7.          Receiver.........................................................................    79
         Section 7.8.          UCC Remedies.....................................................................    79


                                       -i-



                                TABLE OF CONTENTS
                                   (continued)



                                                                                                                  PAGE
                                                                                                               
         Section 7.9.          Exercise of Equity Interest Rights...............................................    80
         Section 7.10.         Power of Attorney................................................................    80

ARTICLE 8.            MISCELLANEOUS.............................................................................    80

         Section 8.1.          Survival.........................................................................    80
         Section 8.2.          Lender's Discretion..............................................................    80
         Section 8.3.          Governing Law....................................................................    81
         Section 8.4.          Modification, Waiver in Writing..................................................    82
         Section 8.5.          Delay Not a Waiver...............................................................    82
         Section 8.6.          Notices..........................................................................    82
         Section 8.7.          Trial By Jury....................................................................    84
         Section 8.8.          Headings.........................................................................    84
         Section 8.9.          Assignment.......................................................................    84
         Section 8.10.         Severability.....................................................................    84
         Section 8.11.         Preferences......................................................................    84
         Section 8.12.         Waiver of Notice.................................................................    85
         Section 8.13.         Remedies of Borrower.............................................................    85
         Section 8.14.         Exculpation......................................................................    85
         Section 8.15.         Exhibits Incorporated............................................................    87
         Section 8.16.         Offsets, Counterclaims and Defenses..............................................    87
         Section 8.17.         No Joint Venture or Partnership..................................................    87
         Section 8.18.         Waiver of Marshalling of Assets Defense..........................................    87
         Section 8.19.         Waiver of Counterclaim...........................................................    88
         Section 8.20.         Conflict; Construction of Documents..............................................    88
         Section 8.21.         Brokers and Financial Advisors...................................................    88
         Section 8.22.         Counterparts.....................................................................    88
         Section 8.23.         Estoppel Certificates............................................................    88
         Section 8.24.         Payment of Expenses..............................................................    89
         Section 8.25.         Bankruptcy Waiver................................................................    89
         Section 8.26.         Entire Agreement.................................................................    89
         Section 8.27.         Dissemination of Information.....................................................    90
         Section 8.28.         Limitation of Interest...........................................................    90
         Section 8.29.         Indemnification..................................................................    91
         Section 8.30.         Borrower Acknowledgments.........................................................    91
         Section 8.31.         Publicity........................................................................    91
         Section 8.32.         .................................................................................    92
         Section 8.33.         Final Agreement..................................................................    92
         Section 8.34.         .................................................................................    92


                                      -ii-



Exhibit A         Intentionally Omitted
Exhibit B         Capital Improvements/Environmental Remediation
Exhibit C         Interest Rate Cap Agreement Requirements
Exhibit D         Allocated Mezzanine Loan Amounts
Exhibit F         Managers
Exhibit G         Franchisors

Schedule 1        Litigation
Schedule 2        Franchise Agreement Defaults

                                      -iii-



                            MEZZANINE LOAN AGREEMENT

                  THIS MEZZANINE LOAN AGREEMENT, made as of September 2, 2004,
is by and between MERRILL LYNCH CAPITAL, a Division of Merrill Lynch Business
Financial Services, Inc., a Delaware corporation, (together, with its successors
and assigns, "Lender"), and ASHFORD MEZZ BORROWER LLC, a Delaware limited
liability company ("Borrower").

                                    RECITALS

                  A. Borrower desires to obtain a loan (the "Loan") from Lender
in the principal amount of $25,000,000.

                  B. Lender is willing to make the Loan on the condition that
Borrower joins in the execution and delivery of this Agreement, which shall
establish the terms and conditions of the Loan.

                  NOW, THEREFORE, in consideration of the making of the Loan by
Lender, and the covenants, agreements, representations and warranties set forth
in this Agreement, the parties hereby covenant, agree, represent and warrant as
follows:

                                    ARTICLE 1

                               CERTAIN DEFINITIONS

         Section 1.1 Definitions.

                  For all purposes of this Agreement:

                           (a) the capitalized terms defined in this Article 1
have the meanings assigned to them in this Article 1, and include the plural as
well as the singular;

                           (b) all accounting terms have the meanings assigned
to them in accordance with GAAP;

                           (c) the words "herein", "hereof", and "hereunder" and
other words of similar import refer to this Agreement as a whole and not to any
particular Article, Section, or other subdivision; and

                           (d) the following terms have the following meanings:

                  "Acceptable Counterparty" means any counterparty to an
Interest Rate Cap Agreement that has and maintains (or whose obligations
thereunder are guaranteed in a manner and by a guarantor that is reasonably
acceptable to Lender, (a) (i) a long-term unsecured debt rating or counterparty
rating of "AA-" or higher from S&P, and (ii) a short-term unsecured debt rating
of not less than "A-1+" by S&P, and (b) a long-term unsecured debt rating of not
less than



"Aa3" by Moody's, or any other counterparty to an Interest Rate Cap Agreement
with respect to which a Rating Agency Confirmation is received.

                  "Account Collateral" means the Deposit Account (including all
Sub-Accounts), all amounts deposited or held in such accounts, and all Proceeds
of any or all of the foregoing.

                  "Affiliate" of any specified Person means any other Person
controlling, controlled by or under common control with such specified Person.
For the purposes of this Agreement, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities or other beneficial interests, by contract or otherwise; and the
terms "controls", "controlling" and "controlled" have the meanings correlative
to the foregoing. For the avoidance of doubt, with respect to Borrower, any
Mortgage Borrower or Operating Lessee, the definition of "Affiliate" shall not
include Remington Manager.

                  "Agreement" means this Mezzanine Loan Agreement, as the same
may from time to time hereafter be modified, supplemented or amended.

                  "Allocated Mezzanine Loan Amount" means, with respect to each
Individual Property, the amount set forth on Exhibit D attached hereto, as such
amounts shall be adjusted from time to time as hereinafter set forth. Upon each
adjustment in the amount of Indebtedness due to the making of a prepayment of
the Loan in accordance with the terms hereof, each Allocated Mezzanine Loan
Amount shall be decreased by an amount equal to the product of (i) the amount of
such payment and (ii) a fraction, the numerator of which is the applicable
Allocated Mezzanine Loan Amount (prior to the adjustment in question) and the
denominator of which is the total of all Allocated Mezzanine Loan Amounts (prior
to the adjustment in question). Notwithstanding the foregoing sentence to the
contrary, when the Indebtedness is reduced as the result of Lender's receipt of
proceeds with respect to a Condemnation or Casualty affecting one hundred
percent (100%) of any Individual Property, the Allocated Mezzanine Loan Amount
for such Individual Property with respect to which the Insurance Proceeds or
Condemnation Proceeds were received shall, at Lender's sole discretion, be
reduced to zero (such Allocated Mezzanine Loan Amount prior to reduction being
referred to as the "Withdrawn Allocated Amount"), and each other Allocated
Mezzanine Loan Amount shall, if the Withdrawn Allocated Amount exceeds such
proceeds (such excess being referred to as the "Proceeds Deficiency"), be
increased by an amount equal to the product of (1) the Proceeds Deficiency and
(2) a fraction, the numerator of which is the applicable Allocated Mezzanine
Loan Amount (prior to the adjustment in question) and the denominator of which
is the aggregate of all of the Allocated Mezzanine Loan Amounts (prior to the
adjustment in question) other than the Withdrawn Allocated Amount.

                  "Appraisal" means an appraisal of any Individual Property
prepared in accordance with the requirements of FIRREA prepared by an
independent third party appraiser holding an MAI designation, who is state
licensed or state certified if required under the laws of the state where such
Individual Property is located, who meets the requirements of FIRREA and who is
otherwise reasonably satisfactory to Lender.

                                        2


                  "Approved Budget" has the meaning provided in Section
5.1(P)(x).

                  "Basic Carrying Costs" means the following costs with respect
to each Individual Property: (i) Impositions applicable to such Property; (ii)
insurance premiums for policies of insurance required or permitted to be
maintained by the applicable Mortgage Borrower pursuant to the Mortgage Loan
Documents; and (iii) all Monthly Assessments and Special Assessments (as such
terms are defined in the Declaration).

                  "Borrower" has the meaning provided in the preamble to this
Agreement.

                  "Business Day" means any day other than a Saturday, a Sunday
or a legal holiday on which national banks are not open for general business in
(i) the State of Kansas, (ii) the state where the corporate trust office of the
any trustee in connection with a Secondary Market Transaction is located, or
(iii) the state where the servicing offices of the any servicer in connection
with a Secondary Market Transactions are located.

                  "Cash Management Fee Sub-Account" means the Sub-Account of the
Deposit Account established and maintained pursuant to Section 2.11 relating to
the payment of fees payable to the Deposit Account Bank.

                  "Closing Date" means the date of this Agreement.

                  "Code" means the Internal Revenue Code of 1986, as amended,
and as it may be further amended from time to time, any successor statutes
thereto, together with applicable U.S. Department of Treasury regulations issued
pursuant thereto in temporary or final form.

                  "Collateral" has the meaning set forth in the Mortgage Loan
Agreement.

                  "Condemnation Proceeds" has the meaning provided in the
Mortgages.

                  "Contingent Obligation" means any obligation of Borrower
guaranteeing any indebtedness, leases, dividends or other obligations ("primary
obligations") of any other Person (the "primary obligor") in any manner, whether
directly or indirectly, including, without limitation, any obligation of
Borrower, whether or not contingent; (i) to purchase any such primary
obligation, or any property constituting direct or indirect security therefor;
(ii) to advance or supply funds (x) for the purchase or payment of any such
primary obligation or (y) to maintain working capital or equity capital of the
primary obligor; (iii) to purchase property, securities or services primarily
for the purpose of assuring the owner or obligee under any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation; or (iv) otherwise to assure or hold harmless the owner or obligee
under such primary obligation against loss in respect thereof. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
anticipated liability in respect thereof (assuming that Borrower is required to
perform thereunder) as determined by Lender in good faith.

                                        3


                  "Contractual Obligation" means, 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 its
property is bound, or any provision of the foregoing.

                  "Current Interest Accrual Period" has the meaning provided in
Section 2.11(d).

                  "Debt Service" means, for any period, the aggregate of all
principal, interest payments, Default Rate interest, Late Charges and Prepayment
Premium that accrue or are due and payable in accordance with the Loan Documents
during such period.

                  "Debt Service Coverage Ratio" shall have the meaning set forth
in the Mortgage Loan Agreement.

                  "Declaration" shall have the meaning set forth in the Mortgage
Loan Agreement.

                  "Mezzanine Debt Service Payment Sub-Account" means the
Sub-Account of the Deposit Account established and maintained pursuant to
Section 2.11 relating to the payment of Debt Service.

                  "Default" means the occurrence of any event which, but for the
giving of notice or the passage of time, or both, would be an Event of Default.

                  "Default Collateral" has the meaning provided in Section 8.14.

                  "Default Prepayment" has the meaning provided in Section
2.6(g).

                  "Default Rate" means the per annum interest rate equal to the
lesser of (i) the Maximum Amount or (ii) the LIBOR Interest Rate plus five
percent (5%).

                  "Deposit Account" has the meaning provided in Section 2.11(b).

                  "Deposit Account Agreement" has the meaning provided in
Section 2.12(b).

                  "Deposit Account Bank" means the bank chosen by Lender to hold
the Deposit Account, or any successor bank hereafter selected by Lender in
accordance with the terms hereof.

                  "Eligible Account" means (i) an account maintained with a
federal or state chartered depository institution or trust company whose (x)
commercial paper, short-term debt obligations or other short-term deposits are
rated at least A-1 by S&P and the equivalent by each other Rating Agency if the
deposits in such account are to be held in such account for thirty (30) days or
less or (y) long-term unsecured debt obligations are rated at least A by S&P and
the equivalent by each other Rating Agency if the deposits in such account are
to be held in such account for more than thirty (30) days; or (ii) a segregated
trust account maintained with the trust department of a federal or state
chartered depository institution or trust company acting in its fiduciary
capacity which institution or trust company is subject to regulations regarding
fiduciary

                                        4


funds on deposit substantially similar to 12 C.F.R. Section 9.10(b); or (iii) an
account otherwise acceptable to each Rating Agency, 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 security issued in
connection with a Secondary Market Transaction.

                  "Embargoed Person" has the meaning provided in Section
4.1(LL).

                  "Engineer" means any reputable Independent engineer, properly
licensed in the relevant jurisdiction and approved by Lender in Lender's
reasonable discretion.

                  "Engineering Report(s)" means, with respect to each Individual
Property, the structural engineering report(s) with respect to such Individual
Property (i) prepared by an Engineer, (ii) addressed to or permitted by such
preparer to be relied upon by Lender, (iii) prepared based on a scope of work
determined by Lender in Lender's discretion, and (iv) in form and content
acceptable to Lender in Lender's discretion, together with any amendments or
supplements thereto.

                  "Entity" means (i), with respect to Borrower, a (a)
corporation, if Borrower is listed as a corporation in the preamble to this
Agreement, (b) limited partnership, if Borrower is listed as a limited
partnership in the preamble to this Agreement or (c) limited liability company,
if Borrower is listed as a limited liability company in the preamble to this
Agreement; and (ii) with respect to any Mortgage Borrower, (a) corporation, if
such Mortgage Borrower is a corporation, (b) limited partnership, if such
Mortgage Borrower is a limited partnership, or (c) limited liability company, if
such Mortgage Borrower is a limited liability company.

                  "Environmental Guaranty" means the Environmental Indemnity
Agreement in form and substance satisfactory to Lender dated as of the Closing
Date from Borrower to Lender relating to all Individual Properties, as the same
may thereafter be from time to time supplemented, amended, modified or extended
by one or more agreements supplemental thereto.

                  "Environmental Indemnified Parties" includes Lender, any
Person who is or will have been involved with the servicing of the Loan, Persons
who may hold or acquire or will have held a full or partial interest in the Loan
(including, but not limited to, Investors or prospective Investors, as well as
custodians, trustees and other fiduciaries who hold or have held a full or
partial interest in the Loan for the benefit of third parties) as well as the
respective directors, officers, shareholders, partners, employees, agents,
servants, representatives, contractors, subcontractors, affiliates,
subsidiaries, participants, successors and assigns of any and all of the
foregoing (including but not limited to any other Person who holds or acquires
or will have held a participation or other full or partial interest in the Loan
or the collateral therefor, whether during the term of the Loan or as a part of
or following a foreclosure of the collateral for the Loan and including, but not
limited to, any successors by merger, consolidation or acquisition of all or a
substantial portion of Lender's assets and business).

                  "Environmental Law" means any present and future federal,
state and local laws, statutes, ordinances, rules, regulations and the like, as
well as common law, relating to protection of human health or the environment,
relating to Hazardous Substances, relating to liability for or

                                        5


costs of other actual or threatened danger to human health or the environment,
including, without limitation, the following statutes, as amended, any successor
thereto, and any regulations promulgated pursuant thereto, and any state or
local statutes, ordinances, rules, regulations and the like addressing similar
issues: the Comprehensive Environmental Response, Compensation and Liability
Act; the Emergency Planning and Community Right-to-Know Act; the Hazardous
Substances Transportation Act; the Resource Conservation and Recovery Act
(including but not limited to Subtitle I relating to underground storage tanks);
the Solid Waste Disposal Act; the Clean Water Act; the Clean Air Act; the Toxic
Substances Control Act; the Safe Drinking Water Act; the Occupational Safety and
Health Act; the Federal Water Pollution Control Act; the Federal Insecticide,
Fungicide and Rodenticide Act; the Endangered Species Act; the National
Environmental Policy Act; and the River and Harbors Appropriation Act, and
including, without limitation, any present and future federal, state and local
laws, statutes ordinances, rules, regulations and the like, as well as common
law: requiring notification or disclosure of Releases of Hazardous Substances or
other environmental condition of any or all of the Individual Properties to any
Governmental Authority or other Person, whether or not in connection with
transfer of title to or interest in any or all of the Individual Properties.

                  "Environmental Liens" means, with respect to each Individual
Property, all liens and other encumbrances imposed on Borrower, any Mortgage
Borrower, the Pledged Collateral or any Individual Property pursuant to any
Environmental Law, whether due to any act or omission of Borrower, any Mortgage
Borrower or any other Person.

                  "Environmental Report(s)" means, with respect to each
Individual Property, environmental audit report(s) (i) prepared by a reputable
environmental Engineer approved by Lender in Lender's discretion, (ii) addressed
to or permitted by such environmental Engineer to be relied upon by Lender (iii)
prepared based on a scope of work determined by Lender in Lender's discretion,
and (iv) in form and content acceptable to Lender in Lender's discretion,
together with any amendments or supplements thereto delivered to Lender.

                  "Equity Interests" means all membership interests in Borrower.

                  "ERISA" means 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
Agreement and, as of the relevant date, any subsequent provisions of ERISA,
amendatory thereof, supplemental thereto or substituted therefor.

                  "ERISA Affiliate" means any corporation or trade or business
that is a member of any group of organizations (i) described in Section 414(b)
or (c) of the Code, of which Borrower, any Mortgage Borrower or Operating Lessee
is a member, and (ii) 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, any Mortgage Borrower or
Operating Lessee is a member.

                                        6


                  "Event of Default" has the meaning set forth in Section 7.1.

                  "Exchange Act" has the meaning set forth in Section 2.13.

                  "Extension Interest Rate Cap Agreement" means a confirmation
(together with the definitions, ISDA master agreement and schedules relating
thereto) between the applicable Acceptable Counterparty and Borrower, relating
to the applicable Extension Term, satisfying the requirements set forth in
Exhibit C.

                  "Extension Term" has the meaning set forth in Section 2.10.

                  "FIRREA" shall mean the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, as the same may be amended from time to
time.

                  "First Extended Maturity Date" has the meaning set forth in
Section 2.10.

                  "First Extension Term" has the meaning set forth in Section
2.10.

                  "Fiscal Year" means the 12-month period ending on December 31
of each year or such other fiscal year of Borrower or other Person as Borrower,
or other Person, as applicable, may select from time to time with the prior
written consent of Lender, such consent not to be unreasonably withheld or
delayed.

                  "Franchise Agreement" shall mean, individually or
collectively, as the context may require, each franchise or similar agreement
entered into by and between the applicable Mortgage Borrower and/or Operating
Lessee and Franchisor pursuant to which the applicable Mortgage Borrower and/or
Operating Lessee is permitted to operate the applicable Individual Property
under the "flag" or other trade name that is the subject thereof, as the same
may be amended, restated, replaced, supplemented or otherwise modified in
accordance with the terms hereof.

                  "Franchisor" shall mean, individually or collectively, as the
context may require, each franchisor under a Franchise Agreement. As of the date
hereof, each Franchisor of each Individual Property is set forth on Exhibit G
attached hereto. No replacement or substitute Franchisor shall be selected,
approved or consented to by any Mortgage Borrower or Operating Lessee other than
in accordance with the terms hereof.

                  "Franchisor's Subordination" means, with respect to each
Individual Property, a Franchisor's Consent and Subordination Agreement, comfort
letter or similar agreement in form and substance satisfactory to Lender, dated
as of the Closing Date, executed by the relevant Franchisor and others as the
same may thereafter from time to time be supplemented, amended, modified or
extended by one or more written agreements supplemental thereto.

                  "Funding Losses" means, collectively, all losses, costs and
expenses incurred or sustained (or expected to be incurred or sustained) by
Lender in liquidating or re-employing

                                        7


funds from third parties to effect or maintain the Loan or any part thereof as a
consequence of (a) if the Loan, or any portion thereof, is repaid for any reason
whatsoever on any date other than a Payment Date (including, without limitation,
from Insurance Proceeds or Condemnation Proceeds); (b) any default in the
payment or prepayment of the Principal Indebtedness or any part thereof or
interest accrued thereon, as and when due and payable (at the date thereof or
otherwise, and whether by acceleration or otherwise); (c) intentionally omitted;
(d) any losses, expenses or increased costs incurred or sustained by Lender due
to the determination of the "LIBOR Rate" other than pursuant to the first
sentence of the definition thereof; (e) the reduction of any amounts received or
receivable from Borrower, in either case, due to the introduction of, or any
change in, law or applicable regulation or treaty (including the administration
or interpretation thereof), whether or not having the force of law, or due to
the compliance by Lender with any directive, whether or not having the force of
law, or request from any central bank or domestic or foreign governmental
authority, agency or instrumentality have jurisdiction; and/or (f) any other set
of circumstances not attributable to Lender's acts.

                  "GAAP" means generally accepted accounting principles
consistently applied in the United States of America as of the date of the
applicable financial report.

                  "Governmental Authority" means any foreign, national, federal,
state, regional or local government, or any other political subdivision of any
of the foregoing, in each case with jurisdiction over Borrower, Guarantor, SPE
Equity Owner, all or any portion of the Collateral, all or any portion of the
Pledged Collateral, any Mortgage Borrower, or any Person with jurisdiction over
Borrower, SPE Equity Owner, all or any portion of each Individual Property, all
or any portion of the Pledged Collateral or any Mortgage Borrower, exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.

                  "Gross Revenue" shall have the meaning set forth in the
Mortgage Loan Agreement.

                  "Ground Lease" shall have the meaning set forth in the
Mortgage Loan Agreement.

                  "Ground Rent" shall have the meaning set forth in the Mortgage
Loan Agreement.

                  "Guarantor" shall mean Ashford Hospitality Limited
Partnership, a Delaware limited partnership.

                  "Hazardous Substance" means, without limitation, any and all
substances (whether solid, liquid or gas) defined, listed, or otherwise
classified as pollutants, toxic or hazardous wastes, toxic or hazardous
substances, toxic or hazardous materials, extremely hazardous wastes, or words
of similar meaning or regulatory effect under any present or future
Environmental Laws including but not limited to petroleum and petroleum
products, asbestos and asbestos-containing materials, polychlorinated biphenyls,
lead, radon, radioactive materials, flammables and explosives, but excluding
substances of kinds and in small amounts ordinarily

                                        8


and customarily used or stored in similar properties for the purposes of
cleaning or other maintenance or operations and otherwise in compliance with all
Environmental Laws.

                  "Impositions" has the meaning provided in the Mortgages.

                  "Indebtedness" means, at any given time, the Principal
Indebtedness, together with all accrued and unpaid interest thereon and all
other obligations and liabilities due or to become due to Lender pursuant
hereto, under the Note or in accordance with any of the other Loan Documents,
and all other amounts, sums and expenses paid by or payable to Lender hereunder
or pursuant to the Note or any of the other Loan Documents.

                  "Indemnified Party" shall have the meaning set forth in
Section 2.13.

                  "Independent" means, when used with respect to any Person, a
Person who: (i) does not have any direct financial interest or any material
indirect financial interest in Borrower, in any Mortgage Borrower or in any
Affiliate of Borrower (including, without limitation, in any SPE Equity Owner),
(ii) is not connected with Borrower, any Mortgage Borrower or any Affiliate of
Borrower (including, without limitation, in any SPE Equity Owner), as an
officer, employee, promoter, underwriter, trustee, partner, member, manager,
creditor, director or person performing similar functions (other than in his or
her capacity as Independent Director), and (iii) is not a member of the
immediate family of a Person defined in (i) or (ii) above.

                  "Independent Director" means a duly appointed member of the
board of directors (or with respect to a Single Member LLC, the board of
managers) of the relevant entity who shall not have been, at the time of such
appointment or at any time while serving as a director or manager of the
relevant entity and may not have been at any time in the preceding five years
(except in a capacity as an "Independent Director" for one or more Affiliates
otherwise satisfying the requirements of this definition), (a) a direct or
indirect legal or beneficial owner in such entity or any of its affiliates or
Borrower or any of its affiliates, (b) a creditor, supplier, employee, officer,
director (other than in its capacity as Independent Director), family member,
manager, or contractor of such entity or any of its affiliates or Borrower or
any of its affiliates, or (c) a Person who controls (directly, indirectly, or
otherwise) such entity or any of its affiliates or Borrower or any of its
affiliates or any creditor, supplier, employee, officer, director, family
member, manager, or contractor of such Person or any of its affiliates or
Borrower or any of its affiliates.

                  "Individual Properties" shall mean, collectively, each and
every Individual Property.

                  "Individual Property" shall have the meaning set forth in the
Mortgage Loan Agreement.

                  "Initial Interest Rate Cap Agreement" means a confirmation
(together with the definitions, ISDA master agreement and schedules relating
thereto) between the applicable

                                        9


Acceptable Counterparty and Borrower, relating to the initial term of the Loan,
satisfying the requirements set forth in Exhibit C.

                  "Initial Maturity Date" means September 29, 2006.

                  "Insurance Proceeds" has the meaning provided in the
Mortgages.

                  "Insurance Requirements" has the meaning provided in the
Mortgages.

                  "Interest Accrual Period" shall mean, with respect to any
Payment Date, a period commencing on the first (1st) Business Day of the
calendar month in which such Payment Date occurs and ending on the day
immediately prior to the first (1st) Business Day of the next calendar month.
The first Interest Accrual Period shall commence on the Closing Date and
continue through and including the day immediately prior to the first Business
Day of the calendar month following the month in which the Closing Date occurs.

                  "Interest Rate" means, for any Interest Accrual Period, the
LIBOR Interest Rate or the Default Rate, as and when applicable pursuant to this
Agreement.

                  "Interest Rate Adjustment Date" shall mean the second LIBOR
Business Day prior to the first day of an Interest Accrual Period; provided that
the Interest Rate Adjustment Date for the first Interest Accrual Period shall be
the Closing Date, or such other date selected by Lender. The LIBOR Rate set on
the Interest Rate Adjustment Date shall be in effect for the Interest Accrual
Period immediately following such Interest Rate Adjustment Date.

                  "Interest Rate Cap Agreement" means any Initial Interest Rate
Cap Agreement or Extension Interest Rate Cap Agreement.

                  "Investor" has the meaning provided in Section 8.27.

                  "Land" means, collectively, "Land" as defined in each
Mortgage.

                  "Late Charge" means the lesser of (i) five percent (5%) of any
unpaid amount and (ii) the maximum late charge permitted to be charged under the
laws of the State of New York.

                  "Leases" means, collectively, "Leases" as defined in each
Mortgage.

                  "Legal Requirements" means all statutes, laws, rules, orders,
regulations, ordinances, judgments, orders, decrees and injunctions of
Governmental Authorities affecting Borrower, Guarantor, any Mortgage Borrower,
the Loan Documents, the Pledged Collateral, the Collateral or any part thereof,
or the ownership, construction, use, alteration or operation thereof, or any
part thereof, enacted or entered and in force as of the relevant date, and all
Permits and regulations relating thereto, and all covenants, agreements,
restrictions and encumbrances contained in any instruments, either of record or
known to Borrower, at any time in force affecting the Collateral, the Pledged
Collateral, or any part thereof, including, without limitation,

                                       10


any which (i) may require repairs, modifications, or alterations in or to the
Collateral or any part thereof, or (ii) in any way limit the use and enjoyment
thereof, and further including, without limitation, all Environmental Laws and
the Americans with Disabilities Act, as they may be amended from time to time,
together with all regulations promulgated pursuant thereto or in connection
therewith.

                  "Lender" has the meaning provided in the preamble to this
Agreement.

                  "Liabilities" has the meaning set forth in Section 2.13.

                  "LIBOR Business Day" means any day on which banks are open for
dealing in foreign currency and exchange in London, England.

                  "LIBOR Interest Rate" means, for any Interest Accrual Period,
the Spread plus the LIBOR Rate for such Interest Accrual Period.

                  "LIBOR Rate" shall mean the London interbank offered rate for
thirty (30) day United States Dollar deposits in an amount of $1,000,000 or more
that appears on Telerate Page 3750 (or on such page as may replace Telerate Page
3750 on that service or such other service or services as may be nominated by
the British Bankers' Association for the purposes of displaying such rate all as
determined by Lender in its sole but good faith discretion) as of 11:00 a.m.,
London time, on the applicable Interest Rate Adjustment Date to the extent
available. If such rate does not appear on Telerate Page 3750 (or on such page
as may replace Telerate Page 3750 on that service or such other service or
services as may be nominated by the British Bankers' Association for the
purposes of displaying such rate all as determined by Lender in its sole but
good faith discretion) as of 11:00 a.m., London time, on the applicable Interest
Rate Adjustment Date, the LIBOR Rate will be the arithmetic mean of the offered
rates (expressed as a percentage per annum) for deposits in U.S. Dollars for a
one (1) month period that appear on the Reuters Screen LIBO Page as of 11:00
a.m., London time, on the applicable Interest Rate Adjustment Date, if at least
two such offered rates so appear. If fewer than two such offered rates appear on
the Reuters Screen LIBO Page as of 11:00 a.m., London time, on the applicable
Interest Rate Adjustment Date, Lender will request the principal London office
of any four (4) major reference banks in the London interbank market selected by
Lender in its sole discretion to provide such bank's offered quotation
(expressed as a percentage per annum) to prime banks in the London interbank
market for deposits in U.S. Dollars for one (1) month period as of approximately
11:00 a.m., London time, on such Interest Rate Adjustment Date for amounts of
not less than $1,000,000. If at least two such offered quotations are so
provided, the LIBOR Rate will be the arithmetic mean of such quotations. If
fewer than two such quotations are so provided, Lender will request any three
(3) major banks in New York City selected by Lender in its sole discretion to
provide such banks' rate (expressed as a percentage per annum) for loans in U.S.
Dollars to leading European banks for a one (1) month period as of approximately
11:00 a.m. New York City time, on the applicable Interest Rate Adjustment Date
for amounts of not less than $1,000,000. If at least two such rates are so
provided, the LIBOR Rate will be the arithmetic mean of such rates. If fewer
than two such rates are so provided, the then LIBOR Rate will be the LIBOR Rate
in effect on the preceding Interest Rate Adjustment Date. The LIBOR Rate for any
Interest Accrual Period shall be adjusted from time to time, by increasing the
rate thereof to compensate Lender for any aggregate reserve requirements
(including, without limitation, all basic, supplemental, marginal and other
reserve requirements and taking into account any transactional adjustments or
other scheduled changes in reserve requirements during any Interest Accrual
Period) which are required to be maintained by Lender with respect to
"Eurodollar liabilities" (as presently defined in Regulation D of the Board of
Governors of the Federal Reserve System) of the same term under said Regulation
D, or any other regulations of a Governmental Authority having jurisdiction over
Lender. The establishment of the LIBOR Rate on each Interest Rate Adjustment
Date by the Lender and the Lender's calculation of the rate

                                       11


of interest applicable to this Note shall (in the absence of manifest error) be
final and binding.

                  "Lien" means any mortgage, deed of trust, deed to secure debt,
lien (statutory or other), pledge, easement, restrictive covenant,
hypothecation, assignment, preference, priority, security interest, or any other
encumbrance or charge on or affecting any portion of the Collateral, the Pledged
Collateral, any or all of the Individual Properties, any Mortgage Borrower or
the Borrower, or any interest in any of the foregoing, including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, the filing of any financing statement or similar instrument under the
UCC or comparable law of any other jurisdiction, domestic or foreign, and
mechanic's, materialmen's and other similar liens and encumbrances.

                  "Loan" has the meaning provided in the Recitals hereto.

                  "Loan Amount" has the meaning provided in the Recitals hereto.

                  "Loan Documents" means, collectively, this Agreement, the
Note, the Recognition Agreement, the Pledge Agreement, the PIP Guaranty, the
Rate Cap Pledge Agreement, the Environmental Guaranty, the Deposit Account
Agreement, the Manager's Subordination, the Franchisor's Subordinations and all
other agreements, instruments, certificates and documents executed or delivered
by or on behalf of Borrower, Operating Lessee or any Affiliate of either of
them, or any other Person to evidence or secure the Loan or otherwise in
satisfaction of the requirements of this Agreement, the Pledge Agreement, the
TRS Pledge Agreement, the TRS Recognition Agreement, or the other documents
listed above.

                  "Losses" means any losses, actual damages, costs, fees,
expenses, claims, suits, judgments, awards, liabilities (including but not
limited to strict liabilities), obligations, debts, fines, penalties, charges,
costs of Remediation (whether or not performed voluntarily), amounts paid in
settlement, litigation costs, reasonable attorneys' fees, engineers' fees,
environmental consultants' fees, and investigation costs (including but not
limited to costs for sampling, testing and analysis of soil, water, air,
building materials, and other materials and substances whether solid, liquid or
gas), of whatever kind or nature, and whether or not incurred in connection with
any judicial or administrative proceedings, actions, claims, suits, judgments or
awards.

                  "Management Agreement" means the Management Agreement entered
into between Manager and each Mortgage Borrower or Operating Lessee pertaining
to the management of each Individual Property in the form attached to the
Manager's Subordinations.

                                       12


                  "Manager" means, individually or collectively, as the context
may require, each manager under a Management Agreement, or any successor or
assignee, provided that each successor or assignee shall be acceptable to Lender
in Lender's discretion. As of the date hereof, the Manager of each Individual
Property is set forth on Exhibit F attached hereto.

                  "Manager's Subordination" means, with respect to each
Individual Property, the Manager's Consent and Subordination of Management
Agreement in form and substance satisfactory to Lender, dated as of the Closing
Date, executed by the applicable Manager, Mezzanine Borrower, the applicable
Mortgage Borrower which owns the Individual Property, Operating Lessee and
Lender, as the same may thereafter from time to time be supplemented, amended,
modified or extended by one or more written agreements supplemental thereto.

                  "Material Adverse Effect" means a material adverse effect upon
(i) the business or the financial position or results of operation of Borrower,
(ii) the ability of Borrower to perform, or of Lender to enforce, any of the
Loan Documents, (iii) the business or the financial position or results of
operation of any Mortgage Borrower, (iv) the ability of any Mortgage Borrower to
perform, or of Mortgage Lender to enforce, any of the Mortgage Loan Documents,
or (v) the value of (x) the Collateral with respect to any Individual Property
taken as a whole, (y) any Individual Property, or (z) the Pledged Collateral.

                  "Maturity Date" means Initial Maturity Date or such earlier
date resulting from acceleration of the Indebtedness by Lender.

                  "Maximum Amount" means the maximum rate of interest designated
by applicable laws relating to payment of interest and usury.

                  "Mold" means any mold or fungus in violation of Legal
Requirements present at or in any Individual Property.

                  "Mortgage" has the meaning set forth in the Mortgage Loan
Agreement.

                  "Mortgage Borrower" means, individually and collectively as
the context may so require, each "Borrower" under the Mortgage Loan Agreement.

                  "Mortgage Debt Service" means Debt Service, as defined in the
Mortgage Loan Agreement.

                  "Mortgage Indebtedness" means Indebtedness, as defined in the
Mortgage Loan Agreement.

                  "Mortgage Lender" means (i) collectively, Merrill Lynch
Mortgage Lending, Inc. and Merrill Lynch Capital, a Division of Merrill Lynch
Business Financial Services, Inc., and (ii) the successors and assigns of either
or both of them.

                                       13


                  "Mortgage Loan Agreement" means that certain Loan Agreement
dated as of the date hereof by and between the Mortgage Borrowers and Mortgage
Lender, as the same may from time to time hereafter be modified, supplemented or
amended, to the extent permitted by this Agreement.

                  "Mortgage Loan Default" means Default, as defined in the
Mortgage Loan Agreement.

                  "Mortgage Loan Event of Default" means Event of Default, as
defined in the Mortgage Loan Agreement.

                  "Mortgage Loan Release Price" means Release Price, as defined
in the Mortgage Loan Agreement.

                  "Mortgage Loan Transfer" means Transfer, as defined in the
Mortgage Loan Agreement.

                  "Mortgage Notes" means the Notes, as defined in the Mortgage
Loan Agreement.

                  "Multiemployer Plan" means a multiemployer plan defined as
such in Section 3(37) of ERISA to which contributions have been made by
Borrower, any Mortgage Borrower or any ERISA Affiliate and which is covered by
Title IV of ERISA.

                  "Net Operating Income" shall have the meaning set forth in the
Mortgage Loan Agreement.

                  "Note" means and refers to that certain Mezzanine Promissory
Note, in form and substance satisfactory to Lender in Lender's discretion, dated
the Closing Date, made by Borrower to Lender pursuant to this Agreement as such
promissory note may be modified, amended, supplemented, extended or consolidated
in writing, and any note(s) issued in exchange therefor or in replacement
thereof.

                  "OFAC List" means 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 any other similar
list maintained by the U.S. Treasury Department, Office of Foreign Assets
Control pursuant to any Legal Requirements (or if such list does not exist, the
similar list then being maintained by the United States) including, without
limitation, trade embargo, economic sanctions, or other prohibitions imposed by
Executive Order of the President of the United States. The OFAC List currently
is accessible through the internet website at www.treas.gov/ofac/t11sdn.pdf.

                  "Officer's Certificate" means a certificate of Borrower which
is signed by the managing equity owner of Borrower.

                                       14


                  "Operating Expenses" shall have the meaning set forth in the
Mortgage Loan Agreement.

                  "Operating Income" shall have the meaning set forth in the
Mortgage Loan Agreement.

                  "Operating Lease" shall mean, individually or collectively, as
the context may require, the operating lease or similar agreement entered into
by and between the applicable Mortgage Borrower and the Operating Lessee, which
governs the operation of one of more of the Individual Properties as the same
may be amended, restated, replaced, supplemented or modified from time to time,
in accordance with the terms hereof.

                  "Operating Lessee" shall mean, individually or collectively,
as the context may require, any operating lessee under an Operating Lease, which
is an Affiliate of the Mortgage Borrowers and which is a Special Purpose Entity,
provided that such operating lessee shall be selected in accordance with the
terms hereof. As of the date hereof, the term Operating Lessee is Ashford TRS
Lessee LLC, a Delaware limited liability company, the current operating lessee
of each Individual Property, and an Affiliate of the Mortgage Borrowers.

                  "Other Borrowings" means, without duplication (but not
including the Indebtedness or any Transaction Costs payable in connection with
the Transactions), (i) all indebtedness of Borrower for borrowed money or for
the deferred purchase price of property or services, (ii) all indebtedness of
Borrower evidenced by a note, bond, debenture or similar instrument, (iii) the
face amount of all letters of credit issued for the account of Borrower and,
without duplication, all unreimbursed amounts drawn thereunder, (iv) all
indebtedness of Borrower secured by a Lien on any property owned by Borrower
whether or not such indebtedness has been assumed, (v) all Contingent
Obligations of Borrower, and (vi) all payment obligations of Borrower under any
interest rate protection agreement (including, without limitation, any interest
rate swaps, caps, floors, collars or similar agreements) and similar agreements.

                  "Payment Date" shall mean the last Business Day of each month
commencing on October 29, 2004 and continuing to and including the Maturity Date
(or, if the Maturity Date is not on a Business Day, the immediately preceding
Business Day).

                  "PBGC" means the Pension Benefit PIP Guaranty Corporation
established under ERISA, or any successor thereto.

                  "Partial Release" shall have the meaning set forth in Section
2.15.

                  "Permits" has the meaning provided in the Mortgages.

                  "Permitted Encumbrances" shall have the meaning set forth in
the Mortgage Loan Agreement.

                                       15


                  "Permitted Investments" has the meaning provided in the
Deposit Account Agreement.

                  "Permitted Transfers" shall mean, with respect to each
Individual Property, each Mortgage Borrower, Borrower and the Pledged
Collateral, (i) provided that no Event of Default has occurred and is
continuing, Permitted Encumbrances (other than Permitted Encumbrances arising
prior to the occurrence of such Event of Default); (ii) provided that no Event
of Default has occurred and is continuing, all transfers of worn out or obsolete
furnishings, fixtures or equipment that are (if deemed necessary or advisable by
the applicable Mortgage Borrower or Operating Lessee) reasonably promptly
replaced with property of equivalent value and functionality in the ordinary
course of the Mortgage Borrowers' or Operating Lessee's operation of each
Individual Property; (iii) provided that no Event of Default has occurred and is
continuing, all Leases which are not Material Leases (other than Material Leases
entered into prior to the occurrence of such Event of Default); (iv) all
Material Leases which have been approved by Mortgage Lender in writing pursuant
to the terms of the Mortgage Loan Agreement and Mezzanine Lender pursuant to the
terms of this Agreement; (v) the pledge of the Pledged Collateral pursuant to
the terms of the Pledge Agreement or the TRS Pledge Agreement; (vi) transfers,
issuance, conversions, pledges and redemptions of stock in Ashford Hospitality
Trust, Inc., a Maryland corporation (or its successors), Ashford OP General
Partner LLC, a Delaware limited liability company, Ashford OP Limited Partner,
LLC, a Delaware limited liability company, or Ashford Hospitality Limited
Partnership, a Delaware limited partner, and (vii) the merger or consolidation
of Ashford Hospitality Trust, Inc. (or its successors).

                  "Person" means any individual, corporation, limited liability
company, partnership, joint venture, estate, trust, unincorporated association,
or any other entity, 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.

                  "PIP Guaranty" means that certain Guaranty dated as of the
date hereof from Ashford Hospitality Limited Partnership to Lender.

                  "Plan" means an employee benefit or other plan established or
maintained by Borrower, any Mortgage Borrower or any ERISA Affiliate and that is
covered by Title IV of ERISA, other than a Multiemployer Plan.

                  "Pledge Agreement" means that certain Mezzanine Pledge and
Security Agreement dated as of the date hereof between Borrower and Lender.

                  "Pledged Collateral" means: (a) Borrower's right, title and
interest in and to the Pledged Equity, (b) all rights, privileges, general
intangibles, payments intangibles, voting rights, authority and power arising
from its interest in the Pledged Equity, (c) the capital of Borrower and any and
all profits, losses, distributions, and allocations attributable to the Pledged
Equity as well as the proceeds of any distribution thereof, whether arising
under the terms of any organizational document of any Mortgage Borrower or
otherwise, (d) all other payments, if any, due or to become due, to Borrower by
or from and all other present or future claims by Borrower

                                       16


against, any Mortgage Borrower, or in respect of the Pledged Equity, under or
arising out of (i) any organizational document of any Mortgage Borrower, (ii)
monies loaned or advanced, for services rendered or otherwise or (iii) any other
contractual obligations, commercial tort claims, supporting obligations,
damages, insurance proceeds, condemnation awards or other amounts due to
Borrower from any Mortgage Borrower or with respect to the Pledged Equity, (e)
Borrower's claims, rights, powers, privileges, authority, options, security
interests, liens and remedies, if any, under or arising out of the ownership of
the Pledged Equity, (f) to the extent permitted by applicable law, Borrower's
rights, if any, in any Mortgage Borrower pursuant to any organizational document
of any Mortgage Borrower, or at law, to exercise and enforce every right, power,
remedy, authority, option and privilege of Borrower relating to any Pledged
Equity, including without limitation, the right to (i) execute any instruments
and to take any and all other action on behalf of and in the name of Borrower in
respect of any Pledged Equity, (ii) exercise any and all voting, consent and
management rights of Borrower in or with respect to any Mortgage Borrower, (iii)
exercise any election (including, but not limited to, election of remedies) or
option or to give or receive any notice, consent, amendment, waiver or approval
with respect to any Mortgage Borrower, (iv) enforce or execute any checks, or
other instruments or orders of any Mortgage Borrower, and (v) file any claims
and to take any action in connection with any of the foregoing, together with
full power and authority to demand, receive, enforce or collect any of the
foregoing or any property of any Mortgage Borrower, (g) all Investment Property
(as such term is defined in Section 9-102 of the UCC) issued by or relating to
any Mortgage Borrower, or otherwise relating to the Pledged Equity, (h) all
equity interests or other property and assets now existing or hereafter acquired
by Borrower, including, without limitation, as a result of any mergers,
acquisitions, exchange offers, recapitalizations of any type, contributions to
capital, or the exercise of options or other rights relating to the Pledged
Equity, and (i) to the extent not otherwise included: all assets and personal
property of Borrower (1) in any way arising from, related to, or pertaining to
Borrower's right, title and interest in and to the Pledged Entity or any Pledged
Equity, and (2) in any way arising from, related to, or pertaining to Borrower's
right, title and interest in and to the Pledged Equity or any Pledged Entity;
and (ii) all proceeds of any or all of the foregoing (including, without
limitation, insurance proceeds and distributions on the Pledged Equity), as
applicable, (j) the Account Collateral and (k) the Initial Interest Rate Cap
Agreement, any Extension Interest Rate Cap Agreement, or any amendment,
replacements, modification thereto obtained by Borrower and assigned to Lender
pursuant to the terms of this Agreement, the Rate Cap Pledge Agreement, or any
of the other Loan Documents.

                  "Pledged Equity" means (i) 100% of Borrower's limited
partnership interests or membership interests, as applicable, in each Mortgage
Borrower, (ii) 100% of Borrower's membership interests in Ashford Senior General
Partner LLC, a Delaware limited liability company, (iii) 100% of Borrower's
membership interest in Bucks County Member LLC, a Delaware limited liability
company, and (iv) 100% of Ashford TRS Corporation's membership interests in
Operating Lessee, whether now existing or hereafter created.

                  "Prepayment Premium" means, with respect to any prepayment of
the Principal Indebtedness, or acceleration of the Loan, in either case, made
prior to or on September 1, 2006, an

                                       17


amount equal to one percent (1.00%) of the Principal Indebtedness being prepaid
(it being understood that Borrower shall not be permitted to voluntarily prepay
all or any part of the Loan prior to October 1, 2005).

                  "Principal Indebtedness" means the principal amount of the
entire Loan outstanding as the same may be increased or decreased, as a result
of prepayment or otherwise, from time to time.

                  "Proceeds" means all "proceeds," as such term is defined in
the UCC, and, to the extent not included in such definition, all proceeds
whether cash or non-cash, movable or immovable, tangible or intangible
(including all Insurance Proceeds, all Condemnation Proceeds and proceeds of
proceeds), from the Pledged Collateral, including, without limitation, those
from the sale, exchange, transfer, collection, loss, damage, disposition,
substitution or replacement of any of the Pledged Collateral and all income,
gain, credit, distributions and similar items from or with respect to the
Pledged Collateral.

                  "Property" has the meaning provided in the Mortgages.

                  "Rate Cap Pledge and Security Agreement" means that certain
form of Rate Cap Pledge and Security Agreement attached hereto as Exhibit I.

                  "Rating Agencies" means Fitch, Inc., Moody's Investors
Service, Inc., S&P, and Dominion Bond Rating Service Limited, or any successor
thereto, and any other nationally recognized statistical rating organization but
only to the extent that any of the foregoing have been or will be engaged by
Lender or its designees in connection with or in anticipation of a Secondary
Market Transaction (each, individually a "Rating Agency").

                  "Rating Agency Confirmation" means a written confirmation from
each of the Rating Agencies rating any securities issued in connection with a
Secondary Market Transaction that an action shall not result in a downgrade,
withdrawal or qualification of any securities issued in connection with a
Secondary Market Transaction.

                  "Recognition Agreement" means that certain Recognition
Agreement dated as of the date hereof among Borrower, Mortgage Borrower, SPE
Equity Owner and Lender.

                  "Release" with respect to any Hazardous Substance includes but
is not limited to any release, deposit, discharge, emission, leaking, leaching,
spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping,
dumping, disposing or other movement of Hazardous Substances.

                  "Release Price" shall have the meaning as set forth in Section
2.15(b)

                  "Remediation" (and its correlative terms) includes but is not
limited to any response, remedial, removal, or corrective action; any activity
to clean up, detoxify, decontaminate, contain or otherwise remediate any
Hazardous Substance; any actions to prevent,

                                       18


cure or mitigate any Release of any Hazardous Substance; any action to comply
with any Environmental Laws or with any permits issued pursuant thereto; any
inspection, investigation, study, monitoring, assessment, audit, sampling and
testing, laboratory or other analysis, or evaluation relating to any Hazardous
Substances or to anything referred to herein, including the preparation of any
plans, studies, reports or documents with respect thereto.

                  "REMIC" means a real estate mortgage investment conduit as
defined under Section 860D of the Code.

                  "Remington Manager" means Remington Lodging & Hospitality LP,
a Delaware limited partnership.

                  "Rents" means, collectively, "Rents" as defined in each
Mortgage.

                  "Required Debt Service Payment" means, on any Payment Date,
the Debt Service then due and payable by Borrower.

                  "Reuters Screen LIBO Page" means the display page designated
as "LIBO" on the Reuters Monitor Money Rates Service.

                  "S&P" means Standard & Poor's Ratings Services, a division of
The McGraw Hill Companies, Inc.

                  "Second Extended Maturity Date" has the meaning set forth in
Section 2.10.

                  "Second Extension Term" has the meaning set forth in Section
2.10.

                  "Secondary Market Transaction" shall have the meaning set
forth in Section 2.13.

                  "Secretary's Certificate" means, with respect to Borrower,
Operating Lessee, each Mortgage Borrower and Remington Manager, the certificate
in form and substance satisfactory to Lender in Lender's discretion dated as of
the Closing Date.

                  "Securities Act" has the meaning provided in Section 2.13.

                  "Single Member LLC" means a limited liability company that (i)
is either (a) a single member limited liability company or (b) a multiple member
limited liability company that does not have a Single-Purpose Entity that owns
at least one percent (1%) of the equity interests in such limited liability
company as its managing member, and (ii) is organized under the laws of the
State of Delaware.

                  "Single-Purpose Entity" means a corporation, limited
partnership, or limited liability company which, at all times since its
formation and thereafter (i) was and will be organized solely for the purpose of
(v) owning the Pledged Equity or (w) owning, leasing, operating, managing,
financing and maintaining any or all of the Individual Properties or (x) acting
as an operating lessee pursuant to the terms of an Operating Lease or (y) acting
as the

                                       19


managing member of the limited liability company which owns any or all of the
Individual Properties or (z) acting as the general partner of a limited
partnership which owns any or all of the Individual Property, (ii) has not and
will not engage in any business unrelated to (w) the ownership of the Pledged
Equity or (x) the ownership, leasing, operating, managing, financing and
maintaining of any or all of the Individual Properties or (y) acting as a member
of a limited liability company which owns any or all of the Individual
Properties or (z) acting as a general partner of a limited partnership which
owns any or all of the Individual Properties, (iii) has not and will not have
any assets other than (w) the Pledged Equity or (x) those related to any or all
of the Individual Properties or (y) its member interest in the limited liability
company which owns any or all of the Individual Properties or (z) its general
partnership interest in the limited partnership which owns any or all of the
Individual Properties, as applicable, (iv) has not and will not engage in, seek
or consent to any dissolution, winding up, liquidation, consolidation or merger,
and, except as otherwise expressly permitted by this Agreement, has not and will
not engage in, seek or consent to any asset sale, transfer of partnership or
membership or shareholder interests, or amendment of its limited partnership
agreement, articles of incorporation, articles of organization, certificate of
formation or operating agreement (as applicable), (v) if such entity is a
limited partnership, has and will have at all times while the Loan is
outstanding as its only general partners, general partners which are and will be
Single-Purpose Entities which are corporations or a Single Member LLC, (vi) if
such entity is a corporation or a Single Member LLC, at all relevant times while
the Loan is outstanding, has and will have at least two Independent Directors,
(vii) the board of directors of such entity (or if such entity is a Single
Member LLC, the entity, each member, each director, each manager, the board of
managers, if any, and all other Persons on behalf of such entity), has not taken
and will not take any action requiring the unanimous affirmative vote of one
hundred percent (100%) of the members and all directors and managers, as
applicable, unless all of the directors or managers, as applicable, including,
without limitation, all Independent Directors, shall have participated in such
vote, (viii) has not and will not fail to correct any known misunderstanding
regarding the separate identity of such entity, (ix) if such entity is a limited
liability company (other than a Single Member LLC), has and will have at least
one member that is and will be a Single-Purpose Entity which is and will be a
corporation, and such corporation is and will be the managing member of such
limited liability company, (x) without the unanimous consent of all of the
partners, directors or managers (including, without limitation, all Independent
Directors) or members, as applicable, has not and will not with respect to
itself or to any other entity in which it has a direct or indirect legal or
beneficial ownership interest (w) file a bankruptcy, insolvency or
reorganization petition or otherwise institute insolvency proceedings or
otherwise seek any relief under any laws relating to the relief from debts or
the protection of debtors generally; (x) seek or consent to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator, custodian or any similar
official for such entity or such entity's properties; (y) make any assignment
for the benefit of such entity's creditors; or (z) take any action that might
cause such entity to become insolvent, (xi) has maintained and will maintain its
accounts, books and records separate from any other Person or entity, (xii) has
maintained and will maintain its books, records, resolutions and agreements as
official records, (xiii) has not commingled and will not commingle its funds or
assets with those of any other entity except as permitted by the Loan Documents,
(xiv) has held and will hold its assets in its own name, (xv) has conducted and
will conduct its business in its

                                       20


name and will not permit its name, identity or type of entity to be changed,
(xvi) has maintained and will maintain its financial statements, accounting
records and other entity documents separate from any other Person or entity,
except to the extent that such Person or entity is required to file consolidated
tax returns by law; provided, that any such consolidated financial statement
shall contain a footnote indicating that separate assets and liabilities are
neither available to pay the debts of the consolidated entity nor constitute
obligations of the consolidated entity, (xvii) has paid and will pay its own
liabilities out of its own funds and assets, (xviii) has observed and will
observe all partnership, corporate or limited liability company formalities as
applicable, (xix) has maintained and will maintain an arms-length relationship
with its Affiliates, (xx) if (x) such entity owns all of any portion of any or
all of the Individual Properties, has and will have no indebtedness other than
the Mortgage Loan, unsecured trade payables in the ordinary course of business
relating to the ownership and operation of such Individual Property which (1)
are not evidenced by a promissory note (2) when aggregated with the unsecured
trade payables of all other Mortgage Borrowers and Operating Lessee do not
exceed, at any time, a maximum amount of two and one-half percent (2-1/2%) of
the original amount of the Mortgage Loan and (3) are paid within 60 days of the
date incurred (unless same are being contested in accordance with the terms of
this Agreement), or other indebtedness that has been fully discharged on or
prior to the date hereof, or (x) if such entity owns all or any portion of the
Pledged Equity, has and will have no indebtedness other than unsecured trade
payables in the ordinary course of business relating to acting as the owner of
the Pledged Equity which (1) do not exceed, at any time, $10,000 and (2) are
paid within 60 days of the date incurred, or (y) if such entity acts as the
general partner of a limited partnership which owns such Individual Property,
has and will have no indebtedness other than unsecured trade payables in the
ordinary course of business relating to acting as general partner of the limited
partnership which owns such Individual Property which (1) do not exceed, at any
time, $10,000 and (2) are paid within 60 days of the date incurred, or (z) if
such entity acts as a managing member of a limited liability company which owns
such Individual Property, has and will have no indebtedness other than unsecured
trade payables in the ordinary course of business relating to acting as a member
of the limited liability company which owns such Individual Property which (1)
do not exceed, at any time, $10,000 and (2) are paid within 60 days of the date
incurred, (xxi) has not and will not assume or guarantee or become obligated for
the debts of any other entity or hold out its credit as being available to
satisfy the obligations of any other entity except for the Indebtedness, (xxii)
has not acquired and will not acquire obligations or securities of its partners,
members or shareholders, (xxiii) has allocated and will allocate fairly and
reasonably shared expenses, including, without limitation, shared office space
and use separate stationery, invoices and checks, (xxiv) except pursuant hereto,
has not and will not pledge its assets for the benefit of any other person or
entity, (xxv) has held and identified itself and will hold itself out and
identify itself as a separate and distinct entity under its own name and not as
a division or part of any other person or entity, (xxvi) has not made and will
not make loans to any person or entity, (xxvii) has not and will not identify
its partners, members or shareholders, or any affiliates of any of them as a
division or part of it, (xxviii) if such entity is a limited liability company
(other than a Single Member LLC), such entity shall dissolve only upon the
bankruptcy of the managing member, and such entity's articles of organization,
certificate of formation and/or operating agreement, as applicable, shall
contain such provision, (xxix) has not entered and will not enter

                                       21


into or be a party to, any transaction with its partners, members, shareholders
or its affiliates except in the ordinary course of its business and on terms
which are intrinsically fair and are no less favorable to it than would be
obtained in a comparable arms-length transaction with an unrelated third party
and which are fully disclosed to Lender in writing in advance, (xxx) has paid
and will pay the salaries of its own employees from its own funds, (xxxi) has
maintained and intends to maintain adequate capital in light of its contemplated
business operations, (xxxii) if such entity is a limited liability company
(other than a Single Member LLC) or limited partnership, and such entity has one
or more managing members or general partners, as applicable, then such entity
shall continue (and not dissolve) for so long as a solvent managing member or
general partner, as applicable, exists and such entity's organizational
documents shall contain such provision, (xxxiii) if such entity is a Single
Member LLC, its organizational documents shall provide that, as long as any
portion of the Indebtedness remains outstanding, upon the occurrence of any
event that causes the last remaining member of such Single Member LLC to cease
to be a member of such Single Member LLC (other than (y) upon an assignment by
such member of all of its limited liability company interest in such Single
Member LLC and the admission of the transferee, if permitted pursuant to the
organizational documents of such Single Member LLC and the Loan Documents, or
(z) the resignation of such member and the admission of an additional member of
such Single Member LLC, if permitted pursuant to the organizational documents of
such Single Member LLC and the Loan Documents), the individuals acting as the
Independent Directors of such Single Member LLC shall, without any action of any
Person and simultaneously with the last remaining member of the Single Member
LLC ceasing to be a member of the Single Member LLC, automatically be admitted
as non-economic members of the Single Member LLC (the "Special Member") and
shall preserve and continue the existence of the Single Member LLC without
dissolution, and (xxxiv) if such entity is a Single Member LLC, its
organizational documents shall provide that for so long as any portion of the
Indebtedness is outstanding, no Special Member may resign or transfer its rights
as Special Member unless (y) a successor Special Member has been admitted to
such Single Member LLC as a Special Member, and (z) such successor Special
Member has also accepted its appointment as the Independent Director.

                  "Special Member" has the meaning provided in the definition of
"Single Purpose Entity."

                  "SPE Equity Owner" means, (a) with respect to each Mortgage
Borrower other than Ashford Bucks County LLC, Ashford Senior General Partner
LLC, a Delaware limited liability company and (b) with respect to Ashford Bucks
County LLC, (i) Borrower and (ii) Bucks County Member LLC, a Delaware limited
liability company.

                  "SPE Equity Owner's Certificate" means the SPE Equity Owner's
Certificate in form and substance satisfactory to Lender dated as of the Closing
Date.

                  "Spread" means 7.20%.

                  "Strike Rate" means 6% per annum.

                                       22


                  "Sub-Account" shall have the meaning provided in Section
2.11(c).

                  "Subordination, Attornment and Security Agreement" shall mean
for each Operating Lease, a Subordination, Attornment and Security Agreement or
other similar agreement among Lender, Borrower, the applicable Mortgage Borrower
and the Operating Lessee, in form and substance acceptable to Lender, as the
same may be amended, restated, replaced, supplemented or otherwise modified in
accordance with the terms hereof.

                  "Survey" means, with respect to each Individual Property, a
survey of such Individual Property satisfactory to Lender, (i) prepared by a
registered Independent surveyor satisfactory to Lender and Title Insurer and
containing a surveyor's certification satisfactory to Lender, (ii) together with
a metes and bounds or platted lot/block legal description of the land
corresponding with the survey, and (iii) prepared based on a scope of work
determined by Lender in Lender's discretion.

                  "Taking" has the meaning, with respect to each Individual
Property, provided in the Mortgages for such Individual Property.

                  "Tax Fair Market Value" means, with respect to the Pledged
Collateral, the fair market value of the Pledged Collateral.

                  "Third Extended Maturity Date" has the meaning set forth in
Section 2.10.

                  "Third Extension Term" has the meaning set forth in Section
2.10.

                  "Title Instruction Letter" means an instruction letter in form
and substance satisfactory to Lender in Lender's discretion.

                  "Title Insurance Policy" means, with respect to each
Individual Property, an owner's loan policy of title insurance for such
Individual Property naming Mortgage Lender as the insured party issued by Title
Insurer with respect to such Individual Property in an amount acceptable to
Mortgage Lender and containing a "mezzanine lender's rights" or similar
endorsement acceptable to Lender.

                  "Title Insurer" means Chicago Title Insurance Company and
First American Title Insurance Company, as co-insurers.

                  "Transaction Costs" means all fees, costs, expenses and
disbursements of Lender relating to the Transactions, including, without
limitation, all appraisal fees, legal fees, accounting fees and the costs and
expenses described in Section 8.24.

                  "Transactions" means the transactions contemplated by the Loan
Documents.

                  "Transfer" means any conveyance, transfer (including, without
limitation, any transfer of any direct or indirect legal or beneficial interest
(including, without limitation, any

                                       23


profit interest) in Borrower, any Mortgage Borrower, Operating Lessee or any SPE
Equity Owner, any sale, any Lease (including, without limitation, any amendment,
extension, modification, waiver or renewal thereof), or any sale, or Lien,
whether by law or otherwise, of, on or affecting any Pledged Collateral, any
Collateral, and Mortgage Borrower, Borrower, Operating Lessee or any SPE Equity
Owner, other than a Permitted Transfer.

                  "TRS Pledge Agreement" means that certain Pledge and Security
Agreement from Ashford TRS Corporation to Lender dated as of the date hereof.

                  "TRS Recognition Agreement" means that certain Recognition
Agreement among Ashford TRS Corporation, Lender and Operating Lessee.

                  "UCC" means, with respect to any Pledged Collateral, the
Uniform Commercial Code in effect in the jurisdiction in which the relevant
Pledged Collateral is located.

                  "UCC Searches" has the meaning provided in Section 3.1.

                                    ARTICLE 2

                                  GENERAL TERMS

         Section 2.1 Amount of the Loan. Lender shall lend to Borrower a total
aggregate amount equal to the Loan Amount.

         Section 2.2 Use of Proceeds. Proceeds of the Loan shall be used for the
following purposes: (a) to make an equity contribution to Mortgage Borrower in
order to cause Mortgage Borrower to use such amounts for any use permitted by
Section 2.2 of the Mortgage Loan Agreement, (b) to fund any upfront reserves or
escrow amounts required hereunder, and (c) to pay any Transaction Costs. Any
excess will be available to Borrower and may be used for any lawful purpose.

         Section 2.3 Security for the Loan. The Note and Borrower's obligations
hereunder and under the other Loan Documents shall be secured by, and Borrower
hereby grants, pledges, hypothecates, transfers and assigns to Lender a first
priority and continuing lien on and first priority security in, all of
Borrower's right, title, ownership, equity or other interests in and to the
Pledged Collateral and the other security interests and Liens granted in this
Agreement and in the other Loan Documents.

         Section 2.4 Borrower's Note.

                           (a) Borrower's obligation to pay the principal of and
interest on the Loan (including Late Charges, Default Rate interest, and the
Prepayment Premium, if any), shall be evidenced by this Agreement and by the
Note, duly executed and delivered by Borrower. The Note shall be payable as to
principal, interest, Late Charges, Default Rate interest and

                                       24


Prepayment Premium, if any, as specified in this Agreement, with a final
maturity on the Maturity Date. Borrower shall pay all outstanding Indebtedness
on the Maturity Date.

                           (b) Lender is hereby authorized, at its option, to
endorse on a schedule attached to the Note (or on a continuation of such
schedule attached to the Note and made a part thereof) an appropriate notation
evidencing the date and amount of each payment of principal, interest, Late
Charges, Default Rate interest and Prepayment Premium, if any, in respect
thereof, which schedule shall be made available to Borrower, at Borrower's sole
cost and expense on reasonable advance notice, for examination at Lender's
offices.

         Section 2.5 Principal and Interest Payments.

                           (a) Accrual of Interest. Interest shall accrue on the
outstanding principal balance of the Note and all other amounts due to Lender
under the Loan Documents at the Interest Rate.

                           (b) Monthly Payments of Interest at the LIBOR
Interest Rate. On each Payment Date, Borrower shall pay to Lender interest on
the unpaid Principal Indebtedness calculated at the LIBOR Interest Rate which
has accrued and will accrue under such Note through the last day of the Interest
Accrual Period in which such Payment Date occurs.

                           (c) Payment Dates. All payments required to be made
pursuant to paragraph (b) above shall be made beginning on the first Payment
Date; provided, however, that Borrower shall pay interest for the first Interest
Accrual Period on the Closing Date.

                           (d) Calculation of Interest. Interest shall accrue on
the outstanding principal balance of the Loan and all other amounts due to
Lender under the Loan Documents commencing upon the Closing Date. Interest shall
be computed on the actual number of days elapsed, based on a 360-day year.

                           (e) Default Rate Interest. Upon the occurrence and
during the continuance of an Event of Default, and at the sole option of Lender
and without need for notice to the Borrower, the entire unpaid amount
outstanding hereunder and under the Note will bear interest at the Default Rate.

                           (f) Late Charge. If Borrower fails to make any
payment of any sums due under the Loan Documents on the date when the same is
due, Borrower shall pay a Late Charge.

                           (g) Maturity Date. On the Maturity Date, Borrower
shall pay to Lender all amounts owing under the Loan Documents including,
without limitation, interest, principal, Late Charges, Default Rate interest and
any Prepayment Premium.

                           (h) Prepayment Premium. Upon any repayment or
prepayment of the Principal Indebtedness, including, without limitation, in
connection with an acceleration of the

                                       25


Loan, but excluding a prepayment made in connection with Section 2.6(b) or (e)
hereof, Borrower shall pay to Lender on the date of such repayment, prepayment
or acceleration of the Loan the Prepayment Premium applicable thereto. All
Prepayment Premium payments hereunder shall be deemed earned by Lender upon the
funding of the Loan.

         Section 2.6 Prepayment

                           (a) Provided that no Event of Default has occurred
and is continuing hereunder, Borrower may prepay the Indebtedness in full (or in
part solely in connection with the consummation of a Partial Release) at any
time after October 1, 2005, provided that (i) simultaneously therewith, the
applicable Mortgage Borrower shall make a prepayment of principal of the
Mortgage Loan pursuant to the terms of and in accordance with Section 2.6 of the
Mortgage Loan Agreement, (ii) such prepayment of Indebtedness shall bear the
same proportion to the Principal Amount of the Loan immediately prior to such
payment as the prepayment of the Mortgage Loan bears to the principal amount of
the Mortgage Loan prior to such prepayment, and (iii) in the event that such
prepayment is not on a Payment Date, simultaneously therewith, Borrower pays to
Lender all interest accrued on the amount of the Loan prepaid through the last
day of the Interest Accrual Period during which such prepayment occurs.

                           (b) At any time during the term of the Loan, if any
Mortgage Borrower is required by Mortgage Lender under the provisions of any
Mortgage to prepay the Mortgage Loan or any portion thereof in the event of
damage to or destruction of, or a Taking of any Individual Property, Borrower
shall cause such Mortgage Borrower to pay any Insurance Proceeds or Condemnation
Proceeds in the following manner and order of priority (i) first, to prepay the
Mortgage Loan to the full extent of the Insurance Proceeds or the Condemnation
Proceeds, as applicable, to the extent of the Allocated Loan Amount (as defined
in the Mortgage Loan Agreement) for the applicable Individual Property, (ii)
second, to prepay the Loan to the full extent of the Allocated Mezzanine Loan
Amount for the applicable Individual Property, (iii) third, to Lender and
Mortgage Lender pro rata to prepay the Loan and the Mortgage Loan to the extent
of the positive difference between the sum of the Release Price and the Mortgage
Loan Release Price for such Individual Property and the combined Allocated Loan
Amount for the Loan and the Mortgage Loan for such Individual Property, and (iv)
to Mortgage Borrowers.

                           (c) All prepayments of the Indebtedness made pursuant
to this Section shall be applied by Lender in accordance with the provisions of
Section 2.7.

                           (d) Borrower shall not be permitted at any time to
prepay all or any part of the Loan, except as expressly provided in this Section
2.6 and 2.15.

                           (e) Intentionally Omitted.

                           (f) Intentionally Omitted.

                           (g) Intentionally Omitted.

                                       26


                           (h) In the event that the Mortgage Loan is paid in
full at any time prior to the Maturity Date of the Loan, the Indebtedness shall
then be immediately due and payable regardless of the Maturity Date of the Loan.

         Section 2.7 Application of Payments.

                  At all times, all proceeds of repayment, including without
limitation any payment or recovery on the Pledged Collateral and any prepayments
on the Loan, shall be applied to the Note and to such amounts payable by
Borrower under the Loan Documents in such order and in such manner as Lender
shall elect in Lender's discretion.

         Section 2.8 Payment of Debt Service, Method and Place of Payment.

                           (a) Except as otherwise specifically provided herein,
all payments and prepayments under this Agreement and the Note shall be made to
Lender not later than 12:00 noon, New York City time, on the date when due, and
shall be made in lawful money of the United States of America in federal or
other immediately available funds to an account specified to Borrower by Lender
in writing, and any funds received by Lender after such time, for all purposes
hereof, shall be deemed to have been paid on the next succeeding Business Day.

                           (b) All payments made by Borrower hereunder or by
Borrower under the other Loan Documents, shall be made irrespective of, and
without any deduction for, any set-offs or counterclaims.

         Section 2.9 Taxes; Funding Losses; Changes in Law.

                           (a) All payments made by Borrower under this
Agreement and under the other Loan Documents shall be made free and clear of,
and without deduction or withholding for or on account of, any present or future
income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions
or withholdings, and all liabilities with respect thereto, now or hereafter
imposed, levied, collected, withheld or assessed by any Governmental Authority
(all such non-excluded taxes, levies, imposts, duties, charges, fees,
deductions, withholdings and liabilities, collectively, "Applicable Taxes"). If
Borrower shall be required by law to deduct any Applicable Taxes from or in
respect of any sum payable hereunder to Lender, the following shall apply: (i)
Borrower shall make all such required deductions, (ii) the sum payable to Lender
shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.9(a)), Lender receives an amount equal to the sum Lender would
have received had no such deductions been made and (iii) Borrower shall pay the
full amount deducted to the relevant taxing authority or other authority in
accordance with applicable law. Payments made pursuant to this Section 2.9(a)
shall be made within ten (10) Business Days after Lender makes written demand
therefor.

                           (b) Borrower shall pay to Lender all Funding Losses
incurred from time to time by Lender upon demand. Lender shall deliver to
Borrower a statement for any such sums to which Lender is entitled to receive
pursuant to this Section 2.9(b), which statement shall

                                       27


be binding and conclusive absent manifest error. Payment of Funding Losses
hereunder shall be in addition to any obligation to pay a Prepayment Premium in
circumstances where such Prepayment Premium would be due and owing.

         Section 2.10 Extension Options. Borrower has the right to extend the
term of the Loan for three additional terms of twelve (12) months each (each, an
"Extension Term"), with the first additional term ("First Extension Term")
having a maturity date that is the date that is the twelfth Payment Date
following the Initial Maturity Date ("First Extended Maturity Date"), the second
additional term ("Second Extension Term") having a maturity date that is the
date that is the twelfth Payment Date following the First Extended Maturity Date
("Second Extended Maturity Date") and the third additional term ("Third
Extension Term") having a maturity date that is the date that is the twelfth
Payment Date following the Second Extended Maturity Date "(Third Extended
Maturity Date"). Borrower shall exercise the right to exercise any extension
option under this Section 2.10 by giving Lender notice of such election at least
ninety (90) days prior to (i) the Initial Maturity Date, in the case of
exercising the option to extend the term of the Loan to the First Extended
Maturity Date, (ii) the First Extended Maturity Date, in the case of exercising
the option to extend the term of the Loan to the Second Extended Maturity Date
and (ii) the Second Extended Maturity Date, in the case of the option to extend
the term of the Loan to the Third Extended Maturity Date. Upon receipt of any
such request by Borrower to extend the term of the Loan, Lender will notify
Borrower whether or not the term of the Loan will be so extended, which
extension shall be granted upon satisfaction of each of the following conditions
in Lender's sole discretion:

                           (a) No Event of Default exists as of the date of
Borrower's extension option election notice to Lender and as of the Initial
Maturity Date the First Extended Maturity Date or the Second Extended Maturity
Date, as applicable, and Borrower delivers Lender an Officer's Certificate
confirming same;

                           (b) No Mortgage Loan Event of Default exists as of
the date of Borrower's extension option election notice to Lender and as of the
Initial Maturity Date, the First Extended Maturity Date, or the Second Extended
Maturity Date, as applicable, and the Borrower delivers to Lender an Officer's
Certificate confirming same;

                           (c) On or prior to the Initial Maturity Date, the
First Extended Maturity Date, or the Second Extended Maturity Date, as
applicable, Borrower either (A) extends the term of the Initial Interest Rate
Cap Agreement to a date not earlier than the First Extended Maturity Date, the
Second Extended Maturity Date or the Third Extended Maturity Date , as
applicable, or (B) obtains an Extension Interest Rate Cap Agreement for the
applicable Extension Term with a LIBOR Rate strike price equal to the Strike
Price, and collaterally assigned such Extension Interest Rate Cap Agreement to
Lender pursuant to an assignment of interest rate cap agreement in the same form
as the Interest Rate Cap; and

                           (d) intentionally omitted;

                                       28


                           (e) in each case, the Maturity Date under, and as
defined in, the Mortgage Loan Agreement is contemporaneously extended to the
First Extended Maturity Date or the Second Extended Maturity Date, as
applicable, and Borrower shall provide Lender copies of any and all notice and
correspondence relating to Borrower's exercise of its extension options under
the Mortgage Loan Agreement;

                  If any of the foregoing conditions are not satisfied in
Lender's sole discretion, Lender shall have no obligation to extend the term of
the Loan. Upon Borrower's exercise of its rights under this Section 2.10 and
Lender's extension of the term of the Loan in connection therewith, the defined
term "Maturity Date" shall be deemed to be the First Extended Maturity Date, the
Second Extended Maturity Date or the Third Extended Maturity Date, as
applicable.

         Section 2.11 Central Cash Management.

                           (a) Borrower shall cause Mortgage Borrower to comply
with Section 2.11 and Section 2.12 of the Mortgage Loan Agreement.

                           (b) On or before the Closing Date, Lender shall
establish and maintain with Deposit Account Bank a collection account (the
"Deposit Account"), which shall be an Eligible Account with a separate and
unique identification number and entitled "[_______________]". Subject to the
terms of Section 2.11(d)(vii) of the Mortgage Loan Agreement, an amount equal to
the scheduled monthly interest payment portion of Debt Service shall be
deposited into the Deposit Account and pursuant to Section 2.11(d)(x) of the
Mortgage Loan Agreement, all amounts then remaining in the Cash Collateral
Account shall be deposited into the Deposit Account. Borrower shall not have any
right to withdraw money from the Deposit Account, which shall be under the sole
dominion and the "control," within the meaning of Sections 9-104 and 9-106 of
the UCC, of Lender. Any such funds held by Borrower prior to deposit into the
Deposit Account shall be held in trust for the benefit of Lender.

                           (c) Establishment of Sub-Accounts. The Deposit
Account shall contain a Debt Service Payment Sub-Account and a Cash Management
Fee Sub-Account, each of which accounts (individually, a "Sub-Account" and
collectively, the "Sub-Accounts") shall be an Eligible Account to which certain
funds shall be allocated and from which disbursements shall be made pursuant to
the terms of this Agreement.

                           (d) Monthly Funding of Sub-Accounts. During each
Interest Accrual Period and, except as provided below, during the term of the
Loan commencing with the Interest Accrual Period in which the Closing Date
occurs (each, the "Current Interest Accrual Period"), Lender shall allocate all
funds then on deposit in the Deposit Account among the Sub-Accounts as follows
and in the following priority:

                                    (i) first, to the Debt Service Payment
         Sub-Account, until an amount equal to the Required Debt Service Payment
         for the Payment Date immediately after the Current Interest Accrual
         Period has been allocated to the Debt Service Payment Sub-Account; and

                                       29


                                    (ii) second, funds sufficient to pay the
         amounts then due Deposit Account Bank shall be deposited in the Cash
         Management Fee Sub-Account; and

                                    (iii) third, provided that (i) no Event of
         Default has occurred and is continuing, and (ii) Lender has received
         all financial information described in Section 5.1(P) for the most
         recent periods for which the same are due, Lender agrees that in each
         Current Interest Accrual Period any amounts deposited into or remaining
         in the Deposit Account after the minimum amounts set forth in clauses
         (i) and (ii), above have been satisfied with respect to the Current
         Interest Accrual Period and any periods prior thereto shall be
         disbursed by Lender on a weekly basis at Borrower's expense, to such
         account that Borrower may request in writing. Lender and its agents
         shall not be responsible for monitoring Borrower's use of any funds
         disbursed from the Deposit Account or any of the Sub-Accounts. If an
         Event of Default has occurred and is continuing, any amounts deposited
         into or remaining in the Deposit Account shall be for the account of
         Lender and may be withdrawn by Lender to be applied in any manner as
         Lender may elect in Lender's discretion.

                  If an Event of Default has occurred and exists or if on any
Payment Date the balance in any Sub-Account is insufficient to make the required
payment due from such Sub-Account, Lender may, in its sole discretion, in
addition to any other rights and remedies available hereunder, withdraw funds
from any other Sub-Account to (a) pay such deficiency or (b) apply to payment of
the Indebtedness. If Lender elects to apply funds of any such Sub-Account to pay
any Required Debt Service Payment, Borrower shall, upon demand, repay to Lender
the amount of such withdrawn funds to replenish such Sub-Account, and if
Borrower shall fail to repay such amounts within five (5) days after notice of
such withdrawal, an Event of Default shall exist hereunder.

                           (e) Payment of Debt Service and Deposit Account Bank
Fees.

                                    (i) Payment of Debt Service. At or before
         12:00 noon, New York City time, on each Payment Date during the term of
         the Loan, Lender shall transfer to Lender's own account from the Debt
         Service Payment Sub-Account an amount equal to the Required Debt
         Service Payment for the applicable Payment Date. Borrower shall be
         deemed to have timely made the Required Debt Service Payment regardless
         of the time Lender makes such transfer as long as sufficient funds are
         on deposit in the Debt Service Payment Sub-Account at 12:00 noon, New
         York City time on the applicable Payment Date. At all times after such
         Payment Date Lender may, at its option, transfer amounts in the Debt
         Service Payment Sub-Account to Lender's own account, provided that
         Borrower shall receive credit against the Required Debt Service Payment
         in the amounts so transferred to Lender such that in any given Current
         Interest Accrual Period Borrower shall not be required to deposit into
         the Debt Service Payment Sub-Account any amounts in excess of the
         aggregate amount of the Required Debt Service Payment for such Current
         Interest Accrual Period.

                                       30


                                    (ii) Payment of Deposit Account Bank Fees.
         Not more frequently than once each Interest Accrual Period, Lender
         shall transfer to the Deposit Account Bank an amount equal to the
         amount of the monthly fee payable to the Deposit Account Bank under the
         Deposit Account Agreement.

                           (f) Permitted Investments. Upon the written request
of Borrower, which request may be made once per Interest Accrual Period, Lender
shall direct the Deposit Account Bank to invest and reinvest any balance in the
Deposit Account from time to time in Permitted Investments as instructed by
Borrower; provided, however, that: (i) if Borrower fails to so instruct Lender,
or if a Default or an Event of Default shall have occurred and is continuing,
Lender shall direct the Deposit Account Bank to invest and reinvest such balance
in Permitted Investments as Lender shall determine in Lender's discretion; (ii)
the maturities of the Permitted Investments on deposit in the Deposit Account
shall, to the extent such dates are ascertainable, be selected and coordinated
to become due not later than the day before any disbursements from the
Sub-Accounts must be made; (iii) all such Permitted Investments shall be held in
the name and be under the sole dominion and control of Lender; (iv) no Permitted
Investment shall be made unless Lender shall retain a first priority perfected
Lien in such Permitted Investment and all filings and other actions necessary to
ensure the validity, perfection, and priority of such Lien have been taken; (v)
Lender shall only be required to follow the written investment instructions
which were most recently received by Lender and Borrower shall be bound by such
last received investment instructions; and (vi) any request from Borrower
containing investment instructions shall contain an Officer's Certificate from
Borrower (which may conclusively relied upon by Lender and its agents) that any
such investments constitute Permitted Investments. It is the intention of the
parties hereto that all amounts deposited in the Deposit Account shall at all
times be invested in Permitted Investments. All funds in the Deposit Account
that are invested in a Permitted Investment are deemed to be held in such
Deposit Account for all purposes of this Agreement and the other Loan Documents.
Lender shall have no liability for any loss in investments of funds in the
Deposit Account that are invested in Permitted Investments (unless invested
contrary to Borrower's request other than after the occurrence of a Default or
an Event of Default) and no such loss shall affect Borrower's obligation to
fund, or liability for funding, the Deposit Account and each Sub-Account, as the
case may be. Borrower and Lender agree that Borrower shall include all such
earnings and losses (other than those for Lender's account in accordance with
the immediately preceding sentence) on the Deposit Account as income of Borrower
for federal and applicable state tax purposes. Borrower shall be responsible for
any and all fees, costs and expenses with respect to Permitted Investments.

                           (g) Interest on Accounts. All interest paid or other
earnings on the Permitted Investments made hereunder shall be income of the
Borrower and applied in the manner and priority set forth in Section 2.11(d)
hereof.

                           (h) Termination of Central Cash Management. The
obligations of Borrower under Section 2.11 and Section 2.12 to maintain and fund
the Deposit Account shall terminate in their entirety and be of no further force
or effect upon the satisfaction of each of the following conditions: (i) no
Default or Event of Default shall have occurred and be continuing;

                                       31


(ii) the release by Lender of its liens on the Pledged Collateral in accordance
with the provisions of this Agreement and the other Loan Documents; and (iii)
Borrower's receipt of Lender's written acknowledgment that the conditions
described in (i) and (ii) above have been satisfied to Lender's satisfaction.

                           (i) Senior Loan Accounts. Notwithstanding anything to
the contrary contained in this Agreement, if at any time and for any reason
(including, without limitation, the satisfaction of the Mortgage Loan), the
Mortgage Borrowers are no longer maintaining any of the accounts or Sub-Accounts
(as defined in the Mortgage Loan Agreement) that it is required to maintain
under and in accordance with the terms of the Mortgage Loan Documents, (i)
Borrower shall be required to promptly establish and maintain with Lender and
for the benefit of Lender reserves in replacement and substitution thereof,
which substitute reserves shall be subject to all of the same terms and
conditions applicable under the Mortgage Loan Documents with respect to the
accounts and Sub-Accounts (as defined in the Mortgage Loan Agreement) being
replaced and be otherwise reasonably satisfactory to Lender, and Borrower shall,
and shall cause each Mortgage Borrower to acknowledge and agree to the
amendments to this Agreement relating to such substitution to cash management
provided such amendments are substantially similar to those contained in the
Mortgage Loan Agreement; and (ii) to the extent agreed to by Mortgage Lender
under the Mortgage Loan Documents, Borrower shall or shall cause Mortgage Lender
to remit to Lender any funds from accounts or Sub-Accounts (as defined in the
Mortgage Loan Agreement) that were remaining in such reserves at the time of the
termination of such reserves for the purpose of funding the equivalent
substitute reserves.

         Section 2.12. Security Agreement.

                           (a) Pledge of Accounts. To secure the full and
punctual payment and performance of all of the Indebtedness, Borrower hereby
sells, assigns, conveys, pledges and transfers to Lender and grants to Lender a
first priority and continuing Lien on and security interest in and to the
Account Collateral.

                           (b) Instructions and Agreements. On or before the
Closing Date, Borrower and the Deposit Account Bank will execute and deliver a
Deposit Account Agreement in form and substance satisfactory to Lender in
Lender's discretion (the "Deposit Account Agreement"). Borrower agrees that
prior to the payment in full of the Indebtedness, the Deposit Account Agreement
shall be irrevocable by Borrower without the prior written consent of Lender.

                           (c) Financing Statements; Further Assurances.
Borrower hereby authorizes Lender to file a financing statement or statements in
connection with the Account Collateral in the form required to properly perfect
Lender's security interest in the Account Collateral to the extent that it may
be perfected by such a filing. Borrower agrees that at any time and from time to
time, at the expense of Borrower, Borrower shall promptly execute and deliver
all further instruments, and take all further action, that Lender may reasonably
request, in order to perfect and protect the pledge, security interest and Lien
granted or purported to be

                                       32


granted hereby, or to enable Lender to exercise and enforce Lender's rights and
remedies hereunder with respect to, the Account Collateral.

                           (d) Transfers and Other Liens. Borrower agrees that
it will not sell or otherwise dispose of any of the Account Collateral other
than pursuant to the terms hereof and of the other Loan Documents, or create or
permit to exist any Lien upon or with respect to all or any of the Account
Collateral, except for the Lien granted to Lender under this Agreement.

                           (e) Lender's Reasonable Care. Beyond the exercise of
reasonable care in the custody thereof, Lender shall not have any duty as to any
Account Collateral or any income thereon in Lender's possession or control or in
the possession or control of any agents for, or of Lender, or the preservation
of rights against any Person or otherwise with respect thereto. Lender shall be
deemed to have exercised reasonable care in the custody of the Account
Collateral in Lender's possession if the Account Collateral is accorded
treatment substantially equal to that which Lender accords Lender's own
property, it being understood that Lender shall not be liable or responsible for
(i) any loss or damage to any of the Account Collateral, or for any diminution
in value thereof from a loss of, or delay in Lender's acknowledging receipt of,
any wire transfer from the Deposit Account Bank or (ii) any loss, damage or
diminution in value by reason of the act or omission of Lender, or Lender's
agents, employees or bailees, except for any loss, damage or diminution in value
resulting from the gross negligence, fraud or willful misconduct of Lender, its
agents or employees.

                           (f) Lender Appointed Attorney-In-Fact. Borrower
hereby irrevocably constitutes and appoints Lender as Borrower's true and lawful
attorney-in-fact, with full power of substitution, at any time after the
occurrence and during the continuance of an Event of Default to execute,
acknowledge and deliver any instruments and to exercise and enforce every right,
power, remedy, option and privilege of Borrower with respect to the Account
Collateral, and do in the name, place and stead of Borrower, all such acts,
things and deeds for and on behalf of and in the name of Borrower with respect
to the Account Collateral, which Borrower could or might do or which Lender may
deem necessary or desirable to more fully vest in Lender the rights and remedies
provided for herein with respect to the Account Collateral and to accomplish the
purposes of this Agreement. The foregoing powers of attorney are irrevocable and
coupled with an interest.

                           (g) Continuing Security Interest; Termination. This
Section shall create a continuing pledge of, Lien on and security interest in
the Account Collateral and shall remain in full force and effect until payment
in full of the Indebtedness. Upon payment in full of the Indebtedness, Borrower
shall be entitled to the return, upon Borrower's written request and at
Borrower's expense, of such of the Account Collateral as shall not have been
sold or otherwise applied pursuant to the terms hereof, and Lender shall execute
such instruments and documents as may be reasonably requested by Borrower in
writing to evidence such termination and the release of the pledge and Lien
hereof, provided, however, that Borrower shall pay on demand all of Lender's
expenses in connection therewith.

         Section 2.13. Secondary Market Transactions.

                                       33


                           (a) Borrower hereby acknowledges that Lender may in
one or more transactions (i) sell or securitize the Loan or portions thereof in
one or more transactions through the issuance of securities, which securities
may be rated by one or more of the Rating Agencies, (ii) sell or otherwise
transfer the Loan or any portion thereof one or more times, (iii) sell
participation interests (including without limitation, senior and subordinate
participation interests) in the Loan one or more times, (iv) re-securitize the
securities issued in connection with any securitization, or (v) further divide
the Loan into more separate notes or components, or change the principal
balances (but not increase the aggregate principal balance) or interest rates of
such notes (including, without limitation, senior and subordinate notes or
components) (the transactions referred to in clauses (i) through (v), each a
"Secondary Market Transaction" and collectively "Secondary Market
Transactions").

                           (b) With respect to any Secondary Market Transaction
described in Section 2.13(a)(v) above, such notes or note components may be
assigned different interest rates, so long as, at such time the weighted average
of the relevant interest rates equals the LIBOR Interest Rate; provided, that
after an Event of Default Borrower recognizes that, in the case of prepayments,
the weighted average interest rate of the Loan may increase because Lender shall
have the right to apply principal payments to one or more notes or components
with lower rates of interest before applying principal payments to one or more
notes or components with higher rates of interest and provided, further, that
the principal balance of the Note shall not change. Lender shall have the same
rights to sell or otherwise transfer, participate or securitize one or more of
the divided, amended, modified or otherwise changed notes or components,
individually or collectively, as Lender has with respect to the Loan.

                           (c) Borrower agrees that it shall cooperate with
Lender and use Borrower's commercially reasonable efforts to facilitate the
consummation of each Secondary Market Transaction including, without limitation,
by: (i) amending or causing the amendment of this Agreement and the other Loan
Documents, and executing such additional documents, instruments and agreements
including amendments to Borrower's organizational documents and preparing
financial statements as requested by the Rating Agencies to conform the terms of
the Loan to the terms of similar loans underlying completed or pending secondary
market transactions having or seeking ratings similar to those then being sought
in connection with the relevant Secondary Market Transaction; (ii) promptly and
reasonably providing such information (including, without limitation, financial
information) as may be requested in connection with the preparation of a private
placement memorandum, prospectus or a registration statement required to
privately place or publicly distribute the securities in a manner which does not
conflict with federal or state securities laws; (iii) providing in connection
with each of (A) a preliminary and a final private placement memorandum or other
offering documents or (B) a preliminary and final prospectus, as applicable, an
indemnification certificate (x) certifying that Borrower has carefully examined
such private placement memorandum, prospectus, registration statement or other
offering document, as applicable, including, without limitation, the sections
entitled "Special Considerations," "Description of the Mortgage Loan," "The
Underlying Mortgaged Property," "The Manager," "Borrower" and "Certain Legal
Aspects of the Mortgage Loan," and such sections (and any other sections
requested) insofar as they relate to Borrower, its Affiliates,

                                       34


the Loan or any Individual Property does not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements made, in the light of the circumstances under which they were made,
not misleading; provided, however, that Borrower shall not be required to
indemnify Lender for any losses relating to untrue statements or omissions which
Borrower identified to Lender in writing at the time of Borrower's examination
of such memorandum or prospectus, as applicable, and (y) indemnifying (i) Lender
and each of its affiliates and their respective successors and assigns
(including their respective officers, directors, partners, employees, attorneys,
accountants, professionals and agents and each other person, if any, controlling
Lender or any of its affiliates within the meaning of either Section 15 of the
Securities Act of 1933, as amended (the "Securities Act"), or Section 20 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (each,
including Lender, an "Indemnified Party") and the (ii) party that has filed the
registration statement relating to the Secondary Market Transaction (the
"Registration Statement"), each of its directors and officers who have signed
the Registration Statement and each Person that controls such Party within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
(collective, the "Underwriter Group"), for any losses, claims, damages, costs,
expenses or liabilities (including, without limitation, all liabilities under
all applicable federal and state securities laws) (collectively, the
"Liabilities") to which any of them may become subject (a) insofar as the
Liabilities arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact relating to Borrower, its Affiliates, the
Loan, any Individual Property, any Manager, the Mortgage Borrowers, the Mortgage
Loan and Operating Lessee contained in such sections 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 sections or necessary in order to make the
statements in such sections, in light of the circumstances under which they were
made, not misleading or (b) as a result of any untrue statement of material fact
in any of the financial statements of Borrower incorporated into any placement
memorandum, prospectus, registration statement or other document connected with
the issuance of securities or the failure to include in such financial
statements or in any placement memorandum, prospectus, registration statement or
other document connected with the issuance of securities any material fact
relating to Borrower, its Affiliates, any Individual Property, the Loan, any
Manager, the Mortgage Borrowers, the Mortgage Loan and the Operating Lessee
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading; and (z) agreeing to reimburse the
Indemnified Party and the Underwriter Group for any legal or other expenses
reasonably incurred by the Indemnified Party and the Underwriter Group in
connection with investigating or defending the Liabilities; (iv) causing to be
rendered such customary opinion letters as shall be requested by the Rating
Agencies for other secondary market or transactions having or seeking ratings
comparable to that then being sought for the relevant Secondary Market
Transaction; (v) making such representations, warranties and covenants, as may
be reasonably requested by the Rating Agencies and comparable to those required
in other secondary market transactions having or seeking the same rating as is
then being sought for the Secondary Market Transaction; (vi) providing such
information regarding the Collateral or the Pledged Collateral as may be
reasonably requested by the Rating Agencies or otherwise required in connection
with the formation of a REMIC; and (vii) providing any other information and
materials required in the Secondary Market Transaction.

                                       35


                           (d) Borrower agrees to participate and cooperate in
any meetings with the Rating Agencies or Investors, and providing any other
information and materials reasonably required in the Secondary Market
Transaction to make the certificates offered in such Secondary Market
Transaction saleable in the secondary market and to obtain ratings from two or
more rating agencies;

                           (e) Borrower acknowledges and agrees that the Lender
may, at any time on or after the Closing Date, assign its duties, rights or
obligations hereunder or under any Loan Document in whole, or in part, to a
servicer and/or a trustee in Lender's discretion. Nothing herein shall in any
way limit Lender's right to sell all or a portion of the Loan in a transaction
which is not a Secondary Market Transaction.

                           (f) Lender shall reimburse Borrower for all
reasonable out-of-pocket costs incurred by the Borrower in connection with
complying with their obligations set forth in this Section 2.13, provided,
however that the Borrower shall remain responsible for all of Borrower's
reasonable and customary legal and accounting fees not to exceed $10,000 and all
indemnity and related obligations incurred by Borrower or its Affiliates.

                           (g) Notwithstanding anything to the contrary
contained herein or in any other Loan Document, Lender reserves the right to
increase, decrease, or otherwise re-allocate the outstanding principal balances
of any and all of the Mortgage Notes and the Note, and Borrower covenants and
agrees to, and to cause the Mortgage Borrowers to execute amendments to the
Note, this Agreement, and the other Loan Documents, the Mortgage Notes, the
Mortgage Loan Documents and the Borrower's organizational documents reasonably
requested by Lender or Mortgage Lender in connection with any such
re-allocation, provided that such modification shall not (a) increase the
aggregate outstanding principal balance of the Mortgage Notes and the Mezzanine
Note, (b) increase the weighted average interest rate of the Loan and the
Mortgage Loan existing on the date of such modification, (c) change the stated
maturity date of the Loan as set forth herein, or (d) modify or amend any other
economic or other term of the Loan.

         Section 2.14. Interest Rate Cap Agreement.

                           (a) On the Closing Date, Borrower shall obtain, and
thereafter maintain in effect, the Initial Interest Rate Cap Agreement, which
shall be coterminous with the Initial Maturity Date and have a notional amount
equal to the Loan Amount. The Initial Interest Rate Cap Agreement shall have a
LIBOR strike rate equal to or less than the Strike Rate.

                           (b) If Borrower exercises any option to extend the
term of the Loan pursuant to Section 2.10, then on or prior to the commencement
of the applicable Extension Term, Borrower shall obtain an Extension Interest
Rate Cap Agreement having (x) a term coterminous with such Extension Term, (y) a
notional amount at least equal to the Principal Indebtedness as of the first day
of such Extension Term, and (z) a LIBOR strike rate equal to or less than the
Strike Rate.

                                       36


                           (c) Borrower shall collaterally assign to Lender
pursuant to the Rate Cap Pledge and Security Agreement all of its right, title
and interest in any and all payments under each Interest Rate Cap Agreement and
shall deliver to Lender an executed counterpart of such Rate Cap Pledge and
Security Agreement and obtain the consent of the Acceptable Counterparty to such
collateral assignment (as evidenced by the Acceptable Counterparty's execution
of a separate acknowledgment to such Rate Cap Pledge and Security Agreement).

                           (d) Borrower shall comply with all of its obligations
under the terms and provisions of each Interest Rate Cap Agreement. All amounts
paid under an Interest Rate Cap Agreement shall be deposited directly into the
Deposit Account. Borrower shall take all actions reasonably requested by Lender
to enforce Lender's rights under the Rate Cap Pledge and Security Agreement in
the event of a default by the counterparty thereunder and shall not waive, amend
or otherwise modify any of its rights thereunder without Lender's reasonable
consent (which consent may be conditioned on receipt of a Rating Agency
Confirmation).

         Section 2.15. Partial Release. Provided that no Event of Default has
occurred and is continuing under any of the Loan Documents, at any time after
October 1, 2005, Borrower may cause each Mortgage Borrower to obtain the release
of such Individual Property (a "Partial Release") from the lien of the
applicable Mortgage (and other Loan Documents) and the release of such Mortgage
Borrower's and Operating Lessee's ongoing obligations under the Mortgage Loan
Documents with respect to such Individual Property (other than those expressly
stated to survive) so long as all of the following conditions shall have been
satisfied:

                           (a) Borrower has provided Lender with no less than
thirty (30) days, but no more than ninety (90) days, prior written notice of the
applicable Mortgage Borrower's request to obtain a release of the applicable
Individual Property;

                           (b) Lender shall have received a prepayment of the
Loan in an amount equal to the greater of (a) in the event that the Partial
Release will result in an aggregate prepayment of five million, nine hundred
fifty-two thousand, three hundred eighty dollars ($5,952,380) or less, 100% of
the Allocated Mezzanine Loan Amount of the Individual Property sold or (b) in
the event that the Partial Release will result in an aggregate prepayment of
greater than five million, nine hundred fifty-two thousand, three hundred eighty
dollars ($5,952,380), 115% of the Allocated Mezzanine Loan Amount for the
Individual Property sold (either (a), or (b) the "Release Price"), which
prepayment shall be accompanied by (i) all accrued and unpaid interest allocable
to the portion of the Principal Indebtedness being prepaid as of the date of
such prepayment, (ii) if such prepayment is not made on a Payment Date, the
interest which would have accrued thereon to the next monthly Payment Date with
respect to the amount prepaid, (iii) the applicable Yield Maintenance Premium on
the Principal Indebtedness being prepaid pursuant to such Partial Release, and
(iv) any and all other sums due under the Loan Documents in connection with a
partial prepayment of the Loan;

                           (c) Mortgage Lender shall have received a prepayment
of the Mortgage Loan simultaneously with the prepayment described in the
immediately preceding subsection (b) equal to the Mortgage Loan Release Price;

                                       37


                           (d) the applicable Mortgage Borrower shall have
complied with all of the terms and provisions regarding such Partial Release set
forth in the Mortgage Loan Agreement, the applicable Mortgage and the other
Mortgage Loan Documents;

                           (e) the requirements of Section 2.15(f) of the
Mortgage Loan Agreement with respect to the required Debt Service Coverage Ratio
for the remaining Individual Properties shall be satisfied, and Borrower shall
deliver to Lender an Officer's Certificate confirming same;

                           (f) Borrower shall execute (i) amendments to the Loan
Documents to the extent necessary (as determined by Lender in its reasonable
discretion to document and reflect the Partial Release);

                           (g) Lender shall have received reimbursement in full
of all of Lender's fees, costs and expenses, including without limitation,
reasonable legal counsel fees and disbursements incurred in connection with the
Partial Release, and the review and approval of all documents and information
required to be delivered in connection therewith; and

         In the event that Borrower shall cause any Mortgage Borrower to obtain
a Partial Release of its applicable Individual Property pursuant to the terms
and conditions of this Section 2.15, Borrower may, upon its request, obtain a
release of the lien upon the portion of the Pledged Equity applicable to such
Mortgage Borrower, and Lender shall, upon Borrower's request and at Borrower's
sole cost and expense, (a) execute such releases and other documentation as may
be reasonably necessary to effect such release, and (b) promptly return to
Borrower the Certificates applicable to such Mortgage Borrower.

                                   ARTICLE 3.

                              CONDITIONS PRECEDENT

         Section 3.1. Conditions Precedent to the Making of the Loan.

                           (a) As a condition precedent to the making of the
Loan, Borrower shall have satisfied the following conditions (unless waived by
Lender in accordance with Section 8.4) on or before the Closing Date:

                                    (A) Loan Documents.

                                             (i) Loan Agreement. Borrower shall
         have executed and delivered this Agreement to Lender.

                                             (ii) Note. Borrower shall have
         executed and delivered to Lender the Note.

                                       38


                                             (iii) Interest Rate Cap Agreement.
         Borrower shall have delivered to Lender the Interest Rate Cap Agreement
         in a form acceptable to Lender form an Acceptable Counterparty.

                                             (iv) Mezzanine Loan Documents.
         Borrower and Guarantor, as applicable, shall have executed and
         delivered to Lender the Pledge Agreement, the Environmental Guaranty,
         the PIP Guaranty, the Manager's Subordination Agreement and all other
         Loan Documents.

                                             (v) Financing Statements. Borrower
         and its partners or members (and their shareholders), as applicable,
         shall have authorized Lender to file all financing statements required
         by Lender and such financing statements shall have been irrevocably
         delivered to an authorized title agent for the Title Company in the
         appropriate filing offices in each of the appropriate jurisdictions.

                                             (vi) Manager's Subordination. Each
         Manager and Borrower shall have executed and delivered to Lender the
         Manager's Subordinations.

                                             (vii) Franchisor Subordinations.
         The Borrower shall have delivered to Lender (1) certified copies of
         each Franchise Agreement and (2) the Franchisor's Subordinations.

                                             (viii) Subordination, Attornment
         and Security Agreement. Operating Lessee and each applicable Borrower
         shall have executed and delivered to Lender (1) a certified copy of
         each Operating Lease, and (2) each applicable Subordination, Attornment
         and Security Agreement.

                                             (ix) Environmental Guaranty.
         Borrower shall have executed and delivered to Lender the Environmental
         Guaranty.

                                             (x) PIP Guaranty. Guarantor shall
         have executed the PIP Guaranty.

                                             (xi) Deposit Account Agreement.
         Borrower and Deposit Account Bank shall have executed and delivered the
         Deposit Account Agreement and shall have delivered an executed copy of
         such Deposit to Lender.

                                             (xii) REA Estoppels. Borrower shall
         have delivered to Lender an executed REA estoppel letter, which shall
         be in form and substance satisfactory to Lender, from each party to any
         REA required by Lender with respect to any Individual Property.

                                             (xiii) Ashford TRS Corporation
         shall have executed and delivered to Lender the TRS Pledge Agreement;

                                       39


                                             (xiv) Borrower, Ashford TRS
         Corporation and Operating Lessee shall have executed and delivered the
         TRS Recognition Agreement.

                                    (B) Opinions of Counsel. Lender shall have
received from counsel satisfactory to Lender, legal opinions in form and
substance satisfactory to Lender in Lender's discretion (including, without
limitation, a bankruptcy opinion). All such legal opinions will be addressed to
Lender and the Rating Agencies, dated as of the Closing Date, and in form and
substance satisfactory to Lender, the Rating Agencies and their counsel.
Borrower hereby instructs any of the foregoing counsel, to the extent that such
counsel represents Borrower, to deliver to Lender such opinions addressed to
Lender and the Rating Agencies.

                                    (C) Secretary's Certificates and SPE Equity
Owner's Certificate. Lender shall have received a Secretary's Certificate
acceptable to Lender with respect to Borrower's managing equity owner and each
Remington Manager and the SPE Equity Owner's Certificate with respect to
Borrower.

                                    (D) Insurance. Lender shall have received
certificates of insurance demonstrating insurance coverage in respect of each
Individual Property as required by and in accordance with the Mortgages.

                                    (E) Lien Search Reports. Lender shall have
received satisfactory reports of UCC (collectively, the "UCC Searches"), federal
tax lien, bankruptcy, state tax lien, judgment and pending litigation searches
conducted by a search firm reasonably acceptable to Lender. Such searches shall
have been received in relation to Borrower, each Mortgage Borrower, the
Operating Lessee, and each Manager. Such searches shall have been conducted in
each of the locations designated by Lender in Lender's reasonable discretion and
shall have been dated not more than fifteen (15) days prior to the Closing Date.

                                    (F) Title Insurance Policy. Lender shall
have received (i) a Title Insurance Policy for each Individual Property or a
marked-up commitment (in form and substance satisfactory to Lender) from Title
Insurer to issue a Title Insurance Policy, for each Individual Property and (ii)
a fully executed copy of the Title Instruction Letter from the Title Insurer and
(iii) an "Eagle 9" or such similar UCC title insurance policy insuring the
perfection of the pledge of the Pledged Collateral in form and substance
acceptable to Lender.

                                    (G) Environmental Matters. Lender shall have
received the Environmental Report with respect to each Individual Property.

                                    (H) Consents, Licenses, Approvals. Lender
shall have received copies of all consents, licenses and approvals, if any,
required in connection with the execution, delivery and performance by Borrower
under, and the validity and enforceability of, the Loan Documents, and such
consents, licenses and approvals shall be in full force and effect.

                                    (I) Additional Matters. Lender shall have
received such other Permits, certificates (including certificates of occupancy
reflecting the permitted uses of the

                                       40


Individual Properties as of the Closing Date), opinions, documents and
instruments (including, without limitation, written proof from the appropriate
Governmental Authority regarding the zoning of each Individual Property in form
and substance satisfactory to Lender in Lender's discretion) relating to the
Loan as may be required by Lender and all other documents and all legal matters
in connection with the Loan shall be satisfactory in form and substance to
Lender. Borrower shall provide Lender with information reasonably satisfactory
to Lender regarding the Basic Carrying Costs on or before the Closing Date.

                                    (J) Representations and Warranties. The
representations and warranties herein and in the other Loan Documents shall be
true and correct in all material respects.

                                    (K) No Injunction. No law or regulation
shall have been adopted, no order, judgment or decree of any Governmental
Authority shall have been issued or entered, and no litigation shall be pending
or threatened, which in the judgment of Lender would have a Material Adverse
Effect.

                                    (L) Survey. Lender shall have received a
Survey for each Individual Property.

                                    (M) Engineering Report. Lender shall have
received an Engineering Report for each Individual Property.

                                    (N) Appraisal. Lender shall have received an
Appraisal satisfactory to Lender with respect to each Individual Property which
shall be (i) prepared by an Appraiser approved by Lender in Lender's reasonable
discretion, (ii) prepared based on a scope of work determined by Lender in
Lender's reasonable discretion and (iii) in form and content acceptable to
Lender in Lender's reasonable discretion.

                                    (O) Security Deposits. Each Mortgage
Borrower shall be in compliance with all applicable Legal Requirements relating
to all security deposits held for any Leases.

                                    (P) Service Contracts and Permits. Borrower
shall have delivered to Lender true, correct and complete copies of all material
contracts and Permits relating to each Individual Property.

                                    (Q) Site Inspection. Unless waived by Lender
in accordance with Section 8.4, Lender shall have performed, or caused to be
performed on its behalf, an on-site due diligence review of each Individual
Property to be acquired or refinanced with the Mortgage Loan, the results of
which shall be satisfactory to Lender in Lender's discretion.

                                    (R) Use. Each Individual Property shall be
operating and operated only as a hotel of the same class and in a similar manner
as each such Individual Property is operated on the Closing Date.

                                       41


                                    (S) Financial Information. Lender shall have
received all financial information (which financial information shall be
satisfactory to Lender in Lender's discretion) relating to each Individual
Property including, without limitation, audited financial statements of
Borrower, each Mortgage Borrower and Operating Lessee for the calendar year
ending December 31, 2003 and other financial reports requested by Lender in
Lender's reasonable discretion. Such financial information shall be (i) prepared
by an accounting firm approved by Lender in Lender's reasonable discretion, (ii)
prepared based on a scope of work determined by Lender in Lender's reasonable
discretion and (iii) in form and content acceptable to Lender in Lender's
reasonable discretion.

                                    (T) Management Agreement. Lender shall have
received each Management Agreement.

                                    (U) Leases; Tenant Estoppels; Subordination,
Nondisturbance and Attornment Agreements. With respect to each Individual
Property, Borrower shall have delivered a true, complete and correct rent roll
and a copy of each of the Leases identified in such rent roll, and each Lease
shall be satisfactory to Lender in Lender's reasonable discretion.

                                    (V) Subdivision. Evidence satisfactory to
Lender (including title endorsements) that the Land relating to each Individual
Property constitutes a separate lot for conveyance and real estate tax
assessment purposes.

                                    (W) Transaction Costs. Borrower shall have
paid or caused to be paid all Transaction Costs.

                                    (X) Ground Lease. Borrower shall have
delivered to Lender (1) certified copy of the Ground Lease, and (2) an executed
estoppel certificate in form and substance acceptable to Lender from the lessor
under the Ground Lease.

                           (b) Lender shall not be obligated to make the Loan
unless and until each of the applicable conditions precedent set forth in this
Section 3.1 is satisfied and until Borrower provides any other information
reasonably required by Lender.

                           (c) In connection with the Loan, Borrower shall
execute and/or deliver to Lender all additions, amendments, modifications and
supplements to the items set forth in this Article III, including, without
limitation, amendments, modifications and supplements to the Note, the Pledge
Agreement, the TRS Pledge Agreement and the Manager's Subordinations if
reasonably requested by Lender to effectuate the provisions hereof, and to
provide Lender with the full benefit of the security intended to be provided
under the Loan Documents. Without in any way limiting the foregoing, such
additions, modifications and supplements shall include those deemed reasonably
desirable by Lender's counsel in the jurisdiction in which the applicable
Individual Property is located.

                           (d) The making of the Loan shall constitute, without
the necessity of specifically containing a written statement to such effect, a
confirmation, representation and

                                       42


warranty by Borrower to Lender that all of the applicable conditions to be
satisfied in connection with the making of the Loan have been satisfied (unless
waived by Lender in accordance with Section 8.4, or otherwise made known to
Lender by Borrower) and that all of the representations and warranties of
Borrower set forth in the Loan Documents are true and correct as of the date of
the making of the Loan.

         Section 3.2. Form of Loan Documents and Related Matters.

                  The Loan Documents and all of the certificates, agreements,
legal opinions and other documents and papers referred to in this Article III,
unless otherwise specified, shall be delivered to Lender, and shall be in form
and substance satisfactory to Lender.

                                   ARTICLE 4.

                         REPRESENTATIONS AND WARRANTIES

         Section 4.1. Representations and Warranties of Borrower. Borrower
represents, warrants and covenants as follows as to Borrower, each Mortgage
Borrower, Guarantor, Operating Lessee, the Pledged Collateral and all Individual
Properties, as applicable:

                                    (A) Organization. Each of Borrower, each
Mortgage Borrower and Operating Lessee (i) is a duly organized and validly
existing Entity in good standing under the laws of the State of its formation,
(ii) is duly qualified as a foreign Entity in each jurisdiction in which the
nature of its business, the applicable Individual Properties or any of the
Collateral or the Pledged Collateral, as applicable, makes such qualification
necessary or desirable, (iii) has the requisite Entity power and authority to
carry on its business as now being conducted, and (iv) has the requisite Entity
power to execute and deliver, and perform its obligations under, the Loan
Documents, as applicable.

                                    (B) Authorization. The execution and
delivery by Borrower, Guarantor, Ashford TRS Corporation, and the Operating
Lessee of the Loan Documents to which it is a party, Borrower's, Guarantor's,
Ashford TRS Corporation's and Operating Lessee's performance of its obligations
thereunder and the creation of the security interests and Liens provided for in
the Loan Documents (i) have been duly authorized by all requisite Entity action
on the part of Borrower, Guarantor, Ashford TRS Corporation and Operating
Lessee, (ii) will not violate any provision of any applicable Legal
Requirements, any order, writ, decree, injunction or demand of any court or
other Governmental Authority, any organizational document of Borrower,
Guarantor, Ashford TRS Corporation or Operating Lessee or any indenture or
agreement or other instrument to which Borrower or Operating Lessee is a party
or by which Borrower, Guarantor, Ashford TRS Corporation or Operating Lessee is
bound except, with respect to violations of any such indentures, agreements or
other instruments, where such violation would not have a Material Adverse
Effect, (iii) will not be in conflict with, result in a breach of, or constitute
(with due notice or lapse of time or both) a default under, or result in the
creation or imposition of any Lien of any nature whatsoever upon any of the
property or assets of Borrower, Guarantor, Ashford TRS Corporation or Operating
Lessee pursuant to, any indenture

                                       43


or agreement or instrument, and (iv) have been duly executed and delivered by
Borrower, Guarantor, Ashford TRS Corporation or Operating Lessee, as applicable.
Except for those obtained or filed on or prior to the Closing Date, none of
Borrower, Guarantor, Ashford TRS Corporation or Operating Lessee 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 the Loan
Documents. The Loan Documents to which Borrower, , Guarantor, Ashford TRS
Corporation Operating Lessee or any Manager is a party have been executed and
delivered by such parties.

                                    (C) Single-Purpose Entity.

                                             (i) Borrower has been, and will
         continue to be, a duly formed and existing Entity, and a Single-Purpose
         Entity.

                                             (ii) Each SPE Equity Owner at all
         times since its formation has been, and will continue to be, a duly
         formed and existing limited liability company or limited partnership,
         as applicable, in good standing under the laws of the jurisdiction of
         its formation and a Single-Purpose Entity, is duly qualified as a
         foreign entity in each other jurisdiction in which the nature of its
         business or any of the Collateral or the Pledged Collateral makes such
         qualification necessary or desirable, and Borrower will take no action
         to cause any SPE Equity Owner not to be a duly formed and existing
         limited liability company in good standing under the laws of the
         jurisdiction of its formation and a Single-Purpose Entity

                                             (iii) Borrower, each Mortgage
         Borrower, each SPE Equity Owner and Operating Lessee has been, and will
         continue to be, a duly formed and existing Entity, and a Single-Purpose
         Entity provided that certain of the Mortgage Borrowers identified on
         Schedule I (the "Pre-Existing Borrowers") were organized prior to the
         transactions contemplated herein, and they did not originally have
         covenants or undertakings with respect to the Special Purpose Entity
         criteria in their organizational documents and did not have Independent
         Directors. However, each Pre-Existing Borrower has certified that since
         organization it has never owned any property other than its current
         respective Individual Property, that it has engaged in no business
         other than the ownership and operation of its respective Individual
         Property, that it has timely paid all taxes, and that it has complied
         in all material respects with the Single-Purpose Entity criteria;
         except that certain of the Pre-Existing Borrowers had indebtedness
         secured by their respective Individual Property or allowed their
         Individual Property to secure obligations of an affiliate, but the
         related lender has executed a release, which includes an
         acknowledgement that such Pre-Existing Borrower's obligation to lender
         has been terminated and discharged in full, and that lender may not
         look to the Pre-Existing Borrower or its assets for satisfaction of the
         obligations of any affiliate of Ashford Hospitality Limited Partnership
         under the related credit facility.

                                             (iv) Each SPE Equity Owner at all
         times since its formation has been, and will continue to be, a duly
         formed and existing limited liability

                                       44


         company or a limited partnership in good standing under the laws of the
         jurisdiction of its formation and a Single-Purpose Entity, is duly
         qualified as a foreign entity in each other jurisdiction in which the
         nature of its business or any of the Collateral makes such
         qualification necessary or desirable, and Borrower will take no action
         to cause any SPE Equity Owner not to be a duly formed and existing
         limited liability company in good standing under the laws of the
         jurisdiction of its formation and a Single-Purpose Entity.

                                    (D) Litigation. Except as disclosed on
Schedule 1 attached hereto, there are no actions, suits or proceedings at law or
in equity by or before any Governmental Authority or other agency now pending
and served or, to the knowledge of Borrower, threatened against Borrower,
Guarantor, Ashford TRS Corporation, any SPE Equity Owner, Mortgage Borrower,
Operating Lessee, any Manager, the Pledged Collateral or any Individual Property
which, if determined against Borrower, Guarantor, Ashford TRS Corporation, SPE
Equity Owner, Mortgage Borrower, Operating Lessee, Manager, the Pledged
Collateral, or Individual Property could reasonably be expected to have a
Material Adverse Effect.

                                    (E) Agreements. Neither Borrower, Guarantor,
Ashford TRS Corporation, nor any Mortgage Borrower or Operating Lessee is a
party to any agreement or instrument or subject to any restriction which is
likely to have a Material Adverse Effect. No such party is in default in any
material respect in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any indenture, agreement or
instrument to which it is a party or by which such party or the applicable
Pledged Collateral or Individual Property is bound which could reasonably be
expected to have a Material Adverse Effect.

                                    (F) No Bankruptcy Filing. Neither Borrower,
nor Borrower on behalf of any Mortgage Borrower, Guarantor, Ashford TRS
Corporation, or Operating Lessee is contemplating either 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 party's assets or property, and
Borrower has no knowledge of any Person contemplating the filing of any such
petition against such party.

                                    (G) Full and Accurate Disclosure. No
statement of fact made by or on behalf of Borrower in the Loan Documents
contains any untrue statement of a material fact or omits to state any material
fact necessary to make statements contained herein or therein not misleading.
There is no fact presently known to Borrower which has not been disclosed to
Lender which materially adversely affects, nor as far as Borrower can foresee,
might materially adversely affect the business, operations or condition
(financial or otherwise) of Borrower.

                                    (H) Management Agreements. Each Management
Agreement is valid, binding and enforceable and in full force and effect and has
not been modified and there are no material defaults under any of them and nor
has any event occurred that with the passage of time, the giving of notice or
both would result to Borrower's knowledge (a) in such a material default under
the terms of each Management Agreement with any Manager other than Remington
Manager, and (b) with respect to any Management Agreement with Remington

                                       45


Manager, has any event occurred that with the passage of time, the giving of
notice or both would result in such a material default under the terms of such
Management Agreement.

                                    (I) Compliance. Except as expressly
disclosed in the Engineering Reports, the Environmental Reports, the PZR zoning
reports or the Surveys delivered to Lender by Borrower, each Individual Property
and each of Mortgage Borrowers', each Manager's and each Operating Lessee's use
thereof as a hotel and operations thereat comply in all material respects with
all applicable Legal Requirements and all Insurance Requirements. Neither
Borrower nor Mortgage Borrower is in default or violation of any order, writ,
injunction, decree or demand of any Governmental Authority, the violation of
which is reasonably likely to have a Material Adverse Effect.

                                    (J) Other Debt and Obligations. Neither
Borrower nor Mortgage Borrower or Operating Lessee has any financial obligation
under any indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which such party is a party, or by which such party or each
Individual Property or the Pledged Collateral is bound, other than (a) unsecured
trade payables incurred in the ordinary course of business relating to the
ownership and operation of each Individual Property or the Pledged Collateral
which are not evidenced by a promissory note and (1) with respect to Mortgage
Borrower when aggregated with the unsecured trade payables of all Mortgage
Borrowers and Operating Lessee, do not exceed a maximum amount of two and
one-half percent (2.5%) of the Mortgage Indebtedness and are paid within sixty
(60) days of the date incurred and (2) with respect to Borrower and Bucks County
Member LLC, do not exceed $10,000 and are paid within sixty (60) days of the
date incurred, (unless same are being contested in accordance with the terms of
this Agreement) and (c) obligations under the Mortgage Loan Documents and the
Loan Documents, as applicable. Except for the Loan and the Mortgage Loan,
neither Borrower nor Mortgage Borrower or Operating Lessee has borrowed or
received other debt financing that has not been heretofore repaid in full and
Borrower has no known material contingent liabilities.

                                    (K) ERISA. (a) Each Plan and, to the
knowledge of Borrower, each Multiemployer Plan, is in compliance in all material
respects 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
federal or state law, and no event or condition has occurred as to which
Borrower would be under an obligation to furnish a report to Lender under
Section 5.1(S).

                                                       (a) As of the date hereof
and throughout the term of the Loan (a) none of Borrower, Mortgage Borrower or
Operating Lessee is or will be an "employee benefit plan," as defined in Section
3(3) of ERISA, subject to Title I of ERISA, or a "plan," as defined in Section
4975(e)(1) of the Code, subject to Code Section 4975, (b) neither Borrower nor
Mortgage Borrower or Operating Lessee is or will be a "governmental plan" within
the meaning of Section 3(32) of ERISA, (c) none of the assets of Borrower,
Mortgage Borrower or Operating Lessee constitutes or will constitute "plan
assets" of one or more of any such plans under 29 C.F.R. Section 2510.3-101 or
otherwise, and (d) transactions by or with

                                       46


Borrower, Mortgage Borrower or Operating Lessee do not and will not violate
state statutes regulating investment of, and fiduciary obligations with respect
to, governmental plans and such state statutes do not in any manner affect the
ability of the Borrower, Mortgage Borrower or Operating Lessee to perform its
obligations under the Loan Documents or the Mortgage Loan Documents, as
applicable, or the ability of Lender or Mortgage Lender to enforce any and all
of its rights under the this Agreement or the Mortgage Loan Agreement, as
applicable.

                                    (L) Solvency. Borrower (i) has not entered
into this Agreement or any Loan Document with the actual intent to hinder,
delay, or defraud any creditor, and (ii) has received reasonably equivalent
value in exchange for its obligations under the Loan Documents. Giving effect to
the transactions contemplated hereby and the agreements set forth herein, the
fair saleable value of Borrower's assets exceeds and will, immediately following
the execution and delivery of this Agreement, exceed Borrower's total
liabilities, including, without limitation, subordinated, unliquidated, or
disputed liabilities or Contingent Obligations. The fair saleable value of
Borrower's assets is and will, immediately following the execution and delivery
of this Agreement, be greater than Borrower's probable liabilities, including
the maximum amount of its Contingent Obligations or its debts as such debts
become absolute and matured. Borrower's assets do not and, immediately following
the execution and delivery of this Agreement, will not, constitute unreasonably
small capital to carry out its business as conducted or as proposed to be
conducted. Borrower does not intend to, and does not believe that it will, incur
debts and liabilities (including, without limitation, Contingent Obligations and
other commitments) beyond its ability to pay such debts as they mature (taking
into account the timing and amounts to be payable on or in respect of
obligations of Borrower).

                                    (M) Not Foreign Person. Borrower is not a
"foreign person" within the meaning of Section 1445(f)(3) of the Code.

                                    (N) Investment Company Act; Public Utility
Holding Company Act. Borrower is not (i) an "investment company" or a company
"controlled" by an "investment company," within the meaning of 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.

                                    (O) No Defaults. No Event of Default, or to
Borrower's knowledge, Default, exists under or with respect to any Loan
Document.

                                    (P) Labor Matters. Borrower is not a party
to any collective bargaining agreements.

                                    (Q) Title to each Individual Property and
the Pledged Collateral. Each Mortgage Borrower owns good, indefeasible,
marketable and insurable fee simple or leasehold title to the applicable
Individual Property which it owns, free and clear of all Liens, other than the
Permitted Encumbrances applicable to such Individual Property. There are

                                       47


no outstanding options to purchase or rights of are not likely to first refusal
affecting any Individual Property. The Permitted Encumbrances do not and are not
likely to materially and adversely affect (i) the ability of Mortgage Borrower
to pay in full all sums due under the Mortgage Notes or any of its other
obligations in a timely manner or (ii) the use of any Individual Property for
the use currently being made thereof, the operation of such Individual Property
as currently being operated or the value of any Individual Property. Borrower
and Ashford TRS Corporation each owns the Pledged Collateral represented to be
owned by it, free and clear of all Liens, except for the liens created under the
Loan Documents. No Person other than Borrower or SPE Equity Owner owns any
equity interests in Mortgage Borrower and no Person other than Borrower owns any
membership interest in Bucks County Member LLC.

                                    (R) Use of Proceeds; Margin Regulations.
Borrower will use the proceeds of the Loan for the purposes described in Section
2.2. No part of the proceeds of the Loan will be used for the purpose of
purchasing or acquiring any "margin stock" within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System or for any other purpose
which would be inconsistent with such Regulation U or any other Regulations of
such Board of Governors, or for any purposes prohibited by applicable Legal
Requirements.

                                    (S) Financial Information. All historical
financial data concerning Borrower, Mortgage Borrower, Operating Lessee, the
Pledged Collateral and any Individual Property (including, without limitation
all rent rolls and operating statements) that has been delivered by Borrower to
Lender is true, complete and correct in all material respects. Since the
delivery of such data, except as otherwise disclosed in writing to Lender, there
has been no material adverse change in the financial position of Borrower,
Mortgage Borrower, Operating Lessee, the Pledged Collateral or any Individual
Property, or in the results of operations of Borrower, Mortgage Borrower or
Operating Lessee. Neither Borrower, Mortgage Borrower nor Operating Lessee, has
incurred any obligation or liability, contingent or otherwise, not reflected in
such financial data which might materially adversely affect its business
operations, the Pledged Collateral or any Individual Property.

                                    (T) Condemnation. No Taking has been
commenced or, to Borrower's knowledge, is contemplated with respect to all or
any portion of any Individual Property or for the relocation of roadways
providing access to any Individual Property.

                                    (U) Utilities and Public Access. Each
Individual Property has adequate rights of access to public ways and is served
by adequate water, sewer, sanitary sewer and storm drain facilities as are
adequate for full utilization of such Individual Property for its current
purpose. Except as otherwise disclosed by the Surveys, all public utilities
necessary to the continued use and enjoyment of each Individual Property as
presently used and enjoyed are located in the public right-of-way abutting the
premises, and all such utilities are connected so as to serve each Individual
Property either (i) without passing over other property or, (ii) if such
utilities pass over other property, pursuant to valid easements. All roads
necessary for the full utilization of each Individual Property for its current
purpose have been completed and dedicated

                                       48


to public use and accepted by all Governmental Authorities or are the subject of
access easements for the benefit of any Individual Property.

                                    (V) Environmental Compliance. Except as
disclosed in the Environmental Reports, Borrower represents, warrants and
covenants, as to itself, Mortgage Borrower, Operating Lessee and its applicable
Individual Property: (a) there are no Hazardous Substances or underground
storage tanks in, on, or under such Individual Property, except those that are
both (i) in compliance with all Environmental Laws and with permits issued
pursuant thereto and (ii) which do not require Remediation; (b) there are no
past, present or threatened Releases of Hazardous Substances in, on, under, from
or affecting any Individual Property which have not been fully Remediated in
accordance with Environmental Law; (c) there is no Release or threat of any
Release of Hazardous Substances which has or is migrating to any Individual
Property; (d) there is no past or present non-compliance with Environmental
Laws, or with permits issued pursuant thereto, in connection with any Individual
Property which has not been fully Remediated in accordance with Environmental
Law; (e) Borrower does not know of, and neither Borrower, Mortgage Borrower or
Operating Lessee has received, any written or oral notice or other communication
from any Person (including but not limited to a governmental entity) relating to
Hazardous Substances or the Remediation thereof, of possible liability of any
Person pursuant to any Environmental Law, other environmental conditions in
connection with any Individual Property, or any actual or potential
administrative or judicial proceedings in connection with any of the foregoing;
and (f) Borrower has truthfully and fully provided to Lender, in writing, any
and all information relating to conditions in, on, under or from each Individual
Property that is known to Borrower, Mortgage Borrower or Operating Lessee and
that is contained in files and records of Borrower, Mortgage Borrower or
Operating Lessee, including but not limited to any reports relating to Hazardous
Substances in, on, under or from such Individual Property and/or to the
environmental condition of each Individual Property.

                                    (W) No Joint Assessment; Separate Lots.
Mortgage Borrower has not and shall not suffer, permit or initiate the joint
assessment of any applicable Individual Property (i) with any other real
property constituting a separate tax lot, and (ii) with any portion of any
Individual 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 any Individual
Property as a single lien. Each Individual Property is comprised of one or more
parcels, each of which constitutes a separate tax lot and none of which
constitutes a portion of any other tax lot.

                                    (X) Assessments. Except as disclosed in the
Title Insurance Policy, there are no pending or, to the knowledge of Borrower,
Mortgage proposed special or other assessments for public improvements or
otherwise affecting any Individual Property, nor, to the knowledge of Borrower,
Mortgage Borrower or Operating Lessee, are there any contemplated improvements
to any Individual Property that may result in such special or other assessments.

                                       49


                                    (Y) Pledged Collateral. The Pledge Agreement
and the TRS Pledge Agreement each creates a valid and enforceable first priority
Lien on the Pledged Collateral described therein, as security for the repayment
of the Indebtedness. This Agreement creates a valid and enforceable first
priority Lien on all Account Collateral. All Pledged Collateral in which a
security interest can be perfected by the filing of a financing statement is
subject to a UCC financing statement filed and/or recorded, as appropriate (or
irrevocably delivered to an agent for such recordation or filing) in all places
necessary to perfect a valid first priority Lien with respect to the rights and
property that are the subject of the Pledge Agreement or this Agreement to the
extent governed by the UCC.

                                    (Z) Enforceability. The Loan Documents
executed by Borrower, Ashford TRS Corporation and Guarantor in connection with
the Loan are the legal, valid and binding obligations of each such Entity,
enforceable against each of Borrower, Ashford TRS Corporation and Guarantor in
accordance with their terms, subject only to bankruptcy, insolvency and other
limitations on creditors' rights generally and to equitable principles. Such
Loan Documents are, as of the Closing Date, not subject to any right of
rescission, set-off, counterclaim or defense by Borrower, including the defense
of usury.

                                    (AA) No Liabilities; No Contractual
Obligations. Borrower has no liabilities or obligations including, without
limitation, Contingent Obligations (and including, without limitation,
liabilities or obligations in tort, in contract, at law, in equity, pursuant to
a statute or regulation, or otherwise) other than those liabilities and
obligations expressly permitted by this Agreement.

                                    (BB) No Prior Assignment. As of the Closing
Date, (i) Lender is the pledgee of Borrower's interest in the Pledged Collateral
and (ii) there are no prior assignments of the Pledged Collateral.

                                    (CC) Certificate of Occupancy. Mortgage
Borrower and Operating Lessee have obtained (in their own name) all Permits
necessary to use and operate the Individual Property for the use described in
Section 3.1(R), and all such Permits are in full force and effect. The use being
made of each Individual Property is in conformity in all material respects with
the certificate of occupancy and/or Permits for each such Individual Property
and any other restrictions, covenants or conditions affecting each such
Individual Property. Each such Individual Property contains all equipment
necessary to use and operate each such Individual Property in a first-class
manner.

                                    (DD) Flood Zone. Except as shown on a
Survey, no Individual Property is located in a flood hazard area as designated
by the Federal Emergency Management Agency.

                                    (EE) Physical Condition. Except as disclosed
in an Engineering Report, each Individual Property is free of material
structural defects and all building systems contained therein are in good
working order in all material respects subject to ordinary wear and tear.

                                       50


                                    (FF) Intellectual Property. All trademarks,
trade names and service marks owned by Borrower, Mortgage Borrower or Operating
Lessee, or that are pending, or under which Borrower, Mortgage Borrower or
Operating Lessee is licensed, are in good standing and uncontested. There is no
right under any trademark, trade name or service mark necessary to the business
of Borrower, Mortgage Borrower or Operating Lessee as presently conducted or as
Borrower, Mortgage Borrower or Operating Lessee contemplates conducting its
business. Neither Borrower, Mortgage Borrower or Operating Lessee has infringed,
is infringing, or has received notice of infringement with respect to asserted
trademarks, trade names and service marks of others. To Borrower's knowledge,
there is no infringement by others of trademarks, trade names and service marks
of Borrower, Mortgage Borrower or Operating Lessee.

                                    (GG) Intentionally Omitted.

                                    (HH) Title Insurance. Each Individual
Property is covered by either an American Land Title Association (ALTA) owner's
title insurance policy, naming Lender as the insured party, or a commitment to
issue such a title insurance policy, insuring fee or leasehold ownership of each
Individual Property, which is in full force and effect and will inure to the
benefit of Lender and any successor or assignee of Lender, including but not
limited to the trustee in a securitization of the Loan, subject only to the
Permitted Encumbrances.

                                    (II) Intentionally Omitted.

                                    (JJ) Leases. (a) Mortgage Borrower or
Operating Lessee is the sole owner of the entire lessor's interest in the
Leases; (b) the Leases are the valid, binding and enforceable obligations of the
applicable Mortgage Borrower or Operating Lessee and the applicable tenant or
lessee thereunder; (c) the terms of all alterations, modifications and
amendments to the Leases are reflected in the certified rent roll statement
delivered to and approved by Lender; (d) no Rents reserved in any Leases have
been assigned or otherwise pledged or hypothecated; (e) no Rents have been
collected for more than one (1) month in advance; (f) the premises demised under
the Leases have been completed and the tenants under the Leases have accepted
the same and have taken possession of the same on a rent-paying basis; (g) there
exists no offset or defense to the payment of any portion of the Rents; (h) no
Lease contains an option to purchase, right of first refusal to purchase,
expansion right, or any other similar provision; and (i) no Person has any
possessory interest in, or right to occupy, any Individual Property except under
and pursuant to a Lease.

                                    (KK) Bank Holding Company. Borrower is not a
"bank holding company" or a direct or indirect subsidiary of a "bank holding
company" as defined in the Bank Holding Company Act of 1956, as amended, and
Regulation Y thereunder of the Board of Governors of the Federal Reserve System.

                                    (LL) Embargoed Person. None of the funds or
other assets of Borrower, SPE Equity Owner, Mortgage Borrower or Operating
Lessee constitute property of, or are beneficially owned, directly or
indirectly, by any person, entity or government subject to

                                       51


trade restrictions under federal law, including, without limitation, the
International Emergency Economic Powers Act, 50 U.S.C. Sections 1701 et seq.,
The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq. , and any executive
orders or regulations promulgated thereunder, with the result that (i) the
investment in Borrower, SPE Equity Owner, Mortgage Borrower or Operating Lessee,
as applicable (whether directly or indirectly), is prohibited by law or (ii) the
Loan made by the Lender is in violation of law ("Embargoed Person"); (b) no
Embargoed Person has any interest of any nature whatsoever in Borrower, SPE
Equity Owner, Mortgage Borrower or Operating Lessee, as applicable (whether
directly or indirectly), with the result that (i) the investment in Borrower,
SPE Equity Owner, Mortgage Borrower or Operating Lessee, as applicable (whether
directly or indirectly) is prohibited by law or (ii) the Loan is in violation of
law; and (c) none of the funds of Borrower, SPE Equity Owner, Mortgage Borrower
or Operating Lessee, as applicable, have been derived from any unlawful activity
with the result that (i) the investment in Borrower, SPE Equity Owner, Mortgage
Borrower or Operating Lessee, as applicable (whether directly or indirectly) is
prohibited by law or (ii) the Loan is in violation of law.

                                    (MM) Illegal Activity. No portion of any of
each Individual Property has been or will be purchased, improved, equipped or
furnished with proceeds of any illegal activity.

                                    (NN) Compliance. No Borrower, Guarantor,
Operating Lessee, or Mortgage Borrower and, to the best of Borrower's knowledge
after due and diligent inquiry, neither (a) any Person owning an interest in
Borrower, SPE Equity Owner, Operating Lessee or Mortgage Borrower nor (b) each
Manager or (c) any tenant at each Individual Property: (i) is currently
identified on the OFAC List ("OFAC List"), and (ii) is a Person with whom a
citizen of the United States is prohibited to engage in transactions by any
trade embargo, economic sanction, or other prohibition of any Legal Requirement
(including the September 24, 2001, Executive Order Blocking Property and
Prohibiting Transactions With Person Who Commit, Threaten to Commit, or Support
Terrorism), and (iii) is not in violation of the U.S. Federal Bank Secrecy Act,
as amended, and its implementing regulations (31 C.F.R. part 103), the Uniting
and Strengthening America by Providing Appropriate Tools Required to Intercept
and Obstruct Terrorism Act of 2001, Public Law 107-56 and the regulations
promulgated thereunder, any order issued with respect to anti-money laundering
by the U.S. Department of the Treasury's Office of Foreign Assets Control, or
any other anti-money laundering law. Each of Borrower, Mortgage Borrower and
Operating Lessee has implemented procedures, and will consistently apply those
procedures throughout the term of the Loan, to ensure the foregoing
representations and warranties remain true and correct during the term of the
Loan.

                                    (OO) Intentionally Omitted.

                                    (PP) Subsidiaries. Effective as of the
consummation of the transaction contemplated by this Agreement and the other
Loan Documents, 100% of the membership interests in Borrower is owned by Ashford
Hospitality Limited Partnership free and clear of all Liens (other than the
Liens created by the Loan Documents) Borrower does not have

                                       52


any subsidiaries except Mortgage Borrower and SPE Equity Owner. Borrower does
not own any equity interests other than the Pledged Collateral.

                                    (QQ) Franchise Agreements. Each Franchise
Agreement is in full force and effect, there is no material default thereunder
by any party thereto and to the best of Borrower's and Operating Lessee's
knowledge and except as set forth on Schedule 2 hereof, no event has occurred
that, with the passage of time and/or the giving of notice would constitute a
default thereunder, and no fees under any Franchise Agreement are accrued and
unpaid.

                                    (RR) Intentionally Omitted.

                                    (SS) Operating Budget. Attached hereto as
Exhibit H is a true, complete and correct copy of the operating budget for each
Mortgage Borrower's or Operating Lessee's Individual Property for the period
between the Closing Date and December 31, 2004, which Operating Budget has been
approved by Lender pursuant to the terms of this Agreement.

                                    (TT) Property Improvement Plans. Attached
hereto as Exhibit I is (a) a true, complete and correct list of all property
improvement plans or similar agreements affecting each Individual Property
(each, a "Property Improvement Plan"), and (b) a true, complete and correct
description of the amounts to be expended and time frames for required
expenditure pursuant to each Property Improvement Plan.

                                    (UU) Organizational Chart. Attached hereto
as Exhibit L is a true, complete and correct copy of the Borrower's
organizational chart.

         Section 4.2. Survival of Representations and Warranties.

                  Borrower agrees that (i) all of the representations and
warranties of Borrower set forth in this Agreement and in the other Loan
Documents delivered on the Closing Date are made as of the Closing Date (except
as expressly otherwise provided) and (ii) all representations and warranties
made by Borrower shall survive the delivery of the Note and continue for so long
as any amount remains owing to Lender under this Agreement, the Note or any of
the other Loan Documents; provided, however, that the representations,
warranties and covenants set forth in Section 4.1(V), Section 4.1(LL), Section
4.1(NN) and Sections 5.1(D) through 5.1(G), inclusive, shall survive in
perpetuity and shall not be subject to the exculpation provisions of Section
8.14. All representations, warranties, covenants and agreements made in this
Agreement or in the other Loan Documents shall be deemed to have been relied
upon by Lender notwithstanding any investigation heretofore or hereafter made by
Lender or on its behalf. Without limiting any other provision of this Agreement,
with respect to each Secondary Market Transaction, within 3 days of receipt of
Lender's request, Borrower shall deliver to Lender a certification (a) remaking
all of the representations and warranties contained in this Agreement as of the
date of such Secondary Market Transaction, or (y) otherwise specifying any
changes in or qualifications to such representations and warranties as of such
date as may be necessary to make such representations consistent with the facts
as they exist on such date.

                                       53


                                   ARTICLE 5.

                              AFFIRMATIVE COVENANTS

         Section 5.1. Borrower Covenants.

                  Borrower covenants and agrees that, from the date hereof and
until payment in full of the Indebtedness:

                                    (A) Existence; Compliance with Legal
Requirements; Insurance. Borrower shall, and shall cause Mortgage Borrower to,
do or cause to be done all things necessary to preserve, renew and keep in full
force and effect its Entity existence, rights, licenses, Permits and franchises
necessary for the conduct of its business and comply in all material respects
with all applicable Legal Requirements and Insurance Requirements applicable to
such party, the Pledged Collateral and each Individual Property. Borrower shall
notify Lender promptly of any written notice or order that Borrower, Mortgage
Borrower or Operating Lessee receives from any Governmental Authority relating
to Borrower's, Mortgage Borrower's or Operating Lessee's failure to comply with
such applicable Legal Requirements relating to the Pledged Collateral or each
Individual Property and promptly take any and all actions necessary to bring
operations at each Individual Property into compliance with such applicable
Legal Requirements (and shall fully comply with the requirements of such Legal
Requirements that at any time are applicable to operations at each Individual
Property) provided, that Borrower at its expense may, after prior notice to the
Lender, contest, or cause Mortgage Borrower or Operating Lessee to contest, by
appropriate legal, administrative or other proceedings conducted in good faith
and with due diligence, the validity or application, in whole or in part, of any
such applicable Legal Requirements as long as (i) neither the applicable
Collateral nor the Pledged Collateral or any part thereof or any interest
therein, will be sold, forfeited or lost if Borrower, Mortgage Borrower or
Operating Lessee pays the amount or satisfies the condition being contested, and
Borrower, Mortgage Borrower or Operating Lessee would have the opportunity to do
so, in the event of Borrower's, Mortgage Borrower's or Operating Lessee's
failure to prevail in the contest, (ii) Lender would not, by virtue of such
permitted contest, be exposed to any risk of any civil liability or criminal
liability, and (iii) Borrower shall have furnished to the Lender additional
security in respect of the claim being contested or the loss or damage that may
result from Borrower's, Mortgage Borrower's or Operating Lessee's failure to
prevail in such contest in such amount as may be reasonably requested by Lender
but in no event less than one hundred twenty-five percent (125%) of the amount
of such claim (reduced by the dollar amount of additional security furnished to
the Mortgage Lender under the counterpart to this Section of the Mortgage Loan
Agreement). Borrower shall at all times maintain, or cause Mortgage Borrower or
Operating Lessee to maintain, preserve and protect all franchises and trade
names and preserve all the remainder of its property necessary for the continued
conduct of its business and keep the applicable Individual Properties in good
repair, working order and condition, except for reasonable wear and use, and
from time to time make, or cause to be made, all necessary repairs, renewals,
replacements, betterments and improvements thereto as more fully provided in the

                                       54


Mortgages. Borrower shall cause Mortgage Borrower or Operating Lessee to keep
their Individual Properties insured at all times, as provided in the Mortgages.

                                    (B) Impositions and Other Claims. Subject to
Section 2.11(e)(i)(x) of the Mortgage Loan Agreement, Borrower shall cause
Mortgage Borrower or Operating Lessee to pay and discharge or cause to be paid
and discharged all Impositions, as well as all lawful claims for labor,
materials and supplies or otherwise, which could become a Lien on the
Collateral, all as more fully provided in, and subject to any rights to contest
contained in, the Mortgages. Borrower shall pay and discharge or cause to be
paid and discharged any and all amounts which could become a Lien on the Pledged
Collateral unless being contested in good faith in a manner reasonably
acceptable to Lender.

                                    (C) Litigation; Notices. Borrower shall give
prompt written notice to Lender of any litigation, arbitration or other
proceedings or governmental investigation pending or threatened against
Borrower, Mortgage Borrower or Operating Lessee which is reasonably likely to
have a Material Adverse Effect.

                                    (D) Environmental.

                                             (i) Borrower covenants and agrees
         that: (a) all uses and operations on or of each Individual Property,
         whether by Borrower, Mortgage Borrower or Operating Lessee or any other
         Person, shall be in compliance with all Environmental Laws and permits
         issued pursuant thereto; (b) there shall be no Releases of Hazardous
         Substances in, on, under or from any Individual Property; (c) there
         shall be no Hazardous Substances used, present or Released in, on,
         under or from any Individual Property, except those that are (i) in
         compliance in all material respects with all Environmental Laws and
         with permits issued pursuant thereto; (ii) fully disclosed to Lender in
         writing; and (iii) which do not require Remediation, (d) Borrower shall
         cause Mortgage Borrower or Operating Lessee to keep each Individual
         Property free and clear of all Environmental Liens; (e) Borrower shall
         cause Mortgage Borrower or Operating Lessee to, at Mortgage Borrower's
         or Operating Lessee's sole cost and expense, fully and expeditiously
         cooperate in all activities pursuant to Section 5.1(E) of this
         Agreement, including but not limited to providing all --------------
         relevant information and making knowledgeable Persons available for
         interviews; (f) intentionally omitted; (g) Borrower shall cause
         Mortgage Borrower or Operating Lessee to, at Mortgage Borrower's or
         Operating Lessee's sole cost and expense, (i) effectuate Remediation of
         any condition (including but not limited to a Release of a Hazardous
         Substance or violation of Environmental Laws) in, on, under or from
         each Individual Property for which Remediation is legally required;
         (ii) comply with all Environmental Laws; (iii) comply with any
         directive from any governmental authority; and (iv) take any other
         reasonable action necessary or appropriate for protection of human
         health or the environment; (h) Borrower shall not permit Mortgage
         Borrower or Operating Lessee to do or allow any tenant or other user of
         any Individual Property to do any act that materially increases the
         dangers to human health or the environment, poses an unreasonable risk
         of harm to any Person (whether on or off any

                                       55


         Individual Property), impairs or may impair the value or marketability
         of any Individual Property, is contrary to any requirement of any
         insurer, constitutes a public or private nuisance, constitutes waste,
         or violates any covenant, condition, agreement or easement applicable
         to any Individual Property; (i) Borrower shall immediately notify
         Lender in writing of (A) any unlawful presence or Releases or
         threatened Releases of Hazardous Substances in, on, under, from or
         migrating towards any Individual Property; (B) any material
         non-compliance with any Environmental Laws related in any way to any
         Individual Property; (C) any actual or potential Environmental Lien;
         (D) any required Remediation of environmental conditions relating to
         any Individual Property required by Environmental Laws; and (E) any
         written notice or other communication of which Borrower, Mortgage
         Borrower or Operating Lessee becomes aware from any source whatsoever
         (including but not limited to a governmental entity) relating in any
         way to Release, presence, or Release or threatened Release of Hazardous
         Substances in violation of Environmental Laws or the Remediation
         thereof, Law, other environmental conditions in connection with any
         Individual Property, or any actual or potential administrative or
         judicial proceedings in connection with anything referred to in this
         Agreement; and (j) without limiting the foregoing, upon becoming aware
         of the presence of or potential for Mold in violation of applicable
         Environmental Laws on any Individual Property, at its sole cost and
         expense Borrower shall cause Mortgage Borrower or Operating Lessee to
         (i) undertake or cause an investigation to identify the source(s) of
         such Mold, including any water intrusion, and develop and implement a
         plan for the Remediation of any Mold required under applicable
         Environmental Laws; (ii) perform, or cause to be performed, all acts
         required under applicable Environmental Laws for the Remediation of the
         Mold in a timely manner given the circumstances; (iii) properly dispose
         in accordance with all applicable Environmental Laws of any materials
         generated as a result of or in connection with the foregoing items (i)
         and (ii); and (iv) provide Lender with evidence of Mortgage Borrower's
         or Operating Lessee's compliance with the requirements of each of the
         foregoing to Lender's reasonable satisfaction.

                                    (E) Environmental Cooperation and Access. In
the event the Environmental Indemnified Parties have reason to believe that an
environmental condition exists on any Individual Property that, in the
discretion of the Lender, could endanger any tenants or other occupants of any
Individual Property or their guests or the general public or materially and
adversely affects the value of any Individual Property, upon reasonable notice
from the Lender, Borrower shall cause Mortgage Borrower or Operating Lessee to
at Mortgage Borrower's or Operating Lessee's sole cost and expense, promptly
cause an engineer or consultant satisfactory to the Lender to conduct any
environmental assessment or audit (the scope of which shall be determined in the
sole and absolute discretion of Lender) and take any samples of soil,
groundwater or other water, air, or building materials or any other invasive
testing reasonably requested by Lender and promptly deliver the results of any
such assessment, audit, sampling or other testing; provided, further, that
Borrower, Mortgage Borrower, Operating Lessee, the Environmental Indemnified
Parties and any other Person designated by the Environmental Indemnified
Parties, including but not limited to any receiver, any representative of a
governmental entity, and any environmental consultant, shall have the right, but
not the

                                       56


obligation, to enter upon such Individual Property at all reasonable times
(without materially interfering with the business conducted at the Individual
Property) to assess any and all aspects of the environmental condition of each
Individual Property and its use, including but not limited to conducting any
environmental assessment or audit (the scope of which shall be determined in the
reasonable discretion of Lender) and taking samples of soil, groundwater or
other water, air, or building materials, and reasonably conducting other
invasive testing (which shall be at Borrower's sole cost and expense if Borrower
fails to conduct or deliver, or to be conducted or delivered, an assessment or
audit as required pursuant to this Section), Borrower shall cooperate with and
provide, and cause Mortgage Borrower and Operating Lessee to cooperate with and
provide, the Environmental Indemnified Parties and any such Person designated by
the Environmental Indemnified Parties with access to each Individual Property.

                                    (F) Environmental Indemnity. Borrower
covenants and agrees, at its sole cost and expense, to protect, defend,
indemnify, release and hold Environmental Indemnified Parties harmless from and
against any and all Losses imposed upon or incurred by or asserted against any
Environmental Indemnified Parties and directly or indirectly arising out of or
in any way relating to any one or more of the following (other than Losses
imposed upon or incurred by or asserted against any Environmental Indemnified
Parties to the extent that the Borrowers can prove that (a) such Losses were
caused exclusively by the actions of Lender (or its successors in interest to
the Pledged Collateral) occurring entirely after the date that Lender actually
acquired title to the Pledged Collateral and (b) such Losses were not caused or
occasioned by the actions or inactions of Borrower, any Mortgage Borrower, or
any agent, employee, contractor of any of the foregoing prior to the time Lender
acquires title to the Pledged Collateral, or Borrower, Manager or Operating
Lessee or any agent, employee, contractor or Affiliate of any of the foregoing:
(a) any presence or use of any Hazardous Substances in, on, above, under, from
or affecting any Individual Property; (b) any past, present or threatened
Release of Hazardous Substances in, on, above, under, from or affecting any
Individual Property; (c) any activity by Borrower, Mortgage Borrower, Operating
Lessee, any Person affiliated with Borrower, Mortgage Borrower or Operating
Lessee or and any tenant or other user of such Individual Property in connection
with any actual, proposed or threatened use, treatment, storage, holding,
existence, disposition or other Release, generation, production, manufacturing,
processing, refining, control, management, abatement, removal, handling,
transfer or transportation to or from such Individual Property of or exposure to
any Hazardous Substances at any time located in, under, on or above such
Individual Property; (d) any activity by Borrower, Mortgage Borrower, Operating
Lessee any Person affiliated with Borrower, Mortgage Borrower or Operating
Lessee, and any tenant or other user of such Individual Property in connection
with any actual or proposed Remediation of any Hazardous Substances at any time
located in, under, on, above or affecting such Individual Property, whether or
not such Remediation is voluntary or pursuant to court or administrative order,
including but not limited to any removal, remedial or corrective action; (e) any
past, present or threatened non-compliance or violations of any Environmental
Laws (or permits issued pursuant to any Environmental Law) in connection with
such Individual Property or operations thereon, including but not limited to any
failure by Borrower, Mortgage Borrower, Operating Lessee, any Person affiliated
with Borrower, Mortgage Borrower, or Operating Lessee and any tenant or other
user of such

                                       57


Individual Property to comply with any order of any governmental authority in
connection with any Environmental Laws; (f) the imposition, recording or filing
or the threatened imposition, recording or filing of any Environmental Lien
encumbering any Individual Property; (g) any administrative processes or
proceedings or judicial proceedings in any way connected with any matter
addressed in this Agreement; (h) any past, present or threatened injury to,
destruction of or loss of natural resources in any way connected with any
Individual Property, including but not limited to costs to investigate and
assess such injury, destruction or loss; (i) any acts of Borrower, Mortgage
Borrower, Operating Lessee or any Person affiliated with Borrower, Mortgage
Borrower or Operating Lessee, and any tenant or other user of such Individual
Property in arranging for disposal or treatment, or arranging with a transporter
for transport for disposal or treatment, of Hazardous Substances at any facility
or incineration vessel containing such or similar Hazardous Substances; (j) any
acts of Borrower, Mortgage Borrower, Operating Lessee, any Person affiliated
with any Borrower, Mortgage Borrower, or Operating Lessee and any tenant or
other user of such Individual Property in accepting any Hazardous Substances for
transport to disposal or treatment facilities, incineration vessels or sites
from which there is a Release, or a threatened Release of any Hazardous
Substance which causes the incurrence of costs for Remediation; (k) any personal
injury, wrongful death, or property or other damage arising under any statutory
or common law or tort law theory, including but not limited to damages assessed
for private or public nuisance or for the conducting of an abnormally dangerous
activity on or near such Individual Property; and (l) any misrepresentation or
inaccuracy in any representation or warranty or material breach or failure to
perform any covenants or other obligations pursuant to this Agreement or any
other Loan Document. IT IS EXPRESSLY ACKNOWLEDGED AND AGREED BY BORROWER THAT
THE INDEMNITY (AND/OR THE RELEASE) CONTAINED IN THIS SECTION 5.1(F) PROTECTS
LENDER FROM THE CONSEQUENCES OF LENDER'S ACTS OR OMISSIONS, INCLUDING WITHOUT
LIMITATION, THE NEGLIGENT ACTS OR OMISSIONS OF LENDER TO THE EXTENT PERMITTED BY
LAW; PROVIDED, HOWEVER, THAT NOTHING CONTAINED HEREIN SHALL BE DEEMED TO RELIEVE
THE LENDER FROM LIABILITY DUE TO ITS GROSS NEGLIGENCE.

                                    (G) Duty to Defend. Upon written request by
any Environmental Indemnified Party, Borrower shall defend same (if requested by
any Environmental Indemnified Party, in the name of the Environmental
Indemnified Party) by attorneys and other professionals reasonably approved by
the Environmental Indemnified Parties. Borrower shall, within five Business Days
of receipt thereof by Borrower, Mortgage Borrower or Operating Lessee, give
written notice to Lender of (i) any notice, advice or other communication from
any governmental entity or any source whatsoever with respect to Hazardous
Substances on, from or affecting any Individual Property, and (ii) any legal
action brought against any party or related to any Individual Property, with
respect to which Borrower may have liability under this Agreement. Such notice
shall comply with the provisions of Section 8.6 hereof.

                                    (H) PIP Performance. Borrower shall cause
the Mortgage Borrowers to comply with Section 5.1(w) of the Mortgage Loan
Agreement.

                                       58


                                    (I) Access to Property. Borrower shall, and
shall cause Mortgage Borrower and Operating Lessee to, permit agents,
representatives and employees of Lender to inspect their Individual Properties
or any part thereof at such reasonable times as may be requested by Lender upon
reasonable advance written notice and without materially interfering with the
business conducted at the Individual Property.

                                    (J) Notice of Default. Borrower shall
promptly advise Lender of any material adverse change in Borrower's, Mortgage
Borrower's or Operating Lessee's condition, financial or otherwise, or of the
occurrence of any Default or Event of Default.

                                    (K) Cooperate in Legal Proceedings. Except
with respect to any claim by Borrower against Lender, Borrower shall cooperate
with Lender with respect to any proceedings before any Governmental Authority
which may in any way affect the rights of Lender hereunder or any rights
obtained by Lender under any of the Loan Documents and, in connection therewith,
not prohibit Lender, at its election, from participating in any such
proceedings.

                                    (L) Perform Loan Documents. Borrower shall
observe, perform and satisfy all the terms, provisions, covenants and conditions
required to be observed, performed or satisfied by it, and shall pay when due
all costs, fees and expenses required to be paid by it, under the Loan Documents
executed and delivered by Borrower.

                                    (M) Insurance Benefits; Condemnation Claims.

                                             (i) Generally. Borrower shall
         promptly notify Lender, in writing, of any actual or threatened Taking
         or of any casualty that damages or renders unusable any Individual
         Property or any part thereof and, except as otherwise provided below,
         shall cause the applicable Mortgage Borrower and Operating Lessee to
         promptly and diligently pursue Mortgage Borrower's or Operating
         Lessee's claim for Condemnation Proceeds or Insurance Proceeds, as
         applicable. Borrower shall not and shall not permit any Mortgage
         Borrower or Operating Lessee to make any agreement in lieu of Taking or
         accept any Condemnation Proceeds without Lender's prior written
         consent. Borrower shall not and shall not permit any Mortgage Borrower
         or Operating Lessee to accept any settlement of Insurance Proceeds with
         respect to a casualty without Lender's prior written consent. If
         requested by Lender, Borrower agrees to provide copies to Lender of all
         notices or filings made or received by Borrower or the applicable
         Mortgage Borrower or Operating Lessee in connection with the casualty
         or Taking or with respect to collection of the Insurance Proceeds or
         Condemnation Proceeds, as applicable. Notwithstanding that a casualty
         or Taking has occurred, or that rights to Condemnation Proceeds or
         Insurance Proceeds are pending, Borrower shall continue to pay the Loan
         at the time and in the manner provided in this Agreement.

                                             (ii) Lender's Consent Required.
         Without the prior written consent of Lender, Borrower shall not make,
         nor shall Borrower permit any

                                       59


         Mortgage Borrower or Operating Lessee to make, any determination to
         replace or restore any Individual Property after a casualty or
         condemnation.

                                             (iii) Certain Lender Rights. In
         addition to and without in any way limiting any of its other rights
         hereunder, in connection with any casualty or Taking and with respect
         to all Insurance Proceeds and Condemnation Proceeds and damages and
         claims with respect thereto, Lender shall have all of the same rights
         that Mortgage Lender has under the Mortgage Loan Documents as if such
         rights were set forth in full herein with only such changes as are
         necessary to reflect Lender's position as a mezzanine lender rather
         than a mortgage lender; provided that Lender shall not exercise any
         such right (x) at a time when any corresponding right is being
         exercised by Mortgage Lender, unless Lender's exercise of its right
         contemporaneously would not in any way impair Mortgage Lender's
         exercise of its rights or be inconsistent therewith or (y) in any
         manner inconsistent with Mortgage Lender's rights under the Mortgage
         Loan Documents.

                                             (iv) Borrower shall, or shall cause
         each Mortgage Borrower to, deliver to Lender all reports, plans,
         specification, documents and other materials that are delivered to
         Mortgage Lender under the Mortgage Loan Agreement in connection with
         the restoration and/or repair of any Individual Property after a
         casualty or a Taking.

                                    (N) Further Assurances. Borrower shall, at
Borrower's sole cost and expense:

                                             (i) upon Lender's request therefor
         given from time to time after the occurrence of any Event of Default
         pay for (a) reports of UCC, federal tax lien, state tax lien, judgment
         and pending litigation searches with respect to Borrower or any
         Mortgage Borrower and (b) searches of title to the Pledged Collateral
         or any Individual Property, each such search to be conducted by search
         firms reasonably designated by Lender in each of the locations
         reasonably designated by Lender.

                                             (ii) furnish to Lender all
         instruments, documents, boundary surveys, footing or foundation
         surveys, certificates, plans and specifications, appraisals, title and
         other insurance reports and agreements, and each and every other
         document, certificate, agreement and instrument required to be
         furnished pursuant to the terms of the Loan Documents;

                                             (iii) execute and deliver to Lender
         such documents, instruments, certificates, assignments and other
         writings, and do such other acts necessary, to evidence, preserve
         and/or protect the Collateral or the Pledged Collateral at any time
         securing or intended to secure the Note, as Lender may require in
         Lender's discretion; and

                                       60


                                             (iv) do and execute all and such
         further lawful acts, conveyances and assurances for the better and more
         effective carrying out of the intents and purposes of this Agreement
         and the other Loan Documents, as Lender shall require from time to time
         in its discretion.

                                    (O) Management of Property. Each Individual
Property will be managed at all times by a Manager pursuant to a Management
Agreement unless terminated as herein provided. Borrower shall cause the
Management Agreement to be terminated by Mortgage Borrower or Operating Lessee,
at Lender's request, upon thirty (30) days prior written notice to Borrower and
the applicable Mortgage Borrower, Operating Lessee and Manager (i) upon the
occurrence of an Event of Default, (ii) if the applicable Manager commits any
act which would permit termination by any Mortgage Borrower or Operating Lessee
under the Management Agreement, or (iii) if the applicable Manager commits any
act which constitutes an act of fraud, material misrepresentation, intentional
misrepresentation, gross negligence, willful misconduct, misappropriation of
funds, or physical waste of any Individual Property. If a manager is terminated
pursuant hereto, Borrower shall cause Mortgage Borrower or Operating Lessee to
immediately seek to appoint a replacement manager acceptable to Lender in
Lender's discretion, and Borrower's failure to cause Mortgage Borrower or
Operating Lessee to appoint an acceptable manager within thirty (30) days after
Lender's request of Borrower to terminate the Management Agreement shall
constitute an immediate Event of Default. Mortgage Borrower or Operating Lessee
may from time to time appoint a successor manager to manage any Individual
Property, which successor manager shall be approved in writing by Lender in
Lender's discretion. Notwithstanding the foregoing, any successor manager
selected hereunder by Lender, any Mortgage Borrower or Operating Lessee to serve
as Manager (i) shall be either (A) the Remington Manager provided, that the
Remington Manager shall manage the applicable Individual Property pursuant to
the terms of the master management agreement by and among the Borrowers and the
Remington Manager, or (B) a reputable management company having at least seven
(7) years' experience in the management of commercial properties with similar
uses as the Individual Properties and in the jurisdiction in which the
Individual Properties are located and (ii) shall not be paid management fees in
excess of fees which are market fees for comparable managers of comparable
properties in the same geographic area.

                                    (P) Financial Reporting.

                                             (i) Borrower shall keep and
         maintain or shall cause to be kept and maintained, on a Fiscal Year
         basis, in accordance with GAAP, books, records and accounts reflecting
         in reasonable detail all of the financial affairs of Borrower, Mortgage
         Borrower or Operating Lessee, as applicable, and all items of income
         and expense in connection with the operation of the Pledged Collateral
         and the applicable Individual Properties and in connection with any
         services, equipment or furnishings provided in connection with the
         operation of such Individual Property. Lender, at Lender's cost and
         expense, whether such income or expense may be realized by Borrower or
         by any other Person whatsoever, shall have the right from time to time
         and at all times during normal business hours upon reasonable prior
         written notice to

                                       61


         Borrower to examine such books, records and accounts at the office of
         Borrower, Mortgage Borrower, Operating Lessee or other Person
         maintaining such books, 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 any and all of Borrower's, Mortgage Borrower's or
         Operating Lessee's books, records and accounts as Lender shall
         determine in Lender's discretion to be necessary or appropriate in the
         protection of Lender's interest.

                                             (ii) Borrower shall furnish to
         Lender annually within ninety (90) days following the end of each
         party's Fiscal Year, a true, complete, correct and accurate copy of the
         consolidated financials of Ashford Hospitality Trust, Inc., audited by
         a "Big Four" accounting firm or other firm reasonably acceptable to
         Lender, accompanied by an unqualified opinion from an Independent
         certified public accountant acceptable to Lender in Lender's
         discretion, and each Mortgage Borrower and Operating Lessee shall
         furnish financial statements and all such financial statements above
         shall (a) be in form and substance reasonably acceptable to Lender, (b)
         be prepared in accordance with GAAP, (c) include or be accompanied by
         without limitation, a statement of operations (profit and loss), a
         statement of cash flows, a calculation of Net Operating Income for all
         applicable Individual Properties, a balance sheet, an aged accounts
         receivable report and such other information or reports as shall be
         requested by Lender or any applicable Rating Agency, (d) be accompanied
         by an Officer's Certificate from a senior executive of Borrower
         certifying as of the date thereof (x) that such statement is true,
         correct, complete and accurate, and fairly reflects the results of
         operations and financial condition of Borrower, Mortgage Borrower, or
         Operating Lessee, as applicable, for the relevant period, and (y)
         notice of whether there exists an Event of Default or Default, and if
         such Event of Default or Default exists, the nature thereof, the period
         of time it has existed and the action then being taken to remedy same.

                                             (iii) Intentionally Omitted.

                                             (iv) Borrower shall furnish to
         Lender within twenty (20) days following the end of each calendar month
         of Borrower and of Mortgage Borrower and Operating Lessee, a true,
         correct, complete and accurate monthly unaudited financial statement
         which shall (a) be in form and substance reasonably acceptable to
         Lender, (b) be prepared in accordance with GAAP, (c) include, without
         limitation, a statement of operations (profit and loss), a statement of
         cash flows, a calculation of Net Operating Income for all applicable
         Individual Properties, a consolidated balance sheet, an aged accounts
         receivable report and such other information or reports as shall be
         requested by Lender or any applicable Rating Agency and (d) be
         accompanied by an Officer's Certificate from a senior executive of such
         entity certifying as of the date thereof (x) that such statement is
         true, correct, complete and accurate and fairly reflects the results of
         operations and financial condition of Borrower, Mortgage Borrower or
         Operating Lessee, as applicable, for the relevant period, and (y)
         notice of whether there exists an Event of

                                       62


         Default or Default, and if such Event of Default or Default exists, the
         nature thereof, the period of time it has existed and the action then
         being taken to remedy same.

                                             (v) Borrower shall furnish to
         Lender, within twenty (20) days following the end of each calendar
         month, (1) a true, complete and accurate rent roll and occupancy report
         and such other occupancy and rate statistics as Lender shall reasonably
         request; (2) operating statements for each Individual Property, in
         "Microsoft Excel" format and in form and substance substantially
         similar to the form set forth on Exhibit J, (a) containing monthly,
         year-to-date and trailing-twelve-month results compared to the results
         for the prior year for the same periods for each Individual Property,
         and (b) containing monthly, year-to-date and trailing-twelve-month
         results compared to the results for the prior year for the same periods
         for the Individual Properties on a consolidated basis; (3) Smith Travel
         Star Reports for the applicable month for each Individual Property in
         "Microsoft Excel" format (if available); (4) updated quality scores for
         the applicable month for each Individual Property, including detailed
         criteria and thresholds (if any); (5) summary reports to franchise
         terminations, defaults, reflagging efforts and conversions for each
         Individual Property (if applicable). Each such document shall (a) be
         delivered to Lender in electronic form and in form and substance
         reasonably acceptable to Lender, and (b) be accompanied by an Officer's
         Certificate from a senior executive of Borrower, as applicable,
         certifying as of the date thereof (x) that such statement is true,
         correct, complete and accurate and (y) notice of whether there exists
         an Event of Default or Default, and if such Event of Default or Default
         exists, the nature thereof, the period of time it has existed and the
         action then being taken to remedy same.

                                             (vi) Borrower shall furnish to
         Lender, within twenty (20) days after request, such further information
         with respect to the operation of all applicable Individual Properties
         and the financial affairs of Borrower or such Mortgage Borrower or
         Operating Lessee as may be reasonably requested by Lender including,
         without limitation, all business plans prepared for Borrower, Mortgage
         Borrower or Operating Lessee and for the operation of all such
         Individual Properties.

                                             (vii) Borrower shall furnish to
         Lender, within twenty (20) days after request, such further information
         regarding any Plan or Multiemployer Plan and any reports or other
         information required to be filed under ERISA as may be requested by
         Lender.

                                             (viii) Borrower shall, concurrently
         with Borrower's delivery to Lender, provide a copy of the items
         required to be delivered to Lender under this Section 5.1(Q) to the
         Rating Agencies, the trustee, and any servicer and/or special servicer
         that may be retained in conjunction with the Loan or any Secondary
         Market Transaction. Borrower shall furnish to Lender written notice,
         within two (2) Business Days after receipt by Mortgage Borrower
         Operating Lessee, of any Rents or other items of Gross Revenue that
         Mortgage Borrower or Operating Lessee is not required by the

                                       63


         Mortgage Loan Documents to deposit in the Collection Account or Cash
         Collateral Account (each as defined in the Mortgage Loan Documents)
         together with such other documents and materials relating to such Rents
         or other items of Gross Revenue as Lender reasonably requests.

                                             (ix) Borrower shall provide Lender
         with updated information (reasonably satisfactory to Lender) concerning
         the Basic Carrying Costs for the next succeeding Fiscal Year prior to
         the termination of each Fiscal Year.

                                             (x) Borrower shall cause each
         Mortgage Borrower and Operating Lessee to furnish to Lender annually no
         less than thirty (30) days prior to the beginning of each Fiscal Year,
         a true, complete, correct and accurate copy of such Mortgage Borrower's
         or Operating Lessee's draft annual capital and operating budget for
         each such Mortgage Borrower's or Operating Lessee's Individual Property
         (each, an "Approved Budget"), which Approved Budgets shall be subject
         to Lender's prior review and approval, which may be granted or withheld
         in Lender's sole and absolute discretion. Each Mortgage Borrower and
         Operating Lessee shall promptly revise and resubmit to Lender, for
         Lender's review and approval, any draft annual capital and operating
         budget to which Lender has objected and requested revisions. Until such
         time that Lender approves or is deemed to have approved an Approved
         Budget, the most recently approved Approved Budget shall apply;
         provided that such approved Approved Budget shall be adjusted to
         reflect (x) matters in the proposed Approved Budget approved by Lender,
         (y) as to matters in the proposed Approved Budget not yet approved by
         Lender (i) increases for expenses actually incurred which vary in
         relation to gross revenues to the extent of increases in such gross
         revenues ("Variable Expenses"), and (ii) expenditures actually incurred
         which are beyond the reasonable control of the applicable Mortgage
         Borrower or Operating Lessee such as taxes, utilities and insurance
         ("Uncontrollable Expenses"). Notwithstanding anything contained in the
         Loan Documents to the contrary, expenditures shall be deemed in
         compliance with and made pursuant to the Approved Budget even though
         such expenditures exceed the amount budgeted therefore in the Approved
         Budget if such expenditures are for Variable Expenses or Uncontrollable
         Expenses.

                                             (xi) Borrower shall furnish to
         Lender such other financial information with respect to Borrower,
         Mortgage Borrower, Operating Lessee or the applicable Manager as Lender
         may, from time to time reasonably request.

                                    (Q) Conduct of Business. Borrower shall
cause Mortgage Borrower and Operating Lessee to cause the operation of the
Individual Properties to be conducted at all times in a manner consistent with
the following:

                                             (i) to maintain or cause to be
         maintained the standard of operations at each Individual Property at
         all times at a level necessary to insure a level of quality for each
         such Individual Property consistent with similar facilities in the same
         competitive market;

                                       64


                                             (ii) to operate or cause to be
         operated each Individual Property in a prudent manner in compliance in
         all material respects with applicable Legal Requirements and Insurance
         Requirements relating thereto and cause all licenses, Permits, and any
         other agreements necessary for the continued use and operation of each
         Individual Property to remain in effect except to the extent the
         failure thereof would not have a Material Adverse Affect; and

                                             (iii) to maintain or cause to be
         maintained sufficient inventory and equipment of types and quantities
         at each Individual Property to enable Mortgage Borrower, Operating
         Lessee or the applicable Manager to operate the Individual Properties.

                                    (R) ERISA.

                                                       (a) Borrower shall
deliver 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 or Multiemployer Plan has
occurred or exists, a statement signed by a senior financial officer of Borrower
setting forth details respecting such event or condition and the action, if any,
that Borrower, Mortgage Borrower, Operating Lessee or an 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 by Borrower, Mortgage Borrower,
Operating Lessee or an ERISA Affiliate with respect to such event or condition):

                                             (i) any reportable event, as
         defined in Section 4043(b) 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 30 days of the occurrence of such event (provided
         that a failure to meet the minimum funding standard of Section 412 of
         the Code or 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 or 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;

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

                                             (iii) 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, Mortgage Borrower, Operating Lessee 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;

                                       65


                                             (iv) the complete or partial
         withdrawal from a Multiemployer Plan by Borrower, Mortgage Borrower,
         Operating Lessee or any ERISA Affiliate that results in 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, Mortgage Borrower, Operating Lessee 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;

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

                                             (vi) 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, Mortgage Borrower,
         Operating Lessee or an ERISA Affiliate fails to timely provide security
         to the Plan in accordance with the provisions of said Sections; and

                                             (vii) the imposition of a lien or a
         security interest in connection with a Plan.

                                                       (b) Borrower shall not,
and shall not allow Mortgage Borrower or Operating Lessee to, engage in any
transaction which would cause any obligation, or action taken or to be taken,
hereunder (or the exercise by (i) Lender of any of its rights under the Note,
this Agreement or the other Loan Documents or (ii) Mortgage Lender of any of its
rights under the Mortgage Loan Documents) to be a non-exempt (under a statutory
or administrative class exemption) prohibited transaction under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").

                                                       (c) Borrower hereby
certifies and shall deliver to Lender such certifications or other evidence from
time to time throughout the term of the Loan, as requested by Lender in its
discretion, that (A) neither Borrower nor Mortgage Borrower or Operating Lessee
is an "employee benefit plan" as defined in Section 3(3) of ERISA, which is
subject to Title I of ERISA, a "plan" as defined in Section 4975 of the Code,
which is subject to Section 4975 of the Code, or a "governmental plan" within
the meaning of Section 3(32) of ERISA; (B) neither Borrower nor Mortgage
Borrower or Operating Lessee is subject to state statutes regulating investments
and fiduciary obligations with respect to governmental plans or, if Borrower,
Mortgage Borrower or Operating Lessee is subject to such statutes, such statutes
do not in any manner affect the ability of the Borrower, Mortgage Borrower or
Operating Lessee to perform its obligations under the Loan Documents or the
ability of Lender to enforce any and all of its rights under this Agreement; and
(C) one or more of the following circumstances is true: (i) equity interests in
Borrower, Mortgage Borrower or Operating Lessee are publicly offered securities,
within the meaning of 29 C.F.R. Section 2510.3-101(b)(2); (ii) less than
twenty-five percent

                                       66


of each outstanding class of equity interests in Borrower, Mortgage Borrower or
Operating Lessee are held by "benefit plan investors" within the meaning of 29
C.F.R. Section 2510.3-101(f)(2); or (iii) Borrower, Mortgage Borrower or
Operating Lessee qualifies as an "operating company" within the meaning of 29
C.F.R. Section 2510.3-101(c).

                                                       (d) If an investor or
equity owner in Borrower, Mortgage Borrower or Operating Lessee is (directly or
indirectly) a plan that is not subject to Title I of ERISA or Section 4975 of
the Code, but is subject to the provisions of any federal, state, local,
non-U.S. or other laws or regulations that are similar to those portions of
ERISA or the Code (collectively, "Other Plan Laws"), the assets of Borrower,
Mortgage Borrower or Operating Lessee shall not constitute the assets of such
plan under such Other Plan Laws.

                                                       (T) Single Purpose
Entity. Borrower, Mortgage Borrower and Operating Lessee shall at all times be a
Single-Purpose Entity.

                                    (U) Trade Indebtedness. Borrower will pay
its trade payables within sixty (60) days of the date incurred, unless Borrower
is in good faith contesting Borrower's obligation to pay such trade payables in
a manner reasonably satisfactory to Lender (which may include Lender's
requirement that Borrower post security with respect to the contested trade
payable).

                                    (V) Capital Improvements and Environmental
Remediation. Borrower shall cause Mortgage Borrower, within the time periods set
forth on Exhibit B hereto, to perform the repairs and environmental remediation
to the Individual Properties itemized on Exhibit B hereto. Furthermore, Borrower
shall cause Mortgage Borrower to diligently perform, or cause to be performed,
in a timely and workmanlike manner, all repairs, maintenance and capital
improvements contemplated by and itemized in the Approved Budget.

                                    (W) Intentionally Omitted.

                                    (X) Compliance with Anti-Terrorism, Embargo,
Sanctions and Anti-Money Laundering Laws. Borrower shall comply, and shall cause
Mortgage Borrower and Operating Lessee to comply, with all Legal Requirements
relating to money laundering, anti-terrorism, trade embargoes and economic
sanctions, now or hereafter in effect. Upon Lender's request from time to time
during the term of the Loan, Borrower shall certify in writing to Lender that
Borrower's representations, warranties and obligations under Section 4.1(NN) and
this Section remain true and correct and have not been breached. Borrower shall
immediately notify Lender in writing if any of such representations, warranties
or covenants are no longer true or have been breached or if Borrower has a
reasonable basis to believe that they may no longer be true or have been
breached. In connection with such an event, Borrower shall, and shall cause
Mortgage Borrower and Operating Lessee to, comply with all Legal Requirements
and directives of Governmental Authorities and, at Lender's request, provide to
Lender copies of all notices, reports and other communications exchanged with,
or received from, Governmental Authorities relating to such an event. Borrower
shall also promptly reimburse to Lender any and all costs and expenses incurred
by Lender in evaluating the effect of such an event on the Loan and

                                       67


Lender's interest in the collateral for the Loan, in obtaining any necessary
license from Governmental Authorities as may be necessary for Lender to enforce
its rights under the Loan Documents, and in complying with all Legal
Requirements applicable to Lender as the result of the existence of such an
event and for any penalties or fines imposed upon Lender as a result thereof.

                                    (Y) The Mortgage Loan. Except as set forth
in Section 8.35 hereof, notwithstanding anything in this Agreement to the
contrary, and without limiting any provision that benefits Lender contained in
this Agreement, Borrower shall cause each Mortgage Borrower and Operating Lessee
to (i) at all times observe, perform and satisfy all of the terms, provisions,
covenants, negative covenants and conditions required to be observed, performed
or satisfied by each Mortgage Borrower or Operating Lessee, or both under all of
the Mortgage Loan Documents, (ii) to at all times enforce all of Mortgage
Borrowers' and Operating Lessee's rights and privileges under all of the
Mortgage Loan Documents in a manner which is in accordance with the Mortgage
Loan Documents (it being understood that no obligation of Borrower set forth in
this Agreement shall constitute a guarantee of any monetary obligation of
Mortgage Borrower to Mortgage Lender), and (iii) to refrain from taking any
action(s) which would constitute or cause an Event of Default under, and as
defined in, the Mortgage Loan Documents and to take all actions required of each
Mortgage Borrower and Operating Lessee so that an Event of Default under, and as
defined in, the Mortgage Loan Documents does not occur.

                                    (Z) Modification of Mortgage Loan Documents.
Borrower shall not consent or agree to, or permit each Mortgage Borrower and
Operating Lessee to consent or agree to, any amendment, modification, waiver, or
restatement of any of the Mortgage Loan Documents or any of the organizational
documents of each Mortgage Borrower and Operating Lessee, without Lender's prior
written consent not to be unreasonably withheld.

                                    (AA) Refinancing/Transfer. Borrower hereby
agrees that it will not permit to occur: (a) any Transfer or Mortgage Loan
Transfer or any creation or issuance of any new, membership, economic,
percentage or other equity interest of any type in Borrower, any Mortgage
Borrower, SPE Equity Owner or Operating Lessee, unless in each case the prior
written consent of Lender is obtained, which consent may be withheld in Lender's
sole and absolute discretion or (b) any refinancing of the Mortgage Loan other
than as permitted hereunder. (BB) Release of Pledged Collateral. In connection
with the release of the Lien of the Pledge Agreement and all other collateral,
Borrower shall submit to Lender, not less than ten (10) days prior to the
Payment Date on which Borrower intends to pay the Loan in full, a release of
Lien (and related Loan Documents) for the Pledged Collateral and all other
collateral for the Loan, for execution by Lender. Such release shall be in a
form appropriate in each jurisdiction in which such collateral is located and
that would be reasonably satisfactory to a prudent lender.

                                    (CC) Mortgage Borrower Distributions. On
each date on which amounts are required to be disbursed to the Deposit Account
pursuant to the terms of the Deposit

                                       68


Account Agreement or are required to be paid to Lender under any of the Loan
Documents, Borrower shall exercise its rights under each Mortgage Borrower's
organizational documents to cause each Mortgage Borrower to make to Borrower a
distribution of its funds in an aggregate amount such that Lender shall receive
the amount required to be disbursed to the Deposit Account or otherwise paid to
Lender on such date.

                                    (DD) Curing. Lender shall have the right,
but shall not have the obligation, to exercise Borrower's rights under each of
the Mortgage Borrower's organizational documents (a) to cure a Default or Event
of Default under, and as each are defined in, the Mortgage Loan Agreement and
(b) to satisfy any Liens, claims or judgments against each Individual Property
(except for Liens permitted by the Mortgage Loan Documents), in the case of
either (a) or (b), unless Borrower or the applicable Mortgage Borrower shall be
diligently pursuing remedies to cure to Lender's satisfaction. Borrower shall
reimburse Lender on demand for any and all costs incurred by Lender in
connection with curing any such Default or Event of Default or satisfying any
Liens, claims or judgments against each Individual Property.

                                    (EE) Business and Operations. Borrower will
qualify to do business and will remain in good standing under the laws of each
state as and to the extent the same are required for the ownership, maintenance,
management and operation of the Pledged Collateral and/or any other collateral
pledged by it as security for the Loan. Borrower shall not enter into any line
of business other than the ownership of such collateral, or make any material
change in the scope or nature of its business objectives, purposes or
operations, or undertake or participate in activities other than the continuance
of its present business.

                                    (FF) Notices. Borrower shall give notice, or
cause notice to be given to Lender promptly upon the occurrence and during the
continuance of an Event of Default and upon any and all the following:

                           (a) any Default, Mortgage Loan Default or Mortgage
Loan Event of Default;

                           (b) any default or event of default under any
Contractual Obligation of Borrower, or, to the knowledge of Borrower, any
Mortgage Borrower, any Manager or Operating Lessee, that could reasonably be
expected to have a material adverse effect on Borrower, the ability of Borrower
to perform under the Loan Documents or the rights and remedies of Lender under
the Loan Documents;

                           (c) any litigation or proceeding affecting Borrower,
or, to the knowledge of Borrower, affecting any of any Mortgage Borrower, any
Manager or Operating Lessee, in which the amount involved in each case is
$100,000 or more and not fully covered by insurance, or in which injunctive or
similar relief is sought;

                           (d) a change in the business, operations, property or
financial or other condition or prospects of Borrower, or, to the knowledge of
Borrower, each Mortgage Borrower, each Manager or Operating Lessee, which could
reasonably be expected to have a material

                                       69


adverse effect on Borrower, the ability of Borrower to perform under the Loan
Documents or the rights and remedies of Lender under the Loan Documents.

                                   ARTICLE 6.

                               NEGATIVE COVENANTS

         Section 6.1. Borrower Negative Covenants.

         Borrower covenants and agrees that, until payment in full of the
Indebtedness, it will not, and, where applicable, will not permit Mortgage
Borrower or Operating Lessee to, do, directly or indirectly, any of the
following unless Lender consents thereto in writing:

                                    (A) Liens on the Individual Property. Incur,
create, assume, become or be liable in any manner with respect to, or permit to
exist, any Lien with respect to the Pledged Collateral or each Individual
Property or any portion thereof, except: (i) Liens in favor of Lender or
Mortgage Lender, as applicable, and (ii) the Permitted Encumbrances.

                                    (B) Transfer. Except as expressly permitted
by or pursuant to this Agreement or the other Loan Documents (except as
otherwise approved by Lender in writing in Lender's discretion) allow any
Transfer or Mortgage Loan Transfer to occur, or modify, change, supplement,
alter, amend, fail to comply with or terminate the Management Agreement or any
Operating Lease, or enter into a new Management Agreement or Operating Lease
with respect to any Individual Property except as permitted under this
Agreement.

                                    (C) Other Borrowings. Incur, unsecured trade
payables (not evidenced by a promissory note) incurred in the ordinary course of
business relating to the ownership and operation of the Pledged Collateral that
do not exceed, at any time, a maximum amount of (1) with respect to Mortgage
Borrower and Operating Lessee, (aggregated) two and one-half percent (2.5%) of
the Indebtedness and are paid within sixty (60) days of the date incurred, and
(2) as to Borrower, $10,000 and are paid within sixty (60) days of the date
incurred, create, assume, become or be liable in any manner with respect to
Other Borrowings.

                                    (D) Change In Business. Cease to be a
Single-Purpose Entity or make any material change in the scope or nature of its
business objectives, purposes or operations, or undertake or participate in
activities other than the continuance of its present business.

                                    (E) Debt Cancellation. Cancel or otherwise
forgive or release any material claim or debt owed to Borrower or Mortgage
Borrower, as applicable, by any Person, except for adequate consideration or in
the ordinary course of Borrower's or Mortgage Borrower's, as applicable,
business or otherwise if such cancellation, release or forgiveness is prudent
and commercially reasonable.

                                       70


                                    (F) Affiliate Transactions. Except as
otherwise permitted under or contemplated by the Loan Documents, enter into, or
be a party to, any transaction with an Affiliate of Borrower, Mortgage Borrower
or Operating Lessee, except in the ordinary course of business and on terms
which are no less favorable to Borrower or such Affiliate than would be obtained
in a comparable arm's length transaction with an unrelated third party, and, if
the amount to be paid to the Affiliate pursuant to the transaction or series of
related transactions is greater than Fifty Thousand Dollars ($50,000.00)
(determined annually on an aggregate basis) fully disclosed to Lender in
advance.

                                    (G) Creation of Easements. Create, or permit
any Individual Property or any part thereof to become subject to, any easement,
license or restrictive covenant, other than a Permitted Encumbrance. Without
limiting the generality of the immediately preceding sentence, neither Borrower
nor Mortgage Borrower or Operating Lessee shall enter into, consent to, grant,
amend, modify, restate or supplement any document, instrument or agreement
affecting, related to or impacting upon any Individual Property, the title
thereto or any portion or aspect thereof, including, without limitation, any
easement, reciprocal easement agreement, or any declaration of easements or
covenants other than a Permitted Encumbrance.

                                    (H) Certain Restrictions. Enter into any
agreement which expressly restricts the ability of Borrower, Mortgage Borrower
or Operating Lessee to enter into amendments, modifications or waivers of any of
the Loan Documents or the Mortgage Loan Documents.

                                    (I) Issuance of Equity Interests. Issue or
allow to be created any stocks or shares or shareholder, partnership or
membership interests, as applicable, or other ownership interests other than the
stocks, shares, shareholder, partnership or membership interests and other
ownership interests which are outstanding or exist on the Closing Date or any
security or other instrument which by its terms is convertible into or
exercisable or exchangeable for stock, shares, shareholder, partnership or
membership interests or other ownership interests in Borrower, Mortgage Borrower
or Operating Lessee. Borrower shall not allow to be issued or created any stock
in Borrower's general partner or managing member, as applicable, other than the
stock which is outstanding or existing on the Closing Date or any security or
other instrument which by its terms is convertible into or exercisable or
exchangeable for any stock in Borrower's general partner or managing member, as
applicable.

                                    (J) Assignment of Licenses and Permits.
Assign or transfer any of its interest in any Permits pertaining to any
Individual Property, or assign, transfer or remove or permit any other Person to
assign, transfer or remove any records pertaining to any Individual Property
without Lender's prior written consent which consent may be granted or refused
in Lender's discretion.

                                    (K) Place of Business. Change its chief
executive office, its principal place of business or place where its books and
records are kept without giving Lender at least thirty (30) days' prior written
notice thereof and promptly providing Lender such information as Lender may
reasonably request in connection therewith.

                                       71


                                    (L) Refinancing. Borrower shall not consent
to or permit a refinancing of the Mortgage Loan unless it obtains the prior
consent of Lender, or in connection with such refinancing, the Loan is repaid in
full pursuant to and in accordance with the terms of this Agreement.

                                    (M) Other Limitations. Prior to the payment
in full of the Indebtedness, except as otherwise permitted in this agreement
including in connection with a Partial Release, neither Borrower nor any of its
subsidiaries or Operating Lessee shall, without the prior written consent of
Lender (which may be furnished or withheld at its sole and absolute discretion),
give its consent or approval to any of the following actions or items:

                                             (1) (i) any refinance of the
Mortgage Loan, (ii) any prepayment of the Mortgage Loan, (iii) any Transfer of
any Individual Property or any portion thereof or (iv) any action in connection
with or in furtherance of the foregoing;

                                             (2) approve the terms of any budget
of or related to any Individual Property;

                                             (3) the distribution to the
partners, members or shareholders of Mortgage Borrower or Operating Lessee of
property other than cash;

                                             (4) except as set forth in an
Approved Budget, any (i) improvement, renovation or refurbishment of all or any
part of each Individual Property to a materially higher standard or level than
that of comparable properties in the same market segment and in the same
geographical area as any Individual Property, (ii) removal, demolition or
material alteration of the improvements or equipment on each Individual Property
or (iii) material increase in the square footage or gross leasable area of the
improvements on any Individual Property if a material portion of any of the
expenses in connection therewith are paid or incurred by Mortgage Borrower or
Operating Lessee;

                                             (5) any material change in the
method of conduct of the business of Borrower or any of its subsidiaries or
Operating Lessee, such consent to be given in the sole discretion of Lender;

                                             (6) the settlement of any claim
against Borrower or any of its subsidiaries or Operating Lessee, other than a
fully insured third party claim, in any amount greater than $500,000 (in the
case of Borrower) or $500,000 (in the case of Mortgage Borrower or Operating
Lessee), such consent to be given in the sole discretion of Lender; or

                                             (7) except as required by the
Mortgage Loan Documents, any determination to restore any Individual Property
after a casualty or a Taking.

                                    (N) Limitations on Distributions. Following
the occurrence and during the continuance of an Event of Default, Borrower shall
not make any distributions to its member.

                                       72


                                    (O) Extra Funds. Following the occurrence
and during the continuance of an Event of Default, Borrower shall not permit any
Mortgage Borrower to make a request to receive any "Extra Funds" (as defined in
the Mortgage Loan Agreement) pursuant to the terms of the Mortgage Loan
Agreement.

                                   ARTICLE 7.

                                    DEFAULTS

         Section 7.1. Event of Default.

                  The occurrence of one or more of the following events shall be
an "Event of Default" hereunder:

                                    (i) if on any Payment Date the funds in the
         Debt Service Payment Sub-Account are insufficient to pay the Required
         Debt Service Payment due on such Payment Date and Borrower fails to pay
         such insufficiency on such Payment Date; provided that Borrower shall
         have an additional two (2) Business Days past the related Payment Date
         to make such payment, but only once during any twelve-month period;

                                    (ii) if Operating Lessee shall materially
         breach any of its representations, warranties or covenants set forth in
         the Mortgage Loan Agreement; provided, however that Operating Lessee
         shall be deemed to have the same right to cure any such breach (if any)
         set forth for such breach in the Mortgage Loan Agreement;

                                    (iii) if Borrower fails to pay the
         outstanding Indebtedness on the Maturity Date;

                                    (iv) if on any Payment Date Borrower fails
         to pay the Deposit Account Bank Fees due on such Payment Date;

                                    (v) the occurrence of the events identified
         elsewhere in the Loan Documents as constituting an "Event of Default";

                                    (vi) any breach of Section 2.11(a), 2.11(b),
         2.11(e), (2.11(h), Section 2.14, Section 5.1(T), Section 5.1(X), or
         Section 6.1(B);

                                    (vii) if any default or event of default
         shall occur with respect to Ashford Bucks County LLC's obligations
         under the Declaration;

                                    (viii) if Borrower fails to pay any other
         amount payable pursuant to this Agreement or any other Loan Document
         within two (2) Business Days of the date when due and payable in
         accordance with the provisions hereof or thereof, as the case may be;

                                       73


                                    (ix) if any representation or warranty made
         herein by Borrower or Operating Lessee or in any other Loan Document,
         or in any report, certificate, financial statement or other Instrument,
         agreement or document furnished by Borrower in connection with this
         Agreement, the Note or any other Loan Document executed and delivered
         by Borrower, shall be false in any material respect as of the date such
         representation or warranty was made or remade;

                                    (x) if Borrower, any of Borrower's partners
         or members, as applicable, or any SPE Equity Owner, Mortgage Borrower
         or Operating Lessee makes an assignment for the benefit of creditors;

                                    (xi) if a receiver, liquidator or trustee
         shall be appointed for Borrower, any of Borrower's partners, members or
         shareholders, as applicable, or any SPE Equity Owner, Mortgage Borrower
         or Operating Lessee or if Borrower, any of Borrower's partners, members
         or shareholders, as applicable, or any SPE Equity Owner, Mortgage
         Borrower or Operating Lessee shall be adjudicated as 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, any of Borrower's partners, members or shareholders, as
         applicable, or any SPE Equity Owner, Mortgage Borrower or Operating
         Lessee or if any proceeding for the dissolution or liquidation of
         Borrower, any of Borrower's partners, members or shareholders, as
         applicable, or any SPE Equity Owner, Mortgage Borrower or Operating
         Lessee shall be instituted; provided, however, that if such
         appointment, adjudication, petition or proceeding was involuntary and
         not consented to by Borrower, any of Borrower's partners, members or
         shareholders, as applicable, or any SPE Equity Owner, Mortgage Borrower
         or Operating Lessee as the case may be, upon the same not being
         discharged, stayed or dismissed within ninety (90) days; or if
         Borrower, any of Borrower's partners, members or shareholders, as
         applicable, or any SPE Equity Owner, Mortgage Borrower or Operating
         Lessee shall generally not be paying its debts as they become due;

                                    (xii) if Borrower attempts to delegate its
         obligations or assign its rights under this Agreement, any of the other
         Loan Documents or any interest herein or therein;

                                    (xiii) if any provision of any
         organizational document of Borrower, any SPE Equity Owner, Mortgage
         Borrower or Operating Lessee is amended or modified in any respect, or
         if Borrower, any SPE Equity Owner, Mortgage Borrower, Operating Lessee
         or any of their respective partners, members, or shareholders as
         applicable, fails to perform or enforce the provisions of such
         organizational documents or attempts to dissolve Borrower, any SPE
         Equity Owner, Operating Lessee or Mortgage Borrower; or if Borrower,
         any SPE Equity Owner, any Operating Lessee or any Mortgage Borrower or
         any of their respective partners, members or shareholders, as
         applicable, breaches any of the covenants set forth in Sections 5.1(T),
         or 6.1(D);

                                       74


                                    (xiv) if Borrower, any Mortgage Borrower,
         Operating Lessee or any SPE Equity Owner enters into any interest rate
         cap protection agreement, interest rate swap, interest rate hedge
         agreement or any similar agreement other than the Interest Rate Cap
         Agreement or unless consented to by Lender in its sole discretion;

                                    (xv) if an event or condition specified in
         Section 5.1(S) shall occur or exist with respect to any Plan,
         Multiemployer Plan or plan and, as a result of such event or condition,
         together with all other such events or conditions, Borrower, Mortgage
         Borrower, Operating Lessee or any ERISA Affiliate or any affiliate
         shall incur or in the opinion of Lender shall be reasonably likely to
         incur a liability to a Plan, a Multiemployer Plan, PBGC or plan (or any
         combination of the foregoing) which would constitute, in the
         determination of Lender, a Material Adverse Effect;

                                    (xvi) if without Lender's prior written
         consent (A) any Manager resigns or is removed or is replaced, (B)
         intentionally omitted, (C) any Management Agreement is entered into for
         any Individual Property or (D) there is any change in or termination of
         any Management Agreement for any Individual Property;

                                    (xvii) if, without Lender's prior written
         consent (A) any Franchisor resigns or is removed or is replaced, (B)
         any Franchise Agreement is entered into for any individual property, or
         (C) there is any material change in or termination of any Franchise
         Agreement for any Individual Property;

                                    (xviii) if without Lender's prior written
         consent (A) any Operating Lessee resigns or is removed or is replaced,
         (B) any Operating Lease is entered into for any Individual Property or
         (C) there is a change in or termination of any Operating Lease;

                                    (xix) if any Operating Lessee is in default
         in any material respect beyond any applicable notice or cure period
         under the applicable Operating Lease;

                                    (xx) if any of the assumptions set forth in
         that certain non-consolidation opinion from Borrower's counsel to
         Lender dated as of the date hereof shall be untrue in any material
         respect;

                                    (xxi) if Borrower shall be in default under
         any of the other obligations, agreements, undertakings, terms,
         covenants, provisions or conditions of this Agreement, the Note, or the
         other Loan Documents, not otherwise referred to in this Section 7.1,
         for ten (10) days after written notice to Borrower from Lender or its
         successors or assigns, in the case of any default which can be cured by
         the payment of a sum of money or for thirty (30) days after written
         notice from Lender or its successors or assigns, in the case of any
         other default (unless otherwise provided herein or in such other Loan
         Document); provided, however, that if such non-monetary default under
         this subparagraph is susceptible of cure but cannot reasonably be cured
         within such thirty (30) day period and provided further that Borrower
         shall have commenced to cure such default within such thirty (30) day
         period and thereafter diligently and expeditiously

                                       75


         proceeds to cure the same, such thirty (30) day period shall be
         extended for such time as is reasonably necessary for Borrower in the
         exercise of due diligence to cure such default, but in no event shall
         such period exceed ninety (90) days after the original notice from
         Lender;

                                    (xxii) the occurrence of an Event of Default
         as such term is defined in any Mortgage Loan Document;

                                    (xxiii) if the Liens created pursuant to any
         Loan Documents shall cease to be a fully perfected enforceable first
         priority security interest or any portion of the Pledged Collateral or
         any other collateral securing the Loan is Transferred without Lender's
         prior written consent;

                                    (xxiv) if any of the assumptions contained
         in any opinion relating to issues of substantive consolidation
         delivered to Lender in connection with the Loan, or in any other
         opinion relating to substantive consolidation delivered subsequent to
         the closing of the Loan, is or shall become untrue in any material
         respect; or

                                    (xxv) if any of Borrower or its subsidiaries
         shall breach any of the terms of:

                                    (A) Section 2.6 (d);

                                    (B) Section 6.1(A);

                                    (C) Section 6.1(I);

                                    (D) Section 6.1(L); or

                                    (E) Section 6.1(M).

         Section 7.2. Remedies.

                           (a) Upon the occurrence and during the continuance of
an Event of Default, all or any one or more of the rights, powers and other
remedies available to Lender against Borrower under this Agreement, the Note,
the Pledge Agreement or any of the other Loan Documents, or at law or in equity
may be exercised by Lender at any time and from time to time (including, without
limitation, the right to accelerate and declare the outstanding principal
amount, unpaid interest, Default Rate interest, Late Charges, Prepayment Premium
and any other amounts owing by Borrower to be immediately due and payable),
without notice or demand, whether or not all or any portion of the Indebtedness
shall be declared due and payable, and whether or not Lender shall have
commenced any foreclosure proceeding or other action for the enforcement of its
rights and remedies under any of the Loan Documents with respect to all or any
portion of the Pledged Collateral. Any such actions taken by Lender shall be
cumulative and concurrent and may be pursued independently, singly,
successively, together or otherwise, at

                                       76


such time and in such order as Lender may determine in its discretion, to the
fullest extent permitted by law, without impairing or otherwise affecting the
other rights and remedies of Lender permitted by law, equity or contract or as
set forth herein or in the other Loan Documents. Notwithstanding anything
contained to the contrary herein, the outstanding principal amount, unpaid
interest, Default Rate interest, Late Charges, Prepayment Premium and any other
amounts owing by Borrower shall be accelerated and immediately due and payable,
without any election by Lender upon the occurrence of an Event of Default
described in Section 7.1(x) or Section 7.1(xi). Notwithstanding that this
Agreement may refer to a continuing Event of Default, and without limiting
Borrower's right to cure a Default which may, with the passage of time, become
an Event of Default, Borrower shall have no right pursuant to this Agreement to
cure any Event of Default unless permitted by Lender in writing.

         Section 7.3. Remedies Cumulative.

                  The rights, powers and remedies of Lender under this Agreement
shall be cumulative and not exclusive of any other right, power or remedy which
Lender may have against Borrower or any other Person pursuant to this Agreement
or the other Loan Documents executed by or with respect to Borrower or any other
Person, or existing at law or in equity or otherwise. Lender's rights, powers
and remedies may be pursued singly, concurrently or otherwise, at such time and
in such order as Lender may determine in Lender's discretion. No delay or
omission to exercise any remedy, right or power accruing upon an Event of
Default shall impair any such remedy, right or power or shall be construed as a
waiver thereof, but any such remedy, right or power may be exercised from time
to time and as often as may be deemed expedient. A waiver of any Default or
Event of Default shall not be construed to be a waiver of any subsequent Default
or Event of Default or to impair any remedy, right or power consequent thereon.
Any and all of Lender's rights with respect to the Pledged Collateral shall
continue unimpaired, and Borrower shall be and remain obligated in accordance
with the terms hereof, notwithstanding (i) the release or substitution of the
Pledged Collateral at any time, or of any rights or interest therein or (ii) any
delay, extension of time, renewal, compromise or other indulgence granted by
Lender in the event of any Default or Event of Default with respect to the
Pledged Collateral or otherwise hereunder. Notwithstanding any other provision
of this Agreement, but subject to Section 8.14 hereof, Lender reserves the right
to seek a deficiency judgment or preserve a deficiency claim, in connection with
the foreclosure on the Pledged Collateral, to the extent necessary to foreclose
on other parts of the Pledged Collateral.

         Section 7.4. Lender's Right to Perform.

                  If Borrower fails to perform any covenant or obligation
contained herein and such failure shall continue for a period of (5) five
Business Days after Borrower's receipt of written notice thereof from Lender,
without in any way limiting Section 7.1 hereof, Lender may, but shall have no
obligation to, itself perform, or cause performance of, such covenant or
obligation, and the expenses of Lender incurred in connection therewith shall be
payable by Borrower to Lender upon demand. Notwithstanding the foregoing, Lender
shall have no obligation to send notice to Borrower of any such failure for
purposes of this Section 7.4.

                                       77


         Section 7.5. Sale. Without limiting any other right or remedy of
Lender, during the existence of an Event of Default, Lender may institute
proceedings, judicial or otherwise, for the complete or partial sale, public or,
to the extent now or hereafter permitted by law, private, of any or all of the
Pledged Collateral under the UCC or any other applicable provision of law. In
connection with any such proceeding, Lender may sell the Pledged Collateral as
an entirety or in blocks or units and at such times and places (at one or more
sales) and upon such terms as it may deem expedient unless prohibited by law
from so acting.

         Section 7.6. Partial Foreclosure. Without limiting any other right or
remedy of Lender, during the existence of an Event of Default, Lender shall have
the right from time to time to partially foreclose upon the Pledged Collateral
in any manner and for any amounts secured by the Pledge Agreement or any other
Loan Document then due and payable as determined by Lender in its sole
discretion including, without limitation, the following circumstances: (i) in
the event Borrower defaults beyond any applicable grace period in the payment of
one or more scheduled payments of principal and interest, Lender may foreclose
upon the Pledged Collateral to recover such delinquent payments or (ii) in the
event Lender elects to accelerate less than the entire Indebtedness, Lender may
foreclose upon the Pledged Collateral to recover so much of the Indebtedness as
Lender may accelerate and such other sums secured by the Pledged Collateral as
Lender may elect. Notwithstanding one or more partial foreclosures, the
remaining Pledged Collateral shall remain subject to the Pledge Agreement and
the other Loan Documents to secure payment of sums secured by the Loan Documents
and not previously recovered.

         Section 7.7. Receiver. Without limiting any other right or remedy of
Lender, during the existence of an Event of Default, Lender may apply for the
appointment of a receiver, trustee, liquidator or conservator of the Pledged
Collateral, without regard for the adequacy of the security for the Indebtedness
or a showing of insolvency, fraud or mismanagement on the part of Borrower. Any
receiver or other party so appointed has all powers permitted by law which may
be necessary or usual in such cases for the protection, possession, control,
management and operation of the Pledged Collateral. Borrower hereby consents, to
the extent permitted under applicable law, to the appointment of a receiver or
trustee of the Pledged Collateral upon Lender's request if an Event of Default
has occurred. At Lender's option, such receiver or trustee shall serve without
any requirement of posting a bond.

         Section 7.8. UCC Remedies. Without limiting any other right or remedy
of Lender, during the existence of an Event of Default, Lender may exercise with
respect to the Pledged Collateral, each right, power or remedy granted to a
secured party under the UCC, including, without limitation: (i) the right to
take possession of the Pledged Collateral and to take such other measures as
Lender deems necessary for the care, protection and preservation of the Pledged
Collateral, (ii) the right to require that Borrower, at its expense, assemble
the Pledged Collateral and make it available to Lender at a convenient place
acceptable to Lender, and (iii) the right to retain any Pledged Collateral in
Lender's possession. Any notice of sale, disposition or other intended action by
Lender with respect to the Pledged Collateral sent to Borrower in accordance
with the provisions hereof at least ten (10) days prior to such action shall
constitute reasonable

                                       78


notice to Borrower. Lender shall not have any obligation to clean-up or
otherwise prepare the Pledged Collateral for sale.

         Section 7.9. Exercise of Equity Interest Rights. Without limiting any
other right or remedy of Lender, during the existence of an Event of Default,
with or without taking title to or retaining possession of the Pledged
Collateral, Lender may, and Borrower hereby grants to Lender the right (but
Lender shall have no obligation) to exercise any and all of Borrower's
managerial, voting and other rights under the organizational documents of
Mortgage Borrower and otherwise, and may exercise any and all of Lender's other
rights under the Pledge Agreement or in, to or with respect to the Pledged
Collateral in the name of Borrower or otherwise.

         Section 7.10. Power of Attorney. For the purpose of carrying out the
provisions and exercising the rights, powers and privileges granted in this
Article 7, Borrower hereby irrevocably and unconditionally constitutes and
appoints Lender its true and lawful attorney-in-fact to execute, acknowledge and
deliver any instruments and do and perform any acts such as are referred to in
this subsection in the name and on behalf of Borrower, such power of attorney to
be exercisable during the existence of an Event of Default. This power of
attorney is a power coupled with an interest and cannot be revoked.

                                   ARTICLE 8.

                                  MISCELLANEOUS

         Section 8.1. Survival.

                  Subject to Section 4.2, this Agreement and all covenants,
agreements, representations and warranties made herein and in the certificates
delivered pursuant hereto shall survive the execution and delivery of this
Agreement and the execution and delivery by Borrower to Lender of the Note, and
shall continue in full force and effect so long as any portion of the
Indebtedness is outstanding and unpaid. Whenever in this Agreement any of the
parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party. All covenants, promises and agreements in
this Agreement contained, by or on behalf of Borrower, shall inure to the
benefit of the respective successors and assigns of Lender. Nothing in this
Agreement or in any other Loan Document, express or implied, shall give to any
Person other than the parties and the holder(s) of the Note and the other Loan
Documents, and their legal representatives, successors and assigns, any benefit
or any legal or equitable right, remedy or claim hereunder.

         Section 8.2. Lender's Discretion.

                  Whenever pursuant to this Agreement or any other Loan
Document, Lender exercises any right, option or election given to Lender to
approve or disapprove, or consent or withhold consent, or any arrangement or
term is to be satisfactory to Lender or is to be in Lender's discretion, the
decision of Lender to approve or disapprove, consent or withhold

                                       79


consent, or to decide whether arrangements or terms are satisfactory or not
satisfactory or acceptable or not acceptable to Lender in Lender's discretion,
shall (except as is otherwise specifically herein provided) be in the sole and
absolute discretion of Lender. Whenever pursuant to this Agreement or any other
Loan Document (a) the Rating Agencies are given any right to approve or
disapprove, (b) confirmation is required from the Rating Agencies that an action
will not result in a downgrade or withdrawal of the ratings in a Secondary
Market Transaction or (c) any arrangement or term is to be satisfactory to the
Rating Agencies, the approval of Lender shall be substituted therefore prior to
the date that all or any portion of the Loan is included in a REMIC, and may be
based upon, among other things, Lender's reasonable determination of Rating
Agency criteria.

         Section 8.3. Governing Law.

                           (a) The proceeds of the Note delivered pursuant
hereto 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 limitation, matters of
construction, validity and performance, this Agreement 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. To the fullest
extent permitted by law, Borrower hereby unconditionally and irrevocably waives
any claim to assert that the law of any other jurisdiction governs this
Agreement and the Note, and this Agreement and the Note shall be governed by and
construed in accordance with the laws of the State of New York pursuant to
Section 5-1401 of the New York General Obligations Law.

                           (b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST
BORROWER ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE INSTITUTED IN ANY
FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, PURSUANT TO SECTION 5-1402 OF THE
NEW YORK GENERAL OBLIGATIONS LAW OR IN ANY FEDERAL OR STATE COURT IN THE
JURISDICTION IN WHICH THE PLEDGED COLLATERAL IS LOCATED, AND BORROWER WAIVES ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH
SUIT, ACTION OR PROCEEDING, AND BORROWER HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. BORROWER DOES
HEREBY DESIGNATE AND APPOINT CSC NETWORKS, 500 CENTRAL AVENUE, ALBANY, NEW YORK,
12206-2290, AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF
SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR
PROCEEDING IN ANY FEDERAL OR STATE COURT AND AGREES THAT SERVICE OF PROCESS UPON
SAID AGENT AT SAID ADDRESS (OR AT SUCH OTHER OFFICE AS MAY BE DESIGNATED BY
BORROWER FROM TIME TO TIME IN ACCORDANCE WITH THE TERMS HEREOF) WITH A COPY TO
BORROWER AT ITS PRINCIPAL EXECUTIVE OFFICES, ATTENTION: GENERAL COUNSEL AND
WRITTEN NOTICE OF SAID SERVICE OF BORROWER MAILED OR DELIVERED TO BORROWER IN
THE MANNER

                                       80


PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS
UPON BORROWER, IN ANY SUCH SUIT, ACTION OR PROCEEDING. BORROWER (I) SHALL GIVE
PROMPT NOTICE TO LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT
HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE
AUTHORIZED AGENT (WHICH OFFICE SHALL BE DESIGNATED AS THE ADDRESS FOR SERVICE OF
PROCESS), AND (III) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED
AGENT CEASES TO HAVE AN OFFICE OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.

         Section 8.4. Modification, Waiver in Writing.

                  No modification, amendment, extension, discharge, termination
or waiver of any provision of this Agreement, the Note or any other Loan
Document, or consent to any departure by Borrower therefrom, shall in any event
be effective unless the same shall be in a writing signed by the party against
whom enforcement is sought, and then such waiver or consent shall be effective
only in the specific instance, and for the purpose, for which given. Except as
otherwise expressly provided herein, no notice to or demand on Borrower shall
entitle Borrower to any other or future notice or demand in the same, similar or
other circumstances.

         Section 8.5. Delay Not a Waiver.

                  Neither any failure nor any delay on the part of Lender in
insisting upon strict performance of any term, condition, covenant or agreement,
or exercising any right, power, remedy or privilege hereunder, or under the
Note, or of any other Loan Document, or any other instrument given as security
therefor, shall operate as or constitute a waiver thereof, nor shall a single or
partial exercise thereof preclude any other future exercise, or the exercise of
any other right, power, remedy or privilege. In particular, and not by way of
limitation, by accepting payment after the due date of any amount payable under
this Agreement, the Note or any other Loan Document, Lender shall not be deemed
to have waived any right either to require prompt payment when due of all other
amounts due under this Agreement, the Note or the other Loan Documents, or to
declare a default for failure to effect prompt payment of any such other amount.

         Section 8.6. Notices.

                  All notices, consents, approvals and requests required or
permitted hereunder or under any other Loan Document shall be given in writing
and shall be effective for all purposes if hand delivered or sent by (a) hand
delivery, with proof of attempted delivery, (b) certified or registered United
States mail, postage prepaid, (c) expedited prepaid delivery service, either
commercial or United States Postal Service, with proof of attempted delivery, or
(d) by telecopier (with answerback acknowledged) provided that such telecopied
notice must also be delivered by one of the means set forth in (a), (b) or (c)
above, addressed to the parties as follows:

                                       81


                  If to Lender:     Merrill Lynch Capital, a Division of Merrill
                                    Lynch Business Financial
                                    Services, Inc.
                                    222 North LaSalle Street
                                    16th Floor
                                    Chicago, IL 60601
                                    Attn: Vice President,
                                          Real Estate Portfolio Manager
                                    Telecopier: 312-499-3026

                  with a copy to:   Merrill Lynch Capital, a Division of Merrill
                                    Lynch Business Financial
                                    Services, Inc.
                                    222 North LaSalle Street
                                    16th Floor
                                    Chicago, IL 60601
                                    Attn: Real Estate Legal
                                    Telecopier: 312-499-3026

                  with a copy to:   Dechert LLP
                                    One Market Street,
                                    Spear Tower,
                                    Suite 1600
                                    San Francisco, CA  94105
                                    Attn: Joseph B. Heil, Esquire
                                    Telecopier: 415-262-4555

                  If to Borrower:   Ashford Mezz Borrower LLC
                                    c/o Ashford Hospitality Trust
                                    14185 Dallas Parkway
                                    Suite 1100
                                    Dallas, TX 75254
                                    Attn: David Brooks, Esquire
                                    Telecopier: (972) 490-9605

                                with a copy to:

                                    Andrews Kurth LLP
                                    1717 Main Street, Suite 3700
                                    Dallas, Texas 75201
                                    Attn: David Barbour, Esquire
                                    Telecopier: (214) 659-4764

                  A party receiving a notice which does not comply with the
technical requirements for notice under this Section 8.6 may elect to waive any
deficiencies and treat the notice as having been properly given. A notice shall
be deemed to have been given: (a) in the case of hand

                                       82


delivery, at the time of delivery; (b) in the case of registered or certified
mail, when delivered or the first attempted delivery on a Business Day; (c) in
the case of expedited prepaid delivery upon the first attempted delivery on a
Business Day; or (d) in the case of telecopier, upon receipt of answerback
confirmation, provided that such telecopied notice was also delivered as
required in this Section 8.6.

         Section 8.7. Trial By Jury.

                  BORROWER AND LENDER, TO THE FULLEST EXTENT THAT THEY MAY
LAWFULLY DO SO, HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING,
INCLUDING, WITHOUT LIMITATION, ANY TORT ACTION, BROUGHT BY ANY PARTY HERETO WITH
RESPECT TO THIS AGREEMENT, THE NOTE OR THE OTHER LOAN DOCUMENTS.

         Section 8.8. Headings.

                  The Article and Section headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.

         Section 8.9. Assignment.

                  Lender shall have the right to assign in whole or in part this
Agreement and/or any of the other Loan Documents and the obligations hereunder
or thereunder to any Person and to participate all or any portion of the Loan
evidenced hereby, including without limitation, any servicer or trustee in
connection with a Secondary Market Transaction. Lender shall provide Borrower
with written notice of any such assignment; provided, however, that such notice
shall not be a condition of Lender's right to assign this Agreement and/or any
of the Loan Documents and the failure to deliver such notice shall not
constitute a default under this Agreement. At the option of Lender, the Loan may
be serviced by a servicer and\or trustee selected by Lender and Lender may
delegate all or any portion of its responsibilities under this Agreement and the
other Loan Documents to such servicer and\or trustee pursuant to a servicing
agreement between Lender and such servicer and\or trustee.

         Section 8.10. Severability.

                  Wherever possible, each provision of this Agreement shall be
interpreted in such 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 law, 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 8.11. Preferences.

                                       83


                  Lender shall have no obligation to marshal any assets in favor
of Borrower or any other party or against or in payment of any or all of the
obligations of Borrower pursuant to this Agreement, the Note or any other Loan
Document. Lender shall have the continuing and exclusive right to apply or
reverse and reapply any and all payments by Borrower to any portion of the
obligations of Borrower hereunder. To the extent Borrower makes a payment or
payments to Lender for Borrower's benefit, which payment or proceeds or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside or required to be repaid to a trustee, receiver or any other party
under any bankruptcy law, state or federal law, common law or equitable cause,
then, to the extent of such payment or proceeds received, the obligations
hereunder or part thereof intended to be satisfied shall be revived and continue
in full force and effect, as if such payment or proceeds had not been received
by Lender.

         Section 8.12. Waiver of Notice.

                  Borrower shall not be entitled to any notices of any nature
whatsoever from Lender except with respect to matters for which this Agreement
or the other 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. Borrower hereby expressly waives the right to receive any
notice from Lender with respect to any matter for which this Agreement or the
other Loan Documents does not specifically and expressly provide for the giving
of notice by Lender to Borrower.

         Section 8.13. Remedies of Borrower.

                  In the event that a claim or adjudication is made that Lender
or its agents, has acted unreasonably or unreasonably delayed acting in any case
where by law or under this Agreement, the Note or the other Loan Documents,
Lender or such agent, as the case may be, has an obligation to act reasonably or
promptly, Borrower agrees that neither Lender nor its agents, shall be liable
for any monetary damages, and Borrower's sole remedies shall be limited to
commencing an action seeking injunctive relief or declaratory judgment. The
parties hereto agree that any action or proceeding to determine whether Lender
has acted reasonably shall be determined by an action seeking declaratory
judgment.

         Section 8.14. Exculpation.

Except as otherwise set forth in this Section 8.14 and Section 4.2 to the
contrary, Lender shall not enforce the liability and obligation of Borrower to
perform and observe the obligations contained in this Agreement, the Note, or
any of the other Loan Documents executed and delivered by Borrower except that
Lender may pursue any power of sale, bring a foreclosure action, action for
specific performance, action for money judgment, or other appropriate action or
proceeding (including, without limitation, to obtain a deficiency judgment)
against Borrower or any other Person solely for the purpose of enabling Lender
to realize upon (a) the Pledged Collateral and (b) any other collateral given to
Lender under the Loan Documents ((a) and (b) collectively, the "Default
Collateral"); provided, however, that any judgment in any such action

                                       84


or proceeding shall be enforceable only to the extent of any such Default
Collateral. The provisions of this Section 8.14 shall not, however, (a) impair
the validity of the Indebtedness evidenced by the Loan Documents or in any way
affect or impair the Liens of any of the Loan Documents or the right of Lender
to foreclose on the Pledged Collateral following an Event of Default; (b) impair
the right of Lender to name any Person as a party defendant in any action or
suit for judicial foreclosure and sale of the Pledged Collateral; (c) affect the
validity or enforceability of the Note or the other Loan Documents; (d) impair
the right of Lender to obtain the appointment of a receiver; (e) impair the
right of Lender to bring suit for and recover against any Person any damages,
losses, expenses, liabilities or costs resulting from fraud, willful
misrepresentation, waste of all or any portion of any Individual Property, the
Pledged Collateral, or wrongful removal or disposal of all or any portion of any
Individual Property or the Pledged Collateral by any Person in connection with
this Agreement, the Note or the other Loan Documents; (f) impair the right of
Lender to enforce the provisions of Sections 4.1(V) or 5.1(D) through 5.1(G),
inclusive of this Agreement or the Environmental Guaranty even after repayment
in full by Borrower of the Indebtedness; (g) 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
Pledged Collateral securing the Note as provided in the Loan Documents; (h)
impair the right of Lender to bring suit for and recover against any Person with
respect to any misapplication of any funds (including, without limitation,
Insurance Proceeds and Condemnation Proceeds); (i) impair the right of Lender to
sue for, seek or demand a deficiency judgment against any Person solely for the
purpose of foreclosing on the Pledged Collateral or any part thereof, or
realizing upon the Default Collateral; provided, however, that any such
deficiency judgment referred to in this clause (i) shall be enforceable only to
the extent of any of the Default Collateral; or (j) impair the right of Lender
to obtain Insurance Proceeds or Condemnation Proceeds due to Lender pursuant to
any Loan Document. The preceding provisions of this Section shall be
inapplicable to any Person if (i) any petition for bankruptcy, reorganization or
arrangement pursuant to federal or state law against any Borrower, any Mortgage
Borrower or Operating Lessee shall be filed by Borrower, any Mortgage Borrower,
Operating Lessee, or any Affiliate of Borrower, any Mortgage Borrower or
Operating Lessee, (ii) if an involuntary bankruptcy or other insolvency
proceeding is commenced against Borrower, any Mortgage Borrower, or Operating
Lessee (by a party other than Lender) but only if such Borrower, Mortgage
Borrower, or Operating Lessee has consented or acquiesced to such proceeding or
if Borrower, any Mortgage Borrower, Guarantor, Operating Lessee or any Affiliate
of Borrower, any Mortgage Borrower, or Operating Lessee has acted in concert
with, colluded or conspired with the party to cause the filing thereof or has
consented to or acquiesced thereto, (iii) if Borrower, Operating Lessee any
Mortgage Borrower shall institute any proceeding for the dissolution or
liquidation of Borrower, or any Mortgage Borrower, (iv) if Borrower, or any
Mortgage Borrower shall make an assignment for the benefit of creditors, (v) if
Borrower, any Mortgage Borrower or Operating Lessee shall breach any
representation, warranty or covenant in Section 2.14, Section 4.1(C), (such that
such breach was considered by a court as a factor in the court's finding for a
consolidation of the assets of Borrower, Mortgage Borrower or Operating Lessee
with the assets of another person or entity or as a result thereof Lender
suffers any material damage, cost, liability or expense; provided, however, that
in the absence of an actual consolidation, recourse may be had against Borrower
only to the extent of

                                       85


losses for such breach), 4.1, (v) 4.1(AA), 5.T(T) such that such breach was
considered by a court as a factor in the court's finding for a consolidation of
the assets of Borrower, Mortgage Borrower or Operating Lessee with the assets of
another person or entity or as a result thereof Lender suffers any material
damage, cost, liability or expense; provided, however, that in the absence of an
actual consolidation, recourse may be had against Borrower only to the extent of
losses for such breach) (v) if Borrower, Mortgage Borrower or Operating Lessee
allows any Transfer or Mortgage Loan Transfer to occur in violation of Section
6.1(B) hereof or otherwise fails to obtain Lender's prior written consent to any
Transfer or Mortgage Loan Transfer to the extent such consent is required in
this Agreement, (vi) Borrower interferes with Lender's exercise of any of its
rights or remedies hereunder, or (vii) if Borrower breaches any representation
or warranty contained in Section 4.1(S).

         Section 8.15. Exhibits Incorporated.

                  The information set forth on the cover, heading and recitals
hereof, and the Exhibits attached hereto, are hereby incorporated herein as a
part of this Agreement with the same effect as if set forth in the body hereof.

         Section 8.16. Offsets, Counterclaims and Defenses.

                  Any assignee of Lender's interest in and to this Agreement,
the Note and the other Loan Documents shall take the same free and clear of all
offsets, counterclaims or defenses which are unrelated to the Loan, this
Agreement, the Note and the other Loan Documents which Borrower may otherwise
have against any assignor, 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 Agreement, the Note, and other Loan Documents 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 8.17. No Joint Venture or Partnership.

                  Borrower and Lender intend that the relationship created
hereunder be solely that of borrower and lender. 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
Pledged Collateral other than that of lender.

         Section 8.18. Waiver of Marshalling of Assets Defense.

                  To the fullest extent that Borrower may legally do so,
Borrower waives all rights to a marshalling of the assets of Borrower, and
others with interests in Borrower, and of the Pledged Collateral, or to a sale
in inverse order of alienation in the event of foreclosure of the interests
hereby created, and agrees not to assert any right under any laws pertaining to
the marshalling of assets, the sale in inverse order of alienation, homestead
exemption, the administration of estates of decedents, or any other matters
whatsoever to defeat, reduce or affect the right of Lender under the Loan
Documents to a sale of the Pledged Collateral for the

                                       86


collection of the Indebtedness without any prior or different resort for
collection, or the right of Lender to the payment of the Indebtedness in
preference to every other claimant whatsoever.

         Section 8.19. Waiver of Counterclaim.

                  Borrower hereby waives the right to assert a counterclaim,
other than compulsory counterclaim, in any action or proceeding brought against
Borrower by Lender or Lender's agents.

         Section 8.20. Conflict; Construction of Documents.

                  In the event of any conflict between the provisions of this
Agreement and the provisions of the Note or any of the other Loan Documents, the
provisions of this Agreement shall prevail. The parties hereto acknowledge that
they were represented by counsel in connection with the negotiation and drafting
of the Loan Documents and that the Loan Documents shall not be subject to the
principle of construing their meaning against the party which drafted same.

         Section 8.21. Brokers and Financial Advisors.

                  Borrower and Lender hereby represent that they have dealt with
no financial advisors, brokers, underwriters, placement agents, agents or
finders in connection with the transactions contemplated by this Agreement.
Borrower hereby agrees to indemnify and hold Lender harmless from and against
any and all claims, liabilities, costs and expenses of any kind in any way
relating to or arising from a claim by any Person, that such Person acted on
behalf of Borrower in connection with the transactions contemplated herein. The
provisions of this Section shall survive the expiration and termination of this
Agreement and the repayment of the Indebtedness.

         Section 8.22. Counterparts.

                  This Agreement may be executed in any number of counterparts,
each of which when so executed and delivered shall be an original, but all of
which shall together constitute one and the same instrument.

         Section 8.23. Estoppel Certificates.

                  Borrower and Lender each hereby agree at any time and from
time to time upon not less than fifteen (15) days prior written notice by
Borrower or Lender (but no more than four (4) times per year unless (i) an Event
of Default has occurred and is continuing or (ii) such request is occasioned in
connection with a Secondary Market Transaction) to execute, acknowledge and
deliver to the party specified in such notice, a statement, in writing,
certifying that this Agreement is unmodified and in full force and effect (or if
there have been modifications, that the same, as modified, is in full force and
effect and stating the modifications hereto), and stating whether or not, to the
knowledge of such certifying party, any Default or

                                       87


Event of Default has occurred, and, if so, specifying each such Default or Event
of Default; provided, however, that it shall be a condition precedent to
Lender's obligation to deliver the statement pursuant to this Section, that
Lender shall have received, together with Borrower's request for such statement,
an Officer's Certificate stating that no Default or Event of Default exists as
of the date of such certificate (or specifying such Default or Event of
Default).

         Section 8.24. Payment of Expenses.

                  Borrower shall, whether or not the Transactions are
consummated, pay all Transaction Costs, which shall include, without limitation,
reasonable out-of-pocket fees, costs, expenses, and disbursements of Lender and
its attorneys, local counsel, accountants and other contractors in connection
with (i) the negotiation, preparation, execution and delivery of the Loan
Documents and the documents and instruments referred to therein, (ii) the
creation, perfection or protection of Lender's Liens in the Pledged Collateral
(including, without limitation, fees and expenses for title and lien searches
and filing and recording fees, intangibles taxes, personal property taxes,
mortgage recording taxes, due diligence expenses, travel expenses, accounting
firm fees, costs of the Appraisals, Environmental Reports (and an environmental
consultant), Surveys and the Engineering Reports), (iii) the negotiation,
preparation, execution and delivery of any amendment, waiver or consent relating
to any of the Loan Documents, (iv) the review and approval of each replacement
Rate Protection Agreement required hereunder, and (v) the preservation of rights
under and enforcement of the Loan Documents and the documents and instruments
referred to therein, including any restructuring or rescheduling of the
Indebtedness, to the extent expressly required hereunder.

         Section 8.25. Bankruptcy Waiver.

                  Borrower hereby agrees that, in consideration of the recitals
and mutual covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, if
Borrower (i) files with any bankruptcy court of competent jurisdiction or be the
subject of any petition under Title 11 of the U.S. Code, as amended, (ii) is the
subject of any order for relief issued under Title 11 of the U.S. Code, as
amended, (iii) files or is the subject of any petition seeking any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any present or law relating to bankruptcy, insolvency or
other relief of debtors, (iv) has sought or consents to or acquiesces in the
appointment of any trustee, receiver, conservator or liquidator or (v) is the
subject of any order, judgment or decree entered by any court of competent
jurisdiction approving a petition filed against such party for any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any present or future federal or state act or law
relating to bankruptcy, insolvency or other relief for debtors, the automatic
stay provided by the Federal Bankruptcy Code shall be modified and annulled as
to Lender, so as to permit Lender to exercise any and all of its rights and
remedies, upon request of Lender made on notice to Borrower and any other party
in interest but without the need of further proof or hearing. Neither Borrower
nor any Affiliate of Borrower shall contest the enforceability of this Section.

                                       88


         Section 8.26. Entire Agreement.

                  This Agreement, together with the Exhibits hereto and the
other Loan Documents constitutes the entire agreement among the parties hereto
with respect to the subject matter contained in this Agreement, the Exhibits
hereto and the other Loan Documents and supersedes all prior agreements,
understandings and negotiations between the parties.

         Section 8.27. Dissemination of Information.

                  If Lender determines at any time to participate in a Secondary
Market Transaction, Lender may forward to each purchaser, transferee, assignee,
servicer, participant or investor in such securities (collectively, the
"Investor"), any Rating Agency rating such securities, any organization
maintaining databases on the underwriting and performance of commercial loans,
trustee, counsel, accountant, and each prospective Investor, all documents and
information which Lender now has or may hereafter acquire relating to the Loan,
Borrower, Mortgage Borrower, Operating Lessee, any direct or indirect equity
owner of Borrower, any guarantor, any indemnitor, the Pledged Collateral and
each Individual Property, which shall have been furnished by Borrower any
Affiliate of Borrower, Operating Lessee, any guarantor, any indemnitor, or any
party to any Loan Document, or otherwise furnished in connection with the Loan,
as Lender in its discretion determines necessary or desirable.

         Section 8.28. Limitation of Interest.

                  It is the intention of Borrower and Lender to conform strictly
to applicable usury laws. Accordingly, if the transactions contemplated hereby
would be usurious under applicable law, then, in that event, notwithstanding
anything to the contrary in any Loan Document, it is agreed as follows: (i) the
aggregate of all consideration which constitutes interest under applicable law
that is taken, reserved, contracted for, charged or received under any Loan
Document or otherwise in connection with the Loan shall under no circumstances
exceed the maximum amount of interest allowed by applicable law, and any excess
shall be credited to principal by Lender (or if the Loan shall have been paid in
full, refunded to Borrower); and (ii) in the event that maturity of the Loan is
accelerated by reason of an election by Lender resulting from any default
hereunder or otherwise, or in the event of any required or permitted prepayment,
then such consideration that constitutes interest may never include more than
the maximum amount of interest allowed by applicable law, and any interest in
excess of the maximum amount of interest allowed by applicable law, if any,
provided for in the Loan Documents or otherwise shall be cancelled automatically
as of the date of such acceleration or prepayment and, if theretofore prepaid,
shall be credited to principal (or if the principal portion of the Loan and any
other amounts not constituting interest shall have been paid in full, refunded
to Borrower.)

                  In determining whether or not the interest paid or payable
under any specific contingency exceeds the maximum amount allowed by applicable
law, Lender shall, to the maximum extent permitted under applicable law (a)
exclude voluntary prepayments and the effects thereof, and (b) amortize,
prorate, allocate and spread, in equal parts, the total amount of

                                       89


interest throughout the entire contemplated term of the Loan so that the
interest rate is uniform throughout the entire term of the Loan; provided, that
if the Loan is paid and performed in full prior to the end of the full
contemplated term hereof, and if the interest received for the actual period of
existence thereof exceeds the maximum amount allowed by applicable law, Lender
shall refund to Borrower the amount of such excess, and in such event, Lender
shall not be subject to any penalties provided by any laws for contracting for,
charging or receiving interest in excess of the maximum amount allowed by
applicable law.

         Section 8.29. Indemnification.

                  Borrower shall indemnify and hold Lender and each of its
affiliates and their respective successors and assigns (including their
respective officers, directors, partners, employees, attorneys, accountants,
professionals and agents and each other person, if any, controlling Lender or
any of its affiliates within the meaning of either Section 15 of the Securities
Act of 1933, as amended, or Section 20 of the Securities Exchange Act of 1934,
as amended) (each, including Lender, an "Indemnified Party") harmless against
any and all losses, claims, damages, costs, expenses (including the fees and
disbursements of outside counsel retained by any such person) or liabilities in
connection with, arising out of or as a result of the transactions and matters
referred to or contemplated by this Agreement, except to the extent that it is
finally judicially determined that any such loss, claim, damage, cost, expense
or liability resulted directly and solely from the gross negligence, fraud or
willful misconduct of such Indemnified Party. If any Indemnified Party becomes
involved in any action, proceeding or investigation in connection with any
transaction or matter referred to or contemplated in this Agreement, Borrower
shall periodically reimburse any Indemnified Party upon demand therefor in an
amount equal to its reasonable legal and other expenses (including the costs of
any investigation and preparation) incurred in connection therewith to the
extent such legal or other expenses are the subject of indemnification
hereunder. IT IS EXPRESSLY ACKNOWLEDGED AND AGREED BY BORROWER THAT THE
INDEMNITY (AND/OR THE RELEASE) CONTAINED IN THIS SECTION 8.29 PROTECTS LENDER
FROM THE CONSEQUENCES OF LENDER'S ACTS OR OMISSIONS, INCLUDING WITHOUT
LIMITATION, THE NEGLIGENT ACTS OR OMISSIONS OF LENDER TO THE EXTENT PERMITTED BY
LAW; PROVIDED, HOWEVER, THAT NOTHING CONTAINED HEREIN SHALL BE DEEMED TO RELIEVE
THE LENDER FROM LIABILITY DUE TO ITS GROSS NEGLIGENCE.

         Section 8.30. Borrower Acknowledgments.

                  Borrower hereby acknowledges to and agrees with Lender that
(i) the scope of Lender's business is wide and includes, but is not limited to,
financing, real estate financing, mezzanine financing, investment in real estate
and other real estate transactions which may be viewed as adverse to or
competitive with the business of Borrower or its Affiliates and (ii) Borrower
has been represented by competent legal counsel and Borrower has consulted with
such counsel prior to executing this Agreement and of the other Loan Documents.

         Section 8.31. Publicity.

                                       90


                  Lender shall have the right to issue press releases,
advertisements and other promotional materials describing Lender's participation
in the origination of the Loan or the Loan's inclusion in any Secondary Market
Transaction effectuated or to be effectuated by Lender. All news releases,
publicity or advertising by Borrower or their affiliates through any media
intended to reach the general public which refers to the Loan Documents or the
financing evidenced by the Loan Documents, to the Lender, Merrill Lynch or any
of their affiliates shall be subject to the prior written approval of Lender and
Merrill Lynch Mortgage Lending, Inc., except for disclosures required by law
which shall not require Lender approval but which shall require prior written
notice to Lender.

         Section 8.32. .Borrower and Lender agree that time is of the essence
with regard to all obligations under this Agreement and the other Loan
Documents.

         Section 8.33. Final Agreement. THE WRITTEN LOAN DOCUMENT TO WHICH THIS
NOTICE RELATES REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

         Section 8.34. .Borrower hereby waives, to the fullest extent permitted
by law, any and all rights under Sections 51.003 and 51.004 of the Texas
Property Code.

         Section 8.35. Notwithstanding any of the provisions of this Agreement,
whenever any covenant or other provision contained herein or any other Loan
Document requires Borrower to "cause" any Mortgage Borrower or other Person to
perform or undertake any action (or language of similar import), such provision
shall apply only with respect to Borrower in its capacity as an equity holder of
the Mortgage Borrower, it being understood that no covenant or other obligation
of Borrower set forth in this Agreement shall constitute a guaranty or other
assurance of payment or performance of any monetary obligation of any Mortgage
Borrower or any other Person to Lender.

                       [Signatures on the following pages]

                                       91


                  IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their duly authorized representatives, all as
of the day and year first above written.

                                    LENDER:

                                    MERRILL LYNCH CAPITAL, a Division of Merrill
                                    Lynch Business Financial Services, Inc., a
                                    Delaware corporation

                                    By: /s/ CYNTHIA M. LOZANO
                                        ---------------------
                                         Name: Cynthia M. Lozano
                                         Title: Assistant Vice President

                    [signatures continued on following page]

                                       92


                                    BORROWER:

                                    ASHFORD MEZZ BORROWER LLC, a Delaware
                                    limited liability company

                                    By: /s/ DAVID A. BROOKS
                                        -------------------
                                        David A. Brooks, Vice President

EX-10.17.2

[SECURED CAPITAL CORP LOGO]             11150 Santa Monica Boulevard, Suite 1400
                                                           Los Angeles, CA 90025

                                                            phone (310) 477-9600
                                                              fax (310) 477-3436

May 10, 2004                                                           VIA FEDEX

Mr. Monty Bennett
Mr. Douglas Kessler
Ashford Hospitality Trust, Inc.
14185 Dallas Parkway
Suite 1100
Dallas, Texas 75254

RE: FINANCING OF HOSPITALITY PORTFOLIO

Dear Monty and Doug:

This letter, when countersigned below, will confirm that Ashford Hospitality
Trust, Inc. (the "Company") has engaged Secured Capital Corp ("SCC") to use its
best efforts as the Company's exclusive financial advisor with respect to
obtaining proposals for the permanent financing (the "Financing") of various
hotel properties (as opposed to single asset structured financings) set forth on
Exhibit A attached hereto, which Exhibit may be modified as mutually agreed by
the Company and SCC (each, a "Property" and collectively, the "Properties"). It
is anticipated that the Financing will be solicited in one to four offerings,
which may be provided by a single lender or multiple lenders, and will result in
total loan proceeds of approximately $100-$200 million, which will be secured by
the Properties.

         1. SCC'S SERVICES. SCC's services pursuant to this engagement shall
include the following:

- -        Prepare and provide descriptive financing materials to be sent to
         prospective lenders (all matters of form and content in respect of such
         materials shall be subject to approval by the Company, which shall be
         responsible for the accuracy and completeness of such materials).

- -        Contact a target list of prospective lenders (approved by Company) to
         present the Financing opportunity.

- -        Prepare analysis and structuring concepts for prospective lenders in
         order to facilitate their proposal.



Letter to Mr. Monty Bennett
and Mr. Douglas Kessler
May 10, 2004
Page 2

- -        Respond to prospective lenders' questions and inquiries about the
Properties.

- -        Obtain proposals from prospective lenders and present them to the
Company.

- -        Negotiate, in coordination with representatives of the Company, the
terms and conditions of the Financing.

- -        Assist the Company and its counsel in coordinating efforts to achieve
timely and efficient documentation and closing of the Financing.

- -        Such other services reasonably required by the Company in connection
with the above.

         2. COMPANY APPROVAL REQUIRED; REFERRAL OF INQUIRIES TO SCC. The terms
and conditions of any proposal shall be subject to acceptance by the Company in
its sole and absolute discretion. SCC shall not have the authority to accept any
offer or proposal or to enter into any commitment on behalf of the Company. The
Company shall refer all inquiries from prospective lenders regarding the
Financing to SCC and agrees to cooperate with SCC in pursuing discussions or
negotiations with such prospective lenders.

         3. COMPANY TO FURNISH INFORMATION. The Company shall furnish to SCC
such information with respect to the Properties and the Company in the Company's
possession as SCC may reasonably request in order to render its services
effectively. The Company represents to the best of its knowledge that all
information furnished by it to SCC will be materially accurate and complete.
Company shall keep SCC informed of any financing or sale proposals it obtains on
any of the Properties.

         4. COMPENSATION. The parties hereto agree that the compensation payable
to SCC shall be as set forth on Exhibit B attached hereto.

         5. EXPENSES. The Company shall be responsible to pay directly or
reimburse SCC, whether or not SCC earns the Success Fee all reasonable
third-party, out of pocket expenses associated with analyzing the Properties,
preparing marketing materials, and marketing the Financing (collectively, the
"Out of Pocket Expenses") incurred by SCC in connection with the marketing of
the Financing. The Out of Pocket Expenses shall include reasonable travel costs
associated with the Financing as well as printing, copying and delivering
financing materials and due diligence materials, including updates. The Company
understands and agrees that all expenses incurred to date will be invoiced and
due at the time the financing materials are ready for distribution. Thereafter,
SCC will periodically invoice the Company for expenses that are subsequently
incurred. In no case will the total Out of Pocket expenses exceed $80,000 in the
aggregate for the Financing.



Letter to Mr. Monty Bennett
and Mr. Douglas Kessler
May 10, 2004
Page 3

If the Company requests changes in the financing materials after final approval
of said materials is given by the Company and production of the material has
commenced, the Company will pay (or reimburse) SCC for any costs incurred in
making such changes. These costs are in addition to any costs incurred by SCC
and are not subject to the cap on expenses set forth above.

         6. PUBLICATION OF TRANSACTION. After the closing of a transaction for
which SCC is entitled to compensation hereunder, SCC may publish a notice of the
transaction in such format, in such publications and at such times as SCC may
deem appropriate and consistent with its customary practices subject to the
reasonable approval of the Company and applicable laws. Such announcement shall
not disclose the monetary terms of the transaction.

         7. TERM OF ENGAGEMENT. SCC's engagement hereunder shall commence upon
the date of this letter and shall terminate three (3) months following the date
of this letter unless extended by the Company in its sole and absolute
discretion. If, at the termination of SCC's engagement, the Company has not
previously accepted a financing proposal with respect to all of the Properties,
SCC may furnish the Company a list of prospective lenders from whom SCC received
a signed confidentiality agreement and to whom SCC has delivered a copy of SCC's
Financing Memorandum or which SCC requested but did not receive the Company's
consent to approach. If a proposal for mortgage financing is accepted by the
Company with respect to any of the Properties from any entity named in such
list, or any affiliate of any entity named in such list within four (4) months
following the termination or expiration of SCC's engagement, SCC shall be deemed
to have earned the Success Fee specified in this letter upon the Company's
acceptance of the financing proposal, such fees to be payable if and when said
transaction actually closes in the manner set forth herein. The Company's
obligations under paragraphs 4, 5, 7 and 8 shall survive the termination or
expiration of SCC's engagement.

         8. INDEMNIFICATION. The Company shall indemnify and hold harmless SCC
and its affiliates, the respective directors, officer, and employees of SCC and
its affiliates and each of the persons, if any, controlling SCC or any of its
affiliates, to the full extent lawful, from and against all claims, demands,
damages, losses, liabilities and expenses (including, without limitation,
reasonable attorneys' fees and expenses) (collectively, "Claims") related to or
arising from the engagement hereunder, provided that this Section 8 shall not
apply to any Claims related to or arising from SCC's gross negligence, bad
faith, willful misconduct, breach of the provisions of this agreement, or
actions outside of the scope of this agreement.

SCC shall indemnify and hold harmless Company and its affiliates, the respective
directors, officers, agents and employees of Company and its affiliates and each
of the persons, if any, controlling Company or any of its affiliates, to the
full extent lawful, from and against all Claims related to or arising from SCC's
gross negligence, bad faith,



Letter to Mr. Monty Bennett
and Mr. Douglas Kessler
May 10, 2004
Page 4

willful misconduct, material breach of the provisions of this agreement, or
actions outside the scope of this agreement.

         9. OTHER MATTERS. Company acknowledges that SCC reserves the right to
retain at its sole expense and responsibility a local real estate or other
broker to comply with local licensing requirements.

If this letter correctly sets forth the Company's understanding, please so
confirm by countersigning and returning the enclosed copy. Upon receipt of the
copy by SCC, this letter shall be deemed a binding agreement to be construed in
accordance with the laws of the State of California.

                                                  Very truly yours,

                                                  SECURED CAPITAL CORP

                                     By: /s/ D. MICHAEL VAN KONYNENBURG
                                         ------------------------------
                                         President and CEO

AGREED AND ACCEPTED:

ASHFORD HOSPITALITY TRUST, INC.

BY: /S/ DAVID A. BROOKS
- ----------------------------
   NAME: DAVID A. BROOKS
   TITLE: CHIEF LEGAL OFFICER

EX-10.18

                                                                   EXHIBIT 10.18

                         AGREEMENT OF PURCHASE AND SALE

                                     between

                    ASHFORD HOSPITALITY LIMITED PARTNERSHIP,
                         a Delaware limited partnership

                                  ("Purchaser")

                                       and

                              DUNN GROUP OF INDIANA
                           DUNN FAMILY ASSOCIATES, LLP
                              HOTEL INVESTMENT, LLC
                       ENCORE HOTELS OF BLOOMINGTON, INC.
                        ENCORE HOTELS OF TERRE HAUTE, LLC
                   ENCORE RESIDENTIAL HOTEL OF EVANSVILLE, LLC
                         ENCORE HOTELS OF COLUMBUS, LLC
                        ENCORE HOTELS OF HORSE CAVE, LLC
                       ENCORE HOTELS OF PRINCETON II, LLC
                           DUNN HOSPITALITY GROUP, LLC

                            (collectively, "Seller")

                        HAMPTON INN, EVANSVILLE, INDIANA
                        HAMPTON INN, TERRA HAUTE, INDIANA
                        HAMPTON INN, HORSE CAVE, KENTUCKY
                       FAIRFIELD INN, EVANSVILLE, INDIANA
                        FAIRFIELD INN, PRINCETON, INDIANA
                         COURTYARD, BLOOMINGTON, INDIANA
                          COURTYARD, COLUMBUS, INDIANA
                         COURTYARD, LOUISVILLE, KENTUCKY
                       RESIDENCE INN, EVANSVILLE, INDIANA



                                TABLE OF CONTENTS



                                                                                                                           Page
                                                                                                                        
ARTICLE I DEFINITIONS................................................................................................       1
    1.1         Definitions..........................................................................................       1

ARTICLE II PURCHASE AND SALE; DEPOSIT; PAYMENT OF PURCHASE PRICE; STUDY PERIOD.......................................       8
    2.1         Purchase and Sale....................................................................................       8
    2.2         Payment of Purchase Price............................................................................       9
    2.3         Deposit..............................................................................................       9
    2.4         Study Period.........................................................................................      10

ARTICLE III SELLER'S REPRESENTATIONS AND WARRANTIES..................................................................      15
    3.1         Organization and Power...............................................................................      15
    3.2         Authorization and Execution..........................................................................      16
    3.3         Non-contravention....................................................................................      16
    3.4         Title To Real Property...............................................................................      16
    3.5         No Special Taxes.....................................................................................      16
    3.6         Compliance with Existing Laws........................................................................      16
    3.7         Personal Property and Inventory......................................................................      17
    3.8         Franchise Agreements/Management Agreements/Operating Agreements/Off-Site Facility Agreements.........      17
    3.9         Insurance............................................................................................      17
    3.10        Condemnation Proceedings; Roadways...................................................................      17
    3.11        Actions or Proceedings...............................................................................      17
    3.12        Labor and Employment Matters.........................................................................      18
    3.13        Financial Information and Submission Matters.........................................................      18
    3.14        Bankruptcy...........................................................................................      18
    3.15        Historical Districts.................................................................................      18
    3.16        Hazardous Substances.................................................................................      18
    3.17        Sales, Use and Occupancy Taxes.......................................................................      19
    3.18        Personal Property Taxes..............................................................................      19
    3.19        Occupancy Agreements.................................................................................      19
    3.20        Utilities............................................................................................      19
    3.21        Curb Cuts............................................................................................      20
    3.22        Leased Property......................................................................................      20
    3.23        Advance Bookings.....................................................................................      20
    3.24        Americans With Disabilities Act......................................................................      20
    3.25        Structural Condition.................................................................................      20
    3.26        Zoning and Platting..................................................................................      20
    3.27        Access...............................................................................................      20
    3.28        No Commitments.......................................................................................      20
    3.29        Seller Is Not a "Foreign Person".....................................................................      20
    3.30        No Other Property Interests..........................................................................      20


                                       i



                                                                                                                      
ARTICLE IV PURCHASER'S REPRESENTATIONS AND WARRANTIES................................................................    22
    4.1         Organization and Power...............................................................................    22
    4.2         Authorization and Execution..........................................................................    22
    4.3         Non-contravention....................................................................................    22
    4.4         Litigation...........................................................................................    22
    4.5         Bankruptcy...........................................................................................    22

ARTICLE V CONDITIONS PRECEDENT.......................................................................................    22
    5.1         As to Purchaser's Obligations........................................................................    22
    5.2         As to Seller's Obligations...........................................................................    25

ARTICLE VI COVENANTS OF SELLER.......................................................................................    26
    6.1         Operating Agreements/Off-Site Facility Agreements....................................................    26
    6.2         Warranties and Guaranties............................................................................    26
    6.3         Insurance............................................................................................    26
    6.4         Independent Audit....................................................................................    26
    6.5         Operation of Property Prior to Closing...............................................................    27
    6.6         No Marketing.........................................................................................    29
    6.7         Employees and Continuation of Seller's Group Health Plans............................................    29
    6.8         Rights of First Refusal and Options..................................................................    29
    6.9         Liquor License.......................................................................................    29

ARTICLE VII CLOSING..................................................................................................    30
    7.1         Closing..............................................................................................    30
    7.2         Seller's Deliveries..................................................................................    31
    7.3         Purchaser's Deliveries...............................................................................    34
    7.4         Mutual Deliveries....................................................................................    34
    7.5         Closing Costs........................................................................................    35
    7.6         Revenue and Expense Allocations......................................................................    35
    7.7         Acquisition and Transfer of Inventory and Personal Property..........................................    37
    7.8         Product Improvement Plan Requirements................................................................    37

ARTICLE VIII GENERAL PROVISIONS......................................................................................    38
    8.1         Condemnation.........................................................................................    38
    8.2         Risk of Loss.........................................................................................    38
    8.3         Broker...............................................................................................    39
    8.4         Bulk Sale............................................................................................    39
    8.5         Confidentiality......................................................................................    39
    8.6         Seller's Accounts Receivable.........................................................................    40

ARTICLE IX LIABILITY OF PURCHASER AND SELLER; INDEMNIFICATION BY SELLER; DEFAULT; TERMINATION RIGHTS.................    40
    9.1         Liability of Purchaser and Seller....................................................................    40
    9.2         Indemnification by Seller............................................................................    41
    9.3         Default by Seller/Failure of Conditions Precedent....................................................    41
    9.4         Default by Purchaser/Failure of Conditions Precedent.................................................    42
    9.5         Costs and Attorneys' Fees............................................................................    42



                                       ii



                                                                                                                      
    9.6         Limitation of Liability..............................................................................    42

ARTICLE X MISCELLANEOUS PROVISIONS...................................................................................    43
    10.1        Completeness; Modification...........................................................................    43
    10.2        Assignments..........................................................................................    43
    10.3        Successors and Assigns...............................................................................    43
    10.4        Days.................................................................................................    43
    10.5        Governing Law........................................................................................    43
    10.6        Counterparts.........................................................................................    43
    10.7        Severability.........................................................................................    43
    10.8        Costs................................................................................................    43
    10.9        Notices..............................................................................................    44
    10.10       Escrow Agent.........................................................................................    45
    10.11       Incorporation by Reference...........................................................................    45
    10.12       Survival.............................................................................................    45
    10.13       Further Assurances...................................................................................    45
    10.14       No Partnership.......................................................................................    46
    10.15       Time of Essence......................................................................................    46
    10.16       Signatory Exculpation................................................................................    46
    10.17       Rules of Construction................................................................................    46



                                      iii



EXHIBITS

Exhibit A   -- Land
Exhibit B   -- Surveyor's Certificate
Exhibit C   -- Submission Matters Certificate
Exhibit D   -- Assignment and Assumption Agreement
Exhibit E   -- Special Warranty Bill of Sale
Exhibit F   -- Special Warranty Deed
Exhibit G   -- Assignment of Occupancy Agreements
Exhibit H   -- Alcoholic Beverage Management Agreement

SCHEDULES

Schedule 1  -- Authorizations
Schedule 2  -- Operating Agreements
Schedule 3  -- Employment Agreements
Schedule 4  -- Occupancy Agreements
Schedule 5  -- Off-Site Facility Agreements
Schedule 6  -- Franchise Agreements
Schedule 7  -- Management Agreements
Schedule 8  -- Allocated Purchase Price for the Hotels
Schedule 9  -- Required Seller Consents
Schedule 10 -- Seller Disclosures and Exceptions

                                       iv



                         AGREEMENT OF PURCHASE AND SALE

      THIS AGREEMENT OF PURCHASE AND SALE (this "Agreement") is made as of this
19th day of May, 2004, between ASHFORD HOSPITALITY LIMITED PARTNERSHIP, a
Delaware limited partnership ("Purchaser"), and DUNN FAMILY ASSOCIATES, LLP, an
Indiana limited liability partnership, HOTEL INVESTMENT, LLC, an Indiana limited
liability company, ENCORE HOTELS OF BLOOMINGTON, INC., an Indiana corporation,
ENCORE HOTELS OF TERRE HAUTE, LLC, an Indiana limited liability company, ENCORE
RESIDENTIAL HOTEL OF EVANSVILLE, LLC, an Indiana limited liability company,
ENCORE HOTELS OF COLUMBUS, LLC, an Indiana limited liability company, ENCORE
HOTELS OF HORSE CAVE, LLC, a Kentucky limited liability company, ENCORE HOTELS
OF PRINCETON II, LLC, an Indiana limited liability company, and ENCORE DUNN
HOSPITALITY GROUP, LLC, an Indiana limited liability company (collectively,
"Seller").

                             R E C I T A T I O N S:

      A. Seller is the owner of those certain real properties as more
particularly described on Exhibits A-1 through A-9 attached hereto and made a
part hereof, commonly known as "Hampton Inn - Evansville" located in Evansville,
Indiana, "Hampton Inn - Terra Haute" located in Terra Haute, Indiana, "Hampton
Inn - Horse Cave" located in Horse Cave, Kentucky, "Fairfield Inn - Evansville"
located in Evansville, Indiana, "Fairfield Inn - Princeton" located in
Princeton, Indiana, "Courtyard - Bloomington" located in Bloomington, Indiana,
"Courtyard - Columbus" located in Columbus, Indiana, "Courtyard - Louisville"
located in Louisville, Kentucky, and "Residence Inn - Evansville" located in
Evansville, Indiana.

      B. Purchaser is desirous of purchasing such hotel properties from the
applicable Seller entity and the applicable Seller entity is desirous of selling
such hotel properties to Purchaser, for the purchase price and upon the terms
and conditions hereinafter set forth.

      NOW, THEREFORE, in consideration of premises and in consideration of the
mutual covenants, promises and undertakings of the parties hereinafter set
forth, and for other good and valuable considerations, the receipt and
sufficiency of which is hereby acknowledged by the parties, it is agreed:

                                   ARTICLE I
                                  DEFINITIONS

      1.1 Definitions. The following terms shall have the indicated meanings:

            "Act of Bankruptcy" shall mean if a party hereto or any general
partner or member thereof shall (a) apply for or consent to the appointment of,
or the taking of possession by, a receiver, custodian, trustee or liquidator of
itself or of all or a substantial part of its property, (b) admit in writing its
inability to pay its debts as they become due, (c) make a general assignment for
the benefit of its creditors, (d) file a voluntary petition or commence a
voluntary case or proceeding under the Federal Bankruptcy Code (as now or
hereafter in effect), (e) be adjudicated a bankrupt or insolvent, (f) file a
petition seeking to take advantage of any other law

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       1



relating to bankruptcy, insolvency, reorganization, winding-up or composition or
adjustment of debts, (g) fail to controvert in a timely and appropriate manner,
or acquiesce in writing to, any petition filed against it in an involuntary case
or proceeding under the Federal Bankruptcy Code (as now or hereafter in effect),
or (h) take any corporate or partnership action for the purpose of effecting any
of the foregoing; or if a proceeding or case shall be commenced, without the
application or consent of a party hereto or any general partner or member
thereof, in any court of competent jurisdiction seeking (1) the liquidation,
reorganization, dissolution or winding-up, or the composition or readjustment of
debts, of such party or general partner or member, (2) the appointment of a
receiver, custodian, trustee or liquidator for such party or general partner or
member or all or any substantial part of its assets, or (3) other similar relief
under any law relating to bankruptcy, insolvency, reorganization, winding-up or
composition or adjustment of debts, and such proceeding or case shall continue
undismissed; or an order (including an order for relief entered in an
involuntary case under the Federal Bankruptcy Code, as now or hereafter in
effect) judgment or decree approving or ordering any of the foregoing shall be
entered and continue unstayed and in effect, for a period of sixty (60)
consecutive days.

            "Advance Bookings" shall mean reservations made by Seller or its
manager prior to Closing for Hotel rooms or meeting rooms to be utilized after
Closing, or for catering services or other Hotel services to be provided after
Closing, in the ordinary course of business as consistent with Seller's past
practices.

            "Affiliate" of a Person shall mean (i) any other Person that is
directly or indirectly (through one or more intermediaries) controlled by, under
common control with, or controlling such Person, or (ii) any other Person in
which such Person has a direct or indirect equity interest constituting at least
a majority interest of the total equity of such other Person. For purposes of
this definition, "control" shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of any
Person or the power to veto major policy decisions of any Person, whether
through the ownership of voting securities, by contract or otherwise.

            "Affiliated Company" means any other entity which is, along with
Seller and/or Seller's management company, a member of a controlled group of
corporations or a controlled group of trades or businesses (as defined in
Section 414(b) or (c) of the Internal Revenue Code), any entity which along with
Seller and/or Seller's management company is included in an affiliated service
group as defined in Section 414(m) of the Internal Revenue Code, and any other
entity which is required to be aggregated with Seller and/or Seller's management
company pursuant to Treasury Regulations under Section 414(o) of the Internal
Revenue Code.

            "Allocated Purchase Price" shall mean the Purchase Price as
allocated among each Hotel as set forth on the Schedule 8 attached hereto.

            "Applicable Laws" shall mean any applicable building, zoning,
subdivision, environmental, health, safety or other governmental laws, statutes,
ordinances, resolutions, rules, codes, regulations, orders or determinations of
any Governmental Authority or of any insurance boards of underwriters (or other
body exercising similar functions), or any restrictive covenants

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       2



or deed restrictions affecting the Property or the ownership, operation, use,
maintenance or condition thereof.

            "Assignment and Assumption Agreement" shall mean one or more
assignment and assumption agreements for each Hotel whereby (a) Seller (1)
assigns and Purchaser and/or its lessee (as Purchaser shall specify) assumes the
Operating Agreements and Off-Site Facility Agreements for the applicable Hotel
that have not been terminated prior to Closing in accordance herewith, (2)
assigns all of Seller's right, title and interest in and to the Intangible
Personal Property for the applicable Hotel, to the extent assignable, and (3)
indemnifies, defends and holds Purchaser and/or its lessee harmless with respect
to all defaults, liabilities, claims, costs and expenses (including, without
limitation, reasonable attorneys' fees) relating to acts or omissions accruing
under such Operating Agreements and Off-Site Facility Agreements before the
Closing Date; and (b) Purchaser and/or its lessee, as applicable, indemnifies,
defends and holds Seller harmless with respect to all defaults, liabilities,
claims, costs and expenses (including, without limitation, reasonable attorneys'
fees) relating to acts or omissions accruing under such Operating Agreements and
Off-Site Facility Agreements from and after the Closing Date.

            "Assignment of Occupancy Agreements" shall mean one or more
assignment agreements for each Hotel, whereby (a) Seller (1) assigns and
Purchaser and/or its lessee (as Purchaser shall specify) assumes all of Seller's
right, title and interest in and to the Occupancy Agreements for the applicable
Hotel, and (2) indemnifies, defends and holds Purchaser and/or its lessee
harmless with respect to all defaults, liabilities, claims, costs and expenses
(including, without limitation, reasonable attorneys' fees) relating to acts or
omissions accruing under such Occupancy Agreements before the Closing Date; and
(b) Purchaser and/or its lessee, as applicable, indemnifies, defends and holds
Seller harmless with respect to all defaults, liabilities, claims, costs and
expenses (including, without limitation, reasonable attorneys' fees) relating to
acts or omissions accruing under such Occupancy Agreements from and after the
Closing Date.

            "Authorizations" shall mean all licenses, permits and approvals
required by any governmental or quasi-governmental agency, body, department,
commission, board, bureau, instrumentality or officer, or otherwise appropriate
with respect to the construction, ownership, operation, leasing, maintenance, or
use of a Property or any part thereof.

            "Bill of Sale" shall mean one or more bills of sale for each Hotel
conveying title to the Inventory, Tangible Personal Property and the Intangible
Personal Property for the applicable Hotel to Purchaser or Purchaser's property
manager, lessee or other designee (as Purchaser shall specify).

            "Broker" shall mean Solid Rock Advisors.

            "Closing" shall mean the Closing of the purchase and sale of the
Property pursuant to this Agreement and shall be deemed to occur on the Closing
Date.

            "Closing Date" shall mean the date on which the Closing occurs.

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       3



            "Closing Documents" shall mean the documents defined as such in
Section 7.1 hereof.

            "Deeds" shall mean those certain deeds conveying title to the Real
Property with special warranty covenants of title from Seller to Purchaser or
Purchaser's designee, and subject only to Permitted Title Exceptions. If for a
subject Hotel there is any difference between the description of the Land, as
shown on the applicable Exhibits A-1 through A-9 attached hereto and the
description of the Land as shown on the applicable Survey for such Hotel then,
if so requested by Purchaser, Seller shall convey title to the description of
the Land contained in the Survey by quitclaim deed.

            "Deposit" shall mean all amounts deposited from time to time with
Escrow Agent by Purchaser pursuant to Section 2.3 hereof, plus all interest or
other earnings that may accrue thereon. All cash Deposits shall be invested by
Escrow Agent in a commercial bank or banks acceptable to Purchaser at money
market rates, or in such other investments as shall be approved in writing by
Seller and Purchaser. The Deposit shall be held and disbursed by Escrow Agent in
strict accordance with the terms and provisions of this Agreement.

            "Employment Agreements" shall mean all employment agreements,
written or oral, between Seller or its managing agent and the persons employed
with respect to a Property.

            "Environmental Damages" shall mean all third-party claims,
judgments, damages, losses, penalties, fines, liabilities (including, without
limitation, punitive damages and strict liability), encumbrances, liens, costs
and expenses of investigation and defense of any claim, whether or not such is
ultimately defeated, and of any settlement or judgment, of whatever kind or
nature, contingent or otherwise, matured or unmatured, including, without
limitation, attorneys' fees and disbursements and consultants' fees, any of
which arise as a result of the existence of Hazardous Materials upon, about or
beneath a Property or migrating or threatening to migrate from a Property, or as
a result of the existence of a violation of Environmental Requirements
pertaining to a Property.

            "Environmental Requirements" shall mean (i) all applicable statutes,
regulations, rules, policies, ordinances, codes, licenses, permits, orders,
approvals, plans, authorizations, and similar items, of all Governmental
Authorities, and (ii) all judicial, administrative and regulatory decrees,
judgments and orders, in each case of (i) and (ii) relating to the protection of
human health or the environment from Hazardous Materials, including, without
limitation: (a) all requirements thereof, including, without limitation, those
pertaining to reporting, licensing, permitting, investigation and remediation of
emissions, discharges, releases or threatened releases of Hazardous Materials
into the air, surface water, groundwater or land, or relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials; and (b) all requirements
pertaining to the protection of the health and safety of employees or the public
from Hazardous Materials.

            "Escrow Agent" shall mean Chicago Title Insurance Company, 711 Third
Avenue, 5th Floor, New York, New York 10017, Attn: Sie Cheung.

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       4



            "Financial Information" shall mean the financial information defined
as such in Section 3.13 hereof.

            "FIRPTA Certificate" shall mean the affidavit of Seller under
Section 1445 of the Internal Revenue Code, as amended, certifying that Seller is
not a foreign corporation, foreign partnership, foreign trust, foreign estate or
foreign person (as those terms are defined in the Internal Revenue Code and
regulations promulgated thereunder), in form and substance satisfactory to
Purchaser.

            "Franchise Agreements" shall collectively mean those certain
franchise agreements relating to each Property as described on Schedule 6
attached hereto.

            "Franchisors" shall mean the franchisors for each Property as
identified on Schedule 6 attached hereto.

            "Guaranty" shall have the meaning as set forth in Section 5.1(h)
hereof.

            "Governmental Authority" shall mean any federal, state, county,
municipal or other government or any governmental or quasi-governmental agency,
department, commission, board, bureau, officer or instrumentality, foreign or
domestic, or any of them.

            "Hazardous Materials" shall mean any chemical substance: (i) which
at the time of Closing is or becomes defined as a "hazardous substance,"
"hazardous waste," "hazardous material," "pollutant," "contaminant," or "toxic,"
"explosive," "corrosive," "flammable," "infectious," "radioactive,"
"carcinogenic," or "mutagenic" material under any law, regulation, rule, order,
or other authority of the federal, state or local governments, or any agency,
department, commission, board, or instrumentality thereof, regarding the
protection of human health or the environment from such chemical substances
including, but not limited to, the following federal laws and their amendments,
analogous state and local laws, and any regulations promulgated thereunder: the
Clean Air Act, the Clean Water Act, the Oil Pollution Control Act, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1986,
the Emergency Planning and Community Right to Know Act, the Solid Waste Disposal
Act, the Resource Conservation and Recovery Act, the Safe Drinking Water Act,
the Federal Insecticide, Fungicide and Rodenticide Act, and the Toxic Substances
Control Act, including, without limitation, asbestos and gasoline and other
petroleum products (including crude oil or any fraction thereof); (ii) without
limitation, which contains gasoline, diesel fuel or other petroleum
hydrocarbons; (iii) without limitation, which contains drinking biphenyls or
asbestos or asbestos-containing materials or urea formaldehyde foam insulation;
or (iv) without limitation, radon gas.

            "Hotels" shall collectively mean (and "Hotel" shall individually
mean each of) the hotels and related amenities located on the Land.

            "Improvements" shall mean the Hotels and all other buildings,
improvements, fixtures and other items of real estate located on the Land.

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       5



            "Insurance Policies" shall mean all policies of insurance maintained
by or on behalf of Seller pertaining to each Property, its operation, or any
part thereof.

            "Intangible Personal Property" shall mean all intangible personal
property owned or possessed by Seller and used in connection with the ownership,
operation, leasing, occupancy or maintenance of a Property, including, without
limitation as to each Property, (1) the Authorizations, (2) telephone numbers,
TWX numbers, post office boxes, warranties, signage rights, utility and
development rights and privileges, general intangibles, business records, site
plans, surveys, environmental and other physical reports, plans and
specifications pertaining to the Real Property and the Personal Property, (3)
all websites and domains used for each Hotel, including access to the FTP files
of the websites to obtain website information and content pertaining to each
such Hotel, (4) any unpaid award for taking by condemnation or any damage to the
Land by reason of a change of grade or location of or access to any street or
highway, and (5) the share of the Rooms Ledger determined under Section 7.6
hereof, excluding (a) any of the aforesaid rights Purchaser elects not to
acquire, (b) Seller's cash on hand, in bank accounts and invested with financial
or other institutions and (c) accounts receivable except for the above described
share of the Rooms Ledger.

            "Inventory" shall mean all inventories described in Section 7.7
hereof.

            "Land" shall mean those certain parcels of real estate more
particularly described on Exhibits A-1 through A-9 attached hereto, together
with all easements, rights, privileges, remainders, reversions and appurtenances
thereunto belonging or in any way appertaining, and all of the estate, right,
title, interest, claim or demand whatsoever of Seller therein, in the streets
and ways adjacent thereto and in the beds thereof, either at law or in equity,
in possession or expectancy, now or hereafter acquired.

            "Leased Property" shall mean for each Hotel all leased items of
Tangible Personal Property at each such Hotel.

            "Management Agreements" shall mean those certain Management
Contracts described on Schedule 7 attached hereto.

            "Occupancy Agreements" shall mean all leases, concession or
occupancy agreements in effect with respect to a Real Property under which any
tenants (other than Hotel guests) or concessionaires occupy space upon a Real
Property.

            "Off-Site Facility Agreements" shall mean those easements, leases,
contracts and agreements pertaining to facilities not located on a Property but
which Purchaser deems necessary, beneficial or related to the operation of the
related Hotel including, without limitation, use agreements for local golf
courses, parking contracts or leases, garage contracts or leases, skybridge
easements, tunnel easements, utility easements, and storm water management
agreements.

            "Operating Agreements" shall mean all service, supply and
maintenance contracts, if any, in effect with respect to a Property and all
other contracts (other than the

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       6



Occupancy Agreements, Management Agreements, Off-Site Facility Agreements and
the Employment Agreements) that affect such Property or are otherwise related to
the construction, ownership, operation, occupancy or maintenance of such
Property.

            "Owner's Title Policy" shall mean an owner's policy of title
insurance issued to Purchaser by the Title Company, pursuant to which the Title
Company insures Purchaser's ownership of fee simple title to each Real Property
(including the marketability thereof) subject only to Permitted Title
Exceptions. The Owner's Title Policy shall insure Purchaser in the amount of the
Purchase Price and shall be acceptable in form and substance to Purchaser.
Purchaser may require such deletions of standard exceptions and such title
endorsements as are legally available and customarily required by institutional
investors purchasing property comparable to a Property in the States where each
Property is situated.

            "Permitted Title Exceptions" shall mean those exceptions to title to
each Real Property that are satisfactory to Purchaser as determined pursuant to
Section 2.4(d) hereof.

            "Person" shall mean an individual, a partnership, a limited
liability company, a corporation, an association, a joint stock company, a
trust, a joint venture, an unincorporated organization, or a Governmental
Authority.

            "Personal Property" shall mean collectively the Tangible Personal
Property and the Intangible Personal Property, but shall not include any
property located on a Property which is owned by Seller's property manager.

            "PIPs" shall mean all product improvement plan requirements
described in Section 7.8 hereof.

            "Property" shall mean collectively all Real Property, all Inventory,
all Tangible Personal Property and all Intangible Personal Property.

            "Purchase Price" shall mean $63,500,000.00 payable in the manner
described in Section 2.2 hereof.

            "Purchaser's Objections" shall mean the objections defined as such
in Section 2.4(d) hereof.

            "Real Property" shall collectively mean the Land and the
Improvements relating to each Hotel.

            "Rooms Ledger" shall mean the final night's room revenue at a Hotel
(revenue from rooms occupied as of 6:00 a.m. on the Closing Date, exclusive of
food, beverage, telephone and similar charges which shall be retained by
Seller), including any sales taxes, room taxes or other taxes thereon.

            "Seller's Organizational Documents" shall mean the current
partnership agreement, operating agreement, or articles of incorporation, and
related certificates of limited liability partnership, organization or
incorporation of each Seller and its general partners or

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       7



members, as applicable, true and correct copies of which shall be provided to
Purchaser prior to Closing.

            "Study Period" shall mean the period commencing on the date this
Agreement has been fully executed and delivered by all parties hereto, and
continuing through the date that is forty-five (45) days thereafter; provided,
however, Purchaser shall have the option to shorten the Study Period. Except as
expressly noted herein to the contrary, time periods herein referred to shall
mean the time periods as in effect, from time to time, in Dallas, Texas.

            "Submission Matters" shall mean all items Seller is required to
deliver and/or make available to Purchaser pursuant to Section 2.4(b) hereof.

            "Submission Matters Certificate" shall mean the certificate defined
as such in Section 2.4(b) hereof.

            "Surveys" shall collectively mean the surveys defined as such in and
prepared pursuant to Section 2.4(d) hereof.

            "Tangible Personal Property" shall mean the items of tangible
personal property consisting of all furniture, fixtures, equipment, machinery,
Inventory and other personal property of every kind and nature (including
cash-on-hand and petty cash funds) located on or used or useful in the operation
of the Hotels and owned by Seller, including, without limitation, Seller's
interest as lessee with respect to any such Tangible Personal Property.

            "Title Commitments" shall collectively mean the title commitments
and exception documents defined as such in Section 2.4(d) hereof.

            "Title Company" shall mean Escrow Agent on behalf of Chicago Title
Insurance Company or other title insurance underwriter selected by Purchaser.

            "UCC Reports" shall mean the reports defined as such in Section
2.4(d) hereof.

            "Utilities" shall mean public sanitary and storm sewers, natural
gas, telephone, public water facilities, electrical facilities and all other
utility facilities and services necessary or appropriate for the operation and
occupancy of each Property as a hotel.

            "Warranties and Guaranties" shall mean all warranties and guaranties
relating to the Improvements or the Tangible Personal Property or any part
thereof.

                                   ARTICLE II
                       PURCHASE AND SALE; DEPOSIT; PAYMENT
                         OF PURCHASE PRICE; STUDY PERIOD

      2.1 Purchase and Sale. Seller agrees to sell and Purchaser agrees to
purchase the Property for the Purchase Price and in accordance with and subject
to the other terms and conditions set forth herein.

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       8



      2.2 Payment of Purchase Price. The Purchase Price shall be paid to Seller
in the following manner:

            (a) Purchaser shall receive a credit against the Purchase Price in
an amount equal to the amount of the Deposit.

            (b) Purchaser shall pay the balance of the Purchase Price, as
adjusted in the manner specified in Article VII and as set forth below, to
Seller or other applicable party at Closing by making a wire transfer of
immediately available federal funds to the account of Seller or other applicable
party as specified in writing by Seller.

            (c) Purchaser and Seller shall in good faith agree, prior to the
expiration of the Study Period, to an allocation of the Purchase Price among the
Real Property and the Personal Property for each Hotel ("Allocation"). Within
seven (7) days after execution of this Agreement, Purchaser will provide to
Seller an initial proposed Allocation for Seller's consideration which Purchaser
and Seller agree to adjust as of the date of Closing if either such party
reasonably deems necessary. Seller and Purchaser agree to (i) be bound by the
Allocation, (ii) act in accordance with the Allocation in the preparation of
financial statements and the filing of all tax returns and in the course of any
tax audit, tax review or tax litigation relating thereto, and (iii) refrain
from, and cause their Affiliates to refrain from, taking a position inconsistent
with the Allocation for all tax purposes.

      2.3 Deposit. Within two (2) business days after the execution hereof by
both Seller and Purchaser and as a condition precedent to the effectiveness of
this Agreement, Purchaser shall deliver to Escrow Agent (i) a wire transfer or
check in the sum of Fifty Dollars ($50.00) payable to the order of Seller
representing the independent consideration for Seller's execution of this
Agreement and agreement to provide Purchaser with the Study Period (which check
or the proceeds of which wire transfer shall thereafter be delivered by Escrow
Agent to Seller) and (ii) a wire transfer or check in the sum of Three Hundred
Thousand and No/100 Dollars ($300,000.00) (the "Initial Deposit"), the proceeds
of which wire transfer or check Escrow Agent shall deposit and invest in an
interest bearing account at a financial institution acceptable to Purchaser or
as otherwise agreed to in writing by Seller and Purchaser. Within two (2)
business days after the expiration of the Study Period, if this Agreement has
not been sooner terminated, Purchaser shall deposit with Escrow Agent, by wire
transfer an additional deposit in the amount of Three Hundred Thousand and
No/100 Dollars ($300,000.00) (the "Additional Deposit"). If Purchaser fails to
timely deposit the Additional Deposit with Escrow Agent, Seller shall be
entitled, as Seller's sole and exclusive remedy, to terminate this Agreement by
written notice to Purchaser at any time before the Additional Deposit is
delivered to Escrow Agent, in which event the Initial Deposit shall be refunded
to Purchaser and neither party shall have any obligations hereunder, except
those which expressly survive a termination of this Agreement. If Purchaser
deposits the Additional Deposit with Escrow Agent before Purchaser's receipt of
Seller's termination notice, Purchaser shall be deemed to have timely deposited
the Additional Deposit and Seller shall not thereafter be entitled to terminate
this Agreement as a result of any delay in depositing the Additional Deposit.
The Initial Deposit and the Additional Deposit (when it is deposited by
Purchaser with Escrow Agent) are collectively and individually referred to
herein as the "Deposit". Escrow Agent shall hold and invest the Deposit pursuant
to the

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       9



terms, conditions and provisions of this Agreement. All accrued interest on the
Deposit shall become part of the Deposit. The Deposit shall be returned to
Purchaser if Purchaser, prior to the end of the Study Period, notifies Seller in
writing, pursuant to Section 2.4 hereof, that Purchaser is electing to terminate
this Agreement. If no such written notice is received by the Seller on or before
the expiration of the Due Diligence Period, the Purchaser is deemed to have
approved the Hotels and the Deposit shall become non-refundable. The Deposit
shall be either (a) applied at the Closing against the Purchase Price, (b)
returned to Purchaser pursuant hereto, or (c) paid to Seller pursuant hereto.
For purposes of reporting earned interest with respect to the Deposit,
Purchaser's Federal Tax Identification Number is 20 0110897, and each Seller's
Federal Tax Identification Number is as follows:



Seller Entity                                        Federal Tax ID No.
- -------------                                        -----------------
                                                  
Dunn Family Associates, LLP                          35-1826022

Hotel Investment, LLC                                35-0559650

Encore Hotel of Bloomington, Inc.                    35-1934951

Encore Hotel of Terre Haute, LLC                     35-2012478

Encore Residential Hotel of Evansville, LLC          35-2007849

Encore Hotel of Columbus, LLC                        35-1984448

Encore Hotel of Horse Cave, LLC                      35-1988963

Encore Hotel of Princeton II, LLC                    35-2007857

Dunn Hospitality Group, LLC                          35-2045445


      2.4 Study Period.

            (a) Purchaser and Purchaser's potential lessee or manager shall have
the right, until 5:00 p.m., Dallas, Texas time on the last day of the Study
Period, and thereafter if Purchaser does not notify Seller in writing prior to
the expiration of the Study Period that Purchaser has elected to terminate this
Agreement, to enter upon the Real Property at each Hotel upon two (2) business
days notice to Seller and to perform, at Purchaser's expense and without
materially interfering with the Seller's normal business operations at the
Hotel, such economic, surveying, engineering, topographic, environmental,
marketing and other tests, studies and investigations as Purchaser and
Purchaser's potential lessee may deem appropriate. If such tests, studies and
investigations warrant, in Purchaser's sole, absolute and unreviewable
discretion, that the purchase of the Property for the purposes contemplated by
Purchaser is not desirable, then Purchaser may elect, prior to the expiration of
the Study Period, to notify Seller in writing that Purchaser has elected to
terminate this Agreement. In such event, this Agreement automatically shall
terminate, the Deposit shall be promptly returned to Purchaser and Purchaser and
Seller

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       10



shall be released from all further liability or obligation hereunder except
those which expressly survive a termination of this Agreement.

            (b) For the purpose of this Agreement any Submission Matters in the
possession of Seller's management company shall be deemed to be "reasonably
available to Seller." Within five (5) days after executing this Agreement,
Seller shall make available to Purchaser at Seller's principal place of business
(as noted below) the following to Purchaser for each Hotel:

            (1)   All Occupancy Agreements in effect as of the date of this
                  Agreement, together with, if in Seller's possession or
                  reasonably available to Seller, summaries of the pertinent
                  terms.

            (2)   To the extent in Seller's possession or reasonably available
                  to Seller, copies of all Authorizations including, without
                  limitation, all certificates of occupancy, permits,
                  authorizations, approvals, liquor licenses, liquor license
                  applications and licenses issued by Governmental Authorities
                  having jurisdiction over the Property and copies of all
                  certificates issued by the local board of fire underwriters
                  (or other body exercising similar functions) relating to the
                  Property.

            (3)   A complete list of Advance Bookings.

            (4)   The Franchise Agreements (including PIP's), Management
                  Agreements and a complete list of all Operating Agreements and
                  Off-Site Facility Agreements in effect as of the date of this
                  Agreement and complete copies of the Franchise Agreements
                  (including PIP's), Management Agreements and all such
                  Operating Agreements and Off-Site Facility Agreements,
                  together with, if in Seller's possession or reasonably
                  available to Seller, summaries of the pertinent terms.

            (5)   A schedule indicating all pertinent information with respect
                  to each Employment Agreement in effect as of the date hereof
                  (including name of employee, social security number, wage or
                  salary, accrued vacation benefits, other fringe benefits,
                  etc.) and copies of all such Employment Agreements.

            (6)   To the extent in Seller's possession or reasonably available
                  to Seller, a schedule setting forth the type and amounts of
                  insurance coverage maintained by Seller with respect to the
                  Property as of the date of this Agreement and complete copies
                  of all such Insurance Policies and loss history reports.

            (7)   To the extent in Seller's possession or reasonably available
                  to Seller, monthly and annual financial and operating
                  statements for the Property

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       11



                  (including audited statements, if available), for the previous
                  three (3) calendar years and the year to date.

            (8)   The operating and capital expenditure budget for the Property
                  for the current calendar year and, to the extent in Seller's
                  possession or reasonably available to Seller, for the previous
                  three (3) calendar years.

            (9)   A complete list of all Tangible Personal Property.

            (10)  A complete list of all Leased Property and deliver a complete
                  copies of all lease agreements and summaries related thereto.

            (11)  To the extent in Seller's possession or reasonably available
                  to Seller, copies of receipts for all personal property taxes
                  and ad valorem taxes and special assessments assessed against
                  the Property for the current calendar year and prior three
                  calendar years, statements for Utilities payable for the
                  current calendar year and prior calendar year, and any
                  information in Seller's possession or reasonably available to
                  Seller regarding current renditions or assessments on the
                  Property or notices relative to change in valuation for ad
                  valorem taxes.

            (12)  A complete list of all Warranties and Guaranties in effect as
                  of the date of this Agreement and complete copies of all such
                  Warranties and Guaranties.

            (13)  Copies of all soil tests, structural engineering tests,
                  masonry tests, percolation tests, water, oil, gas, mineral,
                  radon, formaldehyde, PCB or other environmental tests, audits
                  or reports, market studies and site plans related to the
                  Property in Seller's possession or reasonably available to
                  Seller.

            (14)  If in Seller's possession or reasonably available to Seller,
                  copies of complete sets of all architectural, mechanical,
                  structural and/or electrical plans and specifications used in
                  connection with the construction of or alterations or repairs
                  to the Property.

            (15)  If in Seller's possession or reasonably available to Seller,
                  copies of as-built plans and specifications for the Property.

            (16)  Parking, structural, mechanical or other engineering reports
                  or studies related to the Property, if any, in Seller's
                  possession or reasonably available to Seller.

            (17)  If in Seller's possession or reasonably available to Seller,
                  copies of any title insurance policies covering the Real
                  Property and any surveys of all or any portion of the
                  Property.

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       12



            (18)  If in Seller's possession or reasonably available to Seller,
                  copies of any and all health inspection reports with respect
                  to the Property.

            (19)  Copies of all appraisals of the Property in Seller's
                  possession or reasonably available to Seller.

            (20)  Photos of the Property in Seller's possession or reasonably
                  available to Seller.

            (21)  A complete list of all prepaid expenses with respect to the
                  Property.

            (22)  A schedule of pending litigation affecting the Property.

            (23)  An employee census listing the name, date of hire, last
                  increase, department, title and rate of pay with respect to
                  each employee at the Property, a payroll run, copies of all
                  pension documents and a schedule of liabilities therefor and
                  copies of all union and collective bargaining agreements
                  affecting the Property.

            (24)  A copy of the most recent STAR Report as well as market
                  segmentation information, sales kits and brochures, marketing
                  plans and Property fact sheets which include Property
                  amenities, rooms and food and beverage facilities.

            (25)  A schedule setting forth the occupancy and average rates for
                  the Property on a monthly basis for the previous three (3)
                  calendar years and the year to date.

            (26)  Copies of any and all franchise quality inspection reports.

            (27)  Copies of all existing zoning and utility letters affecting
                  the Property.

All Submission Matters shall be delivered to Purchaser together with a
certificate of Seller (the "Submission Matters Certificate") in which Seller
shall represent that, to the best of Seller's knowledge, the Submission Matters
delivered to Purchaser are true, accurate and complete copies thereof in
Seller's possession or reasonably available to Seller and that those Submission
Matters that have been prepared by Seller are true, accurate and complete in all
material respects but Seller makes no representations and warranties as to the
truth, accuracy and completeness of any materials, data or information prepared
by or obtained from a party other than the Seller and included as a part of the
Submission Matters delivered to Purchaser. The form of Submission Matters
Certificate is attached hereto as Exhibit C and incorporated herein. Such
certification shall constitute a representation and warranty of Seller contained
in and made under this Agreement. During the Study Period and thereafter until
the Closing, Seller shall make available to Purchaser, its agents, auditors,
engineers, attorneys, potential lessees and other designees, for inspection
and/or copying, copies of all existing architectural and engineering studies,
surveys, title insurance policies, zoning and site plan materials,
correspondence, environmental audits and reviews, books, records, tax returns,
bank statements, financial statements, advance reservations

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       13



and room bookings and function bookings, rate schedules and any and all other
materials or information relating to each Property which are in, or come into,
Seller's possession or control or are otherwise reasonably available to Seller.

            (c) Purchaser shall indemnify and defend Seller against any loss,
damage or claim for death, personal injury or property damage arising from the
acts upon the Real Property by Purchaser or any agents, contractors or employees
of Purchaser. Purchaser, at its own expense, shall restore any damage to the
Property caused by any of the tests or studies made by Purchaser unless arising
from the negligent or willful acts of Seller or any of its agents, contractors
or employees. This provision shall survive any termination of this Agreement and
a closing of the transaction contemplated hereby.

            (d) Within ten (10) days following the execution of this Agreement
by the last of Purchaser or Seller, Purchaser shall obtain, at Purchaser's sole
cost and expense (which cost and expense shall be applied as a credit to the
Purchase Price at Closing), for each Real Property, a Survey of the Land and the
Improvements, prepared by a Surveyor licensed to practice as such in the State
where the Land is located, bearing a date not earlier than thirty (30) days from
the date of its delivery, containing the certificate attached hereto as Exhibit
B, and conforming to the requirements set forth in such certificate. Within ten
(10) days following the execution of this Agreement by the last of Purchaser or
Seller, Seller shall cause the Title Company to furnish to Purchaser, at
Seller's sole cost and expense, (i) for each Real Property, a title insurance
commitment bearing an effective date subsequent to the date of this Agreement
issued by the Title Company covering the Real Property, binding the Title
Company to issue its 1990 Form ALTA Owner's Policy of Title Insurance (without a
creditors' rights exception), in form approved for use in the state where the
Property is located in favor of Purchaser, showing title to be held currently by
Seller in a good, marketable and insurable condition, together with legible
copies of all documents identified in such title insurance commitment as
exceptions to title certified as true and complete by the Title Company (the
"Title Commitment"), and (ii) reports of searches of the Uniform Commercial Code
records of both the county and State in which each Property is located and the
state of Seller's formation (collectively, the "UCC Reports") with respect to
the state of title to the Property. Prior to the expiration of the Study Period,
Purchaser shall notify Seller of any matters shown on the Surveys or identified
in the Title Commitments or the UCC Reports that Purchaser is unwilling to
accept (collectively, "Purchaser's Objections"). In the event that any of the
Surveys, the Title Commitments and/or the UCC Reports are not delivered to
Purchaser within the required ten (10) day period, the Study Period shall be
extended by a period of time equal to the number of days after the expiration of
the required ten (10) day period Seller takes to deliver the Surveys, the Title
Commitments and/or the UCC Reports. If any of Purchaser's Objections consist of
delinquent taxes, mortgages, deeds of trust, security agreements, construction
or mechanics' liens, tax liens or other liens or charges in a fixed sum or
capable of computation as a fixed sum, then, to that extent, notwithstanding
anything herein to the contrary, Seller shall be obligated to pay and discharge
(or bond against in a manner sufficient to cause the Title Company to insure
over such Purchaser's Objections) any such Purchaser's Objections and Escrow
Agent is authorized to pay and discharge at Closing such Purchaser's Objections
to the extent not paid and discharged or bonded against at Closing. For such
purposes, Seller may use all or a portion of the cash to close. Seller shall not
be obligated to incur any expenses to cure any non-monetary Purchaser's
Objections unless Seller

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       14



agrees to cure such non-monetary Purchaser's Objections as hereinafter provided.
Seller shall notify Purchaser within five (5) days after receipt of notice of
Purchaser's Objections whether Seller agrees to cure such non-monetary
Purchaser's Objections. If Seller notifies Purchaser in writing within such five
(5) day period that Seller agrees to cure such non-monetary Purchaser's
Objections, Seller shall correct such non-monetary Purchaser's Objections on or
before the Closing Date to the reasonable satisfaction of Purchaser. If Seller
does not notify Purchaser within such five (5) day period of Seller's agreement
to cure such non-monetary Purchaser's Objections, Seller shall be deemed to have
elected not to cure such non-monetary Purchaser's Objections, and Purchaser
shall elect (1) to waive such non-monetary Purchaser's Objections without any
abatement in the Purchase Price, (2) to terminate this Agreement in its
entirety, in which case the Deposit shall be promptly returned to Purchaser and
the parties hereto shall be released from all further obligations hereunder
except those which expressly survive a termination of this Agreement. Seller
shall not, after the date of this Agreement, subject the Real Property to or
permit or suffer to exist any liens, encumbrances, covenants, conditions,
restrictions, easements or other title matters or seek any zoning changes or
take any other action which may affect or modify the status of title without
Purchaser's prior written consent. All title matters revealed by the Title
Commitments, UCC Reports and Surveys and not objected to by Purchaser as
provided above (other than those rendering title defeasible and delinquent
taxes, mortgages, deeds of trust, security agreements and other liens and
charges that are to be paid at Closing as provided above) shall be deemed
Permitted Title Exceptions. Notwithstanding the foregoing, Purchaser shall not
be required to take title to the Real Property subject to any matters which may
arise subsequent to the effective date of the Title Commitments, UCC Reports and
Surveys examined by Purchaser during the Study Period.

            (e) The parties acknowledge that Purchaser is attempting to obtain
"Hampton Inn," "Fairfield Inn," "Courtyard," and "Residence Inn" franchise
agreements with respect to the applicable Property as of the Closing Date and in
connection therewith, Purchaser agrees to initiate the application process with
the Franchisors within ten (10) days after the ten (10) day waiting period in
connection with Purchaser's receipt of the Uniform Franchise Offering Circular
and application ("UFOC") from the Franchisors, which UFOC Purchaser agrees to
request from such franchisors within ten (10) days after execution of this
Agreement.

                                   ARTICLE III
                     SELLER'S REPRESENTATIONS AND WARRANTIES

      To induce Purchaser to enter into this Agreement and to purchase the
Property, and to pay the Purchase Price therefor, each Seller hereby makes the
following representations and warranties with respect to the Property owned by
such Seller, subject to the disclosures and exceptions made by Seller as set
forth on Schedule 10 attached hereto, upon each of which Seller acknowledges and
agrees that Purchaser is entitled to rely and has relied:

      3.1 Organization and Power. Seller, as applicable, is a corporation,
limited liability company or limited liability partnership, validly existing and
in good standing under the laws of the State of its formation or organization,
is duly qualified to transact business in the State where its Property is
located, and has all requisite powers and all governmental licenses,
authorizations, consents and approvals to carry on its business as now conducted
and to enter into and perform

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       15



its obligations hereunder and under any document or instrument required to be
executed and delivered on behalf of Seller hereunder, except where the failure
to qualify or to obtain licenses, authorizations, or consents does not have a
material adverse effect on the ability of Seller to carry on its business as now
conducted.

      3.2 Authorization and Execution. This Agreement has been duly authorized
by all necessary action on the part of Seller, has been duly executed and
delivered by Seller, constitutes the valid and binding agreement of Seller and
is enforceable in accordance with its terms. In the event the consent of any
person or entity is required in connection with the execution of this Agreement,
or in the performance of Seller's performance of its obligations hereunder,
Seller shall, prior to closing, obtain such persons and/or entities written
consent to the same. As of the date of this Agreement, the Persons identified on
Schedule 9 are required to consent to the transactions contemplated hereby. The
person executing this Agreement on behalf of Seller has the authority to do so.

      3.3 Non-contravention. The execution and delivery of, and the performance
by Seller of its obligations under, this Agreement do not and will not
contravene, or constitute a default under, any provision of applicable law or
regulation known to Seller , Seller's Organizational Documents or any agreement,
judgment, injunction, order, decree or other instrument binding upon Seller or
to which its Property is subject, or result in the creation of any lien or other
encumbrance on any asset of Seller. There are no outstanding agreements (written
or oral) pursuant to which Seller or a representative of Seller (or to the best
of Seller's knowledge, a predecessor to Seller) has agreed to sell or has
granted an option or right of first refusal to purchase the Property or any part
thereof or to which the Property is subject.

      3.4 Title To Real Property. Seller is the sole owner of fee simple
absolute title to the Real Property which it owns, subject to the Permitted
Title Exceptions.

      3.5 No Special Taxes. Seller has no knowledge of, nor has it received any
notice of, any special taxes or assessments relating to its Property or any part
thereof or any planned public improvements that may result in a special tax or
assessment against such Property.

      3.6 Compliance with Existing Laws. To Seller's knowledge, Seller possesses
all Authorizations, each of which is valid and in full force and effect, and no
provision, condition or limitation of any of the Authorizations has been
breached or violated in any material respect. To Seller's knowledge, Schedule 1
attached hereto is a complete list of Authorizations. To Seller's knowledge,
Seller has not misrepresented or failed to disclose any relevant fact in
obtaining any Authorizations, and Seller has no knowledge of any change in the
circumstances under which those Authorizations were obtained that result in
their termination, suspension, modification or limitation. Seller has no
knowledge, nor has it received notice within the past three (3) years, of any
existing or threatened violation of any provision of any Applicable Laws
including, but not limited to, those of environmental agencies or insurance
boards of underwriters with respect to the ownership, operation, use,
maintenance or condition of the Property or any part thereof, or requiring any
repairs or alterations to the Property other than those that have been made
prior to the date hereof. Seller has no knowledge, nor has it received notice
within the past three (3)

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       16



years, of any existing or threatened violation of any restrictive covenants or
deed restrictions affecting the Property.

      3.7 Personal Property and Inventory. All of the Personal Property and
Inventory being conveyed by Seller hereunder are free and clear of all liens and
encumbrances except for those which will be discharged by Seller at Closing, and
Seller has good and merchantable title thereto and the right to convey same in
accordance with the terms of this Agreement.

      3.8 Franchise Agreements/Management Agreements/Operating
Agreements/Off-Site Facility Agreements. There are no management, service,
supply or maintenance contracts in effect with respect to the Property other
than the Franchise Agreements, Management Agreements, Operating Agreements or
Off-Site Facility Agreements. Schedule 2 is a complete list of the Operating
Agreements, and Schedule 5 is a complete list of the Off-Site Facility
Agreements. To Seller's knowledge, Seller has performed all of its obligations
under the Franchise Agreements, Management Agreements and each of the Operating
Agreements and Off-Site Facility Agreements and to Seller's knowledge, no fact
or circumstance has occurred which, by itself or with the passage of time or the
giving of notice or both, would constitute a default under the Franchise
Agreements, Management Agreements or any of the Operating Agreements or Off-Site
Facility Agreements. To Seller's knowledge, all other parties to the Franchise
Agreements, Management Agreements, Operating Agreements and Off-Site Facility
Agreements have performed all of their obligations thereunder in all material
respects, and are not in default thereunder in any material respect. Seller has
received no notice of any intention by any of the parties to the Franchise
Agreements, Management Agreements or any of the Operating Agreements or Off-Site
Facility Agreements to cancel the same, nor has Seller canceled any of same.
Seller has provided to Purchaser a true, correct and complete copy of each of
the Franchise Agreements and Management Agreements.

      3.9 Insurance. To Seller's knowledge, all of Seller's Insurance Policies
are valid and in full force and effect and Seller has complied with all material
requirements or recommendations of the insurance carriers of the Insurance
Policies.

      3.10 Condemnation Proceedings; Roadways. Seller has received no notice of
any condemnation or eminent domain proceeding pending or threatened against the
Property or any part thereof. Seller has no knowledge of any change or proposed
change in the route, grade or width of, or otherwise affecting, any street,
creek or road adjacent to or serving the Real Property.

      3.11 Actions or Proceedings. There is no action, suit or proceeding
pending or known to Seller to be threatened against or affecting Seller in any
court, before any arbitrator or before or by any Governmental Authority which
(a) in any manner raises any question affecting the validity or enforceability
of this Agreement or any other agreement or instrument to which Seller is a
party or by which it is bound and that is or is to be used in connection with,
or is contemplated by, this Agreement, (b) could materially and adversely affect
the business, financial position or results of operations of Seller or the
Property, (c) could materially and adversely affect the ability of Seller to
perform its obligations hereunder, or under any document to be delivered
pursuant hereto, (d) could create a lien on the Property, any part any

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       17



interest therein, (e) concerns any past or present employee of Seller or its
managing agent or (f) could otherwise adversely affect the Property, any part
thereof or any interest therein or the use, operation, condition or occupancy
thereof.

      3.12 Labor and Employment Matters. To Seller's knowledge, neither Seller
nor its management company is a party to any oral or written employment
contracts or agreements with respect to the Property other than the Employment
Agreements. Schedule 3 is a complete list of the Employment Agreements. To
Seller's knowledge, no party is in default under any Employment Agreement. To
Seller's knowledge, there are no labor disputes or organizing activities pending
or threatened as to the operation or maintenance of the Property or any part
thereof. Neither Seller nor its management company is a party to any union or
other collective bargaining agreement with employees employed in connection with
the ownership, operation or maintenance of the Property, except for those
described on Schedule 3. To Seller's knowledge, the Property has been operated
in such a way as to materially comply with all applicable labor and employment
laws, including, but not limited to, laws related to equal employment, plant
closings, employment taxes and withholding requirements.

      3.13 Financial Information and Submission Matters. To Seller's knowledge,
all of Seller's financial information, including, without limitation, all books
and records and financial statements ("Financial Information") is correct and
complete in all material respects and presents accurately the results of the
operations of the Property for the periods indicated. Since the date of the last
financial statement included in Seller's Financial Information, there has been
no material adverse change in the financial condition or in the operations of
the Property. Unless assumed by the Purchaser, or Purchaser's lessee or
management company, neither Purchaser nor Purchaser's lessee or its management
company shall have any liability under any pension, profit sharing or welfare
benefit plan that Seller, its management company or any Affiliated Company may
have established with respect to the Property or their or its employees. To
Seller's knowledge, all such pension, profit sharing and welfare benefit plans
have been fully funded and administered in accordance with Applicable Laws and
regulations.

      3.14 Bankruptcy. No Act of Bankruptcy has occurred with respect to Seller.

      3.15 Historical Districts. Neither the Property, nor any portion thereof,
is (a) listed, or eligible to be listed, in any national, state or local
register of historic places or areas, or (b) located within any designated
district or area in which the permitted uses of land located therein are
restricted by regulations, rules or laws other than those specified under local
generally applicable zoning ordinances.

      3.16 Hazardous Substances. To Seller's knowledge, neither Seller nor any
previous owner, tenant, occupant or user of the Property, nor any other person,
has engaged in or permitted any operations or activities upon, or any use or
occupancy of the Property or any portion thereof, for the purpose of or in any
way involving the handling, manufacture, treatment, storage, use, generation,
release, discharge, refining, dumping or disposal of any Hazardous Materials on,
under, in or about the Property in violation of any Applicable Laws. To Seller's
knowledge, no Hazardous Materials have migrated from or to the Property upon,
about, or beneath other properties in violation of any Environmental
Requirements. To Seller's

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       18



knowledge, neither the Property nor its existing or prior uses fail or failed
to materially comply with Environmental Requirements. Seller has no knowledge of
any permits, licenses or other authorizations which are required under any
Environmental Requirements with regard to the current uses of the Property which
have not been obtained and complied with. To Seller's knowledge, neither Seller
nor any prior owner, occupant or user of the Property has received any written
notice concerning any alleged violation of Environmental Requirements in
connection with the Property or any liability for Environmental Damages in
connection with the Property for which Seller (or Purchaser after Closing) may
be liable. To Seller's knowledge, no Hazardous Materials are constructed,
deposited, stored or otherwise located on, under, in or about the Property in
violation of any Environmental Requirements. To Seller's knowledge, there exists
no writ, injunction, decree, order or judgment outstanding, nor any lawsuit,
claim, proceeding, citation, summons or investigation, pending or threatened,
relating to any alleged violation of Environmental Requirements on the Property,
or from the suspected presence of Hazardous Materials thereon, or relating to
any Environmental Damages. To Seller's knowledge, no underground or above ground
chemical treatment or storage tanks, or gas or oil wells are located on the
Property.

      3.17 Sales, Use and Occupancy Taxes. All sales, use and occupancy taxes
due and owing with respect to the Property have been paid or will be paid by
Seller within forty-five (45) days after Closing.

      3.18 Personal Property Taxes. All ad valorem personal property taxes due
and owing with respect to the Property have been paid.

      3.19 Occupancy Agreements. There are no leases, concessions or occupancy
agreements in effect with respect to the Real Property other than the Occupancy
Agreements. A complete list of the Occupancy Agreements is attached hereto as
Schedule 4. Except as specifically provided in the Occupancy Agreements, no
tenant or concessionaire is entitled to any rebates, allowances, free rent or
rent abatement for any period after the Closing of the transaction contemplated
hereby. Seller has received no notice of any intention by any of the parties to
any of the Occupancy Agreements to cancel the same, nor has Seller canceled any
of same. To the extent that any of the Occupancy Agreements call for security,
such security remains on deposit with Seller, and has not been applied towards
any payment due under said Occupancy Agreements. Seller has not received any
advance rent or advance compensation under any of said Occupancy Agreements in
excess of one month. No brokerage commissions or compensation of any kind shall
be due in connection with the Occupancy Agreements, and the rents or revenues to
be derived therefrom. To Seller's knowledge, no party is in default under any
Occupancy Agreement. To Seller's knowledge, Seller has performed all obligations
required of it under all of the Occupancy Agreements and there remain no
unfulfilled obligations of Seller under the Occupancy Agreements. To Seller's
knowledge, no tenant has given notice to Seller of its intention to institute
litigation with respect to any Occupancy Agreement.

      3.20 Utilities. To Seller's knowledge, all Utilities required for the
operation of the Property either enter the Property through adjoining streets,
or they pass through adjoining land, do so in accordance with valid public
easements or irrevocable private easements, and all of said

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       19



Utilities are installed and operating and all installation and connection
charges therefor have been paid in full.

      3.21 Curb Cuts. To Seller's knowledge, all curb cut street opening permits
or licenses required for vehicular access to and from the Property from any
adjoining public street have been obtained and paid for and are in full force
and effect.

      3.22 Leased Property. To Seller's knowledge, all leases of the Leased
Property are in good standing and free from default.

      3.23 Advance Bookings. To Seller's knowledge, the Advance Bookings are
true and correct in all material respects.

      3.24 Americans With Disabilities Act. To Seller's knowledge, the Property
is in compliance with the Americans With Disabilities Act.

      3.25 Structural Condition. To Seller's knowledge, there is no latent
material defect in the Improvements or structural elements thereof, mechanical
systems (including, without limitation, all heating, ventilating, air
conditioning, plumbing, electrical, utility and sprinkler systems) therein, the
utility system servicing the Property and the roofs.

      3.26 Zoning and Platting. To Seller's knowledge, the present zoning of the
Property permits the current use thereof without special variances. Seller has
no knowledge of any fact, proceeding or threatened action or proceeding which
could result in a modification or termination of the present zoning of the
Property. To Seller's knowledge, each Property is properly platted as a separate
lot under Applicable Laws and constitute separate tax lots.

      3.27 Access. Seller has no knowledge of any pending or threatened
governmental proceeding or any other fact or condition which would limit or
result in the termination of the Property's existing access to and from public
streets or roads.

      3.28 No Commitments. No commitments have been made by Seller to any
Governmental Authority, utility company, school board, church or other religious
body, or any homeowners' association or any other organization, group or
individual, relating to the Property which would impose an obligation upon
Purchaser to make any contribution or dedication of money or land or to
construct, install or maintain any improvements of a public or private nature on
or off the Property.

      3.29 Seller Is Not a "Foreign Person". Seller is not a "foreign person"
within the meaning of Section 1445 of the Internal Revenue Code, as amended
(i.e., Seller is not a foreign corporation, foreign partnership, foreign trust,
foreign estate or foreign person as those terms are defined in the Internal
Revenue Code and regulations promulgated thereunder).

      3.30 No Other Property Interests. There are no property interests,
buildings, structures or other improvements or personal property that are owned
by Seller which are necessary for the operation of the Hotels that are not being
conveyed pursuant to this Agreement.

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       20



Except as set forth in this Article III and except as to the specific
representation and warranty set forth in the last paragraph of Section 2.4(b)
with respect to the Submission Matters or contained in any Closing Document,
Seller makes no other representations or warranties, express or implied of any
kind. Each of the representations and warranties contained in this Article III
and its various subparagraphs and in Section 2.4(b) with respect to the
Submission Matters are intended for the benefit of Purchaser and may be waived
in whole or in part, by Purchaser, but only by an instrument in writing signed
by Purchaser. All rights and remedies arising in connection with the untruth or
inaccuracy of any such representations and warranties shall survive the Closing
of the transaction contemplated hereby except to the extent that Seller gives
Purchaser written notice prior to Closing of the untruth or inaccuracy of any
representation or warranty, or Purchaser otherwise obtains actual knowledge
prior to Closing of the untruth or inaccuracy of any representation or warranty,
and Purchaser nevertheless elects to close this transaction. Any such written
notice from Seller to Purchaser shall state in the first paragraph thereof and
in all capitalized letters that "THIS NOTICE IS GIVEN PURSUANT TO THE AGREEMENT
OF PURCHASE AND SALE MADE AS OF MAY __, 2004, AND RELATES TO THE UNTRUTH OR
INACCURACY OF SELLER'S REPRESENTATIONS OR WARRANTIES." Purchaser shall be deemed
to have actual knowledge of the untruth or inaccuracy of any representation or
warranty only if (i) Purchaser receives written notice from Seller satisfying
the foregoing requirements, or (ii) David A. Brooks has actual knowledge of any
such untruth or inaccuracy. Except to the extent otherwise expressly provided in
the immediately preceding sentence, no investigation, audit, inspection, review
or the like conducted by or on behalf of Purchaser shall be deemed to terminate
the effect of any such representations, warranties and covenants, it being
understood that Purchaser has the right to rely thereon and that each such
representation and warranty constitutes a material inducement to Purchaser to
execute this Agreement and to close the transaction contemplated hereby and to
pay the Purchase Price to Seller.

Notwithstanding anything herein contained to the contrary, Seller's
representations and warranties in this Article III and in the last paragraph of
Section 2.4(b) with respect to the Submission Matters shall survive the Closing
Date for a period of one (1) year thereafter, provided that the party claiming a
breach within said one (1) year period notifies the other party in writing of
any damage, claim, loss, liability or expense which the Purchaser has determined
has given or could give rise to a claim under Section 9.2 hereof, and such
notice contains a description of the nature and amount (actual or estimated) of
any such claim, together with a statement as to the basis for Seller's
liability. A party's liability under this Agreement for specific breach of any
representation or warranty identified in such notice shall continue beyond the
survival period.

As of the date of execution of this Agreement, the term "to Seller's knowledge"
or similar phrase shall mean the knowledge of one or more of the following
individuals: John Dunn or Bob Jobes. Following the date of execution and
continuing until the Closing Date, the term "to Seller's knowledge" or similar
phrase shall mean the knowledge of one or more of the following individuals:
John Dunn or Bob Jobes, following a commercially reasonable inquiry of Seller's
own personnel involved in the operation, ownership, maintenance and management
of the Property and of its current manager for the Property, and such inquiry
shall include the direction

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       21



to its personnel and manager to review all files in their possession relating to
the operation, ownership, maintenance and management of the Property.

                                   ARTICLE IV
                   PURCHASER'S REPRESENTATIONS AND WARRANTIES

      To induce Seller to enter into this Agreement and to sell the Property,
Purchaser hereby makes the following representations and warranties, upon each
of which Purchaser acknowledges and agrees that Seller is entitled to rely and
has relied:

      4.1 Organization and Power. Purchaser is a limited partnership duly
formed, validly existing and in good standing under the laws of the State of
Delaware, and has all partnership power and all governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted and to enter into and perform its obligations under this Agreement and
any document or instrument required to be executed and delivered on behalf of
Purchaser hereunder.

      4.2 Authorization and Execution. This Agreement has been duly authorized
by all necessary action on the part of Purchaser, has been duly executed and
delivered by Purchaser, constitutes the valid and binding agreement of Purchaser
and is enforceable in accordance with its terms. The person executing this
Agreement on behalf of Purchaser has the authority to do so.

      4.3 Non-contravention. The execution and delivery of this Agreement and
the performance by Purchaser of its obligations hereunder do not and will not
contravene, or constitute a default under, any provisions of applicable law or
regulation, or any agreement, judgment, injunction, order, decree or other
instrument binding upon Purchaser or result in the creation of any lien or other
encumbrance on any asset of Purchaser.

      4.4 Litigation. There is no action, suit or proceeding, pending or known
to be threatened, against or affecting Purchaser in any court or before any
arbitrator or before any Governmental Authority which (a) in any manner raises
any question affecting the validity or enforceability of this Agreement or any
other agreement or instrument to which Purchaser is a party or by which it is
bound and that is to be used in connection with, or is contemplated by, this
Agreement, (b) could materially and adversely affect the business, financial
position or results of operations of Purchaser, and (c) could materially and
adversely affect the ability of Purchaser to perform its obligations hereunder,
or under any document to be delivered pursuant hereto.

      4.5 Bankruptcy. No Act of Bankruptcy has occurred with respect to
Purchaser.

                                    ARTICLE V
                              CONDITIONS PRECEDENT

      5.1 As to Purchaser's Obligations. Purchaser's obligations hereunder are
subject to the satisfaction of the following conditions precedent:

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       22



            (a) Seller's Deliveries. Seller shall have delivered to or for the
benefit of Purchaser, on or before the Closing Date, all of the documents and
other information required of Seller pursuant to Sections 7.2 and 7.4 hereof,
unless, as set forth therein, such matters have previously been provided or made
available to Purchaser for copying during the Study Period (if originals are not
in the possession or control of Seller).

            (b) Representations, Warranties and Covenants; Obligations of
Seller; Certificate. All of Seller's representations and warranties made in this
Agreement shall be true and correct in all material respects as of the date
hereof and as of the date of Closing as if then made; there shall have been no
material adverse change in the business conducted at a Property or the financial
results thereof from the date of acceptance of this Agreement and no matter,
condition or event shall have occurred which could materially and adversely
affect the operation, value or marketability of a Property or any part thereof;
Seller shall have performed in all material respects all of its covenants and
other obligations under this Agreement and Seller shall have executed and
delivered to Purchaser at Closing a certificate to the foregoing effect.

            (c) Title Insurance. Good and marketable fee simple title to the
Real Property shall be insurable as such by the Title Company subject only to
Permitted Title Exceptions as determined in accordance with Section 2.4 hereof
and including, without limitation, all applicable deletions of standard
exceptions and endorsements permitted under applicable state law which are
customarily required by institutional investors purchasing property comparable
to the Property.

            (d) Surveys. The Surveys shall be adequate for the Title Company to
delete any exception for general survey matters in the Owner's Title Policy
except for "shortages in area".

            (e) Title to Property. Seller shall be the sole owner of good and
marketable fee simple title to the Real Property and good and marketable fee
simple title to the Tangible Personal Property, free and clear of all liens,
encumbrances, restrictions, conditions and agreements except for Permitted Title
Exceptions. Seller shall not have taken any action or permitted or suffered any
action to be taken by others from the date hereof and through and including the
date of Closing that would adversely affect the status of title to the Real
Property and Tangible Personal Property.

            (f) Condition of Improvements. The Improvements and the Tangible
Personal Property (including but not limited to the mechanical systems,
plumbing, electrical, wiring, appliances, fixtures, heating, air conditioning
and ventilating equipment, elevators, boilers, equipment, roofs, structural
members and furnaces) shall be in the same condition at Closing as they are as
of the date hereof, reasonable wear and tear excepted. Prior to Closing, Seller
shall not have diminished the quality or quantity of maintenance and upkeep
services heretofore provided to the Real Property and the Tangible Personal
Property (except in the ordinary course of business and consistent with Seller's
past practices) and, except in the ordinary course of business as consistent
with Seller's past practices, Seller shall not have diminished the Inventory at
each Hotel without replacing same as necessary to continue Seller's business at
such Hotels. Seller shall not have removed or caused or permitted to be removed
any

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       23



part or portion of the Real Property or the Tangible Personal Property without
Purchaser's prior written consent unless the same is replaced, prior to Closing,
with a similar item of at least equal suitability, quality and value, free and
clear of any lien or security interest.

            (g) Liquor License. All liquor licenses, alcoholic beverage licenses
and other permits and Authorizations necessary to operate the restaurants, bars
and lounges presently located in the Hotels shall be in full force and effect.
To that end, Seller and Purchaser shall have cooperated with each other, and
each shall have executed such transfer forms, license applications and other
documents as may be necessary to effect the continued operation of the
restaurants, bars and lounges at the Hotels from and after Closing as set forth
in Section 6.9 hereof.

            (h) Taxes. Seller shall use its best efforts to provide to Purchaser
written evidence from the appropriate taxing authorities of the payment of all
sales, gross receipts, hotel occupancy and other similar taxes in connection
with the operation of the Hotels before Closing. In the event for any Hotel,
Seller is unable or unwilling to obtain such clearance certificates prior to
Closing, Purchaser shall cause John Dunn to deliver to Purchaser a guaranty in
form and substance reasonably acceptable to Purchaser on or before Closing (the
"Guaranty"). Notwithstanding the foregoing, Seller shall indemnify Purchaser for
the amount by which the full amount of all such sales, gross receipts, hotel
occupancy and other similar taxes in connection with the operation of the Hotels
before Closing exceeds the amount so withheld by Purchaser. The provisions of
this Section 5.1(h) shall survive the Closing.

            (i) Estoppels for Off-Site Facility Agreements. On or before the
Closing Date, Seller shall provide Purchaser with a fully executed estoppel
certificate related to each of the Off-Site Facility Agreements, if any, (the
"Off-Site Facility Estoppel"). The Off-Site Facility Estoppel must be in a form
reasonably satisfactory to Purchaser. To that end, Purchaser shall provide
Seller with a recommended form of Off-Site Facility Estoppel within fifteen (15)
days after the delivery of the Surveys and Title Commitments to Purchaser.

            (j) Third-Party Consents. On or before the Closing Date, Seller
shall furnish Purchaser, in form and content reasonably satisfactory to
Purchaser, with any and all third party consents (the "Third Party Consents"),
which are necessary to consummate the transaction contemplated in this
Agreement.

            (k) Tenant Estoppels. On or before the Closing Date, Seller shall
provide Purchaser with fully executed estoppel certificates ("Major Tenant
Estoppels") from one-hundred percent (100%) of the tenants occupying over 2,000
square feet of the Hotels ("Major Tenants"), and shall provide Purchaser with
fully executed estoppel certificates from at least seventy-five percent (75%) of
the tenants occupying less than 2,000 square feet of the Hotels (the Major
Tenant Estoppels and all other tenant estoppels provided for in this paragraph
are sometimes referred to collectively as the "Tenant Estoppels"). The Tenant
Estoppels shall be in a form reasonably satisfactory to Purchaser. To that end,
Purchaser shall provide Seller with a recommended form of Tenant Estoppel within
fifteen (15) days after the delivery of the Surveys and Title Commitments to
Purchaser. In the event Seller fails to procure the appropriate percentage of
fully executed Tenant Estoppels, Purchaser may, at its election, (i) terminate
this

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       24



Agreement, in which case the Deposit shall be promptly returned to Purchaser,
and all rights and obligations of Seller and Purchaser hereunder (except those
which expressly survive a termination of this Agreement) shall terminate
immediately or (ii) Purchaser may proceed to Closing and Seller shall, with
respect to the undelivered Tenant Estoppels, execute and deliver to Purchaser
estoppels conforming to the requirements of the Tenant Estoppels. As of the date
of this Agreement, there are no Major Tenants at the Hotels.

            (l) No Code Violations. There shall be no material violations of
Applicable Laws.

            (m) Management Agreements. Seller agrees that Purchaser shall have
the right on or before expiration of the Study Period to either (a) elect that
Manager operate the Property for a period of three (3) years to expire on the
third anniversary date of Closing subject to a new management agreement in form
and substance acceptable to Purchaser and Manager (the "New Management
Agreement") to be negotiated and finalized prior to the expiration of the Study
Period (the "Management Election"), or (b) to elect that Purchaser engage its
own manager to operate the Property. Seller and Purchaser agree that in any
event, the Management Agreements shall be terminated on or before Closing.

            (n) Franchise Agreements. Purchaser shall have received, in a form
reasonably acceptable to Purchaser, a consent from each Franchisor under each of
the Franchise Agreements consenting to the assignment and assumption of the
Franchise Agreements, together with an estoppel certificate wherein each
Franchisor represents that a true, correct and complete copy of the Franchise
Agreements have been provided to Purchaser and that there are no events of
default under said Franchise Agreements, or any event which, after the passage
of time or the giving of notice, or both, would constitute an event of default
thereunder.

Each of the conditions contained in this Section are intended for the benefit of
Purchaser and may be waived in whole or in part, by Purchaser, but only by an
instrument in writing signed by Purchaser.

      5.2 As to Seller's Obligations. Seller's obligations hereunder are subject
to the satisfaction of the following conditions precedent:

            (a) Purchaser's Deliveries. Purchaser shall have delivered to or for
the benefit of Seller, on or before the Closing Date, all of the documents and
payments required of Purchaser pursuant to Sections 7.3 and 7.4 hereof.

            (b) Representations, Warranties and Covenants; Obligations of
Purchaser. All of Purchaser's representations and warranties made in this
Agreement shall be true and correct in all material respects as of the date
hereof and as of the date of Closing as if then made and Purchaser shall have
performed in all material respects all of its covenants and other obligations
under this Agreement.

Each of the conditions contained in this Section are intended for the benefit of
Seller and may be waived in whole or in part, by Seller, but only by an
instrument in writing signed by Seller.

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       25



                                   ARTICLE VI
                              COVENANTS OF SELLER

      To induce Purchaser to enter into this Agreement and to purchase the
Property, and to pay the Purchase Price therefor, each Seller covenants and
agrees to the following with respect to the Property owned by such Seller:

      6.1 Operating Agreements/Off-Site Facility Agreements. All Operating
Agreements or Off-Site Facility Agreements are terminable upon either 15 days or
30 days notice. Seller shall not enter into any new management agreement,
maintenance or repair contract, supply contract, lease in which it is lessee or
other agreements with respect to the Property, nor shall Seller enter into any
agreements modifying the Operating Agreements or Off-Site Facility Agreements,
unless (a) any such agreement or modification will not bind Purchaser or the
Property after the date of Closing or is subject to termination on not more than
thirty (30) days' notice without penalty, or (b) Seller has obtained Purchaser's
prior written consent to such agreement or modification. Seller agrees to cancel
and terminate on the Closing Date any Operating Agreements or Off-Site Facility
Agreements unless Purchaser requests in writing prior to the expiration of the
Study Period that one or more remain in effect after Closing. Purchaser shall be
responsible for the term of any Operating Agreement or Off-Site Facility
Agreement continuing after Closing.

      6.2 Warranties and Guaranties. Seller shall not before or after Closing
release or modify any Warranties and Guaranties, if any, except with the prior
written consent of Purchaser.

      6.3 Insurance. Seller shall pay all premiums on, and shall not cancel or
voluntarily allow to expire, any of Seller's Insurance Policies unless such
policy is replaced, without any lapse of coverage, by another policy or policies
providing coverage at least as extensive as the policy or policies being
replaced.

      6.4 Independent Audit. Promptly following the execution of this Agreement
and prior to Closing, Seller shall make available and shall cause its management
company to make available to Purchaser's representatives and independent
accounting firm at the Seller's principal place of business (or shall deliver to
Purchaser, at Purchaser's cost and expense if so requested by Purchaser)
financial and other information relating to the Property in the possession of or
otherwise available to Seller, its affiliates or Seller's management company
which would be sufficient to enable Purchaser's representatives and independent
accounting firm to prepare audited financial statements for the three (3)
calendar years prior to the Closing and during the year in which the Closing
occurs in conformity with generally accepted accounting principles and to enable
them to prepare such statements, reports or disclosures as Purchaser may deem
necessary or advisable. Seller shall also provide and/or shall cause its
management company to make reasonable efforts to provide to Purchaser's
independent accounting firm a signed representation letter which would be
sufficient to enable an independent public accountant to render an opinion on
the financial statements related to the Property. Seller shall authorize and
shall cause its management company to authorize any attorneys who have
represented Seller or its management company in material litigation pertaining
to or affecting the Property to respond,

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       26



at Purchaser's expense, to inquiries from Purchaser's representatives and
independent accounting firm. If and to the extent Seller's financial statements
pertaining to the Property for any periods during the three (3) calendar years
prior to the Closing and during the year in which the Closing occurs have been
audited, promptly after the execution of this Agreement Seller shall provide
Purchaser with copies of such audited financial statements and shall cooperate
with Purchaser's representatives and independent public accountants to enable
them to contact the auditors who prepared such audited financial statements and
to obtain, at Purchaser's expense, a reissuance of such audited financial
statements.

      6.5 Operation of Property Prior to Closing. Seller covenants and agrees
with Purchaser that, between the date of this Agreement and the date of Closing:

            (a) Subject to the restrictions contained herein, Seller shall
operate the Property in the same manner in which Seller operated the Property
prior to the execution of this Agreement, so as to keep the Property in good
condition, reasonable wear and tear excepted, so as to maintain consistent
inventory levels, so as to maintain the existing caliber of the Hotels
operations conducted at the Property, and so as to maintain the reasonable good
will of all tenants of the Property and all employees, guests and other
customers of the Hotels.

            (b) Seller shall maintain its books of account and records in the
usual, regular and ordinary manner, in accordance with sound accounting
principles applied on a basis consistent with the basis used in keeping its
books in prior years.

            (c) Seller shall maintain in full force and effect all Insurance
Policies.

            (d) Seller shall maintain in full force and effect, and not cause or
permit a default under (with or without the giving of any required notice and/or
lapse of time), the Franchise Agreements and/or the Management Agreements.

            (e) Seller shall use and operate the Property in material compliance
with Applicable Laws and the requirements of the Franchise Agreements, the
Management Agreements, any mortgage, and any lease, Occupancy Agreement,
Operating Agreement and Insurance Policy affecting the Property.

            (f) Seller shall cause to be paid prior to delinquency all ad
valorem, occupancy and sales taxes due and payable with respect to the Property
or the operation of the Hotels.

            (g) Except as otherwise permitted hereby, Seller shall not take any
action or fail to take action the result of which would have a material adverse
effect on the Property or Purchaser's ability to continue the operation thereof
after the date of Closing in substantially the same manner as presently
conducted, or which would cause any of the representations and warranties
contained in Article III hereof to be untrue as of Closing in any material
respect.

            (h) Except in the ordinary course of Seller's business as consistent
with Seller's past practices, Seller shall not enter into new Occupancy
Agreements of any kind or nature affecting the Property without the express
written consent of Purchaser. Except in the

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       27



ordinary course of Seller's business as consistent with Seller's past practices,
Seller shall not, without the express written consent of Purchaser, in any
manner change, modify, extend, renew or terminate any Occupancy Agreement except
as required by the terms thereof. Copies of any new Occupancy Agreement or
modifications, renewals, extensions or terminations shall be promptly delivered
to Purchaser. Seller shall not apply all or any part of the security or damage
deposit of a tenant under any Occupancy Agreement to obligations of such tenant
unless such tenant has vacated its portion of the Property as of the Closing
Date.

            (i) Seller shall not fail to maintain the Improvements and the
Tangible Personal Property (including, but not limited to, the mechanical
systems, plumbing, electrical, wiring, appliances, fixtures, heating, air
conditioning and ventilating equipment, elevators, boilers, equipment, roofs,
structural members and furnaces) in the same condition as they are as of the
date hereof, reasonable wear and tear excepted.

            (j) Seller shall not diminish the quality or quantity of maintenance
and upkeep services heretofore provided to the Real Property and the Tangible
Personal Property and Seller shall not permit the Inventory to be diminished
other than as a result of the ordinary and necessary operation of the Hotels by
Seller.

            (k) Seller shall not remove or cause or permit to be removed any
part or portion of the Real Property or the Tangible Personal Property without
the express written consent of Purchaser unless the same is replaced, prior to
Closing, with similar items of at least equal suitability, quality and value,
free and clear of any liens or security interests.

            (l) Seller and Seller's managing agent shall continue to use its
best efforts to take guest room reservations and to book functions and meetings
and otherwise to promote the business of the Property in generally the same
manner as Seller did prior to the execution of this Agreement; and all advance
room bookings and reservations and all meetings and function bookings shall be
booked at rates, prices and charges heretofore customarily charged by Seller for
such purposes, and in accordance with Seller's published rate schedules. Seller
acknowledges that the Purchase Price includes the transfer of Advance Bookings.

            (m) Neither Seller nor Seller's managing agent shall (1) make any
agreements which shall be binding upon Purchaser with respect to the Property or
that otherwise cannot be terminated without penalty upon thirty (30) days
notice, or (2) materially reduce or cause to be reduced any room rents or any
other charges over which Seller has operational control.

            (n) Seller shall promptly deliver to Purchaser upon Purchaser's
request such reports showing the revenue and expenses of the Hotels and all
departments thereof, together with such periodic information with respect to
room reservations and other bookings, as Seller customarily keeps or receives
internally for its own use.

            (o) Seller or Seller's managing agent (1) shall not enter into any
new Employment Agreements which would be binding on Purchaser with respect to
the Property without the express written consent of Purchaser, and (2) shall not
change, modify, extend, renew or terminate any Employment Agreement in effect as
of the date hereof which would be

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       28



binding on Purchaser with respect to the Property without the express written
consent of Purchaser.

            (p) Except as required by the terms thereof or hereof, Seller shall
not in any material manner change, modify, extend, renew or terminate any
Operating Agreement which would be binding on Purchaser with respect to the
Property without the express written consent of Purchaser, and any such change
shall be promptly copied to Purchaser.

            (q) Seller shall promptly advise Purchaser of any litigation,
arbitration or administrative hearing concerning or affecting the Property of
which Seller obtains actual knowledge.

            (r) Seller shall not modify or release any warranties or guaranties
applicable to the Property.

            (s) Seller shall not grant any encumbrances on the Property or
contract for any construction or service for the Property which may impose any
mechanics' or materialmen's lien on the Property, except in the ordinary course
of business as consistent with Seller's past practices and except as removed
and/or cleared or paid prior to Closing.

      6.6 No Marketing. Seller shall not market the Property for sale or enter
into discussions or negotiations with potential purchasers of the Property upon
expiration of the Study Period.

      6.7 Employees and Continuation of Seller's Group Health Plans. Payment of
all costs and expenses associated with accrued but unpaid salary, earned but
unpaid vacation pay, accrued but unearned vacation pay, pension and welfare
benefits, the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA") benefits, employee fringe benefits, employee termination payments or
any other employee benefits due to Seller's, or Seller's management company's
employees up to the Closing Date shall be the sole responsibility and obligation
of and shall be paid promptly by Seller or Seller's management company. Seller
shall indemnify and defend Purchaser and/or its lessee or management company,
from and against any and all claims, causes of action, proceedings, judgments,
damages, penalties and liabilities made, assessed or rendered against Purchaser
and/or its lessee or management company and any costs and expenses (including
attorneys' fees and disbursements) incurred by Purchaser and/or its lessee or
management company with respect to claims, causes of action, judgments, damages,
penalties and liabilities asserted by such employees arising out of the failure
of Seller or its management company to comply with the provisions of this
Subsection 6.9.

      6.8 Rights of First Refusal and Options. Seller shall provide Purchaser
with reasonably satisfactory evidence of the waiver of any and all rights of
first refusal or options related to the Property that may have been granted to
any party

      6.9 Liquor License. Upon Closing, Seller shall transfer to Purchaser or
its designee, or cause to be transferred to Purchaser or its designee, all
liquor licenses and alcoholic beverage licenses necessary to operate the
restaurant, bars and lounges presently located within each

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       29



Hotel. To that end, Seller and Purchaser shall cooperate each with the other,
and each shall execute such transfer forms, license applications and other
documents as may be necessary to effect such transfer. If permitted under the
laws of the jurisdiction in which each Hotel is located, the parties shall
execute and file all necessary transfer forms, applications and papers with the
appropriate liquor and alcoholic beverage authorities prior to Closing, to the
end that the transfer shall take effect, if possible, on the Closing Date,
simultaneously with Closing. If not so permitted, then the parties agree each
with the other that they will promptly execute all transfer forms, applications
and other documents required by the appropriate liquor and alcoholic beverage
authorities in order to effect such transfer at the earliest date in time
possible consistent with the laws of the State where the Property is located, in
order that all liquor licenses may be transferred from Seller to Purchaser or
its designee at the earliest possible time. If under the laws of the State where
the Property is located, such licenses cannot be transferred until after the
Closing of the transaction contemplated hereby, then Seller covenants and agrees
that Seller shall cooperate with Purchaser in keeping open the bars and lounges
and liquor facilities of the Hotels between the Closing Date and the time when
such liquor license transfers actually become effective, by exercising
management and supervision of such facilities until such time under Seller's
licenses pursuant to a written agreement in form and substance substantially as
attached hereto as Exhibit H (the "Alcoholic Beverage Management Agreement");
provided, however, that Purchaser, at Purchaser's cost and expense, shall
maintain in force and effect at all times insurance reasonably acceptable to
Seller (with Seller as an additional named insured) and shall indemnify and hold
Seller harmless from any liability, damages or claims encountered in connection
with such operations during said period of time, except for Seller's gross
negligence or willful misconduct. All cost and expense of such operations during
said period of time shall be the sole responsibility of and be promptly paid by
Purchaser. All costs and expenses of obtaining the transfer of existing and/or
the issuance of new licenses and permits hereunder shall be the sole
responsibility of Purchaser (except for any legal fees and expenses incurred by
Purchaser in connection with the Alcoholic Beverage Management Agreement, if
applicable). Purchaser covenants and agrees that upon the filing of all
necessary transfer forms, applications and other documents with the appropriate
liquor and alcoholic beverage authorities, Purchaser will diligently and in good
faith prosecute the transfer of the liquor licenses to completion.

                                   ARTICLE VII
                                     CLOSING

      7.1 Closing. The Closing shall occur on a business day designated by
Purchaser, with at least five (5) days notice to Seller (which such day shall be
no later than thirty (30) days following the expiration of the Study Period). As
more particularly described below, at the Closing the parties hereto will meet
to (i) execute all of the documents required to be delivered in connection with
the transactions contemplated hereby (the "Closing Documents"), (ii) deliver the
same to Escrow Agent, and (iii) take all other action required to be taken in
respect of the transactions contemplated hereby. The Closing will occur either
through escrow or at the offices of Andrews Kurth LLP, 1717 Main Street, Suite
3700, Dallas, Texas 75201. At the Closing, Purchaser shall deliver the balance
of the Purchase Price to Escrow Agent, Escrow Agent shall update the title to
the Property and, provided there has been no change in the status of title as
reflected in the Title Commitments and the Surveys, Escrow Agent shall record
the Deeds, release and date, where appropriate, the Closing Documents in
accordance with the instructions

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       30



of Seller and Purchaser and shall send, by wire transfer or otherwise, all sums
owing to Seller hereunder to Seller. As provided herein, the parties hereto will
agree upon adjustments and prorations to certain items which cannot be exactly
determined at the Closing and will make the appropriate adjustments with respect
thereto. Possession of the Property shall be delivered to Purchaser at the
Closing, subject only to Permitted Title Exceptions and the rights of tenants
under the Occupancy Agreements and guests in possession.

      7.2 Seller's Deliveries. At the Closing, each Seller shall deliver to
Escrow Agent originals of all of the following instruments for the Property
owned by such Seller (unless previously provided or made available to Purchaser
for copying during the Study Period and originals are not in the possession or
within the control of Seller), each of which shall have been duly executed and,
where applicable, acknowledged and/or sworn on behalf of such Seller and shall
be dated as of the Closing Date:

            (a) The certificate required by Section 5.1(b) hereof.

            (b) The Deeds, each in the form attached hereto as Exhibit F.

            (c) Intentionally Deleted.

            (d) The Bill of Sale, in the form attached hereto as Exhibit E.

            (e) The Assignment of Occupancy Agreements, in the form attached
hereto as Exhibit G.

            (f) The Assignment and Assumption Agreement, in the form attached
hereto as Exhibit D.

            (g) Off-Site Facility Estoppels, Tenant Estoppels (Seller's
estoppel, if necessary) and All Third Party Consents.

            (h) Certificates from the applicable State taxing authority and
local taxing authorities stating that all occupancy, sales and ad valorem real
and personal property taxes due and payable for the Property have been paid and,
if any such taxes have not been paid, the amount due and payable as of the
Closing Date, and if such certificates are not delivered at Closing, the
Guaranty.

            (i) Certificate(s)/Registration of Title for any vehicle owned by
Seller and used in connection with the Property.

            (j) Such agreements, affidavits or other documents as may be
required by the Title Company to issue the Owner's Title Policy subject only to
the Permitted Title Exceptions and to eliminate such standard exceptions and to
issue such endorsements thereto which may be eliminated and issued under
applicable State law and which are customarily required by institutional
investors purchasing property comparable to the Property.

            (k) The FIRPTA Certificate.

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       31



            (l) All original Warranties and Guaranties in Seller's possession or
reasonably available to Seller.

            (m) Copies of Seller's Organizational Documents.

            (n) Appropriate resolutions of the partners, members or officers of
Seller, together with all other necessary approvals and consents of Seller and
such documentary and other evidence as may be reasonably required by Purchaser
or Escrow Agent, authorizing and evidencing the authorization of (i) the
execution on behalf of Seller of this Agreement and the authority of the person
or persons who are executing the various documents to be executed and delivered
by Seller prior to, at or otherwise in connection with the Closing, and (ii) the
performance by Seller of its obligations hereunder and under such documents.

            (o) A valid, final and unconditional certificate of occupancy for
each Real Property and Improvements, issued by the appropriate Governmental
Authority.

            (p) If Purchaser is assuming Seller's obligations under any or all
of the Operating Agreements or Off-Site Facility Agreements, to the extent in
Seller's possession or reasonably available to Seller, the originals of such
agreements, duly assigned to Purchaser and with such assignment acknowledged and
approved by the other parties to such Operating Agreements or Off-Site Facility
Agreements to the extent required by such Operating Agreements or Off-Site
Facility Agreements.

            (q) An assignment of each of the leases of the Leased Property to
Purchaser and/or its property manager, lessee or other designee (as Purchaser
shall specify), together with (1) the written consent of the lessors of such
leases to such assignment, if required by such leases, and (2) executed
originals of all such leases in Seller's possession or reasonably available to
Seller. If any Leased Property is leased pursuant to a lease which is a capital
lease, in accordance with generally accepted accounting principles, Seller shall
cancel such capital lease at its expense and convey good and marketable title to
such property (which shall constitute Tangible Personal Property hereunder) to
Purchaser and/or its property manager, lessee or other designee (as Purchaser
shall specify) free from any lien or encumbrance pursuant to the Bill of Sale -
Personal Property.

            (r) Such proof as Purchaser may reasonably require with respect to
Seller's compliance with the bulk sales laws or similar statutes, if applicable.

            (s) Copies of all existing Insurance Policies.

            (t) To the extent in Seller's possession or reasonably available to
Seller, originals of the following items (copies of which were delivered by
Seller to Purchaser with the Submission Matters): (1) complete sets of all
architectural, mechanical, structural and/or electrical plans and specifications
used in connection with the construction of or alterations or repairs to the
Property; and (2) as-built plans and specifications for the Property.

            (u) A written instrument executed by Seller, conveying and
transferring to Purchaser all of Seller's right, title and interest in any
telephone numbers and TWX numbers

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       32



relating to the Property, and, if Seller maintains a post office box, conveying
to Purchaser all of its interest in and to such post office box and the number
associated therewith, so as to assure a continuity in operation and
communication.

            (v) Duplicate originals of all agreements, leases, concession
agreements and other instruments affecting the Property and the Hotels and/or
restaurant business conducted thereon.

            (w) All current real estate and personal property tax bills in
Seller's possession or under its control.

            (x) An Affidavit from the chief executive officer of Seller or
Seller's management company, setting forth the date to which all employees have
been paid and setting forth and describing, in detail, as to each employee, all
accrued but unpaid vacation pay, a description of whether any of Seller's
employees are participating in Seller's group health plan through the exercise
of COBRA benefits and all other fringe benefits.

            (y) A complete set of all guest registration cards, guest
transcripts, guest histories, and all other available guest information.

            (z) All surveys and plot plans of the Real Property in possession of
or in the control of Seller.

            (aa) An updated schedule of employees, showing salaries and duties,
with a statement of the length of service of each such employee, brought current
to a date not more than forty-eight (48) hours prior to the Closing.

            (bb) A complete list of all advance room reservations, functions and
the like, in reasonable detail so as to enable Purchaser to honor Seller's
commitments in that regard.

            (cc) A list of Seller's outstanding accounts receivable as of
midnight on the date prior to the Closing, specifying the name of each account
and the amount due Seller.

            (dd) A list of all vendors and suppliers servicing the Hotels.

            (ee) All books, records, operating reports, appraisal reports, files
and other materials in Seller's possession or control which are necessary in
Purchaser's discretion to maintain continuity of operation of the Property.

            (ff) Written notice executed by Seller notifying all interested
parties, including, without limitation, all tenants under any Occupancy
Agreements, that the Property has been conveyed to Purchaser and directing that
all payments, inquiries and the like be forwarded to Purchaser at the address to
be provided by Purchaser.

            (gg) A current UCC Report showing no financing statements by Seller
as Debtor covering the Property.

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       33



            (hh) Executed originals of all Occupancy Agreements, Employment
Agreements and, to the extent available, Authorizations transferred or assigned
to Purchaser at Closing as required hereunder.

            (ii) Evidence in writing that Seller and Manager have terminated the
Management Agreements.

            (jj) If Purchaser makes the Management Election, the New Management
Agreement.

            (kk) A termination of the lease agreement between Dunn Group of
Indiana, as landlord, and Dunn Family Associates, LLP, as tenant.

            (ll) Any other document or instrument reasonably necessary or
required to consummate the transactions contemplated by this Agreement.

      7.3 Purchaser's Deliveries. At the Closing, Purchaser shall deliver to
Escrow Agent all of the following, each of which, if required, shall have been
duly executed and, where applicable, acknowledged and/or sworn on behalf of
Purchaser and shall be dated as of the Closing Date:

            (a) The portion of the Purchase Price described in Section 2.2
hereof.

            (b) The Assignment and Assumption Agreement.

            (c) The Assignment of Occupancy Agreements.

            (d) If Purchaser makes the Management Election, the New Management
Agreement.

            (e) Any other document or instrument reasonably necessary or
required to consummate the transactions contemplated by this Agreement.

      7.4 Mutual Deliveries. At the Closing, Purchaser and Seller shall mutually
execute and deliver each to the other:

            (a) A final closing statement reflecting the Purchase Price and the
adjustments and prorations required hereunder and the allocation of income and
expenses required hereby.

            (b) The Alcoholic Beverage Management Agreement and such other
documents, instruments and undertakings as may be required by the liquor
authorities of the State where the Property is located, or of any county or
municipality or governmental entity having jurisdiction with respect to the
transfer or issue of liquor licenses or alcoholic beverage licenses or permits
for the Hotels, to the extent not theretofore executed and delivered.

            (c) Such other and further documents, papers and instruments as may
be reasonably required by the parties hereto or their respective counsel.

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       34



      7.5 Closing Costs. Except as is explicitly provided in this Agreement,
each party hereto shall pay its own legal fees and expenses. The escrow fees,
costs of title examination and the title insurance premium for the issuance of
the Title Policy shall be shared equally between Seller and Purchaser. All
filing fees for the Deeds shall be paid by Seller. All costs of supplying tax
certificates to the title company shall be paid by Seller. The transfer,
recording, sales or other similar taxes and surtaxes due with respect to the
transfer of title shall be paid by Seller. Seller shall pay for all prepayment
charges or other costs associated with the releases of any deeds of trust,
mortgages and other financing encumbering the Property and for any costs
associated with any corrective instruments. The UCC Searches, endorsements to
the Title Policy and the costs of any Property inspections shall be paid by
Purchaser. The Purchaser shall pay all costs and expenses associated with the
Surveys, however, if the Closing is consummated, Purchaser shall be allowed a
credit against the Purchase Price for such costs and expenses at Closing. All
other costs (except any costs incurred by Seller for its own account) which are
necessary to carry out the transactions contemplated hereunder shall be
allocated between Purchaser and Seller in accordance with local custom in the
jurisdiction in which the Property is located. Any and all costs incurred in
obtaining a product improvement plan and related inspection fees with respect to
the Franchise Agreements, including transfer fees with respect to the Franchise
Agreements, shall be paid by Purchaser.

      7.6 Revenue and Expense Allocations. All revenues and expenses with
respect to the Property, and applicable to the period of time before and after
Closing, determined in accordance with sound accounting principles consistently
applied, shall be allocated between Seller and Purchaser as provided herein.
Seller shall be entitled to all revenue and shall be responsible for all
expenses for the period of time up to but not including the date of Closing, and
Purchaser shall be entitled to all revenue and shall be responsible for all
expenses for the period of time from, after and including the date of Closing
(provided that housekeeping costs and the Rooms Ledger for the date of Closing
shall be shared equally between Purchaser and Seller). Such adjustments shall be
shown on the closing statements (with such supporting documentation as the
parties hereto may require being attached as exhibits to the closing statements)
and shall increase or decrease (as the case may be) the cash amount payable by
Purchaser pursuant to Section 2.2 hereof. Without limiting the generality of the
foregoing, the following items of revenue and expense shall be allocated at
Closing:

            (a) Current rents.

            (b) Real estate and personal property taxes.

            (c) Revenue and expenses under the Operating Agreements and Off-Site
Facility Agreements to be assigned to and assumed by Purchaser.

            (d) Utility charges (including, but not limited to, charges for
water, sewer and electricity).

            (e) Municipal or other governmental improvement liens, which shall
be paid by Seller at Closing where the work has physically commenced, and which
shall be assumed by Purchaser at Closing where the work has been authorized, but
not physically commenced.

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       35



            (f) Insurance premiums, to the extent required hereby.

            (g) License and permit fees, where transferable.

            (h) All other revenues and expenses of the Property, including, but
not limited to, such things as restaurant, bar and meeting room income and
expenses and the like.

            (i) The Rooms Ledger and housekeeping costs for the date of Closing
(to be apportioned equally between Seller and Purchaser).

            (j) Such other items as are usually and customarily prorated between
purchasers and sellers of hotel properties in the area where the Property is
located.

Purchaser shall receive a credit against the Purchase Price for the total of (i)
prepaid rents, (ii) prepaid room receipts and deposits, function receipts and
deposits and other reservation receipts and deposits, (iii) unforfeited security
deposits together with interest thereon held by Seller under Occupancy
Agreements, and (iv) the value of any complimentary rooms (based upon the "rack"
rate for each room) and any complimentary food or beverages (based upon the
advertised rate for each food and beverage) provided by Seller from and after
6:00 a.m. on the Closing Date. At Closing, Seller shall sell to Purchaser in
connection with the Hotels, and Purchaser shall purchase from Seller, at face
value: (i) all petty cash funds in the hands of the Seller (or its manager) in
connection with the Hotel guest operations at the Property; and (ii) the
so-called "guest ledger" as mutually approved by Purchaser and Seller for the
Hotels of guest accounts receivable payable to the Hotels as of the check out
time for the Hotels on the Closing Date (based on guests and customers then
using the Hotels) both (1) in occupancy from the preceding night through check
out time the morning of the Closing Date, and (2) previously in occupancy prior
to check out time on the Closing Date; provided, however, that the term "guest
ledger" shall not include any accounts receivable which have been or are to be
paid by any means other than a credit card. Purchaser shall not be obligated to
purchase such non-credit card accounts receivable. For purposes of this
Agreement, transfer or sale at face value shall have the following meanings: (i)
for petty cash, an amount equal to the total of all petty cash funds on hand and
transferred to Purchaser; and (ii) for the guest ledger, the total of all credit
card accounts receivable as shown on the records of the Hotels, less actual
collection costs (i.e., fees retained by credit card companies), less accounting
charges for rooms furnished on a gratuity or complimentary basis to any hotel
staff or as an accommodation to other parties and less Purchaser's one-half
(-1/2) share of Rooms Ledger. The purchase price of said petty cash fund and
guest ledger, as determined above, shall be paid to Seller at Closing by a
credit to Seller in the computation of the adjustments and prorations on the
Closing Date.

Seller shall pay or cause to be paid a prorate amount of the real property taxes
for the Property due and payable in November 2004 based on the number of days
Seller owned the Property in 2004 relative to the total number of days in 2004
up to the date such real property taxes are due and payable. Purchaser will pay
all such taxes due and payable thereafter. All special assessments pending,
levied or due and payable on or prior to the Closing Date shall be paid by
Seller on or before the Closing Date. All subdivision and platting costs and
expenses heretofore incurred by Seller, including, without limitation, all
subdivision exactions, fees and costs and all

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       36



dedication of land for parks and other public uses or payment of fees in lieu
thereof, shall be paid by Seller on or prior to the Closing Date.

Seller shall be required to pay or cause to be paid on or before the Closing
Date any wages, vacation pay, sick leave, bonuses, pension, profit-sharing and
welfare benefits and other compensation and fringe benefits of all persons
employed at the Property on or before the Closing Date, including any employment
taxes or other fees or assessments attributable thereto.

Seller shall be required to pay all sales, occupancy and liquor taxes and like
impositions currently through the date of Closing and deliver copies of paid
checks and applicable statements to Purchaser.

Seller shall be responsible for payments of amounts owing to third parties in
respect of inventory and supplies ordered by Seller in respect of the Hotels
prior to the Closing Date. Notwithstanding the foregoing, special purchases
needed for future Advance Bookings which have been approved by Purchaser "in
writing" and which relate to the period from and after Closing shall be the
responsibility of Purchaser.

Purchaser shall not be obligated to collect any delinquent rents, accounts
receivable or revenues accrued prior to the Closing Date for Seller, but if
Purchaser collects same, such amounts shall be promptly remitted to Seller in
the form received.

If accurate allocations cannot be made at Closing because current bills are not
obtainable (as, for example, in the case of utility bills and/or real estate or
personal property taxes), the parties shall allocate such revenue or expenses at
Closing on the best available information, subject to adjustment upon receipt of
the final bill or other evidence of the applicable revenue or expense. The
obligation to make the adjustment shall survive the closing of the transaction
contemplated by this Agreement. Any revenue received or expense incurred by
Seller or Purchaser with respect to the Property after the date of Closing shall
be promptly allocated in the manner described herein and the parties shall
promptly pay or reimburse any amount due. The proration provisions of this
Agreement shall survive the closing of the transaction contemplated hereby for a
period of twelve (12) months.

      7.7 Acquisition and Transfer of Inventory and Personal Property. As part
of the Property and included in the Purchase Price, Seller agrees to transfer to
Purchaser or its lessee, property manager or other designee (as Purchaser shall
specify) all inventories of food and beverage and unused reserve stock
(including in-use operating supplies) of linens, towels, paper goods, soaps,
cleaning supplies, china, glassware, silverware and miscellaneous guest
supplies, engineering cleaning supplies and the like at each Hotel
(collectively, the "Inventory") and Personal Property.

      7.8 Product Improvement Plan Requirements. In determining the Purchase
Price, the parties hereto have assumed that product improvement plan
requirements imposed by the Franchisor under the Franchise Agreements in
connection with the contemplated change of ownership ("PIPs") will not exceed
$1,000,000.00 in the aggregate. If Purchaser's reasonable estimates of the final
PIPs for all of the Franchisors exceed $1,000,000.00 in the aggregate, and

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       37



Seller reasonably agrees with Purchaser's estimates, then the Seller will pay
the excess over such $1,000,000.00 of up to $1,500,000.00. If however, such
estimates exceed $1,500,000.00 in the aggregate, Purchaser shall have the right
(prior to the expiration of the Study Period) to either (a) terminate this
Agreement upon written notice to Seller, whereupon the Deposit shall be returned
to Purchaser without any further obligations between the parties hereunder
except for any provisions which expressly survive this Agreement, (b) continue
this Agreement and pay the excess over $1,500,000.00, or (c) obtain a credit to
the Purchase Price by the amount of such excess to which Seller reasonably
agrees up to $1,500,000 (the "PIP Excess") and issue to Seller "Common
Partnership Units" in Purchaser (as defined and described in the agreement of
limited partnership of Purchaser), the number of which (at issuance in value
equal to the PIP Excess) and terms regarding the issuance of such units to be
governed by an amendment to this Agreement in form and substance reasonably
satisfactory to Seller and Purchaser (and in compliance with any public company
requirements imposed on Purchaser by applicable laws).

                                  ARTICLE VIII
                               GENERAL PROVISIONS

      8.1 Condemnation. In the event of any actual or threatened taking,
pursuant to the power of eminent domain, of all or any portion of the Real
Property, or any proposed sale in lieu thereof, Seller shall give written notice
thereof to Purchaser promptly after Seller learns or receives notice thereof. If
all or any part of the Real Property is, or is to be, so condemned or sold
(except for any condemnation or sale which does not affect the Purchaser's
ability to own and operate the Hotels), Purchaser shall have the right to either
terminate this Agreement pursuant to Section 9.3 hereof or terminate the Hotel
subject to such condemnation or sale whereupon the Purchase Price shall be
reduced by the applicable Allocated Purchase Price. If Purchaser elects not to
terminate this Agreement (or if a sale or condemnation occurs for which
Purchaser is not entitled to terminate this Agreement), all proceeds, awards and
other payments arising out of such condemnation or sale (actual or threatened)
shall be paid or assigned, as applicable, to Purchaser at Closing. Seller shall
not settle or compromise any such proceeding without Purchaser's written
consent. If Purchaser elects to terminate this Agreement in its entirety by
giving Seller written notice thereof prior to the Closing, the Deposit shall be
promptly returned to Purchaser and all rights and obligations of Seller and
Purchaser hereunder (except those set forth herein which expressly survive a
termination of this Agreement) shall terminate immediately.

      8.2 Risk of Loss. The risk of any loss or damage to the Property prior to
the Closing shall remain upon Seller. If any such loss or damage occurs prior to
Closing, Purchaser shall have the right to terminate this Agreement pursuant to
Section 9.3 hereof or terminate the Hotel subject to such loss or damage
whereupon the Purchase Price shall be reduced by the applicable Allocated
Purchase Price. If Purchaser elects not to terminate this Agreement, all
insurance proceeds and rights to proceeds arising out of such loss or damage
shall be paid or assigned, as applicable, to Purchaser at Closing and Purchaser
shall receive as a credit against the Purchase Price the amount of any
deductibles under the policies of insurance covering such loss or damage. If
Purchaser elects to terminate this Agreement in its entirety by giving Seller
written notice thereof prior to the Closing, the Deposit shall be promptly
returned to Purchaser and all

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       38



rights and obligations of Seller and Purchaser hereunder (except those set forth
herein which expressly survive a termination of this Agreement) shall terminate
immediately.

      8.3 Broker. The parties acknowledge that Broker has been the procuring
cause of this Agreement. It shall be the obligation of Seller to pay Broker its
commission, when, as and if the transaction contemplated hereby actually closes,
in accordance with a separate agreement between the Broker and Seller. There is
no other real estate broker involved in this transaction. Purchaser warrants and
represents to Seller that Purchaser has not dealt with any other real estate
broker in connection with this transaction, nor has Purchaser been introduced to
the Property or to Seller by any other real estate broker, and Purchaser shall
indemnify Seller and hold Seller harmless from and against any claims, suits,
demands or liabilities of any kind or nature whatsoever arising on account of
the claim of any other person, firm or corporation to a real estate brokerage
commission or a finder's fee as a result of having dealt with Purchaser, or as a
result of having introduced Purchaser to Seller or to the Property. In like
manner, Seller warrants and represents to Purchaser that Seller has not dealt
with any other real estate broker in connection with this transaction, nor has
Seller been introduced to Purchaser by any other real estate broker, and Seller
shall indemnify Purchaser and save and hold Purchaser harmless from and against
any claims, suits, demands or liabilities of any kind or nature whatsoever
arising on account of the claim of any person, firm or corporation to a real
estate brokerage commission or a finder's fee as a result of having dealt with
Seller in connection with this transaction. This provision shall survive any
termination of this Agreement and a closing of the transaction contemplated
hereby.

      8.4 Bulk Sale. It shall be the obligation of Seller to comply with any
bulk sale requirements, statutes, laws, ordinances and regulations promulgated
with respect thereto, if any, in the State in which the Property is located, or
in or by any governmental entity having jurisdiction with respect thereto, and
to provide proof of such compliance or proof that no such compliance is
required, to Purchaser, at or prior to Closing. In any event, Seller shall
indemnify Purchaser and save and hold Purchaser harmless from and against any
claims, suits, demands, liabilities or obligations of any kind or nature
whatsoever, including all costs of defending same, and reasonable attorneys'
fees paid or incurred in connection therewith, arising out of or relating to any
claim made by any third party or any liability asserted by any third party that
any applicable bulk sales law or like statute has not been complied with. The
provisions of this Section shall survive the Closing of the transaction
contemplated hereby.

      8.5 Confidentiality. Except as hereinafter provided, from and after the
execution of this Agreement, Purchaser and Seller shall keep the terms,
conditions and provisions of this Agreement confidential and neither shall make
any public announcements hereof unless the other first approves of same in
writing, nor shall either disclose the terms, conditions and provisions hereof,
except to persons who "need to know," such as their respective officers,
directors, employees, attorneys, accountants, engineers, surveyors, consultants,
financiers, partners, investors, potential lessees and bankers and such other
third parties whose assistance is required in connection with the consummation
of this transaction. Notwithstanding the foregoing, it is acknowledged that
Purchaser is, or is an affiliate of, a real estate investment trust (the
"REIT"), and the REIT has and will seek to sell shares to the general public;
consequently, Purchaser shall have the absolute and unbridled right to disclose
any information regarding the transaction

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       39



contemplated by this Agreement required by law or as determined to be necessary
or appropriate by Purchaser or Purchaser's attorneys to satisfy disclosure and
reporting obligations of Purchaser or its affiliates.

      8.6 Seller's Accounts Receivable. It is expressly agreed by and between
Purchaser and Seller that Seller is not hereby agreeing to sell to Purchaser,
and Purchaser is not hereby agreeing to purchase from Seller, any of Seller's
accounts receivable. All of Seller's accounts receivable shall be and remain the
property of Seller, subsequent to the Closing of the transaction contemplated
hereby. At the Closing, Seller shall prepare a list of its outstanding accounts
receivable as of midnight on the date prior to the Closing, specifying the name
of each account and the amount due to Seller. Purchaser shall hold any funds
received by Purchaser explicitly designated as payment of such accounts
receivable, in trust, if Purchaser actually collects any such amounts, and shall
pay the monies collected in respect thereof to Seller at the end of each
calendar month, accompanied by a statement showing the amount collected on each
such account. After Closing, at Seller's sole cost and expense, upon two (2)
business days notice to Purchaser, and without materially interfering with the
business conducted by Purchaser at the Hotels, Seller may review the account
receivable records of Purchaser to confirm any statements issued by Purchaser
with respect to any Seller receivables collected by Purchaser. Other than the
foregoing, Purchaser shall have no obligation with respect to any such account,
and Purchaser shall not be required to take any legal proceeding or action to
effect collection on behalf of Seller. It is generally the intention of
Purchaser and Seller that although all of Seller's accounts receivable shall be
and remain the property of Seller, still, if any such accounts are paid to
Purchaser, then Purchaser shall collect same and remit to Seller in the manner
above provided. Nothing herein contained shall be construed as requiring
Purchaser to remit to Seller any funds collected by Purchaser on account of
Purchaser's accounts receivable generated from Hotel operations, even if the
person or entity paying same is also indebted to Seller.

                                   ARTICLE IX
                       LIABILITY OF PURCHASER AND SELLER;
             INDEMNIFICATION BY SELLER; DEFAULT; TERMINATION RIGHTS

      9.1 Liability of Purchaser and Seller. Except for obligations expressly
assumed or agreed to be assumed by Purchaser hereunder, Purchaser is not
assuming any obligations of Seller or any liability for claims arising out of
any act, omission or occurrence which occurs, accrues or arises prior to the
Closing Date, and Seller hereby indemnifies and holds Purchaser harmless from
and against any and all claims, costs, penalties, damages, losses, liabilities
and expenses (including reasonable attorneys' fees) that may at any time be
incurred by Purchaser as a result of (1) obligations of Seller not expressly
assumed or agreed to be assumed by Purchaser hereunder, or (2) acts, omissions
or occurrences which occur, accrue or arise prior to the Closing Date. Except as
set forth in this Section 9.1 above, Purchaser hereby indemnifies and holds
Seller harmless from and against any and all claims, costs, penalties, damages,
losses, liabilities and expenses (including reasonable attorneys' fees) that may
at any time be incurred by Seller as a result of (1) obligations of Purchaser
expressly assumed by Purchaser hereunder, or (2) acts, omissions or occurrences
which first occur, accrue, or arise after the Closing Date. The provisions of
this Section shall survive the Closing of the transaction contemplated hereby.

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       40



      9.2 Indemnification by Seller. Seller hereby indemnifies and holds
Purchaser harmless from and against any and all claims, costs, penalties,
damages, losses, liabilities and expenses (including reasonable attorneys' fees)
that may at any time be incurred by Purchaser, whether before or after Closing,
as a result of any inaccuracy or breach by Seller of any of its representations,
warranties, covenants or obligations set forth herein or in any other document
delivered by Seller pursuant hereto except for any breach or inaccuracy of any
representation or warranty as to which Seller has given Purchaser written notice
prior to Closing of the untruth or inaccuracy or of which Purchaser otherwise
had actual knowledge prior to the Closing and nevertheless elected to consummate
the Closing; provided, however, the foregoing knowledge limitation on Seller's
indemnity shall not limit Purchaser's remedy described in Section 9.3(a)(ii)
hereof. Notwithstanding anything herein contained to the contrary, Seller's
indemnity set forth herein, shall survive the Closing Date for a period of one
(1) year thereafter, provided that Purchaser provides to Seller written notice
within such one (1) year period of any damage, claim, loss, liability or expense
which the Purchaser has determined has given or could give rise to a claim under
this Section 9.2, and such notice contains a description of the nature and
amount (actual or estimated) of any such claim, together with a statement as to
the basis for Seller's liability. Any indemnity obligations of Seller hereunder
shall be limited to $3,500,000.00 and Purchaser agrees not to make any indemnity
claims hereunder against Seller until the aggregate of such claims exceeds
$50,000.00. The provisions of this Section shall survive the Closing of the
transaction contemplated hereby. If any third party shall notify Purchaser with
respect to any matter (a "Claim") which may give rise to a claim for
indemnification against Seller under this Section 9.2, then Purchaser shall
promptly (and in any event within five (5) business days after receiving notice
of the Claim) notify Seller thereof in writing. Seller will have the right at
any time to assume and thereafter conduct the defense of the Claim with counsel
of Seller's choice reasonably satisfactory to Purchaser; provided, however, that
Seller will not consent to the entry of any judgment or enter into any
settlement with respect to the Claim without the prior written consent of
Purchaser (not to be withheld unreasonably) unless the judgment or proposed
settlement involves only the payment of money damages and does not impose an
injunction or other equitable relief upon Purchaser. Unless and until Seller
assumes the defense of the Claim as provided hereinabove, however, Purchaser may
defend against the Claim in any manner Purchaser reasonably may deem
appropriate. In no event will Purchaser consent to the entry of any judgment or
enter into any settlement with respect to the Claim without the prior written
consent of Seller (not to be unreasonably withheld).

      9.3 Default by Seller/Failure of Conditions Precedent. If any condition
set forth herein for the benefit of Purchaser cannot or will not be satisfied
prior to Closing, or upon the occurrence of any other event that would entitle
Purchaser to terminate this Agreement and its obligations hereunder, and if
Seller fails to cure any such matter or satisfy that condition within ten (10)
business days after notice thereof from Purchaser (or such other time period as
may be explicitly provided for herein), Purchaser, at its option, may elect (a)
to terminate this Agreement in its entirety, in which event (i) the Deposit
shall be promptly returned to Purchaser, (ii) if the condition which has not
been satisfied is a material breach of a representation, warranty or covenant,
then Seller shall be obligated upon demand to reimburse Purchaser for
Purchaser's actual out-of-pocket inspection, financing and other costs related
to Purchaser's entering into this Agreement, inspecting the Property and
preparing for a Closing of the transaction contemplated hereby, including,
without limitation, Purchaser's attorneys' fees incurred in connection with the

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       41



preparation, negotiation and execution of this Agreement and in connection with
Purchaser's due diligence review, audits and preparation for a Closing, in an
amount not to exceed $200,000.00 in the aggregate, and (iii) all other rights
and obligations of Seller and Purchaser hereunder (except those set forth herein
which expressly survive a termination of this Agreement) shall terminate
immediately; or (b) elect to proceed to Closing. If Purchaser elects to proceed
to Closing and there is either a material misrepresentation or material breach
of a warranty by Seller (other than a material breach of a representation or
warranty of which Purchaser had actual knowledge prior to the Closing and
nevertheless elected to consummate the Closing) or the material breach of a
covenant by Seller or a material failure by Seller to perform its obligations
hereunder, Purchaser shall retain all remedies accruing as a result thereof,
including, but not limited to the remedy of specific performance of Seller's
covenants and obligations and the remedy of the recovery of all reasonable
damages resulting from Seller's breach of warranty or covenant.

      9.4 Default by Purchaser/Failure of Conditions Precedent. If any condition
set forth herein for the benefit of Seller (other than a default by Purchaser)
cannot or will not be satisfied prior to Closing, and if Purchaser fails to
satisfy that condition within ten (10) business days after notice thereof from
Seller (or such other time period as may be explicitly provided for herein),
Seller may, at its option, elect either (a) to terminate this Agreement in which
event the Deposit shall be promptly returned to Purchaser and the parties hereto
shall be released from all further obligations hereunder except those which
expressly survive a termination of this Agreement, or (b) to waive its right to
terminate, and instead, to proceed to Closing. If, prior to Closing, Purchaser
defaults in performing any of its obligations under this Agreement (including
its obligation to purchase the Property), and Purchaser fails to cure any such
default within ten (10) business days after notice thereof from Seller, then
Seller's sole remedy for such default shall be to terminate this Agreement and
retain the Deposit. Seller and Purchaser agree that, in the event of such a
default, the damages that Seller would sustain as a result thereof would be
difficult if not impossible to ascertain. Therefore, Seller and Purchaser agree
that, Seller shall retain the Deposit as full and complete liquidated damages
and as Seller's sole remedy.

      9.5 Costs and Attorneys' Fees. In the event of any litigation or dispute
between the parties arising out of or in any way connected with this Agreement,
resulting in any litigation, then the prevailing party in such litigation shall
be entitled to recover its costs of prosecuting and/or defending same,
including, without limitation, reasonable attorneys' fees at trial and all
appellate levels. The provisions of this Section shall survive the Closing of
the transaction contemplated hereby.

      9.6 Limitation of Liability. Notwithstanding anything herein to the
contrary, except in the case of fraud by either party, the liability of each
party hereto resulting from the breach or default by either party shall be
limited to actual damages incurred by the injured party and except in the case
of fraud by either party, the parties hereto hereby waive their rights to
recover from the other party consequential, punitive, exemplary, and speculative
damages. The provisions of this Section 9.6 shall survive the Closing of the
transaction contemplated hereby.

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       42



                                   ARTICLE X
                            MISCELLANEOUS PROVISIONS

      10.1 Completeness; Modification. This Agreement constitutes the entire
agreement between the parties hereto with respect to the transactions
contemplated hereby and supersedes all prior discussions, understandings,
agreements and negotiations between the parties hereto. This Agreement may be
modified only by a written instrument duly executed by the parties hereto.

      10.2 Assignments. Purchaser may assign all or any portion of its rights
hereunder to one or more Affiliates of Purchaser without the consent of Seller;
however, any such assignment shall not relieve Purchaser of its obligations
under this Agreement.

      10.3 Successors and Assigns. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns.

      10.4 Days. If any action is required to be performed, or if any notice,
consent or other communication is given, on a day that is a Saturday or Sunday
or a legal holiday in the jurisdiction in which the action is required to be
performed or in which is located the intended recipient of such notice, consent
or other communication, such performance shall be deemed to be required, and
such notice, consent or other communication shall be deemed to be given, on the
first business day following such Saturday, Sunday or legal holiday. Unless
otherwise specified herein, all references herein to a "day" or "days" shall
refer to calendar days and not business days.

      10.5 Governing Law. This Agreement and all documents referred to herein
shall be governed by and construed and interpreted in accordance with the laws
of the state where the Property is located.

      10.6 Counterparts. To facilitate execution, this Agreement may be executed
in as many counterparts as may be required. It shall not be necessary that the
signature on behalf of both parties hereto appear on each counterpart hereof.
All counterparts hereof shall collectively constitute a single agreement.

      10.7 Severability. If any term, covenant or condition of this Agreement,
or the application thereof to any person or circumstance, shall to any extent be
invalid or unenforceable, the remainder of this Agreement, or the application of
such term, covenant or condition to other persons or circumstances, shall not be
affected thereby, and each term, covenant or condition of this Agreement shall
be valid and enforceable to the fullest extent permitted by law.

      10.8 Costs. Regardless of whether Closing occurs hereunder, and except as
otherwise expressly provided herein, each party hereto shall be responsible for
its own costs in connection with this Agreement and the transactions
contemplated hereby, including, without limitation, fees of attorneys, engineers
and accountants.

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       43



      10.9 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be delivered by hand, transmitted by
facsimile transmission, sent prepaid by Federal Express (or a comparable
overnight delivery service) or sent by the United States mail, certified,
postage prepaid, return receipt requested, at the addresses and with such copies
as designated below. Any notice, request, demand or other communication
delivered or sent in the manner aforesaid shall be deemed given or made (as the
case may be) when actually delivered to the intended recipient.

     If to Seller:             Dunn Hospitality Group, LLC
                               100 South Green River Road
                               Evansville, Indiana  47715
                               Attn: John Dunn
                               Telecopy: _________________________________


     With a copy to:           Merritt & Tenney LLP
                               Suite 500, 200 Galleria Parkway, N.W.
                               Atlanta, Georgia 30339
                               Attn: James F. Tenney
                               Telecopy: 770.952.0028

     If to Purchaser:          Ashford Hospitality Limited Partnership
                               c/o Ashford Hospitality Trust, Inc.
                               14185 Dallas Parkway
                               Suite 1100
                               Dallas,  Texas  75254
                               Attn: David A. Brooks and Christopher A. Peckham
                               Telecopy: (972) 490-9605

     With a copy to:           Andrews Kurth LLP
                               1717 Main Street, Suite 3700
                               Dallas, Texas  75201
                               Attn: Brigitte Kimichik
                               Telecopy: (214) 659-4777

     If to Escrow Agent:       Chicago Title Insurance Company
                               711 Third Avenue, 5th Floor
                               New York, New York 10017
                               Attn: Sie Cheung
                               Telecopy: (214) 880-9623

or to such other address as the intended recipient may have specified in a
notice to the other party. Any party hereto may change its address or designate
different or other persons or entities to receive copies by notifying the other
party and Escrow Agent in a manner described in this Section.

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       44



      10.10 Escrow Agent. Escrow Agent referred to in the definition thereof
contained in Section 1.1 hereof has agreed to act as such for the convenience of
the parties without fee or other charges for such services as Escrow Agent.
Escrow Agent shall not be liable: (a) to any of the parties for any act or
omission to act except for its own willful misconduct or gross negligence; (b)
for any legal effect, insufficiency, or undesirability of any instrument
deposited with or delivered by Escrow Agent or exchanged by the parties
hereunder, whether or not Escrow Agent prepared such instrument; (c) for any
loss or impairment of funds that have been deposited in escrow while those funds
are in the course of collection, or while those funds are on deposit in a
financial institution, if such loss or impairment results from the failure,
insolvency or suspension of a financial institution; (d) for the expiration of
any time limit or other consequence of delay, unless a properly executed written
instruction, accepted by Escrow Agent, has instructed Escrow Agent to comply
with said time limit; (e) for the default, error, action or omission of either
party to the escrow. Escrow Agent, in its capacity as escrow agent, shall be
entitled to rely on any document or paper received by it, believed by such
Escrow Agent, in good faith, to be bona fide and genuine. In the event of any
dispute as to the disposition of the Deposit or any other monies held in escrow,
or of any documents held in escrow, Escrow Agent may, if such Escrow Agent so
elects, interplead the matter by filing an interpleader action in a court of
general jurisdiction in the county or circuit where the Real Property is located
(to the jurisdiction of which both parties do hereby consent), and pay into the
registry of the court the Deposit, or deposit any such documents with respect to
which there is a dispute in the Registry of such court, whereupon such Escrow
Agent shall be relieved and released from any further liability as Escrow Agent
hereunder. Escrow Agent shall not be liable for Escrow Agent's compliance with
any legal process, subpoena, writ, order, judgment and decree of any court,
whether issued with or without jurisdiction, and whether or not subsequently
vacated, modified, set aside or reversed.

      10.11 Incorporation by Reference. All of the exhibits attached hereto are
by this reference incorporated herein and made a part hereof. Notwithstanding
the foregoing, Seller and Purchaser agree that to the extent any of the exhibits
or schedules are not attached hereto on the date of execution of this Agreement,
the parties hereto shall use their best efforts to complete and agree to such
exhibits and schedules within ten (10) days after execution of this Agreement.
With respect to Schedule 10 attached hereto, Seller shall have the right to
supplement such schedule within the herein referenced ten (10) day period, upon
written notice thereof to Purchaser.

      10.12 Survival. All of the covenants and agreements of Seller and
Purchaser made in, or pursuant to, this Agreement shall survive Closing and
shall not merge into the Deed or any other document or instrument executed and
delivered in connection herewith.

      10.13 Further Assurances. Seller and Purchaser each covenant and agree to
sign, execute and deliver, or cause to be signed, executed and delivered, and to
do or make, or cause to be done or made, upon the written request of the other
party, any and all agreements, instruments, papers, deeds, acts or things,
supplemental, confirmatory or otherwise, as may be reasonably required by either
party hereto for the purpose of or in connection with consummating the
transactions described herein.

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       45



      10.14 No Partnership. This Agreement does not and shall not be construed
to create a partnership, joint venture or any other relationship between the
parties hereto except the relationship of Seller and Purchaser specifically
established hereby.

      10.15 Time of Essence. Time is of the essence with respect to every
provision hereof.

      10.16 Signatory Exculpation. The signatory(ies) for Purchaser and Seller
is/are executing this Agreement in his/their capacity as representative of
Purchaser and Seller and not individually and, therefore, shall have no personal
or individual liability of any kind in connection with this Agreement and the
transactions contemplated by it.

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

            (a) 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.

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

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

            (d) 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 hereto.

            (e) As used herein, the term "Seller" shall mean the entities listed
in the opening paragraph of this Agreement, however, any representations,
warranties and covenants made by Seller herein are deemed to apply only to what
is owned and to be sold by such Seller.

            (f) As used herein, the term or phrases "Effective Date," "date of
this Agreement" or "date hereof" shall mean the first date Escrow Agent is in
receipt of this Agreement executed by Seller and Purchaser.

  [Remainder of page intentionally left blank - signatures follow on next page]

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       46



      IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement to be
executed in their names by their respective duly authorized representatives.

                               SELLER:

                               DUNN FAMILY ASSOCIATES, LLP, an Indiana limited
                               liability partnership

                               By: /s/: JOHN M. DUNN
                                   --------------------
                               Name: John M. Dunn
                               Title: Manager

                               Date of Execution: May 19, 2004

                               HOTEL INVESTMENT, LLC, an Indiana limited
                               liability company

                               By: /s/: JOHN M. DUNN
                                   --------------------------------
                               Name: John M. Dunn
                               Title: Manager

                               Date of Execution: May 19, 2004

                               ENCORE HOTEL OF BLOOMINGTON, INC., an Indiana
                               corporation

                               By: /s/: JOHN M. DUNN
                                   ----------------------------------
                               Name: John M. Dunn
                               Title: President

                               Date of Execution: May 19, 2004

                               ENCORE HOTEL OF TERRE HAUTE, LLC, an Indiana
                               limited liability company

                               By: /s/: JOHN M. DUNN
                                   -----------------------------------
                               Name: John M. Dunn
                               Title: Manager
                               Date of Execution: May 19, 2004

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       47



                               ENCORE RESIDENTIAL HOTEL OF EVANSVILLE, LLC,
                               an Indiana limited liability company

                               By: /s/: JOHN M. DUNN
                                   ------------------------------
                               Name: John M. Dunn
                               Title: Manager

                               Date of Execution: May 19, 2004

                               ENCORE HOTEL OF COLUMBUS, LLC, an Indiana
                               limited liability company

                               By: /s/: JOHN M. DUNN
                                   --------------------------------
                               Name: John M. Dunn
                               Title: Manager

                               Date of Execution: May 19, 2004

                               ENCORE HOTEL OF HORSE CAVE, LLC, a limited
                               liability company

                               By: /s/: JOHN M. DUNN
                                   --------------------
                               Name: John M. Dunn
                               Title: Manager

                               Date of Execution: May 19, 2004

                               ENCORE HOTEL OF PRINCETON II, LLC, an Indiana
                               limited liability company

                               By: /s/: JOHN M. DUNN
                                   ---------------------------------
                               Name: John M. Dunn
                               Title: Manager

                               Date of Execution: May 19, 2004

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       48



                               ENCORE DUNN HOSPITALITY GROUP, LLC, an
                               Indiana limited liability company

                               By: /s/: JOHN M. DUNN
                                   ----------------------------
                               Name: John M. Dunn
                               Title: Manager

                               Date of Execution: May 19, 2004

                               PURCHASER:

                               ASHFORD HOSPITALITY LIMITED PARTNERSHIP,
                               a Delaware limited partnership

                               By: Ashford OP General Partner, LLC,
                                   a Delaware limited liability company

                                   By: /s/ DAVID A. BROOKS
                                       ----------------------------
                                   Name: David A. Brooks
                                   Title: Vice President

                                          Date of Execution: May 19, 2004

                              ESCROW AGENT:

                              Chicago Title Insurance Company (Escrow Agent
                              hereby acknowledges receipt of a fully executed
                              Agreement from both Seller and Purchaser for
                              purposes of Sections 10.10 and 10.17 hereof.)

                              By: /s/ FRANNY TRATAROS
                                  ----------------------------
                              Name: Franny Trataros
                              Title: Vice President
                              Date: May 20, 2004

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       49



                             RECEIPT OF ESCROW AGENT

      Chicago Title Insurance Company, as Escrow Agent, acknowledges receipt of
the sum of $300,000.00 by check or by wire transfer from Purchaser as described
in Section 2.2 of the foregoing Agreement of Purchase and Sale, said check or
wire transfer to be held pursuant to the terms and provisions of said Agreement.

      DATED this 24th day of May, 2004.

                                     CHICAGO TITLE INSURANCE COMPANY

                                     By: /s/ FRANNY TRATAROS
                                         ----------------------------------
                                     Name: Franny Trataros
                                     Title: Vice President

AGREEMENT OF PURCHASE AND SALE
ASHFORD/DUNN PORTFOLIO

                                       50

EX-10.18.1

                                                                 EXHIBIT 10.18.1

                FIRST AMENDMENT TO AGREEMENT OF PURCHASE AND SALE

      THIS FIRST AMENDMENT TO AGREEMENT OF PURCHASE AND SALE (this "AMENDMENT")
is made as of the 1st day of July, 2004, by and between ASHFORD HOSPITALITY
LIMITED PARTNERSHIP, a Delaware limited partnership ("PURCHASER"), and DUNN
FAMILY ASSOCIATES, LLP, an Indiana limited liability partnership, HOTEL
INVESTMENT, LLC, an Indiana limited liability company, ENCORE HOTELS OF
BLOOMINGTON, INC., an Indiana corporation, ENCORE HOTELS OF TERRE HAUTE, LLC, an
Indiana limited liability company, ENCORE RESIDENTIAL HOTEL OF EVANSVILLE, LLC,
an Indiana limited liability company, ENCORE HOTELS OF COLUMBUS, LLC, an Indiana
limited liability company, ENCORE HOTELS OF HORSE CAVE, LLC, a Kentucky limited
liability company, ENCORE HOTELS OF PRINCETON II, LLC, an Indiana limited
liability company, and ENCORE DUNN HOSPITALITY GROUP, LLC, an Indiana limited
liability company (collectively, "SELLER").

                                    RECITALS

      A. Seller and Purchaser have entered into that certain Agreement of
Purchase and Sale dated as of May 19, 2004 (the "PURCHASE AGREEMENT"), which
provides, among other things, for the Purchaser's purchase of the Property from
the Seller.

      B. Seller and Purchaser wish to modify and amend the Purchase Agreement
(as amended, the "AGREEMENT") as hereinafter provided.

      NOW, THEREFORE, in consideration of the mutual covenants provided herein
and for other good and valuable consideration, the receipt and sufficiency of
which Seller and Purchaser hereby acknowledge, Seller and Purchaser hereby agree
as follows:

      1. Definitions. Capitalized terms not otherwise defined in this Amendment
shall have the meanings given to them in the Purchase Agreement.

      2. Study Period. The Study Period is hereby extended twenty (20) days,
expiring 5:00 pm Dallas, Texas time on Monday, July 26, 2004 (the "EXTENDED
STUDY PERIOD"). Any rights of Purchaser to terminate the Agreement prior to the
expiration of the Study Period or to make Purchaser Objections are hereby
extended by the Extended Study Period. The foregoing shall not operate to limit
any other right of Purchaser to terminate the Agreement pursuant to any other
provision expressly set forth in the Agreement.

      3. Amendment. The Agreement, as hereby amended, is hereby ratified and
confirmed and shall continue in full force and effect.

      4. Counterparts. The parties hereto may execute this Amendment in one or
more identical counterparts, all of which when taken together will constitute
one and the same instrument. Copied or telecopied signatures may be attached
hereto and shall have the same binding and legal effect as original signatures.

                           [Signature Pages to Follow]



      IN WITNESS WHEREOF, Seller and Purchaser have caused this Amendment to be
executed effective as of the date first above written.

                                            SELLER:

                                            DUNN FAMILY ASSOCIATES, LLP,
                                            an Indiana limited liability
                                            partnership

                                            By: /s/ JOHN M. DUNN
                                            Name: John M. Dunn
                                            Title: Manager

                                            Date of Execution:  July 1, 2004

                                            HOTEL INVESTMENT, LLC, an Indiana
                                            limited liability company

                                            By: /s/ JOHN M. DUNN
                                            Name: John M. Dunn
                                            Title: Manager

                                            Date of Execution:  July 1, 2004

                                            ENCORE HOTEL OF BLOOMINGTON, INC.,
                                            an Indiana corporation

                                            By: /s/ JOHN M. DUNN
                                            Name: John M. Dunn
                                            Title: Manager

                                            Date of Execution:  July 1, 2004

                                            ENCORE HOTEL OF TERRE HAUTE, LLC, an
                                            Indiana limited liability company

                                            By: /s/ JOHN M. DUNN
                                            Name: John M. Dunn
                                            Title: Manager

                                            Date of Execution:  July 1, 2004

                                     Page 2

                                            ENCORE RESIDENTIAL HOTEL OF
                                            EVANSVILLE, LLC, an Indiana limited
                                            liability company

                                            By: /s/ JOHN M. DUNN
                                            Name: John M. Dunn
                                            Title: Manager

                                            Date of Execution:  July 1, 2004

                                            ENCORE HOTEL OF COLUMBUS, LLC, an
                                            Indiana limited liability company

                                            By: /s/ JOHN M. DUNN
                                            Name: John M. Dunn
                                            Title: Manager

                                            Date of Execution:  July 1, 2004

                                            ENCORE HOTEL OF HORSE CAVE, LLC, a
                                            Kentucky limited liability company

                                            By: /s/ JOHN M. DUNN
                                            Name: John M. Dunn
                                            Title: Manager

                                            Date of Execution:  July 1, 2004

                                            ENCORE HOTEL OF PRINCETON II, LLC,
                                            an Indiana limited liability company

                                            By: /s/ JOHN M. DUNN
                                            Name: John M. Dunn
                                            Title: Manager

                                            Date of Execution:  July 1, 2004

                                     Page 3


                                            ENCORE DUNN HOSPITALITY GROUP, LLC,
                                            an Indiana limited liability company

                                            By: /s/ JOHN M. DUNN
                                            Name: John M. Dunn
                                            Title: Manager

                                            Date of Execution:  July 1, 2004

                                     Page 4


                                            PURCHASER:

                                            ASHFORD HOSPITALITY LIMITED
                                            PARTNERSHIP, a Delaware limited
                                            partnership

                                                 By: Ashford OP General Partner
                                                     LLC, a Delaware limited
                                                     liability company

                                                     By: /s/ DAVID A. BROOKS
                                                         ---------------------
                                                             David A. Brooks
                                                             Vice President

                                            Date of Execution: July 2, 2004

                                     Page 5

EX-10.18.2

                                                                 EXHIBIT 10.18.2

               SECOND AMENDMENT TO AGREEMENT OF PURCHASE AND SALE

      THIS SECOND AMENDMENT TO AGREEMENT OF PURCHASE AND SALE (this "AMENDMENT")
is made as of the 23rd day of July, 2004, by and between ASHFORD HOSPITALITY
LIMITED PARTNERSHIP, a Delaware limited partnership ("PURCHASER"), and DUNN
FAMILY ASSOCIATES, LLP, an Indiana limited liability partnership, HOTEL
INVESTMENT, LLC, an Indiana limited liability company, ENCORE HOTELS OF
BLOOMINGTON, INC., an Indiana corporation, ENCORE HOTELS OF TERRE HAUTE, LLC, an
Indiana limited liability company, ENCORE RESIDENTIAL HOTEL OF EVANSVILLE, LLC,
an Indiana limited liability company, ENCORE HOTELS OF COLUMBUS, LLC, an Indiana
limited liability company, ENCORE HOTELS OF HORSE CAVE, LLC, a Kentucky limited
liability company, ENCORE HOTELS OF PRINCETON II, LLC, an Indiana limited
liability company, and ENCORE DUNN HOSPITALITY GROUP, LLC, an Indiana limited
liability company (collectively, "SELLER").

                                    RECITALS

      A. Seller and Purchaser have entered into that certain Agreement of
Purchase and Sale dated as of May 19, 2004, as amended by that certain First
Amendment to Agreement of Purchase and Sale dated July 1, 2004, executed by
Purchaser and Seller (collectively, the "PURCHASE AGREEMENT"), which provides,
among other things, for the Purchaser's purchase of the Property from the
Seller.

      B. Seller and Purchaser wish to modify and amend the Purchase Agreement
(as amended, the "AGREEMENT") as hereinafter provided.

      NOW, THEREFORE, in consideration of the mutual covenants provided herein
and for other good and valuable consideration, the receipt and sufficiency of
which Seller and Purchaser hereby acknowledge, Seller and Purchaser hereby agree
as follows:

      1. Definitions. Capitalized terms not otherwise defined in this Amendment
shall have the meanings given to them in the Purchase Agreement.

      2. Study Period. The Study Period is hereby extended fourteen (14) days,
expiring 5:00 pm Dallas, Texas time on Monday, August 9, 2004 (the "EXTENDED
STUDY PERIOD"). Any rights of Purchaser to terminate the Agreement prior to the
expiration of the Study Period or to make Purchaser Objections are hereby
extended by the Extended Study Period. The foregoing shall not operate to limit
any other right of Purchaser to terminate the Agreement pursuant to any other
provision expressly set forth in the Agreement.

      3. Amendment. The Agreement, as hereby amended, is hereby ratified and
confirmed and shall continue in full force and effect.

      4. Counterparts. The parties hereto may execute this Amendment in one or
more identical counterparts, all of which when taken together will constitute
one and the same instrument. Copied or telecopied signatures may be attached
hereto and shall have the same binding and legal effect as original signatures.

                           [Signature Pages to Follow]



      IN WITNESS WHEREOF, Seller and Purchaser have caused this Amendment to be
executed effective as of the date first above written.

                                 SELLER:

                                 DUNN FAMILY ASSOCIATES, LLP, an Indiana
                                 limited liability partnership

                                 By: /s/ JOHN M. DUNN
                                     ------- ----------------
                                 Name: John M. Dunn
                                 Title: Manager

                                 Date of Execution:  July 23, 2004

                                 HOTEL INVESTMENT, LLC, an Indiana
                                 limited liability company

                                 By: /s/ JOHN M. DUNN
                                     ---------------------------
                                 Name: John M. Dunn
                                 Title: Manager

                                 Date of Execution:  July 23, 2004

                                 ENCORE HOTEL OF BLOOMINGTON, INC.,
                                 an Indiana corporation

                                 By: /s/ JOHN M. DUNN
                                    ---------------------
                                 Name: John M. Dunn
                                 Title: President

                                 Date of Execution:  July 23, 2004

                                 ENCORE HOTEL OF TERRE HAUTE, LLC, an
                                 Indiana limited liability company

                                 By: /s/ JOHN M. DUNN
                                     ------------------------------
                                 Name: John M. Dunn
                                 Title: Manager

                                 Date of Execution:  July 23, 2004

                                     Page 2



                                 ENCORE RESIDENTIAL HOTEL OF EVANSVILLE, LLC,
                                 an Indiana limited liability company

                                 By: /s/ JOHN M. DUNN
                                     ----------------------------
                                 Name: John M. Dunn
                                 Title: Manager

                                 Date of Execution:  July 23, 2004

                                 ENCORE HOTEL OF COLUMBUS, LLC, an Indiana
                                 limited liability company

                                 By: /s/ JOHN M. DUNN
                                     ----------------------------
                                 Name: John M. Dunn
                                 Title: Manager

                                 Date of Execution:  July 23, 2004

                                 ENCORE HOTEL OF HORSE CAVE, LLC,
                                 a Kentucky limited liability company

                                 By: /s/ JOHN M. DUNN
                                     ----------------------------
                                 Name: John M. Dunn
                                 Title: Manager

                                 Date of Execution:  July 23, 2004

                                 ENCORE HOTEL OF PRINCETON II, LLC, an
                                 Indiana limited liability company

                                 By: /s/ JOHN M. DUNN
                                     ----------------------------
                                 Name: John M. Dunn
                                 Title: Manager

                                 Date of Execution:  July 23, 2004

                                     Page 3



                                 ENCORE DUNN HOSPITALITY GROUP, LLC,
                                 an Indiana limited liability company

                                 By: /s/ JOHN M. DUNN
                                     --------------------------------
                                 Name: John M. Dunn
                                 Title: Manager

                                 Date of Execution:  July 23, 2004

                                     Page 4



                                 PURCHASER:

                                 ASHFORD HOSPITALITY LIMITED PARTNERSHIP,
                                 a Delaware limited partnership

                                 By: Ashford OP General Partner LLC,
                                     a Delaware limited liability company

                                     By: /s/ DAVID A. BROOKS
                                         ----------------------------------
                                            David A. Brooks
                                            Vice President

                                 Date of Execution: July 23, 2004

                                     Page 5

EX-10.18.3

                                                                 EXHIBIT 10.18.3

                THIRD AMENDMENT TO AGREEMENT OF PURCHASE AND SALE

      THIS THIRD AMENDMENT TO AGREEMENT OF PURCHASE AND SALE (this "AMENDMENT")
is made as of the 4th day of August, 2004, by and between ASHFORD HOSPITALITY
LIMITED PARTNERSHIP, a Delaware limited partnership ("PURCHASER"), and DUNN
FAMILY ASSOCIATES, LLP, an Indiana limited liability partnership, HOTEL
INVESTMENT, LLC, an Indiana limited liability company, ENCORE HOTELS OF
BLOOMINGTON, INC., an Indiana corporation, ENCORE HOTELS OF TERRE HAUTE, LLC, an
Indiana limited liability company, ENCORE RESIDENTIAL HOTEL OF EVANSVILLE, LLC,
an Indiana limited liability company, ENCORE HOTELS OF COLUMBUS, LLC, an Indiana
limited liability company, ENCORE HOTELS OF HORSE CAVE, LLC, a Kentucky limited
liability company, ENCORE HOTELS OF PRINCETON II, LLC, an Indiana limited
liability company, and DUNN HOSPITALITY GROUP, LLC, an Indiana limited liability
company (collectively, "SELLER").

                                    RECITALS

      A. Seller and Purchaser have entered into that certain Agreement of
Purchase and Sale dated as of May 19, 2004, as amended by that certain First
Amendment to Agreement of Purchase and Sale dated July l, 2004 and that certain
Second Amendment to Agreement of Purchase and Sale dated July 23, 2004, executed
by Purchaser and Seller (collectively, the "PURCHASE AGREEMENT"), which
provides, among other things, for the Purchaser's purchase of the Property from
the Seller.

      B. Seller and Purchaser wish to modify and amend the Purchase Agreement
(as amended, the "AGREEMENT") as hereinafter provided.

      NOW, THEREFORE, in consideration of the mutual covenants provided herein
and for other good and valuable consideration, the receipt and sufficiency of
which Seller and Purchaser hereby acknowledge, Seller and Purchaser hereby agree
as follows:

      1. Definitions. Capitalized terms not otherwise defined in this Amendment
shall have the meanings given to them in the Agreement.

      2. Purchase Price. The definition of "Purchase Price" is hereby amended
and restated to be as follows:

      "Purchase Price" shall mean $62,000,000.00 payable in the manner described
      in Section 2.2 hereof.

      3. Common Partnership Units.

            (a) At Closing, Purchaser shall issue to Seller a number of "Common
Partnership Units" (as defined and described in the agreement of limited
partnership of Purchaser) in Purchaser equal to the quotient (rounded to the
nearest whole number) resulting from $3,000,000.00 divided by Nine and No/100ths
Dollars ($9.00).



            (b) Subsection 2.2(b) of the Agreement is hereby amended to insert
the following sentence at the beginning of such paragraph: "Purchaser shall
receive a credit against the Purchase Price in an amount equal to $3,000,000.00,
which is the aggregate value of the Common Partnership Units to be issued to
Seller."

      4. Manager. Pursuant to Section 5.1(m) of the Agreement, Purchaser hereby
elects that Dunn Hospitality Dunn Hospitality Group Manager, Inc. ("Manager")
manage the Property pursuant to the New Management Agreements.

      5. PIP Requirements. Section 7.8 of the Agreement is hereby deleted.
Manager shall manage the performance and completion of the product improvement
plan requirements imposed by the Franchisor under the Franchise Agreements in
connection with the contemplated change in ownership of the Property (the
"PIPS"). Manager shall be entitled to receive a Ten Percent (10%) project
management fee based on the cost of the PIPS. Manager agrees to pay for the
aggregate cost to complete the PIPs that exceeds an amount equal to the
difference between the budgeted amount for the completion of the PIPS to be
agreed to by Purchaser and Manager (the maximum amount of which is currently
estimated to be $6,500,000.00 exclusive of the project management fee) (the "PIP
Budget") less the cost of any item in the PIPS that may be waived or deferred by
the applicable Franchisor after agreement to the PIP Budget (the "PIP Excess"),
and Manager agrees to indemnify and reimburse Purchaser and its Affiliates for
any costs or expenses incurred by Purchaser or any of its Affiliates which
constitute payment of all or any part of the PIP Excess (the "Reimbursement
Obligation"). Manager and John M. Dunn shall jointly and severally guarantee the
payment of the PIP Excess and the Reimbursement Obligation (the "Guaranty"). The
Guaranty is subject to approval by the parties to the PIP Budget. Seller,
Manager and Purchaser shall use good faith commercially efforts to agree to the
PIP Budget prior to Closing, upon which the Reimbursement Obligation shall be
based, or after Closing pursuant to the approval terms applicable to budgets
contained in the New Management Agreement. The Guaranty shall be secured by a
pledge by Seller of the Common Partnership Units issued to Seller at Closing
("Pledge Agreement"). Additionally, the parties agree that to the extent of any
Reimbursement Obligation, Ashford TRS Lessee LLC, as "owner" under the New
Management Agreements, may offset such Reimbursement Obligation against any
management fees otherwise due and owing to Manager under the New Management
Agreements. The provisions of this Paragraph 5 shall survive the Closing.

      6. Study Period. Seller and Purchaser agree that the Study Period has
expired on the date hereof.

      7. Repairs. Manager, at its sole cost and expense, shall complete the
repairs to the Property described on Exhibit A attached hereto within the time
frames set forth for the completion of the applicable PIPs. The provisions of
this Paragraph 7 shall survive the Closing.

      8. Closing Date. The Closing Date shall occur on a date no later than
August 31, 2004; provided, however, Purchaser shall have the right, upon written
notice to Seller, to extend the Closing Date for a period not to exceed thirty
(30) days in order to finalize Purchaser's loan documents for the acquisition of
the Property.

                               Exhibit 8 - Page 2



      9. Conditions to Closing. The following conditions precedent are hereby
added to Section 5.1 of the Agreement:

            (o) Seller and Purchaser shall have agreed upon the form of
            documentation required in connection with the issuance of the Common
            Partnership Units to Seller at Closing.

            (p) Seller and Purchaser shall have agreed upon the form of Guaranty
            and Pledge Agreement in connection with the Reimbursement
            Obligation.

            (q) Purchaser shall be satisfied, in its sole and absolute
            discretion, as to the results of a limited subsurface investigation
            at and around the elevator pits at the Hampton Inn Terre Haute hotel
            to determine the environmental impact of a leaking hydraulic system
            for the elevators.

      10. Conflicts. Except to the extent expressly modified by this Amendment,
the terms, provisions and conditions of the Agreement are hereby ratified and
confirmed and shall remain in full force and effect, unmodified by the terms and
provisions hereof and, in the event of any conflict between the terms and
provisions of the Agreement and this Amendment, the terms and provisions of this
Amendment shall be deemed controlling. In the event of any conflict between the
terms and provisions of the New Management Agreement and this Amendment, the
terms and provisions of this Amendment shall be deemed controlling.

      11. Counterparts. The parties hereto may execute this Amendment in one or
more identical counterparts, all of which when taken together will constitute
one and the same instrument. Copied or telecopied signatures may be attached
hereto and shall have the same binding and legal effect as original signatures.

                               Exhibit 8 - Page 3



      IN WITNESS WHEREOF, Seller and Purchaser have caused this Amendment to be
executed effective as of the date first above written.

                                SELLER:

                                DUNN FAMILY ASSOCIATES, LLP, an Indiana
                                limited liability partnership

                                By: /s/ JOHN M. DUNN
                                    ------------------------
                                Name: John M. Dunn
                                Title: Manager

                                Date of Execution:  August 4, 2004

                                HOTEL INVESTMENT, LLC, an Indiana limited
                                liability company

                                By: /s/ JOHN M. DUNN
                                    ------------------------------
                                Name: John M. Dunn
                                Title: Manager

                                Date of Execution:  August 4, 2004

                                ENCORE HOTEL OF BLOOMINGTON, INC.,
                                an Indiana corporation

                                By: /s/ JOHN M. DUNN
                                    ---------------------------
                                Name: John M. Dunn
                                Title: President

                                Date of Execution:  August 4, 2004

                               Exhibit 8 - Page 4



                                ENCORE HOTEL OF TERRE HAUTE, LLC, an
                                Indiana limited liability company

                                By: /s/ JOHN M. DUNN
                                    ---------------------------
                                Name: John M. Dunn
                                Title: Manager

                                Date of Execution:  August 4, 2004

                                ENCORE RESIDENTIAL HOTEL OF EVANSVILLE, LLC,
                                an Indiana limited liability company

                                By: /s/ JOHN M. DUNN
                                    ----------------------------
                                Name: John M. Dunn
                                Title: Manager

                                Date of Execution:  August 4, 2004

                                ENCORE HOTEL OF COLUMBUS, LLC, an Indiana
                                limited liability company

                                By: /s/ JOHN M. DUNN
                                    -------------------------
                                Name: John M. Dunn
                                Title: Manager

                                Date of Execution:  August 4, 2004

                                ENCORE HOTEL OF HORSE CAVE, LLC, a Kentucky
                                limited liability company

                                By: /s/ JOHN M. DUNN
                                    ----------------
                                Name: John M. Dunn
                                Title: Manager

                                Date of Execution:  August 4, 2004

                               Exhibit 8 - Page 6



                                ENCORE HOTEL OF PRINCETON II, LLC, an Indiana
                                limited liability company

                                By: /s/ JOHN M. DUNN
                                    --------------------
                                Name: John M. Dunn
                                Title: Manager

                                Date of Execution:  August 4, 2004

                                ENCORE DUNN HOSPITALITY GROUP, LLC,
                                an Indiana limited liability company

                                By: /s/ JOHN M. DUNN
                                    ----------------
                                Name: John M. Dunn
                                Title: Manager

                                Date of Execution:  August 4, 2004

                                Exhibit 8 - Page 6



                                PURCHASER:

                                ASHFORD HOSPITALITY LIMITED PARTNERSHIP,
                                a Delaware limited partnership

                                By: /s/ DAVD A. BROOKS
                                    -------------------------
                                Name: David A. Brooks
                                Title: Vice President

                                Date of Execution:  August 4, 2004

                               Exhibit 8 - Page 7

EX-10.18.4

                                                                 EXHIBIT 10.18.4

               FOURTH AMENDMENT TO AGREEMENT OF PURCHASE AND SALE

         THIS FOURTH AMENDMENT TO AGREEMENT OF PURCHASE AND SALE (this
"AMENDMENT") is made as of the 2nd day of September, 2004, by and between
ASHFORD HOSPITALITY LIMITED PARTNERSHIP, a Delaware limited partnership
("PURCHASER"), and DUNN FAMILY ASSOCIATES, LLP, an Indiana limited liability
partnership, as the sole Beneficiary with sole management and control under that
certain Land Trust Agreement dated July 16, 1990, HOTEL INVESTMENT, LLC, an
Indiana limited liability company, ENCORE HOTELS OF BLOOMINGTON, INC., an
Indiana corporation, ENCORE HOTELS OF TERRE HAUTE, LLC, an Indiana limited
liability company, ENCORE RESIDENTIAL HOTELS OF EVANSVILLE, LLC, an Indiana
limited liability company, ENCORE HOTELS OF COLUMBUS, LLC, an Indiana limited
liability company, ENCORE HOTELS OF HORSE CAVE, LLC, a Kentucky limited
liability company, ENCORE HOTELS OF PRINCETON II, LLC, an Indiana limited
liability company, and DUNN HOSPITALITY GROUP, LLC, an Indiana limited liability
company (collectively, "SELLER").

                                    RECITALS

         A. Seller and Purchaser have entered into that certain Agreement of
Purchase and Sale dated as of May 19, 2004, as amended by that certain First
Amendment to Agreement of Purchase and Sale dated July 1, 2004 that certain
Second Amendment to Agreement of Purchase and Sale dated July 23, 2004, and that
certain Third Amendment to Agreement of Purchase and Sale dated August 4, 2004,
executed by Purchaser and Seller (collectively, the "PURCHASE AGREEMENT"), which
provides, among other things, for the Purchaser's purchase of the Property from
the Seller.

         B. Seller and Purchaser wish to modify and amend the Purchase Agreement
(as amended, the "AGREEMENT") as hereinafter provided.

         NOW, THEREFORE, in consideration of the mutual covenants provided
herein and for other good and valuable consideration, the receipt and
sufficiency of which Seller and Purchaser hereby acknowledge, Seller and
Purchaser hereby agree as follows:

         1. Definitions. Capitalized terms not otherwise defined in this
Amendment shall have the meanings given to them in the Agreement. The following
definitions are added and incorporated into Section 1.1 of the Agreement:

          "COMMON STOCK" has the meaning given such term in the attached Exhibit
1 (Registration Rights Agreement).

         "COMPANY" shall mean Ashford Hospitality Trust, Inc., a Maryland
corporation.

         "DUNN APPROVED TRANSFEREE" has the meaning given such term in the
attached Exhibit 2 (Partnership Amendment).

          "GUARANTY" shall mean the Guaranty as defined in the Third Amendment
to Agreement of Purchase and Sale.

Fourth Amendment to Agreement
of Purchase and Sale

                                      -1-


         "PARTNERSHIP AGREEMENT" shall mean the Second Amended and Restated
Agreement of Limited Partnership of Purchaser, as the same has been and may be
amended from time to time.

         "PLEDGE AGREEMENT" shall mean have the meaning ascribed to such term in
the Third Amendment to Agreement of Purchase and Sale.

         "REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights
Agreement attached hereto as Exhibit 1.

         "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.

         "UNIT RECIPIENT" shall mean any Seller who shall acquire and have any
Unit issued to it by Purchaser pursuant to this Agreement.

         "UNITS" shall mean "COMMON PARTNERSHIP UNITS" in Purchaser, as defined
and described in the Partnership Agreement.

         2. Subsection 2.2(b) of the Agreement is hereby revised and amended to
insert the following as the last sentence of such Subsection:

                           "The percentage of the total amount of Units issued
                  pursuant to this Agreement as allocated to each Unit Recipient
                  is set forth on Schedule 1 attached hereto."

         3. ARTICLE III of the Agreement is hereby revised to add a new Section
3.31 as follows:

                           "3.31 Investment Representations and Warranties. Each
         Unit Recipient represents, warrants and covenants as follows:

                           (a) Unit Recipient is an `ACCREDITED INVESTOR' within
                  the meaning of Rule 501(a) promulgated under the Securities
                  Act, and understands the risks of, and other considerations
                  relating to, the purchase of the Units. Unit Recipient, by
                  reason of its business and financial experience, together with
                  the business and financial experience of those persons, if
                  any, retained by it to represent or advise it with respect to
                  its investment in the Units, (i) has such knowledge,
                  sophistication and experience in financial and business
                  matters and in making investment decisions of this type, (ii)
                  is capable of evaluating the merits and risks of an investment
                  in Purchaser and of making an informed investment decision,
                  (iii) is capable of protecting its own interest or has engaged
                  representatives or advisors to assist it in protecting its
                  interests and (iv) is capable of bearing the economic risk of
                  such investment.

                           (b) The Units to be issued to Unit Recipient will be
                  acquired by Unit Recipient for its own account for investment
                  only and not with a view to, or with any intention of, a
                  distribution or resale thereof, in whole or in part, or the
                  grant of any participation therein, other than the potential
                  distribution of the Units to the

Fourth Amendment to Agreement
of Purchase and Sale

                                      -2-


                  respective partners or members of Unit Recipient, as
                  applicable, following the expiration of the lock-up period
                  provided in Section 6.15 of this Agreement.

                           (c) Unit Recipient acknowledges that (i) the Units to
                  be issued to Unit Recipient have not been registered under the
                  Securities Act or state securities laws by reason of a
                  specific exemption or exemptions from registration under the
                  Securities Act and applicable state securities laws, (ii)
                  Purchaser's reliance on such exemptions is predicated in part
                  on the accuracy and completeness of the representations and
                  warranties of Unit Recipient contained herein, (iii) such
                  Units, therefore, cannot be resold unless registered under the
                  Securities Act and applicable state securities laws (unless an
                  exemption from registration is available), (iv) there is no
                  public market for such Units, and (v) Purchaser has no
                  obligation or intention to register such Units for resale
                  under the Securities Act or any state securities laws or to
                  take any action that would make available any exemption from
                  the registration requirements of such laws. Unit Recipient
                  hereby acknowledges that because of the restrictions on
                  transfer or assignment of such Units to be issued hereunder
                  (such restrictions on transfer or assignment being set forth
                  in this Agreement and the Partnership Agreement), Unit
                  Recipient may have to bear the economic risk of the investment
                  commitment evidenced by this Agreement and any Units purchased
                  hereby for an indefinite period of time, although (x) Units
                  may be redeemed at the request of the holder thereof for cash
                  or (at the option of the general partner of Purchaser) for
                  Common Stock of Company pursuant to the terms of the
                  Partnership Agreement (which redemption rights may be limited
                  or modified pursuant to the terms of the Partnership
                  Agreement) and (y) Company and Unit Recipient will execute and
                  deliver a Registration Rights Agreement in the form attached
                  hereto as Exhibit 1.

                           (d) The address set forth for Unit Recipient in this
                  Agreement is the address of the Unit Recipient's principal
                  place of business or residence, as applicable, and Unit
                  Recipient has no present intention of becoming a resident of
                  any country, state or jurisdiction other than the country and
                  state in which such principal place of business or residence,
                  as applicable, is sited."

         4. ARTICLE IV of the Agreement is hereby revised to add a new Section
4.6 as follows:

                           "4.6 Issuance of Units. Capitalized terms used in
                  this Section 4.6 and not otherwise defined shall have the
                  meaning given such terms in the Partnership Agreement.

                           (a) The Partnership Agreement shall be amended
                  effective with the Closing Date in the form attached hereto as
                  Exhibit 2 (the `PARTNERSHIP AMENDMENT'), to provide for the
                  issuance of the Units to Unit Recipients as provided herein.
                  The Units to be issued in connection with the transactions
                  herein contemplated have been, or prior to the Closing Date
                  will have been, duly authorized for issuance by Purchaser to
                  Unit Recipients and, on the Closing Date,

Fourth Amendment to Agreement
of Purchase and Sale

                                      -3-


                  will be validly issued. The rights and obligations of Unit
                  holders will be as set forth in the Partnership Agreement,
                  provided that, after the expiration of the lock-up period as
                  provided in Section 6.15 of this Agreement and the Lock-Up
                  Agreement, a Transfer of the Units by Unit Recipients to any
                  Dunn Approved Transferee shall be excepted from the
                  restrictions of Subsections 9.5(a) and 9.6(a)(i) of the
                  Partnership Agreement.

                           (b) With respect to the transfer of Units by Unit
                  Recipients to any Dunn Approved Transferee after the lock-out
                  period as contemplated by Subsection 4.6(a) of this Agreement,
                  the parties further agree that the provisions relating to a
                  `Transfer' in Section 9.5 and Section 9.6 of the Partnership
                  Agreement will be deemed to have been satisfied or discharged
                  as to any such Transfer to such Dunn Approved Transferee upon
                  the following:

                  (i)      such Dunn Approved Transferee completes, executes and
                           delivers to the Partnership the Subscriber
                           Questionnaire in the form attached hereto as Exhibit
                           3;

                  (ii)     such Dunn Approved Transferee executes and delivers
                           to the Partnership the Power of Attorney and Limited
                           Partner Signature Page in the form attached hereto as
                           Exhibit 4;

                  (iii)    such Dunn Approved Transferee executes and delivers
                           to the Partnership a letter in the form of Exhibit 6
                           attached hereto, containing the representations,
                           warranties, and agreement set forth in Section 3.31;

                  (iv)     such Dunn Approved Transferee executes and delivers
                           to Company the signature page to the Registration
                           Rights Agreement, the form of which is attached
                           hereto as Exhibit 1;

                  (v)      such Dunn Approved Transferee is an `accredited
                           investor' within the meaning of Rule 501 of the
                           Securities Act, as evidenced by the Subscriber
                           Questionnaire; and

                  (vi)     the Partnership shall not have received an opinion
                           from legal counsel that there has been a change in
                           the Securities Act or any applicable federal or state
                           securities or `Blue Sky' law, (including investment
                           suitability standards) which would require
                           registration under the Securities Act of the Units
                           being transferred to the Dunn Approved Transferee."

         5. ARTICLE V of the Agreement is hereby revised to add a new Subsection
5.1(o) as follows:

                  "(o) Offering of Units. There shall have been no change in any
         securities or related law or interpretation, nor any change in Seller's
         status as an `accredited investor' under the Securities Act that would
         render the consummation of the conveyance of the

Fourth Amendment to Agreement
of Purchase and Sale

                                      -4-


         Property for Units, as contemplated by this Agreement, a violation of
         any such laws or interpretations thereof."

         6. ARTICLE VI of the Agreement is hereby revised as follows:

         a. A new Section 6.10 is added as follows:

                  "6.10 Prospective Subscriber Questionnaire. Each Unit
         Recipient shall deliver to Purchaser, at or prior to the expiration of
         the Study Period, a Prospective Subscriber Questionnaire with respect
         to such Unit Recipient in substantially the form attached hereto and
         made a part hereof as Exhibit 3. Each Unit Recipient shall also deliver
         to Purchaser, upon Purchaser's reasonable request, such other
         information, certificates and materials as Purchaser may reasonably
         request in connection with offering the Units without registration
         under the Securities Act and the securities laws of applicable states
         and other jurisdictions."

         b. A new Section 6.11 is added as follows:

                  "6.11 Delivery of Tax Information. In connection with the
         issuance of Units to Unit Recipients, each Unit Recipient shall deliver
         to Purchaser no later than the Closing, at such Unit Recipient's sole
         cost and expense, the following information in a form reasonably
         determined by the Unit Recipients:

                           (a) depreciation and amortization schedules for all
                  assets constituting or otherwise included in such Unit
                  Recipient's respective Property (the `Assets'), as kept for
                  both book and tax purposes, showing original basis and
                  accumulated depreciation or amortization;

                           (b) basis information (computed for both book and tax
                  purposes, if different) for all non-depreciable,
                  non-amortizable Assets;

                           (c) the adjusted basis of such Unit Recipient's
                  respective partners or members, as the case may be, in the
                  Assets;

                           (d) calculations of the estimated amounts of gain to
                  be realized and recognized by such Unit Recipient's respective
                  partners or members, as the case may be, as a result of the
                  transactions contemplated by this Agreement, including the
                  disclosure of the method by which such amounts are calculated;

                           (e) breakouts of basis information for any other
                  balance sheet accounts of such Unit Recipient for which
                  information has not been provided pursuant to the other
                  clauses of this Section;

                           (f) the names and numbers of such Unit Recipient's
                  respective partners or members, as the case may be; and

Fourth Amendment to Agreement
of Purchase and Sale

                                      -5-


                           (g) for each of such Unit Recipient's respective
                  partners or members, as the case may be, that is a partnership
                  (or other entity treated as a partnership for federal income
                  tax purposes), S corporation or grantor trust (any of the
                  foregoing, a `LOOK-THROUGH ENTITY'), and for each look-through
                  entity that holds an indirect interest in such Unit Recipient
                  through other look-through entities, the names and numbers of
                  such entity's partners, shareholders or grantors."

         c. A new Section 6.12 is added as follows:

                  "6.12 Cooperation on Tax Matters. In connection with the
         issuance of Units to the Unit Recipients, each Unit Recipient shall
         provide reasonable assistance to Company to enable Company to prepare
         its tax returns. Each Unit Recipient shall deliver to Company copies of
         its federal, state and local tax returns (including information
         returns) for the tax year in which the Closing occurs, including any
         amendments thereto, and each Unit Recipient shall notify Company, in
         writing, of any audits of such returns, or of any audits for other tax
         years that could affect the amounts shown on the returns, for the tax
         year in which the Closing occurs. Copies of such returns shall be
         provided to Company in draft form at least twenty (20) days before they
         are filed and in final form upon filing. Each Unit Recipient shall also
         provide to Company, promptly upon receipt, any notice that such Unit
         Recipient receives from any of its respective partners or members, as
         the case may be, that such partner or member intends to prepare its tax
         returns in a manner inconsistent with the returns filed by such Unit
         Recipient. The parties understand and agree that the tax returns filed
         by each Unit Recipient will be substantially consistent with the
         information provided to Company pursuant to this Agreement. The
         provisions of this Section shall survive the Closing."

         d. A new Section 6.13 is added as follows:

                  "6.13 Information Regarding the Restrictions on Beneficial
         Ownership of Units. From the date of this Agreement until the Closing,
         and then so long as a Unit Recipient holds any Units, such Unit
         Recipient shall promptly provide Purchaser with written notice of any
         change in the identity or number of its respective partners or members,
         as the case may be (or of its indirect partners or members as
         identified pursuant to this Agreement), and shall provide the
         information called for in this Amendment with respect to any such
         change. In addition, so long as a Unit Recipient holds any Units, any
         such Unit Recipient shall not, without the prior written consent of
         Purchaser: (i) admit additional partners or members, (ii) permit the
         transfer of interests in such Unit Recipient to a look-through entity,
         or (iii) permit any transfer of interests in such Unit Recipient if, as
         a result of the admissions or transfers described in the foregoing (i)
         through (iii), the number of direct or indirect beneficial owners in
         such Unit Recipient would increase. Each Unit Recipient shall use its
         best efforts to secure the compliance of any look-through entities that
         hold direct or indirect interests in such Unit Recipient with the
         requirements of this Section as if such requirements applied directly
         to such entities. Each Unit Recipient acknowledges that the provisions
         of this Section are imposed to aid Purchaser in avoiding taxation as a
         corporation for federal income tax purposes, agrees that monetary
         damages may be insufficient to remedy the potential harm caused by any

Fourth Amendment to Agreement
of Purchase and Sale

                                      -6-


         breach of the provisions of this Section, and agrees that injunctive
         relief, including specific performance or another equitable remedy
         would be an appropriate remedy. The provisions of this Section shall
         survive the Closing."

         e. A new Section 6.14 is added as follows:

                  "6.14 Partnership Agreement. Each Unit Recipient agrees to be
         bound by and subject to all of the terms of the Partnership Agreement,
         including the grant of the Power of Attorney to the general partner of
         the Partnership. At or prior to the Closing, each Unit Recipient shall
         execute and deliver to Purchaser a Power of Attorney and Limited
         Partner Signature Page in substantially the form attached hereto and
         made a part hereof as Exhibit 4."

         f. A new Section 6.15 is added as follows:

                  "6.15 Lock Up Agreement. Each Unit Recipient acknowledges and
         agrees that all Units issued to it at Closing must be held by such Unit
         Recipient for a period of one (1) year from the Closing Date with
         respect to one-half (1/2) of the Units, and two (2) years with respect
         to the remaining one-half (1/2) of the Units, and, during such period,
         may not be assigned, pledged, sold or otherwise transferred in whole or
         in part or subjected to any claim, lien, pledge, voting agreement,
         option, charge, security interest, mortgage, deed of trust,
         encumbrance, rights of assignment, purchase rights or rights of any
         nature whatsoever of any third party. Accordingly, at or prior to the
         Closing, each Unit Recipient shall execute and deliver to Purchaser a
         Lock Up Agreement (the "LOCK UP AGREEMENT") in substantially the form
         attached hereto and made a part hereof as Exhibit 5."

         g. A new Section 6.16 is added as follows:

                  "6.16 Pledge Agreement. At the time of the execution of the
         Guaranty, each Unit Recipient agrees to pledge its respective Units to
         Purchaser as security for the Guaranty upon the terms and provisions as
         set forth in the Pledge Agreement, in the form attached hereto and made
         a part hereof as Exhibit 7, and accordingly each Unit Recipient shall
         execute and deliver to Purchaser the Pledge Agreement at Closing or at
         such later date that the Guaranty is executed."

         h. A new Section 6.17 is added as follows:

                  "6.17 Guaranty. In the event of a Reimbursement Obligation,
         Dunn Hospitality Group Manager, Inc. and John M. Dunn shall guarantee
         payment of the Reimbursement Obligation to Purchaser, and any costs,
         fees or other amounts arising in connection with such guarantee, in
         accordance with and as provided and described in the Guaranty, in the
         form attached hereto and made a part hereof as Exhibit 8 (the
         "GUARANTY"), subject to the conditions set forth in the Guaranty and
         Seller shall cause to be executed and delivered to Purchaser the
         Guaranty at Closing or at such later date as the applicable parties
         agree to the PIP Budget (as defined in the Guaranty)."

Fourth Amendment to Agreement
of Purchase and Sale

                                      -7-


         i. The following sentence is added to the end of ARTICLE VI:

                  "The foregoing covenants of Seller and the Unit Recipients are
         for the benefit of Purchaser and Company or any of their assignees of
         their respective rights under this Agreement."

         7. ARTICLE VII of the Agreement is revised as follows:

         a. Section 7.2 is revised to change the Subparagraph (ll) to (rr) and
to add the following new Subsections 7.2(ll), 7.2(mm), 7.2(nn), 7.2(oo), 7.2(pp)
and 7.2(qq):

                  "7.2(ll) The Prospective Subscriber Questionnaire.

                  7.2(mm) The Lock-Up Agreement restricting transfer of Units.

                  7.2(nn) The Registration Rights Agreement.

                  7.2(oo) The Power of Attorney and Limited Partner Signature
                  Page

                  7.2(pp) The Pledge Agreement, if applicable in accordance with
                  Section 6.16.

                  7.2(qq) The Guaranty, if applicable in accordance with Section
                  6.17."

         b. Section 7.3 is revised to change subparagraph (e) to (g) and to add
the following new Subsections 7.3(e) and 7.3(f):

                           "(e) To Unit Recipients, the Partnership Amendment
                  executed by the general partner of Purchaser.

                           (f) To Unit Recipients, the Registration Rights
                  Agreement executed by Company."

         8. Conflicts. Except to the extent expressly modified by this
Amendment, the terms, provisions and conditions of the Agreement are hereby
ratified and confirmed and shall remain in full force and effect, unmodified by
the terms and provisions hereof and, in the event of any conflict between the
terms and provisions of the Agreement and this Amendment, the terms and
provisions of this Amendment shall be deemed controlling.

         9. Counterparts. The parties hereto may execute this Amendment in one
or more identical counterparts, all of which when taken together will constitute
one and the same instrument. Copied or telecopied signatures may be attached
hereto and shall have the same binding and legal effect as original signatures.

Fourth Amendment to Agreement
of Purchase and Sale

                                      -8-


     [signature page to Fourth Amendment to Agreement of Purchase and Sale]

         IN WITNESS WHEREOF, Seller and Purchaser have caused this Amendment to
be executed effective as of the date first above written.

                                    SELLER:

Seller:                    Dunn Hospitality Group, LLC
Purchaser:                 Ashford Louisville LP, d/b/a Ashford Louisville
                           Limited Partnership
Property Address:          819 Phillips Lane, Louisville, Kentucky  40209
Hotel:                     Courtyard Inn

                                       DUNN HOSPITALITY GROUP, LLC
                                       By: Dunn Hospitality Group Manager, Inc.,
                                       Its Manager

                                       /s/ JOHN M. DUNN
                                       ----------------
                                       John M. Dunn, President

Seller:                    Encore Hotels of Bloomington, Inc.
Purchaser:                 Ashford Bloomington LP
Property Address:          310 South College Avenue, Bloomington, IN  47403
Hotel:                     Courtyard Inn

                                       ENCORE HOTELS OF BLOOMINGTON, INC.

                                       /s/ JOHN M. DUNN
                                       ----------------
                                       John M. Dunn, President

Seller:                    Encore Hotels of Columbus, LLC
Purchaser:                 Ashford Tipton Lakes LP
Property Address:          3888 Mimosa Drive, Columbus, IN  47201
Hotel:                     Courtyard Inn

                                       ENCORE HOTELS OF COLUMBUS, LLC
                                       By: Dunn Hospitality Group Manager, Inc.,
                                       its Manager

                                       /s/ JOHN M. DUNN
                                       ----------------
                                       John M. Dunn, President

Fourth Amendment to Agreement
of Purchase and Sale

                                      -9-


Seller:                    Encore Hotels of Horse Cave, LLC
Purchaser:                 Ashford Horse Cave Limited Partnership
Property Address:          750 Flintridge Road, Horse Cave, Kentucky  42749
Hotel:                     Hampton Inn

                                       ENCORE HOTELS OF HORSE CAVE, LLC
                                       By: Dunn Hospitality Group Manager, Inc.,
                                       Its Manager

                                       /s/ JOHN M. DUNN
                                       ----------------
                                       John M. Dunn, President

Seller:                    Encore Hotels of Princeton II, LLC
Purchaser:                 Ashford Evansville II LP
Property Address:          2828 Dixon, Princeton, Indiana  47670
Hotel:                     Fairfield Inn

                                       ENCORE HOTELS OF PRINCETON II, LLC
                                       By: Dunn Hospitality Group Manager, Inc.,
                                       Its Manager

                                       /s/ JOHN M. DUNN
                                       ----------------
                                       John M. Dunn, President

Seller:                    Encore Hotels of Terre Haute, LLC
Purchaser:                 Ashford Terre Haute LP
Property Address:          3325 U.S. 41 South, Terre Haute, Indiana  47802
Hotel:                     Hampton Inn

                                       ENCORE HOTELS OF TERRE HAUTE, LLC
                                       By: Dunn Hospitality Group Manager, Inc.,
                                       Its Manager

                                       /s/ JOHN M. DUNN
                                       ----------------
                                       John M. Dunn, President

Fourth Amendment to Agreement
of Purchase and Sale

                                      -10-


Seller:                    Encore Residential Hotels of Evansville, LLC
Purchaser:                 Ashford Evansville III LP
Property Address:          8283 E. Walnut Street, Evansville, IN  47715
Hotel:                     Residence Inn

                                       ENCORE RESIDENTIAL HOTELS OF EVANSVILLE,
                                       LLC
                                       By: Dunn Hospitality Group Manager, Inc.,
                                       Its Manager

                                       /s/ JOHN M. DUNN
                                       ----------------
                                       John M. Dunn, President

Seller:                    Hotel Investment, LLC
Purchaser:                 Ashford Evansville II LP
Property Address:          5400 Weston Drive, Evansville, IN  47712
Hotel:                     Fairfield Inn

                                       HOTEL INVESTMENT, LLC
                                       By: Evansville Hotel Corporation,
                                       its Manager

                                       /s/ JOHN M. DUNN
                                       ----------------
                                       John M. Dunn, President

Legal Owner:               Fifth Third Bank as Successor Trustee by merger to
                           The Citizens National Bank of Evansville, IN as
                           Trustee Under Land Trust Agreement dated July 16,
                           1990
Purchaser:                 Ashford Evansville I LP
Property Address:          8000 Eagle Lake, Evansville, IN  47715
Hotel:                     Hampton Inn

                                       DUNN FAMILY ASSOCIATES, LLP,
                                       an Indiana limited liability partnership,
                                       as Sole Beneficiary under Land
                                       Trust Agreement dated July
                                       16, 1990

                                       By: /s/ JOHN M. DUNN
                                       ----------------
                                       Name:  John M. Dunn

                                       As: Agent and Attorney-in-Fact for
                                           Beneficiary and as General Partner

Fourth Amendment to Agreement
of Purchase and Sale

                                      -11-


                                       PURCHASER:

                                       ASHFORD HOSPITALITY LIMITED PARTNERSHIP,
                                       a Delaware limited partnership

                                       By:    /s/ DAVID A. BROOKS
                                              ----------------------
                                       Name:  David A. Brooks
                                       Title: Vice President

Fourth Amendment to Agreement
of Purchase and Sale

                                      -12-

EX-10.19

                                                                   EXHIBIT 10.19

(MULTICURRENCY-CROSS BORDER)

                                      ISDA

               International swaps & Derivatives Association Inc.

                                MASTER AGREEMENT

                          dated as of September 2, 2004

     CALYON NEW YORK BRANCH   AND   ASHFORD HOSPITALITY LIMITED PARTNERSHIP

have entered and/or anticipate entering into one or more transactions (each a
"Transaction") that are or will be governed by this Master Agreement, which
includes the schedule (the 'Schedule"), and the documents and other confirming
evidence (each a "Confirmation") exchanged between the parties confirming those
Transactions.

Accordingly, the parties agree as follows:-

1. INTERPRETATION

(a) DEFINITIONS. The terms defined in Section 14 and in the Schedule will have
the meanings therein specified for the purpose of this Master Agreement.

(b) INCONSISTENCY. In the event of any inconsistency between the provisions of
the Schedule and the other provisions of this Master Agreement, the Schedule
will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such
Confirmation will prevail for the purpose of the relevant Transaction.

(c) SINGLE AGREEMENT. All Transactions are entered into in reliance on the fact
that this Master Agreement and all Confirmations form a single agreement between
the parties (collectively referred to as this "Agreement"), and the parties
would not otherwise enter into any Transactions.

2. OBLIGATIONS

(a) GENERAL CONDITIONS.

         (i) Each party will make each payment or delivery specified in each
         Confirmation to be made by it, subject to the other provisions of this
         Agreement.

         (ii) Payments under this Agreement will be made on the due date for
         value on that date in the place of the account specified in the
         relevant Confirmation or otherwise pursuant to this Agreement, in
         freely transferable funds and in the manner customary for payments in
         the required currency. Where settlement is by delivery (that is, other
         than by payment), such delivery will be made for receipt on the due
         date in the manner customary for the relevant obligation unless
         otherwise specified in the relevant Confirmation or elsewhere in this
         Agreement.

         (iii) Each obligation of each party under Section 2(a)(i) is subject to
         (1) the condition precedent that no Event of Default or Potential Event
         of Default with respect to the other party has occurred and is
         continuing, (2) the condition precedent that no Early Termination Date
         in respect of the relevant Transaction has occurred or been effectively
         designated and (3) each other applicable condition precedent specified
         in this Agreement.



(b) CHANGE OF ACCOUNT. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to which
such change applies unless such other party gives timely notice of a reasonable
objection to such change.

(c) NETTING. If on any date amounts would otherwise be payable:-

         (i) in the same currency; and

         (ii) in respect of the same Transaction,

by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the other
party, replaced by an obligation upon the party by whom the larger aggregate
amount would have been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.

The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be made
in the Schedule or a Confirmation by specifying that subparagraph (ii) above
will not apply to the Transactions identified as being subject to the election,
together with the starting date (in which case subparagraph (ii) above will not,
or will cease to, apply to such Transactions from such date). This election may
be made separately for different groups of Transactions and will apply
separately to each pairing of Offices through which the parties make and receive
payments or deliveries.

(d) DEDUCTION OR WITHHOLDING FOR TAX.

         (i) GROSS-UP. All payments under this Agreement will be made without
         any deduction or withholding for or on account of any Tax unless such
         deduction or withholding is required by any applicable law, as modified
         by the practice of any relevant governmental revenue authority, then in
         effect. If a party is so required to deduct or withhold, then that
         party ("X") will:-

              (1) promptly notify the other party ("Y") of such requirement;

              (2) pay to the relevant authorities the full amount required to be
              deducted or withheld (including the full amount required to be
              deducted or withheld from any additional amount paid by X to Y
              under this Section 2(d)) promptly upon the earlier of determining
              that such deduction or withholding is required or receiving notice
              that such amount has been assessed against Y;

              (3) promptly forward to Y an official receipt (or a certified
              copy), or other documentation reasonably acceptable to Y,
              evidencing such payment to such authorities; and

              (4) if such Tax is an Indemnifiable Tax, pay to Y, in addition to
              the payment to which Y is otherwise entitled under this Agreement,
              such additional amount as is necessary to ensure that the net
              amount actually received by Y (free and clear of Indemnifiable
              Taxes, whether assessed against X or Y) will equal the full amount
              Y would have received had no such deduction or withholding been
              required. However, X will not be required to pay any additional
              amount to Y to the extent that it would not be required to be paid
              but for:-

                  (A) the failure by Y to comply with or perform any agreement
                  contained in Section 4(a)(i), 4(a)(iii) or 4(d); or

                  (B) the failure of a representation made by Y pursuant to
                  Section 3(f) to be accurate and true unless such failure would
                  not have occurred but for (I) any action taken by a taxing
                  authority, or brought in a court of competent jurisdiction, on
                  or after the date on which a Transaction is entered into
                  (regardless of whether such action is taken or brought with
                  respect to a party to this Agreement) or (II) a Change in Tax
                  Law.

         (ii) LIABILITY. If:-



              (1) X is required by any applicable law, as modified by the
              practice of any relevant governmental revenue authority, to make
              any deduction or withholding in respect of which X would not be
              required to pay an additional amount to Y under Section
              2(d)(i)(4);

              (2) X does not so deduct or withhold; and

              (3) a liability resulting from such Tax is assessed directly
              against X,

         then, except to the extent Y has satisfied or then satisfies the
         liability resulting from such Tax, Y will promptly pay to X the amount
         of such liability (including any related liability for interest, but
         including any related liability for penalties only if Y has failed to
         comply with or perform any agreement contained in Section 4(a)(i),
         4(a)(iii) or 4(d)).

(e) DEFAULT INTEREST; OTHER AMOUNTS. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant Transaction,
a party that defaults in the performance of any payment obligation will, to the
extent permitted by law and subject to Section 6(c), be required to pay interest
(before as well as after judgment) on the overdue amount to the other party on
demand in the same currency as such overdue amount, for the period from (and
including) the original due date for payment to (but excluding) the date of
actual payment, at the Default Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed. If, prior to
the occurrence or effective designation of an Early Termination Date in respect
of the relevant Transaction, a party defaults in the performance of any
obligation required to be settled by delivery, it will compensate the other
party on demand if and to the extent provided for in the relevant Confirmation
or elsewhere in this Agreement.

3. REPRESENTATIONS

Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered into
and, in the case of the representations in Section 3(f), at all times until the
termination of this Agreement) that:-

(a) BASIC REPRESENTATIONS.

         (i) STATUS. It is duly organised and validly existing under the laws of
         the jurisdiction of its organisation or incorporation and, if relevant
         under such laws, in good standing;

         (ii) POWERS. It has the power to execute this Agreement and any other
         documentation relating to this Agreement to which it is a party, to
         deliver this Agreement and any other documentation relating to this
         Agreement that it is required by this Agreement to deliver and to
         perform its obligations under this Agreement and any obligations it has
         under any Credit Support Document to which it is a party and has taken
         all necessary action to authorise such execution, delivery and
         performance;

         (iii) NO VIOLATION OR CONFLICT. Such execution, delivery and
         performance do not violate or conflict with any law applicable to it,
         any provision of its constitutional documents, any order or judgment of
         any court or other agency of government applicable to it or any of its
         assets or any contractual restriction binding on or affecting it or any
         of its assets;

         (iv) CONSENTS. All governmental and other consents that are required to
         have been obtained by it with respect to this Agreement or any Credit
         Support Document to which it is a party have been obtained and are in
         full force and effect and all conditions of any such consents have been
         complied with; and

         (v) OBLIGATIONS BINDING. Its obligations under this Agreement and any
         Credit Support Document to which it is a party constitute its legal,
         valid and binding obligations, enforceable in accordance with their
         respective terms (subject to applicable bankruptcy, reorganisation,
         insolvency, moratorium or similar laws affecting creditors' rights
         generally and subject, as to enforceability, to equitable principles of
         general application (regardless of whether enforcement is sought in a
         proceeding in equity or at law)).

(b) ABSENCE OF CERTAIN EVENTS. No Event of Default or Potential Event of Default
or, to its knowledge, Termination Event with respect to it has occurred and is
continuing and no such event or circumstance would occur as a result of its
entering into or performing its obligations under this Agreement or any Credit
Support Document to which it is a party.



(c) ABSENCE OF LITIGATION. There is not pending or, to its knowledge, threatened
against it or any of its Affiliates any action, suit or proceeding at law or in
equity or before any court, tribunal, governmental body, agency or official or
any arbitrator that is likely to affect the legality, validity or enforceability
against it of this Agreement or any Credit Support Document to which it is a
party or its ability to perform its obligations under this Agreement or such
Credit Support Document.

(d) ACCURACY OF SPECIFIED INFORMATION. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material respect.

(e) PAYER TAX REPRESENTATION. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(e) is accurate and true.

(f) PAYEE TAX REPRESENTATIONS. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(f) is accurate and true.

4. AGREEMENTS

Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:-

(a) FURNISH SPECIFIED INFORMATION. It will deliver to the other party or, in
certain cases under subparagraph (iii) below, to such government or taxing
authority as the other party reasonably directs:-

         (i) any forms, documents or certificates relating to taxation specified
         in the Schedule or any Confirmation;

         (ii) any other documents specified in the Schedule or any Confirmation;
         and

         (iii) upon reasonable demand by such other party, any form or document
         that may be required or reasonably requested in writing in order to
         allow such other party or its Credit Support Provider to make a payment
         under this Agreement or any applicable Credit Support Document without
         any deduction or withholding for or on account of any Tax or with such
         deduction or withholding at a reduced rate (so long as the completion,
         execution or submission of such form or document would not materially
         prejudice the legal or commercial position of the party in receipt of
         such demand), with any such form or document to be accurate and
         completed in a manner reasonably satisfactory to such other party and
         to be executed and to be delivered with any reasonably required
         certification,

in each case by the date specified in the Schedule or such Confirmation or, if
none is specified, as soon as reasonably practicable.

(b) MAINTAIN AUTHORISATIONS. It will use all reasonable efforts to maintain in
full force and effect all consents of any governmental or other authority that
are required to be obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party and will use all reasonable efforts to
obtain any that may become necessary in the future.

(c) COMPLY WITH LAWS. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.

(d) TAX AGREEMENT. It will give notice of any failure of a representation made
by it under Section 3(f) to be accurate and true promptly upon learning of such
failure.

(e) PAYMENT OF STAMP TAX. Subject to Section 11, it will pay any Stamp Tax
levied or imposed upon it or in respect of its execution or performance of this
Agreement by a jurisdiction in which it is incorporated, organised, managed and
controlled, or considered to have its seat, or in which a branch or office
through which it is acting for the purpose of this Agreement is located ("Stamp
Tax Jurisdiction") and will indemnify the other party against any Stamp Tax
levied or imposed upon the other party or in respect of the other party's
execution or performance of this Agreement by any such Stamp Tax Jurisdiction
which is not also a Stamp Tax Jurisdiction with respect to the other party.

5. EVENTS OF DEFAULT AND TERMINATION EVENTS



(a) EVENTS OF DEFAULT. The occurrence at any time with respect to a party or, if
applicable, any Credit Support Provider of such party or any Specified Entity of
such party of any of the following events constitutes an event of default (an
"Event of Default") with respect to such party:-

         (i) FAILURE TO PAY OR DELIVER. Failure by the party to make, when due,
         any payment under this Agreement or delivery under Section 2(a)(i) or
         2(e) required to be made by it if such failure is not remedied on or
         before the third Local Business Day after notice of such failure is
         given to the party;

         (ii) BREACH OF AGREEMENT. Failure by the party to comply with or
         perform any agreement or obligation (other than an obligation to make
         any payment under this Agreement or delivery under Section 2(a)(i) or
         2(e) or to give notice of a Termination Event or any agreement or
         obligation under Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied
         with or performed by the party in accordance with this Agreement if
         such failure is not remedied on or before the thirtieth day after
         notice of such failure is given to the party;

         (iii) CREDIT SUPPORT DEFAULT.

              (1) Failure by the party or any Credit Support Provider of such
              party to comply with or perform any agreement or obligation to be
              complied with or performed by it in accordance with any Credit
              Support Document if such failure is continuing after any
              applicable grace period has elapsed;

              (2) the expiration or termination of such Credit Support Document
              or the failing or ceasing of such Credit Support Document to be in
              full force and effect for the purpose of this Agreement (in either
              case other than in accordance with its terms) prior to the
              satisfaction of all obligations of such party under each
              Transaction to which such Credit Support Document relates without
              the written consent of the other party; or

              (3) the party or such Credit Support Provider disaffirms,
              disclaims, repudiates or rejects, in whole or in part, or
              challenges the validity of, such Credit Support Document;

         (iv) MISREPRESENTATION. A representation (other than a representation
         under Section 3(e) or (f)) made or repeated or deemed to have been made
         or repeated by the party or any Credit Support Provider of such party
         in this Agreement or any Credit Support Document proves to have been
         incorrect or misleading in any material respect when made or repeated
         or deemed to have been made or repeated;

         (v) DEFAULT UNDER SPECIFIED TRANSACTION. The party, any Credit Support
         Provider of such party or any applicable Specified Entity of such party
         (1) defaults under a Specified Transaction and, after giving effect to
         any applicable notice requirement or grace period, there occurs a
         liquidation of, an acceleration of obligations under, or an early
         termination of, that Specified Transaction, (2) defaults, after giving
         effect to any applicable notice requirement or grace period, in making
         any payment or delivery due on the last payment, delivery or exchange
         date of, or any payment on early termination of, a Specified
         Transaction (or such default continues for at least three Local
         Business Days if there is no applicable notice requirement or grace
         period) or (3) disaffirms, disclaims, repudiates or rejects, in whole
         or in part, a Specified Transaction (or such action is taken by any
         person or entity appointed or empowered to operate it or act on its
         behalf);

         (vi) CROSS DEFAULT. If "Cross Default" is specified in the Schedule as
         applying to the party, the occurrence or existence of (1) a default,
         event of default or other similar condition or event (however
         described) in respect of such party, any Credit Support Provider of
         such party or any applicable Specified Entity of such party under one
         or more agreements or instruments relating to Specified Indebtedness of
         any of them (individually or collectively) in an aggregate amount of
         not less than the applicable Threshold Amount (as specified in the
         Schedule) which has resulted in such Specified Indebtedness becoming,
         or becoming capable at such time of being declared, due and payable
         under such agreements or instruments, before it would otherwise have
         been due and payable or (2) a default by such party, such Credit
         Support Provider or such Specified Entity (individually or
         collectively) in making one or more payments on the due date thereof in
         an aggregate amount of not less than the applicable Threshold Amount
         under such agreements or instruments (after giving effect to any
         applicable notice requirement or grace period);

         (vii) BANKRUPTCY. The party, any Credit Support Provider of such party
         or any applicable Specified Entity of such party:-



              (1) is dissolved (other than pursuant to a consolidation,
              amalgamation or merger); (2) becomes insolvent or is unable to pay
              its debts or fails or admits in writing its inability generally to
              pay its debts as they become due; (3) makes a general assignment,
              arrangement or composition with or for the benefit of its
              creditors; (4) institutes or has instituted against it a
              proceeding seeking a judgment of insolvency or bankruptcy or any
              other relief under any bankruptcy or insolvency law or other
              similar law affecting creditors' rights, or a petition is
              presented for its winding-up or liquidation, and, in the case of
              any such proceeding or petition instituted or presented against
              it, such proceeding or petition (A) results in a judgment of
              insolvency or bankruptcy or the entry of an order for relief or
              the making of an order for its winding-up or liquidation or (B) is
              not dismissed, discharged, stayed or restrained in each case
              within 30 days of the institution or presentation thereof; (5) has
              a resolution passed for its winding-up, official management or
              liquidation (other than pursuant to a consolidation, amalgamation
              or merger); (6) seeks or becomes subject to the appointment of an
              administrator, provisional liquidator, conservator, receiver,
              trustee, custodian or other similar of official for it or for all
              or substantially all its assets; (7) has a secured party take
              possession of all or substantially all its assets or has a
              distress, execution, attachment, sequestration or other legal
              process levied, enforced or sued on or against all or
              substantially all its assets and such secured party maintains
              possession, or any such process is not dismissed, discharged,
              stayed or restrained, in each case within 30 days thereafter; (8)
              causes or is subject to any event with respect to it which, under
              the applicable laws of any jurisdiction, has an analogous effect
              to any of the events specified in clauses (1) to (7) (inclusive);
              or (9) takes any action in furtherance of, or indicating its
              consent to, approval of, or acquiescence in, any of the foregoing
              acts; or

         (viii) MERGER WITHOUT ASSUMPTION. The party or any Credit Support
         Provider of such party consolidates or amalgamates with, or merges with
         or into, or transfers all or substantially all its assets to, another
         entity and, at the time of such consolidation, amalgamation, merger or
         transfer:-

              (1) the resulting, surviving or transferee entity fails to assume
              all the obligations of such party or such Credit Support Provider
              under this Agreement or any Credit Support Document to which it or
              its predecessor was a party by operation of law or pursuant to an
              agreement reasonably satisfactory to the other party to this
              Agreement; or

              (2) the benefits of any Credit Support Document fail to extend
              (without the consent of the other party) to the performance by
              such resulting, surviving or transferee entity of its obligations
              under this Agreement.

(b) TERMINATION EVENTS. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified Entity
of such party of any event specified below constitutes an Illegality if the
event is specified in (i) below, a Tax Event if the event is specified in (ii)
below or a Tax Event Upon Merger if the event is specified in (iii) below, and,
if specified to be applicable, a Credit Event Upon Merger if the event is
specified pursuant to (iv) below or an Additional Termination Event if the event
is specified pursuant to (v) below:-

         (i) ILLEGALITY. Due to the adoption of, or any change in, any
         applicable law after the date on which a Transaction is entered into,
         or due to the promulgation of, or any change in, the interpretation by
         any court, tribunal or regulatory authority with competent jurisdiction
         of any applicable law after such date, it becomes unlawful (other than
         as a result of a breach by the party of Section 4(b)) for such party
         (which will be the Affected Party):-

              (1) to perform any absolute or contingent obligation to make a
              payment or delivery or to receive a payment or delivery in respect
              of such Transaction or to comply with any other material provision
              of this Agreement relating to such Transaction; or

              (2) to perform, or for any Credit Support Provider of such party
              to perform, any contingent or other obligation which the party (or
              such Credit Support Provider) has under any Credit Support
              Document relating to such Transaction;

         (ii) TAX EVENT. Due to (x) any action taken by a taxing authority, or
         brought in a court of competent jurisdiction, on or after the date on
         which a Transaction is entered into (regardless of whether such action
         is taken or brought with respect to a party to this Agreement) or (y) a
         Change in Tax Law, the party (which will be the Affected Party) will,
         or there is a substantial likelihood that it will, on the next
         succeeding Scheduled Payment Date (1) be required to pay to the other
         party an additional amount in respect of an Indemnifiable Tax under
         Section 2(d)(i)(4) (except in respect of interest under Section 2(e),
         6(d)(ii) or 6(e)) or (2) receive a payment from which an amount is
         required to be deducted or withheld for or



         on account of a Tax (except in respect of interest under Section 2(e),
         6(d)(ii) or 6(e)) and no additional amount is required to be paid in
         respect of such Tax under Section 2(d)(i)(4) (other than by reason of
         Section 2(d)(i)(4)(A) or (B));

         (iii) TAX EVENT UPON MERGER. The party (the "Burdened Party") on the
         next succeeding Scheduled Payment Date will either (l) be required to
         pay an additional amount in respect of an Indemnifiable Tax under
         Section 2(d)(i)(4) (except in respect of interest under Section 2(e),
         6(d)(ii) or 6(e)) or (2) receive a payment from which an amount has
         been deducted or withheld for or on account of any Indemnifiable Tax in
         respect of which the other party is not required to pay an additional
         amount (other than by reason of Section 2(d)(i)(4)(A) or (B)), in
         either case as a result of a party consolidating or amalgamating with,
         or merging with or into, or transferring all or substantially all its
         assets to, another entity (which will be the Affected Party) where such
         action does not constitute an event described in Section 5(a)(viii);

         (iv) CREDIT EVENT UPON MERGER. If "Credit Event Upon Merger" is
         specified in the Schedule as applying to the party, such party ("X"),
         any Credit Support Provider of X or any applicable Specified Entity of
         X consolidates or amalgamates with, or merges with or into, or
         transfers all or substantially all its assets to, another entity and
         such action does not constitute an event described in Section
         5(a)(viii) but the creditworthiness of the resulting, surviving or
         transferee entity is materially weaker than that of X, such Credit
         Support Provider or such Specified Entity, as the case may be,
         immediately prior to such action (and, in such event, X or its
         successor or transferee, as appropriate, will be the Affected Party);
         or

         (v) ADDITIONAL TERMINATION EVENT. If any "Additional Termination Event"
         is specified in the Schedule or any Confirmation as applying, the
         occurrence of such event (and, in such event, the Affected Party or
         Affected Parties shall be as specified for such Additional Termination
         Event in the Schedule or such Confirmation).

(c) EVENT OF DEFAULT AND ILLEGALITY. If an event or circumstance which would
otherwise constitute or give rise to an Event of Default also constitutes an
Illegality, it will be treated as an Illegality and will not constitute an Event
of Default.

6. EARLY TERMINATION

(a) RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT. If at any time an Event of
Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party (the "Non-defaulting Party") may, by not more
than 20 days notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is effective as an
Early Termination Date in respect of all outstanding Transactions. If, however,
"Automatic Early Termination" is specified in the Schedule as applying to a
party, then an Early Termination Date in respect of all outstanding Transactions
will occur immediately upon the occurrence with respect to such party of an
Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6) or, to the
extent analogous thereto, (8), and as of the time immediately preceding the
institution of the relevant proceeding or the presentation of the relevant
petition upon the occurrence with respect to such party of an Event of Default
specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).

(b) RIGHT TO TERMINATE FOLLOWING TERMINATION EVENT.

         (i) NOTICE. If a Termination Event occurs, an Affected Party will,
         promptly upon becoming aware of it, notify the other party, specifying
         the nature of that Termination Event and each Affected Transaction and
         will also give such other information about that Termination Event as
         the other party may reasonably require.

         (ii) TRANSFER TO AVOID TERMINATION EVENT. If either an Illegality under
         Section 5(b)(i)(1) or a Tax Event occurs and there is only one Affected
         Party, or if a Tax Event Upon Merger occurs and the Burdened Party is
         the Affected Party, the Affected Party will, as a condition to its
         right to designate an Early Termination Date under Section 6(b)(iv),
         use all reasonable efforts (which will not require such party to incur
         a loss, excluding immaterial, incidental expenses) to transfer within
         20 days after it gives notice under Section 6(b)(i) all its rights and
         obligations under this Agreement in respect of the Affected
         Transactions to another of its Offices or Affiliates so that such
         Termination Event ceases to exist.

         If the Affected Party is not able to make such a transfer it will give
         notice to the other party to that effect within such 20 day period,
         whereupon the other party may effect such a transfer within 30 days
         after the notice is given under Section 6(b)(i).



         Any such transfer by a party under this Section 6(b)(ii) will be
         subject to and conditional upon the prior written consent of the other
         party, which consent will not be withheld if such other party's
         policies in effect at such time would permit it to enter into
         transactions with the transferee on the terms proposed.

         (iii) TWO AFFECTED PARTIES. If an Illegality under Section 5(b)(i)(1)
         or a Tax Event occurs and there are two Affected Parties, each party
         will use all reasonable efforts to reach agreement within 30 days after
         notice thereof is given under Section 6(b)(i) on action to avoid that
         Termination Event.

         (iv) RIGHT TO TERMINATE. If:-

              (l) a transfer under Section 6(b)(ii) or an agreement under
              Section 6(b)(iii), as the case may be, has not been effected with
              respect to all Affected Transactions within 30 days after an
              Affected Party gives notice under Section 6(b)(i); or

              (2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon
              Merger or an Additional Termination Event occurs, or a Tax Event
              Upon Merger occurs and the Burdened Party is not the Affected
              Party,

              either party in the case of an Illegality, the Burdened Party in
              the case of a Tax Event Upon Merger, any Affected Party in the
              case of a Tax Event or an Additional Termination Event if there is
              more than one Affected Party, or the party which is not the
              Affected Party in the case of a Credit Event Upon Merger or an
              Additional Termination Event if there is only one Affected Party
              may, by not more than 20 days notice to the other party and
              provided that the relevant Termination Event is then continuing,
              designate a day not earlier than the day such notice is effective
              as an Early Termination Date in respect of all Affected
              Transactions.

(c) EFFECT OF DESIGNATION.

         (i) If notice designating an Early Termination Date is given under
         Section 6(a) or (b), the Early Termination Date will occur on the date
         so designated, whether or not the relevant Event of Default or
         Termination Event is then continuing.

         (ii) Upon the occurrence or effective designation of an Early
         Termination Date, no further payments or deliveries under Section
         2(a)(i) or 2(e) in respect of the Terminated Transactions will be
         required to be made, but without prejudice to the other provisions of
         this Agreement. The amount, if any, payable in respect of an Early
         Termination Date shall be determined pursuant to Section 6(e).

(d) CALCULATIONS.

         (i) STATEMENT. On or as soon as reasonably practicable following the
         occurrence of an Early Termination Date, each party will make the
         calculations on its part, if any, contemplated by Section 6(e) and will
         provide to the other party a statement (1) showing, in reasonable
         detail, such calculations (including all relevant quotations and
         specifying any amount payable under Section 6(e)) and (2) giving
         details of the relevant account to which any amount payable to it is to
         be paid. In the absence of written confirmation from the source of a
         quotation obtained in determining a Market Quotation, the records of
         the party obtaining such quotation will be conclusive evidence of the
         existence and accuracy of such quotation.

         (ii) PAYMENT DATE. An amount calculated as being due in respect of any
         Early Termination Date under Section 6(e) will be payable on the day
         that notice of the amount payable is effective (in the case of an Early
         Termination Date which is designated or occurs as a result of an Event
         of Default) and on the day which is two Local Business Days after the
         day on which notice of the amount payable is effective (in the case of
         an Early Termination Date which is designated as a result of a
         Termination Event). Such amount will be paid together with (to the
         extent permitted under applicable law) interest thereon (before as well
         as after judgment) in the Termination Currency, from (and including)
         the relevant Early Termination Date to (but excluding) the date such
         amount is paid, at the Applicable Rate. Such interest will be
         calculated on the basis of daily compounding and the actual number of
         days elapsed.

(e) PAYMENTS ON EARLY TERMINATION. If an Early Termination Date occurs, the
following provisions shall apply based on the parties' election in the Schedule
of a payment measure, either "Market Quotation" or "Loss", and a payment method,
either the "First Method" or the "Second Method". If the parties fail to
designate a payment measure or payment method in the Schedule, it will be



deemed that 'Market Quotation" or the "Second Method", as the case may be, shall
apply. The amount, if any, payable in respect of an Early Termination Date and
determined pursuant to this Section will be subject to any Set-off.

         (i) EVENTS OF DEFAULT. If the Early Termination Date results from an
         Event of Default:-

              (1) FIRST METHOD AND MARKET QUOTATION. If the First Method and
              Market Quotation apply, the Defaulting Party will pay to the
              Non-defaulting Party the excess, if a positive number, of (A) the
              sum of the Settlement Amount (determined by the Non-defaulting
              Party) in respect of the Terminated Transactions and the
              Termination Currency Equivalent of the Unpaid Amounts owing to the
              Non-defaulting Party over (B) the Termination Currency Equivalent
              of the Unpaid Amounts owing to the Defaulting Party.

              (2) FIRST METHOD AND LOSS. If the First Method and Loss apply, the
              Defaulting Party will pay to the Non-defaulting Party, if a
              positive number, the Non-defaulting Party's Loss in respect of
              this Agreement.

              (3) SECOND METHOD AND MARKET QUOTATION. If the Second Method and
              Market Quotation apply, an amount will be payable equal to (A) the
              sum of the Settlement Amount (determined by the Non-defaulting
              Party) in respect of the Terminated Transactions and the
              Termination Currency Equivalent of the Unpaid Amounts owing to the
              Non-defaulting Party less (B) the Termination Currency Equivalent
              of the Unpaid Amounts owing to the Defaulting Party. If that
              amount is a positive number, the Defaulting Party will pay it to
              the Non-defaulting Party; if it is a negative number, the
              Non-defaulting Party will pay the absolute value of that amount to
              the Defaulting Party.

              (4) SECOND METHOD AND LOSS. If the Second Method and Loss apply,
              an amount will be payable equal to the Non-defaulting Party's Loss
              in respect of this Agreement. If that amount is a positive number,
              the Defaulting Party will pay it to the Non-defaulting Party; if
              it is a negative number, the Non-defaulting Party will pay the
              absolute value of that amount to the Defaulting Party.

         (ii) TERMINATION EVENTS. If the Early Termination Date results from a
         Termination Event:-

              (1) ONE AFFECTED PARTY. If there is one Affected Party, the amount
              payable will be determined in accordance with Section 6(e)(i)(3),
              if Market Quotation applies, or Section 6(e)(i)(4), if Loss
              applies, except that, in either case, references to the Defaulting
              Party and to the Non-defaulting Party will be deemed to be
              references to the Affected Party and the party which is not the
              Affected Party, respectively, and, if Loss applies and fewer than
              all the Transactions are being terminated, Loss shall be
              calculated in respect of all Terminated Transactions.

              (2) TWO AFFECTED PARTIES. If there are two Affected Parties:-

                  (A) if Market Quotation applies, each party will determine a
                  Settlement Amount in respect of the Terminated Transactions,
                  and an amount will be payable equal to (I) the sum of (a)
                  one-half of the difference between the Settlement Amount of
                  the party with the higher Settlement Amount ("X") and the
                  Settlement Amount of the party with the lower Settlement
                  Amount ("Y") and (b) the Termination Currency Equivalent of
                  the Unpaid Amounts owing to X less (II) the Termination
                  Currency Equivalent of the Unpaid Amounts owing to Y; and

                  (B) if Loss applies, each party will determine its Loss in
                  respect of this Agreement (or, if fewer than all the
                  Transactions are being terminated, in respect of all
                  Terminated Transactions) and an amount will be payable equal
                  to one-half of the difference between the Loss of the party
                  with the higher Loss ("X") and the Loss of the party with the
                  lower Loss ("Y").

              If the amount payable is a positive number, Y will pay it to X; if
              it is a negative number, X will pay the absolute value of that
              amount to Y.

         (iii) ADJUSTMENT FOR BANKRUPTCY. In circumstances where an Early
         Termination Date occurs because "Automatic Early Termination" applies
         in respect of a party, the amount determined under this Section 6(e)
         will be subject to such adjustments as are appropriate and permitted by
         law to reflect any payments or deliveries made by one party to the
         other under this Agreement (and retained by such other party) during
         the period from the relevant Early Termination Date to the date for
         payment determined under Section 6(d)(ii).



         (iv) PRE-ESTIMATE. The parties agree that if Market Quotation applies
         an amount recoverable under this Section 6(e) is a reasonable
         pre-estimate of loss and not a penalty. Such amount is payable for the
         loss of bargain and the loss of protection against future risks and
         except as otherwise provided in this Agreement neither party will be
         entitled to recover any additional damages as a consequence of such
         losses.

7. TRANSFER

Subject to Section 6(b)(ii), neither this Agreement nor any interest or
obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by either party without the prior written consent of the
other party, except that:-

(a) a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to, another entity (but without prejudice to any
other right or remedy under this Agreement); and

(b) a party may make such a transfer of all or any part of its interest in any
amount payable to it from a Defaulting Party under Section 6(e).

Any purported transfer that is not in compliance with this Section will be void.

8. CONTRACTUAL CURRENCY

(a) PAYMENT IN THE CONTRACTUAL CURRENCY. Each payment under this Agreement will
be made in the relevant currency specified in this Agreement for that payment
(the "Contractual Currency"). To the extent permitted by applicable law, any
obligation to make payments under this Agreement in the Contractual Currency
will not be discharged or satisfied by any tender in any currency other than the
Contractual Currency, except to the extent such tender results in the actual
receipt by the party to which payment is owed, acting in a reasonable manner and
in good faith in converting the currency so tendered into the Contractual
Currency, of the full amount in the Contractual Currency of all amounts payable
in respect of this Agreement. If for any reason the amount in the Contractual
Currency so received falls short of the amount in the Contractual Currency
payable in respect of this Agreement, the party required to make the payment
will, to the extent permitted by applicable law, immediately pay such additional
amount in the Contractual Currency as may be necessary to compensate for the
shortfall. If for any reason the amount in the Contractual Currency so received
exceeds the amount in the Contractual Currency payable in respect of this
Agreement, the party receiving the payment will refund promptly the amount of
such excess.

(b) JUDGMENTS. To the extent permitted by applicable law, if any judgment or
order expressed in a currency other than the Contractual Currency is rendered
(i) for the payment of any amount owing in respect of this Agreement, (ii) for
the payment of any amount relating to any early termination in respect of this
Agreement or (iii) in respect of a judgment or order of another court for the
payment of any amount described in (i) or (ii) above, the party seeking
recovery, after recovery in full of the aggregate amount to which such party is
entitled pursuant to the judgment or order, will be entitled to receive
immediately from the other party the amount of any shortfall of the Contractual
Currency received by such party as a consequence of sums paid in such other
currency and will refund promptly to the other party any excess of the
Contractual Currency received by such party as a consequence of sums paid in
such other currency if such shortfall or such excess arises or results from any
variation between the rate of exchange at which the Contractual Currency is
converted into the currency of the judgment or order for the purposes of such
judgment or order and the rate of exchange at which such party is able, acting
in a reasonable manner and in good faith in converting the currency received
into the Contractual Currency, to purchase the Contractual Currency with the
amount of the currency of the judgment or order actually received by such party.
The term "rate of exchange" includes, without limitation, any premiums and costs
of exchange payable in connection with the purchase of or conversion into the
Contractual Currency.

(c) SEPARATE INDEMNITIES. To the extent permitted by applicable law, these
indemnities constitute separate and independent obligations from the other
obligations in this Agreement, will be enforceable as separate and independent
causes of action, will apply notwithstanding any indulgence granted by the party
to which any payment is owed and will not be affected by judgment being obtained
or claim or proof being made for any other sums payable in respect of this
Agreement.

(d) EVIDENCE OF LOSS. For the purpose of this Section 8, it will be sufficient
for a party to demonstrate that it would have suffered a loss had an actual
exchange or purchase been made.



9. MISCELLANEOUS

(a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.

(b) AMENDMENTS. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced by
a facsimile transmission) and executed by each of the parties or confirmed by an
exchange of telexes or electronic messages on an electronic messaging system.

(c) SURVIVAL OF OBLIGATIONS. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the
termination of any Transaction.

(d) REMEDIES CUMULATIVE. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.

(e) COUNTERPARTS AND CONFIRMATIONS.

         (i) This Agreement (and each amendment, modification and waiver in
         respect of it) may be executed and delivered in counterparts (including
         by facsimile transmission), each of which will be deemed an original.

         (ii) The parties intend that they are legally bound by the terms of
         each Transaction from the moment they agree to those terms (whether
         orally or otherwise). A Confirmation shall be entered into as soon as
         practicable and may be executed and delivered in counterparts
         (including by facsimile transmission) or be created by an exchange of
         telexes or by an exchange of electronic messages on an electronic
         messaging system, which in each case will be sufficient for all
         purposes to evidence a binding supplement to this Agreement. The
         parties will specify therein or through another effective means that
         any such counterpart, telex or electronic message constitutes a
         Confirmation.

(f) NO WAIVER OF RIGHTS. A failure or delay in exercising any right, power or
privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege will
not be presumed to preclude any subsequent or further exercise, of that right,
power or privilege or the exercise of any other right, power or privilege.

(g) HEADINGS. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.

10. OFFICES; MULTIBRANCH PARTIES

(a) If Section 10(a) is specified in the Schedule as applying, each party that
enters into a Transaction through an Office other than its head or home office
represents to the other party that, notwithstanding the place of booking office
or jurisdiction of incorporation or organisation of such party, the obligations
of such party are the same as if it had entered into the Transaction through its
head or home office. This representation will be deemed to be repeated by such
party on each date on which a Transaction is entered into.

(b) Neither party may change the Office through which it makes and receives
payments or deliveries for the purpose of a Transaction without the prior
written consent of the other party.

(c) If a party is specified as a Multibranch Party in the Schedule, such
Multibranch Party may make and receive payments or deliveries under any
Transaction through any Office listed in the Schedule, and the Office through
which it makes and receives payments or deliveries with respect to a Transaction
will be specified in the relevant Confirmation.

11. EXPENSES

A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees and
Stamp Tax, incurred by such other party by reason of the enforcement and
protection of its rights under this Agreement or any Credit Support Document to
which the Defaulting Party is a party or by reason of the early termination of
any Transaction, including, but not limited to, costs of collection.



12. NOTICES

(a) EFFECTIVENESS. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:-

         (i) if in writing and delivered in person or by courier, on the date it
         is delivered;

         (ii) if sent by telex, on the date the recipient's answerback is
         received;

         (iii) if sent by facsimile transmission, on the date that transmission
         is received by a responsible employee of the recipient in legible form
         (it being agreed that the burden of proving receipt will be on the
         sender and will not be met by a transmission report generated by the
         sender's facsimile machine);

         (iv) if sent by certified or registered mail (airrnail, if overseas) or
         the equivalent (return receipt requested), on the date that mail is
         delivered or its delivery is attempted; or

         (v) if sent by electronic messaging system, on the date that electronic
         message is received,

unless the date of that delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.

(b) CHANGE OF ADDRESSES. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.

13. GOVERNING LAW AND JURISDICTION

(a) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.

(b) JURISDICTION. With respect to any suit, action or proceedings relating to
this Agreement ("Proceedings"), each party irrevocably:-

         (i) submits to the jurisdiction of the English courts, if this
         Agreement is expressed to be governed by English law, or to the
         non-exclusive jurisdiction of the courts of the State of New York and
         the United States District Court located in the Borough of Manhattan in
         New York City, if this Agreement is expressed to be governed by the
         laws of the State of New York; and

         (ii) waives any objection which it may have at any time to the laying
         of venue of any Proceedings brought in any such court, waives any claim
         that such Proceedings have been brought in an inconvenient forum and
         further waives the right to object, with respect to such Proceedings,
         that such court does not have any jurisdiction over such party.

Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgments Act 1982 or any modification, extension or
re-enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.

(c) SERVICE OF PROCESS. Each party irrevocably appoints the Process Agent (if
any) specified opposite its name in the Schedule to receive, for it and on its
behalf, service of process in any Proceedings. If for any reason any party's
Process Agent is unable to act as such, such party will promptly notify the
other party and within 30 days appoint a substitute process agent acceptable to
the other party. The parties irrevocably consent to service of process given in
the manner provided for notices in Section 12. Nothing in this Agreement will
affect the right of either party to serve process in any other manner permitted
by law.

(d) WAIVER OF IMMUNITIES. Each party irrevocably waives, to the fullest extent
permitted by applicable law, with respect to itself and its revenues and assets
(irrespective of their use or intended use), all immunity on the grounds of
sovereignty or other



similar grounds from (i) suit, (ii) jurisdiction of any court, (iii) relief by
way of injunction, order for specific performance or for recovery of property,
(iv) attachment of its assets (whether before or after judgment) and (v)
execution or enforcement of any judgment to which it or its revenues or assets
might otherwise be entitled in any Proceedings in the courts of any jurisdiction
and irrevocably agrees, to the extent permitted by applicable law, that it will
not claim any such immunity in any Proceedings.

14. DEFINITIONS

As used in this Agreement:-

"ADDITIONAL TERMINATION EVENT" has the meaning specified in Section 5(b).

"AFFECTED PARTY" has the meaning specified in Section 5(b).

"AFFECTED TRANSACTIONS" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Transactions.

"AFFILIATE" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.

"APPLICABLE RATE" means:-

(a) in respect of obligations payable or deliverable (or which would have been
but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;

(b) in respect of an obligation to pay an amount under Section 6(e) of either
party from and after the date (determined in accordance with Section 6(d)(ii))
on which that amount is payable, the Default Rate;

(c) in respect of all other obligations payable or deliverable (or which would
have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default
Rate; and

(d) in all other cases, the Termination Rate.

"BURDENED PARTY" has the meaning specified in Section 5(b).

"CHANGE IN TAX LAW" means the enactment, promulgation, execution or ratification
of, or any change in or amendment to, any law (or in the application or official
interpretation of any law) that occurs on or after the date on which the
relevant Transaction is entered into.

"CONSENT" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.

"CREDIT EVENT UPON MERGER" has the meaning specified in Section 5(b).

"CREDIT SUPPORT DOCUMENT" means any agreement or instrument that is specified as
such in this Agreement.

"CREDIT SUPPORT PROVIDER" has the meaning specified in the Schedule.

"DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.

"DEFAULTING PARTY" has the meaning specified in Section 6(a).

"EARLY TERMINATION DATE" means the date determined in accordance with Section
6(a) or 6(b)(iv).

"EVENT OF DEFAULT" has the meaning specified in Section 5(a) and, if applicable,
in the Schedule.



"ILLEGALITY" has the meaning specified in Section 5(b).

"INDEMNIFIABLE TAX" means any Tax other than a Tax that would not be imposed in
respect of a payment under this Agreement but for a present or former connection
between the jurisdiction of the government or taxation authority imposing such
Tax and the recipient of such payment or a person related to such recipient
(including, without limitation, a connection arising from such recipient or
related person being or having been a citizen or resident of such jurisdiction,
or being or having been organised, present or engaged in a trade or business in
such jurisdiction, or having or having had a permanent establishment or fixed
place of business in such jurisdiction, but excluding a connection arising
solely from such recipient or related person having executed, delivered,
performed its obligations or received a payment under, or enforced, this
Agreement or a Credit Support Document).

"LAW" includes any treaty, law, rule or regulation (as modified, in the case of
tax matters, by the practice of any relevant governmental revenue authority) and
"LAWFUL" and "UNLAWFUL" will be construed accordingly.

"LOCAL BUSINESS DAY" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located and, if
different, in the principal financial centre, if any, of the currency of such
payment, (c) in relation to any notice or other communication, including notice
contemplated under Section 5(a)(i), in the city specified in the address for
notice provided by the recipient and, in the case of a notice contemplated by
Section 2(b), in the place where the relevant new account is to be located and
(d) in relation to Section 5(a)(v)(2), in the relevant locations for performance
with respect to such Specified Transaction.

"LOSS" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination Currency
Equivalent of an amount that party reasonably determines in good faith to be its
total losses and costs (or gain, in which case expressed as a negative number)
in connection with this Agreement or that Terminated Transaction or group of
Terminated Transactions, as the case may be, including any loss of bargain, cost
of funding or, at the election of such party but without duplication, loss or
cost incurred as a result of its terminating, liquidating, obtaining or
reestablishing any hedge or related trading position (or any gain resulting from
any of them). Loss includes losses and costs (or gains) in respect of any
payment or delivery required to have been made (assuming satisfaction of each
applicable condition precedent) on or before the relevant Early Termination Date
and not made, except, so as to avoid duplication, if Section 6(e)(i)(1) or (3)
or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and
out-of-pocket expenses referred to under Section 11. A party will determine its
Loss as of the relevant Early Termination Date, or, if that is not reasonably
practicable, as of the earliest date thereafter as is reasonably practicable. A
party may (but need not) determine its Loss by reference to quotations of
relevant rates or prices from one or more leading dealers in the relevant
markets.

"MARKET QUOTATION" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document
with respect to the obligations of such party) and the quoting Reference
Market-maker to enter into a transaction (the "Replacement Transaction") that
would have the effect of preserving for such party the economic equivalent of
any payment or delivery (whether the underlying obligation was absolute or
contingent and assuming the satisfaction of each applicable condition precedent)
by the parties under Section 2(a)(i) in respect of such Terminated Transaction
or group of Terminated Transactions that would, but for the occurrence of the
relevant Early Termination Date, have been required after that date. For this
purpose, Unpaid Amounts in respect of the Terminated Transaction or group of
Terminated Transactions are to be excluded but, without limitation, any payment
or delivery that would, but for the relevant Early Termination Date, have been
required (assuming satisfaction of each applicable condition precedent) after
that Early Termination Date is to be included. The Replacement Transaction would
be subject to such documentation as such party and the Reference Market-maker
may, in good faith, agree. The party making the determination (or its agent)
will request each Reference Market-maker to provide its quotation to the extent
reasonably practicable as of the same day and time (without regard to different
time zones) on or as soon as reasonably practicable after the relevant Early
Termination Date. The day and time as of which those quotations are to be
obtained will be selected in good faith by the party obliged to make a
determination under Section 6(e), and, if each party is so obliged, after
consultation with the other. If more than three quotations are provided, the
Market Quotation will be the arithmetic mean of the quotations, without regard
to the quotations having the highest and lowest values. If exactly three such
quotations are provided, the Market Quotation will be the quotation remaining
after disregarding the highest and lowest quotations.



For this purpose, if more than one quotation has the same highest value or
lowest value, then one of such quotations shall be disregarded. If fewer than
three quotations are provided, it will be deemed that the Market Quotation in
respect of such Terminated Transaction or group of Terminated Transactions
cannot be determined.

"NON-DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it) if
it were to fund the relevant amount.

"NON-DEFAULTING PARTY" has the meaning specified in Section 6(a).

"OFFICE" means a branch or office of a party, which may be such party's head or
home office.

"POTENTIAL EVENT OF DEFAULT" means any event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default.

"REFERENCE MARKET-MAKERS" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria that
such party applies generally at the time in deciding whether to offer or to make
an extension of credit and (b) to the extent practicable, from among such
dealers having an office in the same city.

"RELEVANT JURISDICTION" means, with respect to a party, the jurisdictions (a) in
which the party is incorporated, organised, managed and controlled or considered
to have its seat, (b) where an Office through which the party is acting for
purposes of this Agreement is located, (c) in which the party executes this
Agreement and (d) in relation to any payment, from or through which such payment
is made.

"SCHEDULED PAYMENT DATE" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.

"SET-OFF" means set-off, offset, combination of accounts, right of retention or
withholding or similar right or requirement to which the payer of an amount
under Section 6 is entitled or subject (whether arising under this Agreement,
another contract, applicable law or otherwise) that is exercised by, or imposed
on, such payer.

"SETTLEMENT AMOUNT" means, with respect to a party and any Early Termination
Date, the sum of:-

(a) the Termination Currency Equivalent of the Market Quotations (whether
positive or negative) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation is determined; and

(b) such party's Loss (whether positive or negative and without reference to any
Unpaid Amounts) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation cannot be determined or would not (in
the reasonable belief of the party making the determination) produce a
commercially reasonable result.

"SPECIFIED ENTITY" has the meaning specified in the Schedule.

"SPECIFIED INDEBTEDNESS" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.

"SPECIFIED TRANSACTION" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any combination of
these transactions and (c) any other transaction identified as a Specified
Transaction in this Agreement or the relevant confirmation.

"STAMP TAX" means any stamp, registration, documentation or similar tax.



"TAX" means any present or future tax, levy, impost, duty, charge, assessment or
fee of any nature (including interest, penalties and additions thereto) that is
imposed by any government or other taxing authority in respect of any payment
under this Agreement other than a stamp, registration, documentation or similar
tax.

"TAX EVENT" has the meaning specified in Section 5(b).

"TAX EVENT UPON MERGER" has the meaning specified in Section 5(b).

"TERMINATED TRANSACTIONS" means with respect to any Early Termination Date (a)
if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).

"TERMINATION CURRENCY" has the meaning specified in the Schedule.

"TERMINATION CURRENCY EQUIVALENT" means, in respect of any amount denominated in
the Termination Currency, such Termination Currency amount and, in respect of
any amount denominated in a currency other than the Termination Currency (the
"Other Currency"), the amount in the Termination Currency determined by the
party making the relevant determination as being required to purchase such
amount of such Other Currency as at the relevant Early Termination Date, or, if
the relevant Market Quotation or Loss (as the case may be), is determined as of
a later date, that later date, with the Termination Currency at the rate equal
to the spot exchange rate of the foreign exchange agent (selected as provided
below) for the purchase of such Other Currency with the Termination Currency at
or about 11:00 a.m. (in the city in which such foreign exchange agent is
located) on such date as would be customary for the determination of such a rate
for the purchase of such Other Currency for value on the relevant Early
Termination Date or that later date. The foreign exchange agent will, if only
one party is obliged to make a determination under Section 6(e), be selected in
good faith by that party and otherwise will be agreed by the parties.

"TERMINATION EVENT" means an Illegality, a Tax Event or a Tax Event Upon Merger
or, if specified to be applicable, a Credit Event Upon Merger or an Additional
Termination Event.

"TERMINATION RATE" means a rate per annum equal to the arithmetic mean of the
cost (without proof or evidence of any actual cost) to each party (as certified
by such party) if it were to fund or of funding such amounts.

"UNPAID AMOUNTS" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under Section
2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be
settled by delivery to such party on or prior to such Early Termination Date and
which has not been so settled as at such Early Termination Date, an amount equal
to the fair market value of that which was (or would have been) required to be
delivered as of the originally scheduled date for delivery, in each case
together with (to the extent permitted under applicable law) interest, in the
currency of such amounts, from (and including) the date such amounts or
obligations were or would have been required to have been paid or performed to
(but excluding) such Early Termination Date, at the Applicable Rate. Such
amounts of interest will be calculated on the basis of daily compounding and the
actual number of days elapsed. The fair market value of any obligation referred
to in clause (b) above shall be reasonably determined by the party obliged to
make the determination under Section 6(e) or, if each party is so obliged, it
shall be the average of the Termination Currency Equivalents of the fair market
values reasonably determined by both parties.

IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.



CALYON NEW YORK BRANCH                 ASHFORD HOSPITALITY LIMITED PARTNERSHIP

Authorized Signature:                  Authorized Signature:

By: /s/ IAN CHEUNG                     By: /s/ DAVID A. BROOKS
    --------------------                     ---------------------------------
Name:  Ian Cheung                      Name:  David A. Brooks
Title: Director                        Title: Vice President
Date:  October 6, 2004                 Date:

By: /s/ SIMON EEDLE
    ------------------------
Name:  Simon Eedle
Title: Managing Director & Treasurer
Date:  October 6, 2004

EX-10.19.1

                                                                 EXHIBIT 10.19.1
(MULTICURRENCY -- CROSS BORDER)

                                     ISDA(R)

                  INTERNATIONAL SWAP DEALERS ASSOCIATION, INC.

                                MASTER AGREEMENT

                          dated as of September 2, 2004

SMBC DERIVATIVE PRODUCTS LIMITED  AND   ASHFORD AUSTIN LP, ASHFORD BLOOMINGTON
             ("PARTY A")                LP, ASHFORD BUENA VISTA LP, ASHFORD
                                        BUFORD I LP, ASHFORD BUFORD II LP,
                                        ASHFORD COLUMBUS LP,.ASHFORD DALLAS LP,
                                        ASHFORD DAYTON LP, ASHFORD DULLES LP,
                                        ASHFORD EVANSVILLE I LP, ASHFORD
                                        EVANSVILLE II LP, ASHFORD EVANSVILLE
                                        III LP, ASHFORD FLAGSTAFF LP, ASHFORD
                                        HOLTSVILLE LP, ASHFORD HORSE CAVE LP,
                                        ASHFORD JACKSONVILLE II LP, ASHFORD LAS
                                        VEGAS LP, ASHFORD LOUISVILLE LP,
                                        ASHFORD MOBILE LP, ASHFORD PHOENIX LP,
                                        ASHFORD PRINCETON LP, ASHFORD SYRACUSE
                                        LP, ASHFORD TERRE HAUTE LP, ASHFORD
                                        TIPTON LAKES LP AND ASHFORD BUCKS
                                        COUNTY LLC
                                      (INDIVIDUALLY AND COLLECTIVELY, "PARTY B")

have entered and/or anticipate entering into one or more transactions (each a
"Transaction") that are or will be governed by this Master Agreement, which
includes the schedule (the "Schedule"), and the documents and other confirming
evidence (each a "Confirmation") exchanged between the parties confirming those
Transactions.

Accordingly, the parties agree as follows: --

1. INTERPRETATION

(a) DEFINITIONS. The terms defined in Section 14 and in the Schedule will have
the meanings therein specified for the purpose of this Master Agreement.

(b) INCONSISTENCY. In the event of any inconsistency between the provisions of
the Schedule and the other provisions of this Master Agreement, the Schedule
will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such
Confirmation will prevail for the purpose of the relevant Transaction.

(c) SINGLE AGREEMENT. All Transactions are entered into in reliance on the fact
that this Master Agreement and all Confirmations form a single agreement between
the parties (collectively referred to as this "Agreement"), and the parties
would not otherwise enter into any Transactions.

2. OBLIGATIONS

(a)      GENERAL CONDITIONS.

      (i) Each party will make each payment or delivery specified in each
      Confirmation to be made by it, subject to the other provisions of this
      Agreement.

      (ii) Payments under this Agreement will be made on the due date for value
      on that date in the place of the account specified in the relevant
      Confirmation or otherwise pursuant to this Agreement, in freely
      transferable funds and in the manner customary for payments in the
      required currency. Where settlement is by delivery (that is, other than by
      payment), such delivery will be made for receipt on the due date in the
      manner customary for the relevant obligation unless otherwise specified in
      the relevant Confirmation or elsewhere in this Agreement.

      (iii) Each obligation of each party under Section 2(a)(i) is subject to
      (1) the condition precedent that no Event of Default or Potential Event of
      Default with respect to the other party has occurred and is continuing,
      (2) the condition precedent that no Early Termination Date in respect of
      the relevant Transaction has occurred or been effectively designated and
      (3) each other applicable condition precedent specified in this Agreement.

       Copyright (C) 1992 by International Swap Dealers Association, Inc.



value of that which was (or would have been) required to be delivered as of the
originally scheduled date for delivery, in each case together with (to the
extent permitted under applicable law) interest, in the currency of such
amounts, from (and including) the date such amounts or obligations were or would
have been required to have been paid or performed to (but excluding) such Early
Termination Date, at the Applicable Rate. Such amounts of interest will be
calculated on the basis of daily compounding and the actual number of days
elapsed. The fair market value of any obligation referred to in clause (b) above
shall be reasonably determined by the party obliged to make the determination
under Section 6(e) or, if each party is so obliged, it shall be the average of
the Termination Currency Equivalents of the fair market values reasonably
determined by both parties.

IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.

                PARTY A                                     PARTY B

SMBC DERIVATIVE PRODUCTS LIMITED          ASHFORD AUSTIN LP

By: SMBC Capital Markets, Inc.            By: Ashford Senior General Partner LLC
Its: Agent                                Its: General Partner

                                          By: /s/ DAVID A. BROOKS
                                              Name: David A. Brooks
                                              Title: Vice President

By: /s/ KENICHI MOROOKA
    Name: Kenichi Morooka                 ASHFORD BLOOMINGTON LP
    Title: Managing Director

                                          By: Ashford Senior General Partner LLC
                                          Its: General Partner

                                          By: /s/ DAVID A. BROOKS
                                              Name: David A. Brooks
                                              Title: Vice President

                                          ASHFORD BUENA VISTA LP

                                          By: Ashford Senior General Partner LLC
                                          Its: General Partner

                                          By: /s/ DAVID A. BROOKS
                                              Name: David A. Brooks
                                              Title: Vice President

                                                                    ISDA(R) 1992

                                       18


                                          ASHFORD BUFORD I LP

                                          By: Ashford Senior General Partner LLC
                                          Its: General Partner

                                          By: /s/ DAVID A. BROOKS
                                              Name: David A. Brooks
                                              Title: Vice President

                                          ASHFORD BUFORD II LP

                                          By: Ashford Senior General Partner LLC
                                          Its: General Partner

                                          By: /s/ DAVID A. BROOKS
                                              Name: David A. Brooks
                                              Title: Vice President

                                          ASHFORD COLUMBUS LP

                                          By: Ashford Senior General Partner LLC
                                          Its: General Partner

                                          By: /s/ DAVID A. BROOKS
                                              Name: David A. Brooks
                                              Title: Vice President

                                          ASHFORD DALLAS LP

                                          By: Ashford Senior General Partner LLC
                                          Its: General Partner

                                          By: /s/ DAVID A. BROOKS
                                              Name: David A. Brooks
                                              Title: Vice President

                                                                    ISDA(R) 1992

                                      18-1



                                          ASHFORD DAYTON LP

                                          By: Ashford Senior General Partner LLC
                                          Its: General Partner

                                          By: /s/ DAVID A. BROOKS
                                              Name: David A. Brooks
                                              Title: Vice President

                                          ASHFORD DULLES LP

                                          By: Ashford Senior General Partner LLC
                                          Its: General Partner

                                          By: /s/ DAVID A. BROOKS
                                              Name: David A. Brooks
                                              Title: Vice President

                                          ASHFORD EVANSVILLE I LP

                                          By: Ashford Senior General Partner LLC
                                          Its: General Partner

                                          By: /s/ DAVID A. BROOKS
                                              Name: David A. Brooks
                                              Title: Vice President

                                          ASHFORD EVANSVILLE II LP

                                          By: Ashford Senior General Partner LLC
                                          Its: General Partner

                                          By: /s/ DAVID A. BROOKS
                                              Name: David A. Brooks
                                              Title: Vice President


                                                                    ISDA(R) 1992

                                      18-2


                                          ASHFORD EVANSVILLE III LP

                                          By: Ashford Senior General Partner LLC
                                          Its: General Partner

                                          By: /s/ DAVID A. BROOKS
                                              Name: David A. Brooks
                                              Title: Vice President

                                          ASHFORD FLAGSTAFF LP

                                          By: Ashford Senior General Partner LLC
                                          Its: General Partner

                                          By: /s/ DAVID A. BROOKS
                                              Name: David A. Brooks
                                              Title: Vice President

                                          ASHFORD HOLTSVILLE LP

                                          By: Ashford Senior General Partner LLC
                                          Its: General Partner

                                          By: /s/ DAVID A. BROOKS
                                              Name: David A. Brooks
                                              Title: Vice President

                                          ASHFORD HORSE CAVE LP

                                          By: Ashford Senior General Partner LLC
                                          Its: General Partner

                                          By: /s/ DAVID A. BROOKS
                                              Name: David A. Brooks
                                              Title: Vice President

                                                                    ISDA(R) 1992

                                      18-3



                                          ASHFORD JACKSONVILLE II LP

                                          By: Ashford Senior General Partner LLC
                                          Its: General Partner

                                          By: /s/ DAVID A. BROOKS
                                              Name: David A. Brooks
                                              Title: Vice President

                                          ASHFORD LAS VEGAS LP

                                          By: Ashford Senior General Partner LLC
                                          Its: General Partner

                                          By: /s/ DAVID A. BROOKS
                                          Name: David A. Brooks
                                          Title: Vice President

                                          ASHFORD LOUISVILLE LP

                                          By: Ashford Senior General Partner LLC
                                          Its: General Partner

                                          By: /s/ DAVID A. BROOKS
                                              Name: David A. Brooks
                                              Title: Vice President

                                          ASHFORD MOBILE LP

                                          By: Ashford Senior General Partner LLC
                                          Its: General Partner

                                          By: /s/ DAVID A. BROOKS
                                              Name: David A. Brooks
                                              Title: Vice President

                                                                    ISDA(R) 1992

                                          18-4



                                          ASHFORD PHOENIX LP

                                          By: Ashford Senior General Partner LLC
                                          Its: General Partner

                                          By: /s/ DAVID A. BROOKS
                                              Name: David A. Brooks
                                              Title: Vice President

                                          ASHFORD PRINCETON LP

                                          By: Ashford Senior General Partner LLC
                                          Its: General Partner

                                          By: /s/ DAVID A. BROOKS
                                              Name: David A. Brooks
                                              Title: Vice President

                                          ASHFORD SYRACUSE LP

                                          By: Ashford Senior General Partner LLC
                                          Its: General Partner

                                          By: /s/ DAVID A. BROOKS
                                              Name: David A. Brooks
                                              Title: Vice President

                                          ASHFORD TERRE HAUTE LP

                                          By: Ashford Senior General Partner LLC
                                          Its: General Partner

                                          By: /s/ DAVID A. BROOKS
                                              Name: David A. Brooks
                                              Title: Vice President

                                          ASHFORD TIPTON LAKES LP

                                          By: Ashford Senior General Partner LLC
                                          Its: General Partner

                                          By: /s/ DAVID A. BROOKS
                                              Name: David A. Brooks
                                              Title: Vice President

                                                                    ISDA(R) 1992

                                      18-5



                                          ASHFORD BUCKS COUNTY LLC

                                          By: Ashford Senior General Partner LLC
                                          Its: General Partner

                                          By: /s/ DAVID A. BROOKS
                                              Name: David A. Brooks
                                              Title: Vice President

                                                                    ISDA(R) 1992

                                      18-6

EX-10.19.2

                                                                 EXHIBIT 10.19.2

(MULTICURRENCY -- CROSS BORDER)

                                     ISDA(R)

                  INTERNATIONAL SWAP DEALERS ASSOCIATION, INC.

                                MASTER AGREEMENT

                          dated as of September 2, 2004

    SMBC DERIVATIVE PRODUCTS LIMITED      AND         ASHFORD MEZZ BORROWER LLC

have entered and/or anticipate entering into one or more transactions (each a
"Transaction") that are or will be governed by this Master Agreement, which
includes the schedule (the "Schedule"), and the documents and other confirming
evidence (each a "Confirmation") exchanged between the parties confirming those
Transactions.

Accordingly, the parties agree as follows: --

1.    INTERPRETATION

(a)   DEFINITIONS. The terms defined in Section 14 and in the Schedule will have
the meanings therein specified for the purpose of this Master Agreement.

(b)   INCONSISTENCY. In the event of any inconsistency between the provisions of
the Schedule and the other provisions of this Master Agreement, the Schedule
will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such
Confirmation will prevail for the purpose of the relevant Transaction.

(c)   SINGLE AGREEMENT. All Transactions are entered into in reliance on the
fact that this Master Agreement and all Confirmations form a single agreement
between the parties (collectively referred to as this "Agreement"), and the
parties would not otherwise enter into any Transactions.

2.    OBLIGATIONS

(a)   GENERAL CONDITIONS.

      (i) Each party will make each payment or delivery specified in each
      Confirmation to be made by it, subject to the other provisions of this
      Agreement.

      (ii) Payments under this Agreement will be made on the due date for value
      on that date in the place of the account specified in the relevant
      Confirmation or otherwise pursuant to this Agreement, in freely
      transferable funds and in the manner customary for payments in the
      required currency. Where settlement is by delivery (that is, other than by
      payment), such delivery will be made for receipt on the due date in the
      manner customary for the relevant obligation unless otherwise specified in
      the relevant Confirmation or elsewhere in this Agreement.

      (iii) Each obligation of each party under Section 2(a)(i) is subject to
      (1) the condition precedent that no Event of Default or Potential Event of
      Default with respect to the other party has occurred and is continuing,
      (2) the condition precedent that no Early Termination Date in respect of
      the relevant Transaction has occurred or been effectively designated and
      (3) each other applicable condition precedent specified in this Agreement.

       Copyright (C) 1992 by International Swap Dealers Association, Inc.



value of that which was (or would have been) required to be delivered as of the
originally scheduled date for delivery, in each case together with (to the
extent permitted under applicable law) interest, in the currency of such
amounts, from (and including) the date such amounts or obligations were or would
have been required to have been paid or performed to (but excluding) such Early
Termination Date, at the Applicable Rate. Such amounts of interest will be
calculated on the basis of daily compounding and the actual number of days
elapsed. The fair market value of any obligation referred to in clause (b) above
shall be reasonably determined by the party obliged to make the determination
under Section 6(e) or, if each party is so obliged, it shall be the average of
the Termination Currency Equivalents of the fair market values reasonably
determined by both parties.

IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.

    SMBC DERIVATIVE PRODUCTS LIMITED            ASHFORD MEZZ BORROWER LLC

             (Name of Party)                          (Name of Party)

By: SMBC Capital Markets Inc.                  By: /s/ DAVID A. BROOKS
Its: Agent                                         -----------------------------
                                                   Name: David A. Brooks
                                                   Title: Vice President
                                                   Date: September 2, 2004

By: /s/ KENICHI MOROOKA
    Name: Kenichi Morooka
    Title: Managing Director
    Date: September 2, 2004

                                                                    ISDA(R) 1992

                                       18

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Montgomery J. Bennett, certify that:

1.	I have reviewed this quarterly report 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 officer(s) 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)) 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)	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
(c)	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 officer(s) 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 12, 2004	/s/ MONTGOMERY J. BENNETT
	Montgomery 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 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 officer(s) 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)) 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)	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
(c)	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 officer(s) 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 12, 2004	/s/ DAVID J. KIMICHIK
	David J. Kimichik
	Chief Financial Officer

EX-31.3

EXHIBIT 31.3

CERTIFICATION

I, Mark L. Nunneley, certify that:

1.	I have reviewed this quarterly report 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 officer(s) 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)) 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)	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
(c)	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 officer(s) 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 12, 2004	/s/ MARK L. NUNNELEY
	Mark L. Nunneley
	Chief Accounting 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 quarter ended September 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Montgomery 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:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Dated: November 12, 2004	/s/ MONTGOMERY J. BENNETT
	Montgomery 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 quarter ended September 30, 2004 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:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Dated: November 12, 2004	/s/ DAVID J. KIMICHIK
	David J. Kimichik
	Chief Financial Officer

EX-32.3

EXHIBIT 32.3

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 quarter ended September 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark L. Nunneley, Chief Accounting 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:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Dated: November 12, 2004	/s/ MARK L. NUNNELEY
	Mark L. Nunneley
	Chief Accounting Officer