Document:

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                                                                EXHIBIT 10.15.01

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                       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

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      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

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      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."

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            (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."

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            (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:

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                  "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.

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            (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

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                  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

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                  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).

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            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

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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.

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            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

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                                    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
<PAGE>

                                    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
<PAGE>

                                    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<PAGE>

                                                                   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)
<PAGE>

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
<PAGE>

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
<PAGE>

      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
<PAGE>

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
<PAGE>

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
<PAGE>

            (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
<PAGE>

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
<PAGE>

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.

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<PAGE>

            (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

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<PAGE>

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

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                                       11
<PAGE>

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

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                                       12
<PAGE>

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

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<PAGE>

      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

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                                       14
<PAGE>
                  (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

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                                       15
<PAGE>

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.

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<PAGE>

            (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

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                                       17
<PAGE>

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

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                                       18
<PAGE>

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

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<PAGE>

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).

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<PAGE>

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

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                                       21
<PAGE>

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).

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                                       22
<PAGE>

      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

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                                       23
<PAGE>

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

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                                       24
<PAGE>

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;

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                                       25
<PAGE>

            (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

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                                       26
<PAGE>

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;

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                                       27
<PAGE>

                  (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;

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                  (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

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                                       29
<PAGE>

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

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                                       30
<PAGE>

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.

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<PAGE>

      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

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                                       32
<PAGE>

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

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                                       33
<PAGE>

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.

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      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.

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<PAGE>

      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

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                                       36
<PAGE>

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

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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).

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            (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

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<PAGE>

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.

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      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

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<PAGE>

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-

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<PAGE>

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.

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<PAGE>

      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

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<PAGE>

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:

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<PAGE>

            (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,

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                                       46
<PAGE>

      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;

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            (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:

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      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

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<PAGE>

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

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<PAGE>

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.

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<PAGE>

      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

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<PAGE>

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

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                                       53
<PAGE>

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

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                                       54
<PAGE>

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,

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<PAGE>

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;

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            (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

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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

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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

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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

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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

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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

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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

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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.

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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

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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

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                                       66
<PAGE>

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."

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                                       67
<PAGE>

            (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
<PAGE>

      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
<PAGE>

      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

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                                       70
<PAGE>

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
<PAGE>

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
<PAGE>

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]

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                                       73
<PAGE>

            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)

<PAGE>

                                    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)

<PAGE>

                                    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)

<PAGE>

                                    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)

<PAGE>

                                    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)

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