Document:

Exhibit 10.1

                                     FORM OF
                                ESCROW AGREEMENT

      THIS AGREEMENT (this "Agreement") is entered into as of this __________
day of __________, by and between Sandalwood Lodging Investment Corporation (the
"Company") and U.S. Bank National Association ("Escrow Agent"), a national
banking association.

                                    RECITALS

      A. The Company is conducting a public offering of shares of common stock
(the "Shares") at a price of $20.00 per Share, with a minimum investment of
$10,000 for individuals or $3,000 for IRA's, under applicable state and Federal
securities laws and regulations (the "Offering").

      B. The Company wishes to assure those who subscribe for Shares (the
"Subscribers") that the Subscribers' monies will be released to the Company only
if and when not less than $50,000,000 (the "Threshold Amount") in subscriptions
are accepted by the Company from the sale of Shares and upon the direction of
the Company.

      C. The Company desires to provide for the safekeeping of the proceeds of
the Offering until such time as subscriptions for Shares totaling the Threshold
Amount (or such greater amount as the Company may direct in writing) have been
received and upon the direction of the Company, or until such time as Escrow
Agent is required to pay and return such proceeds to the Subscribers upon the
terms hereinafter provided.

AGREEMENT

      1. Deposit and Disbursement.

            a. Escrow Agent hereby agrees to receive and disburse the proceeds
from the Offering of the Shares and any interest earned thereon in accordance
with the terms of this Agreement.

            b. Subscribers shall from time to time cause to be wired or
deposited with Escrow Agent certain funds representing the purchase price of
their subscribedShares to be placed in a special interest-bearing escrow account
at Escrow Agent designated as the Sandalwood Lodging Investment Corporation
Escrow Account (the "Escrow Account") until the Threshold Amount (or such
greater amount as the Company may direct in writing) has been deposited in said
account. All funds are to be deposited in the Escrow Account within one (1)
business day after receipt by Escrow Agent.

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<PAGE>

            c. Subscribers shall cause to be delivered to Escrow Agent with each
such deposit a form bearing the name, address, and tax identification number of
such Subscriber Escrow Agent shall keep a current list of the persons who have
subscribed for the Shares and deposited money, showing name, date, address and
amount of each subscription. All funds so deposited shall remain the property of
the Subscribers, subject to the provisions of Paragraph 5 hereof. Escrow Agent
shall promptly forward to the Company any subscription agreements which it may
receive directly from Subscribers.

            d. If the Company rejects any subscriptions for which Escrow Agent
has already collected funds, Escrow Agent shall promptly issue a refund check to
the rejected Subscriber in the amount of the original deposit collected from
such Subscriber, plus interest thereon (if any). If the Company rejects any
subscription for which Escrow Agent has not yet collected funds but has
submitted the Subscriber's check for collection, Escrow Agent shall promptly
issue a check in the amount of the rejected Subscriber's check or Escrow Agent
shall promptly remit the Subscriber's check directly to the Subscriber.

            e. In the event that the Threshold Amount is not deposited with
Escrow Agent on or before June 30, 2004, as set forth in the Company's
prospectus, dated ________ , 2002 (the "Prospectus") (unless that date is
extended in accordance therewith), a copy of which has been attached as Exhibit
A hereto, Escrow Agent shall promptly return the funds which have been deposited
in the Escrow Account to the Subscribers, in the amount and to the addresses as
shown on its records, with interest earned. If the Offering is terminated due to
the failure to fulfill the Threshold amount by June 30, 2004, Escrow Agent will
inform the Company of the total amount of interest earned on funds deposited
with Escrow Agent, calculate the amount of interest earned by each Subscriber
and inform the Company how much of the total interest accrued will be
distributed to each Subscriber. For purposes of reporting to tax authorities,
Escrow Agent will report all interest earned by the escrow as paid upon
distribution. As needed, the Company will provide the Escrow Agentwritten
instructions with respect to the distribution of such amounts, subject to the
terms of this Agreement.

            f. Upon receipt of (i) the Threshold Amount (or such greater amount
as the Company may direct in writing) and (ii) written confirmation from the
Company that funds may be released from escrow, Escrow Agent shall release the
escrow funds to the Company. Interest income shall be distributed to the
Subscribers by the Escrow Agent as calculated on a pro-rata basis. At the
Company's option, it may continue to deposit proceeds from the sale of
additional Shares (after receipt and/or distribution of the Threshold Amount or
any greater amount as directed in writing by the Company) and to direct the
disbursement from time to time of funds so deposited after subscriptions for the
Threshold Amount have been received.

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      2. Responsibilities and Obligations of Escrow Agent.

            a. Escrow Agent assumes no responsibilities, obligations, or
liabilities except those expressly provided for elsewhere in this Agreement and
as follows:

                  (1) Escrow Agent shall have no responsibility, obligation or
liability to any person with respect to any action taken, suffered or omitted to
be taken by it in good faith under this Agreement and shall in no event be
liable hereunder except for its gross negligence or willful misconduct.

                  (2) Notwithstanding anything herein to the contrary, no
reference in this Agreement to any other agreement shall be construed or deemed
to enlarge the responsibilities, obligations, or liabilities of Escrow Agent set
forth in this Agreement.

            b. Escrow Agent shall be protected in relying upon the truth of any
statement contained in any requisition, notice, request, certificate, approval,
consent or other proper paper, and in acting on any such document, which on its
face and without inquiry as to any other facts, appears to be genuine and to be
signed by the proper party or parties, and is entitled to believe all signatures
are genuine and that any person signing any such paper who claims to be duly
authorized is in fact so authorized.

            c. Escrow Agent shall be entitled to act on any instruction given to
it in writing and signed by an authorized signatory of the Company and shall be
fully protected in doing so.

            d. Escrow Agent shall be entitled to act in accordance with any
court order or other final determination by any governmental authority with
jurisdiction of any matter arising hereunder.

            e. Escrow Agent shall have no responsibility for, and makes no
representation as to the value, validity or genuineness of any article, asset or
document deposited with Escrow Agent in the Escrow Account under this Agreement,
provided that it will give notice to the Company of any check for money not
credited and the reason stated therefore and of any discrepancy with respect to
the value, validity or genuineness of any article, asset or document so
deposited if and when it has actual knowledge thereof.

            f. Escrow Agent shall have no responsibility to make payments out of
the Escrow Account for any amount in excess of the amount of collected funds
deposited in the Escrow Account, together with any interest earnings thereon, at
the time any payment is to be made.

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<PAGE>

            g. If any controversy arises between the parties hereto or with any
third person relating to the Escrow Account, Escrow Agent shall not be required
to resolve the same or to take any action to do so but may at its discretion,
institute such interpleader or other proceedings as it deems proper. As to any
third-party dispute relating to the Escrow Agreement, Escrow Agent shall notify
the Company of the existence and facts of such dispute. Escrow Agent may rely on
any joint written instructions as to the disposition of funds, assets, documents
or other assets held in escrow hereunder.

            h. Escrow Agent may execute any of its powers or responsibilities
hereunder and exercise any of its rights hereunder either directly or by or
through its agents or attorneys. Nothing in this Agreement shall be deemed to
impose upon Escrow Agent any duty to qualify to do business or to act as a
fiduciary or otherwise in any jurisdiction. Escrow Agent shall not be
responsible for and shall not be under a duty to examine or pass upon the
validity, binding effect, execution or sufficiency of the Prospectus or of any
amendment or supplement to the Prospectus or the subscription documents or of
any other agreement.

      3. Investment of Escrow Funds.

            The Escrow Agent shall invest all deposited funds in an interest
bearing U.S. Bank Money Market Savings Account. Owner acknowledges that the U.S.
Bank money market accounts are U.S. Bank Trust National Association deposit
accounts designed to meet the needs of global escrow and other corporate trust
customers of U.S. Bank Trust National Association. The accounts pay competitive
variable interest rates, which are determined based upon the customer's
aggregated balance. Each customer's deposit is insured up to $100,000 per
participant by the Federal Deposit Insurance Corporation. Interest rates
currently offered on the accounts are determined at U.S. Bank's direction and
may change daily. U.S. Bank Trust National Association uses the daily balance
method to calculate interest on these accounts. This method applies a daily
periodic rate to the principal in the accounts each day of the month and
dividing that figure by the number of days in the period. Interest on customer
deposits begins to accrue on the business day funds are credited to the U.S.
Bank deposit account. Interest is compounded on a monthly basis. The owner of
the accounts is U.S. Bank Trust National Association as agent for its customers.
All account deposits and withdrawals are performed by U.S. Bank Trust National
Association. Any and all interest earned on the Proceeds after the deposit shall
be added to the Proceeds and shall become a part thereof. Interest earned on the
Escrow Account will be the property of the Subscribers, pro-rata, as provided in
Section 1(e) above. All entities entitled to receive interest from the escrow
account will provide Escrow Agent with a W-9 or W-8 IRS tax form prior to the
disbursement of interest. A statement of citizenship will be provided if
requested by Escrow Agent. Escrow Agent shall have no responsibility for
preparing or filing any Federal or State tax returns in connection therewith.

      4. Compensation of Escrow Agent.

            Escrow Agent shall be paid for services hereunder in accordance with
the fee schedule attached hereto as Exhibit B. Payment of all fees shall be the
responsibility of the Company..

            In the event that Escrow Agent is made a party to litigation with
respect to the property held hereunder, or brings an action in interpleader or
in the event that the conditions of this escrow are not promptly fulfilled, or
Escrow Agent is required to render any service not provided for in this
Agreement and fee schedule, or there is any assignment of the interest of this

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<PAGE>

escrow or any modification hereof, Escrow Agent shall be entitled to reasonable
compensation for such extraordinary services and reimbursement for all fees,
costs, liability and expenses, including reasonable attorneys' fees.

      5. Indemnification of Escrow Agent.

            The Company hereby agrees to indemnify and hold harmless Escrow
Agent against any and all claims, losses, and damages it may suffer in
connection with its carrying out the terms of this Agreement, including, without
limitation, Escrow Agent's unpaid fees and reimbursable expenses, but excluding
any loss Escrow Agent may sustain as a result of its gross negligence or willful
misconduct. Escrow Agent shall have a lien or right of setoff on all funds,
monies or other assets held hereunder to pay all of its fees and reimbursable
expenses permitted under this Agreement. The obligations of the Company under
this Section 5 shall survive termination of this Agreement for any reason or
resignation or removal of Escrow Agent.

      6. Termination and Resignation.

            a. This Agreement shall terminate when (i) Escrow Agent or its
successor or assign receives written notification of termination from the
Company; including final disposition instructions signed by the Company, and
(ii) there occurs the actual final disposition of the monies held in escrow
hereunder as provided in this Agreement. The rights and obligations of Escrow
Agent shall survive the termination of this Agreement.

            b. Escrow Agent may resign at any time and be discharged from its
duties as Escrow Agent hereunder by giving the Company not fewer than sixty (60)
days prior written notice thereof. Upon resignation during the first six months
of this Agreement, the Escrow Agent shall be required to return any initial or
set-up fees paid by the Company. As soon as practicable after its resignation,
Escrow Agent shall turn over to a successor escrow agent appointed by the
Company all monies held hereunder upon presentation of the document from the
Company appointing a successor escrow agent and its acceptance of appointment.
If no such designation of a successor Escrow Agent is made by the Company within
45 days of Company's receipt of Escrow Agent's notice of resignation, Escrow
Agent may designate its own successor by written notice to the Company, so long
as any such successor is a bank or trust company and Escrow Agent receives
written consent to such proposed successor escrow agent within 60 days of Escrow
Agent's original notice of resignation. Upon the designation of a successor
escrow agent and the delivery to the resigning Escrow Agent of the document
appointing such successor escrow agent and its acceptance of appointment, the
resigning Escrow Agent shall be released from any and all liabilities arising
thereafter except as provided in Sections 2(a)(1) and 5 of this Agreement.

                  If no successor escrow agent is appointed, or consented to, by
the Company within the sixty (60) day period following such notice of
resignation, Escrow Agent reserves the right to forward the matter and all
monies and other property held by Escrow Agent pursuant to this Agreement to a
court of competent jurisdiction at the expense of the Company.

            c. The Company may discharge Escrow Agent without cause and appoint
a successor escrow agent hereunder at any time by giving Escrow Agent no fewer
than sixty (60) days prior written notice thereof. As soon as practicable after
its discharge, Escrow Agent shall turn over to the successor escrow agent
appointed by the Company all monies held hereunder upon presentation of the
document from the Company appointing such successor escrow agent

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<PAGE>

and its acceptance of appointment. Upon the designation of a successor escrow
agent, the delivery to a discharged Escrow Agent with its obligations pursuant
to the immediately preceding sentence, the discharged Escrow Agent shall be
released from any and all liabilities arising thereafter except as provided in
Sections 2(a)(1) and 5 of this Agreement.

      7. Notices.

            All notices provided for herein shall be in writing, shall be
delivered by hand or by registered or certified mail, shall be deemed given when
actually received, and shall be addressed to the parties hereto at their
respective addresses, which may be changed by any party from time to time by
written notice to all other parties hereto as follows:

            a.    If to the Company:
                  Sandalwood Lodging Investment Corporation
                  11790 Glen Road
                  Potomac, MD 20854
                  Attn: Douglas H.S. Greene
                  (301) 299-8715 (phone)
                  (301) 765-0309 (fax)

                  With fax copy to:
                  Christopher G. Townsend, Esq.
                  (703) 744-8080 (phone)
                  (703) 744-8001 (fax)

            b.    If to the Escrow Agent:

                  U.S. Bank Corporate Trust Services
                  180 East Fifth Street
                  St. Paul, MN  55101
                  Attn:  Chris Smith (EP-MN-T3DM)
                  (651) 244-8542   (phone)
                  (651) 244-8555 (fax)

                  With Fax Copy to:
                  Dawnita Ehl
                  (206)344-4685 (phone)
                  (206)344-4630 (fax)

      8. Disclosure.

            The parties hereby agree not to use the name of U.S. Bank National
Association to imply an association with the Offering other than that of a legal
escrow agent.

      9. Brokerage Confirmation.

            The parties acknowledge that to the extent regulations of any
applicable regulatory entity grant a right to receive brokerage confirmations of
security transactions of the escrow, the parties waive receipt of such
confirmations to the extent permitted by law. Escrow Agent shall furnish a
statement of security transactions on its regular daily reports to the

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<PAGE>

Company, which should be made available either via US Bank's Internet website or
via e-mail to the Company .

      10. Parties Bound.

            This Agreement shall extend to and be binding upon the respective
successors, representatives, and assigns of the Company and Escrow Agent.

      11. Entire Agreement.

            This Agreement constitutes the entire agreement of the parties
hereto with respect to the subject matter hereof and cannot be modified,
amended, supplemented, or changed, nor can any provisions hereof be waived,
except by written instrument executed by the parties hereto.

      12. Assignment.

            Neither party may assign its rights or obligations under this
Agreement without the written consent of the other party hereto.

      13. Applicable Law.

            The Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Maryland.

      14. Severability.

            If at any time subsequent to the date hereof, any provision of this
Agreement shall be held by a court of competent jurisdiction to be illegal,
void, or unenforceable, such provision shall be of no force or effect, and shall
be limited or expanded in scope so as to carry out the intent of the parties as
expressed herein to the greatest extent possible. The illegality or
unenforceability of any such provision shall have no effect upon and shall not
impair the enforceability of any other provision of this Agreement.

      15. Counterparts.

            This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be one and the same instrument.

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<PAGE>

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

SANDALWOOD LODGING INVESTMENT CORPORATION

By: ________________________________________

Title: _______________________________________

U.S. BANK NATIONAL ASSOCIATION

Authorized Agent: _______________________________

Title:  _______________________________

                                       8Exhibit 10.2

                               ADVISORY AGREEMENT

                                      among

                    SANDALWOOD LODGING INVESTMENT CORPORATION

                                       and
                            SANDALWOOD LODGING , LLC

                                       and

                        [SLTRS - TAXABLE REIT SUBSIDIARY]

                                       and

                      SANDALWOOD HOSPITALITY ADVISORS, LLC

                               ____________, 2002

<PAGE>

                                Table of Contents

Article I.     Definitions................................................   1
Article II.    Appointment of Advisor.....................................   1
               Section 2.1.  Appointment..................................   7
Article III.   Duties of Advisor..........................................   7
               Section 3.1.  Asset Management Services....................   7
Article IV.    Delegation to Advisor......................................   7
               Section 4.1.  Delegation...................................   9
               Section 4.2.  Approval of Acquisitions.....................   9
               Section 4.3.  Modification or Revocation of Authority......   9
Article V.     Bank Accounts..............................................   9
               Section 5.1.  Establishment of Bank Accounts...............  10
Article VI.    Records; Access to Records.................................  10
               Section 6.1.  Maintenance of records.......................  10
Article VII.   Limitations on Activities..................................  10
               Section 7.1.  Sandalwood REIT's Status as a REIT...........  10
Article VIII.  Relationship with Directors................................  10
               Section 8.1.  Service on Board of Directors................  10
Article IX.    Fees.......................................................  10
               Section 9.1.  Asset Management Fees........................  11
               Section 9.2.  Loans from Affiliates........................  11
Article X.     Expenses...................................................  11
               Section 10.1. Reimbursement of Expenses....................  11
               Section 10.2. Timing of Reimbursements.....................  11
               Section 10.3  Reimbursement of Certain Offering Expenses
                             in the Form of Shares........................  12
Article XI.    Other Services.............................................  12
               Section 11.1. Additional Services..........................  13
Article XII.   Fidelity Bond..............................................  13
               Section 12.1. Bond.........................................  13
Article XIII.  Other Activities of Advisor and its Affiliates.............  13
               Section 13.1. Other Activities.............................  13
               Section 13.2. Investments..................................  13
               Section 13.3. Other Opportunities..........................  14
Article XIV.   Relationshipof Advisor and Companies.......................  14
               Section 14.1. Parties not Related..........................  14
Article XV.    Term; Termination of Agreement.............................  14
               Section 15.1. Term.........................................  14
               Section 15.2. Termination..................................  14
               Section 15.3. Responsibilities upon Termination............  15
Article XVI.   Assignment to an Affiliate.................................  15
               Section 16.1. Assignment...................................  15
Article XVII.  Indemnification............................................  15
               Section 17.1. Indemnification by the Companies.............  15
               Section 17.2. Indemnification by Advisor...................  15
Article XVIII. Appraisal..................................................  16

<PAGE>

               Section 18.1. Appraisal Process............................  16
Article XIX.   Notices....................................................  16
               Section 19.1. Notices......................................  16
Article XX.    Modifications to Agreement.................................  16
               Section 20.1. Changes to Agreement.........................  17
Article XXI.   Miscellaneous..............................................  17
               Section 21.1. Severability.................................  17
               Section 21.2. Construction.................................  17
               Section 21.3. Entire Agreement.............................  17
               Section 21.4. Delay; Not Waivers...........................  17
               Section 21.5. Gender.......................................  17
               Section 21.6. Titles; Headings.............................  17
               Section 21.7. Counterparts.................................  17
Article XXII.  Sandalwood Name............................................  17
               Section 22.1. Ownership of "Sandalwood" Name...............  18

<PAGE>

                               ADVISORY AGREEMENT

      THIS ADVISORY AGREEMENT (the "Agreement"), dated as of _______________,
2002, is between and among SANDALWOOD LODGING INVESTMENT CORPORATION, a Maryland
corporation ("Sandalwood REIT"), SANDALWOOD LODGING, LLC, a Delaware limited
liability company ("Sandalwood LLC"), [SL-TRS], a ____________corporation
("SLTRS") and SANDALWOOD HOSPITALITY ADVISORS, LLC., a Delaware limited
liability company (the "Advisor"). Sandalwood REIT, Sandalwood LLC and SL-TRS
collectively are sometimes referred to as the "Companies" and individually as a
"Company."

                               W I T N E S S E T H

      WHEREAS, Sandalwood REIT has filed with the United States Securities and
Exchange Commission (the "SEC") a Registration Statement (No. 333-89094) on Form
S-11 covering 11,752,688 of its common shares (the "Offering") to be offered to
the public;

      WHEREAS, Sandalwood REIT intends to qualify as a REIT (as defined below),
and intends to continue to invest its funds in investments permitted by the
terms of the Registration Statement and Sections 856 through 860 of the Code (as
defined below);

      WHEREAS, SL-TRS is a wholly owned subsidiary of Sandalwood LLC;

      WHEREAS, the Companies wish to engage the Advisor to provide to the
Companies the Advisor's experience, sources of information, advice, assistance
and certain facilities available to the Advisor and to have the Advisor
undertake the duties and responsibilities hereinafter set forth, on behalf of
the Companies, and subject to the supervision of the Companies, all as provided
herein; and

      WHEREAS, the Advisor is willing to undertake to render such services, on
the terms and conditions set forth herein.

      NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements contained herein, the parties hereto agree as follows:

                                    ARTICLE I
                                   Definitions

      As used in this Agreement, the following terms have the definitions
hereinafter indicated:

      "Acquisition Expenses" shall mean any and all expenses incurred by the
Companies, the Advisor, or any Affiliate of the Companies or the Advisor in
connection with the selection or acquisition of any Property or Other
Investment, whether or not acquired, including, without

<PAGE>

limitation, legal fees and expenses, travel and communications expenses, costs
of appraisals, nonrefundable option payments on property not acquired,
accounting fees and expenses, and title insurance.

      "Acquisition Fees" shall mean any and all fees and commissions, exclusive
of Acquisition Expenses, paid by any Person to any other Person (including any
fees or commissions paid by or to any Affiliate of the Companies or the Advisor)
in connection with making or investing in the Properties and the Other
Investments, including, without limitation, real estate commissions, acquisition
fees, finder's fees, selection fees, development fees, construction fees,
consulting fees, loan fees, or any other similar fees or commissions.

      "Advisor" shall mean Sandalwood Hospitality Advisors, LLC, a Delaware
limited liability company, any successor advisor to the Companies, or any person
or entity to which Sandalwood Hospitality Advisors, LLC, or any successor
advisor subcontracts substantially all of its functions.

      "Affiliate or Affiliated" shall mean as to any specified Person, (i) any
Person that directly or indirectly through one or more intermediaries controls,
is controlled by, or is under common control with the specified Person, (ii) any
Person that is an officer or director of, general partner in or trustee of, or
serves in a similar capacity with respect to, the specified Person, or of which
the specified Person is an officer, director, general partner or trustee, or
with respect to which the specified Person serves in a similar capacity, (iii)
any Person for which an officer or director of, general partner in or trustee
of, or individual serving in a similar capacity with respect to, the specified
Person serves in such capacity, (iv) any Person that, directly or indirectly, is
the beneficial owner of ten percent (10%) or more of any class of equity
securities (whether voting or nonvoting) of the specified Person or of which the
specified Person is directly or indirectly the owner of ten percent (10%) or
more of any class of equity securities (whether voting or nonvoting) and (v) any
relative or spouse of the specified Person who makes his or her home with the
specified Person.

      "Agreement" shall have the meaning provided therefore in the Preamble.

      "Appraisal" shall have the meaning provided therefore in Section 18.1.

      "Appraised Value" shall mean the value according to an appraisal made by
an Independent Appraiser.

      "Articles of Incorporation" shall mean the Articles of Incorporation of
Sandalwood REIT under Title 2 of the Corporations and Associations Article of
the Annotated Code of Maryland, as amended from time to time.

      "Asset Management Fee" and "Asset Management Fees" shall have the meanings
provided therefore in Section 9.1.

      "Asset Management Services" shall have the meaning provided therefore in
Section 3.1 of this Agreement.

      "Asset Valuation" shall mean the total value of a Company's or the
Companies' assets, as applicable, based upon an independent annual appraisal of
long-term assets and a quarterly GAAP valuation of current assets.

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<PAGE>

      "Board of Directors" shall mean the persons holding such office, as of any
particular time, under the Articles of Incorporation of Sandalwood REIT, whether
they be the Directors named therein or additional or successor Directors.

      "Bylaws" shall mean the bylaws of Sandalwood REIT, as the same are in
effect from time to time.

      "Cause" shall mean, with respect to the termination of this Agreement,
fraud, gross negligence, or negligent breach of fiduciary duty by either party,
or breach of this Agreement which remains uncured within 30 days after notice by
the other party.

      "Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time, or any successor statute thereto. Reference to any provision of the
Code shall mean such provision as in effect from time to time, as the same may
be amended, and any successor provision thereto, as interpreted by any
applicable regulations as in effect from time to time.

      "Company" and "Companies" shall have the meanings provided therefore in
the Preamble.

      "Company Property" shall mean any and all property, real, personal or
otherwise, tangible or intangible, including Properties and Other Investments,
which is transferred or conveyed to a Company (including all rents, income,
profits and gains therefrom), and which is owned or held by, or for the account
of, the Company.

      "Deferred Asset Management Fees" shall have the meaning provided therefore
in Section 9.1.

      "Director" shall mean a member of the Board of Directors.

      "Distributions" shall mean any distributions of money or other property by
Sandalwood REIT to owners of Equity Shares including distributions that may
constitute a return of capital for federal income tax purposes.

      "Equity Shares" shall mean transferable shares of beneficial interest of
Sandalwood REIT of any class or series, including common shares or preferred
shares.

      "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
as enacted and in force on the date hereof.

      "Fiscal Year" shall mean the fiscal year of Sandalwood REIT, as such may
be changed from time to time by the Board of Directors. As of the date of this
Agreement, Sandalwood REIT's Fiscal Year shall end December 31 of each year. A
"full Fiscal Year" shall mean 52 consecutive weeks of operations running from
January 1 to December 31 of that year.

      "Gross Proceeds" shall mean the aggregate purchase price of all Shares
sold for the account of Sandalwood REIT through the Offering, without deduction
for Selling Commissions, volume discounts, the marketing expense reimbursement
or Offering Expenses.

                                       3
<PAGE>

      "Hotel Chains" shall mean the national and regional full-service hotel
chains, to be selected by the Advisor, and who themselves or their franchisees
will either lease or manage the Properties.

      "Independent Appraiser" shall mean a qualified appraiser of real estate as
determined by the Board of Directors. Membership in a nationally recognized
appraisal society such as the American Institute of Real Estate Appraisers
("M.A.I.") or the Society of Real Estate Appraisers ("S.R.E.A.") shall be
conclusive evidence of such qualification.

      "Independent Director" shall mean a Director who is not and within the
last two years has not been directly or indirectly associated with the Advisor
by virtue of (i) ownership of an interest in the Advisor or its Affiliates, (ii)
employment by the Advisor or its Affiliates, (iii) service as an officer or
director of the Advisor or its Affiliates, (iv) performance of services, other
than as a Director, for a Company, (v) service as a director or trustee of more
than three Persons advised by the Advisor, or (vi) maintenance of a material
business or professional relationship with the Advisor or any of its Affiliates.
A business or professional relationship is considered material if the gross
revenue derived by the Director from the Advisor and Affiliates exceeds 5% of
either the Director's annual gross income during either of the last two years or
the Director's net worth on a fair market value basis. An indirect relationship
shall include circumstances in which a Director's spouse, parents, children,
siblings, mothers- or fathers-in-law, sons- or daughters-in-law, or brothers- or
sisters-in-law is or has been associated with the Advisor, any of its
Affiliates, or the Company.

      "Invested Capital" shall mean the Gross Proceeds of the Offering plus the
amount calculated by multiplying the total number of additional Shares purchased
by Stockholders by the purchase price, reduced by the portion of any
Distribution that is attributable to Net Capital Proceeds.

      "Listing" shall mean the listing of the Shares of Sandalwood REIT on the
American Stock Exchange or another national or international securities exchange
or national over-the-counter market.

      "Lodging Investments" shall mean Properties and Other Investments,
collectively.

      "Managing Dealer" shall mean Emerald Bay Capital Management, LLC, an
Affiliate of the Advisor, or such entity selected by the Board of Directors to
act as the managing dealer for the Offering. Emerald Bay Capital Management, LLC
has filed an application for membership in the National Association of
Securities Dealers, Inc.

      "Net Capital Proceeds" shall mean Net Refinancing Proceeds, Net Sales
Proceeds, and the Asset Valuation calculated annually after the earlier to occur
of (a) trading volume of company shares of Sandalwood REIT common stock equal to
at least 6% of the average outstanding shares of common stock, at an average
trading price of greater than $20.00 per share, over 90 consecutive calendar
days, or (b) five years following the initial closing of the Offering.

      "Net Offering Proceeds" shall mean Gross Proceeds minus Offering Expenses.

                                       4
<PAGE>

      "Net Refinancing Proceeds" shall mean, the net proceeds received by a
Company from any refinancing or borrowing by the Company, the proceeds of which
are ultimately applied to make distributions to the Stockholders, including the
proceeds of a sale and leaseback transaction in which no taxable gain or loss is
recognized for federal income tax purposes after deducting (i) the amount of any
legal and other selling expenses incurred in connection with such transaction,
(ii) amounts applied by the Company toward the payment of any indebtedness,
other obligation, or expense of the Company, and (iii) all amounts then payable
to the Advisor.

      "Net Sales Proceeds" shall mean any net proceeds received by a Company and
ultimately distributed to the Stockholders (in excess of the outstanding
indebtedness and other liabilities of the Company) from (i) the exchange,
condemnation, eminent domain, taking, casualty, sale, or other disposition of
all or a portion of the Lodging Investments, or (ii) the liquidation of the
Lodging Investments in connection with a dissolution of the Company, after
deducting (A) any expenses incurred in connection therewith, (B) any amounts
applied by the Board of Directors toward the payment of any indebtedness, other
obligations, or expenses of the Company, or the creation of any reserves deemed
necessary by the Board of Directors, and (C) all amounts then payable therefrom
to the Advisor.

      "Offering" shall mean the public offering of 11,752,688 Shares that
commenced upon ____________, 2002.

      "Offering Expenses" shall mean any and all costs and expenses, other than
Selling Commissions and the marketing expense reimbursement, incurred by the
Advisor or any Affiliate of either in connection with the qualification and
registration of the Companies and the marketing and distribution of Shares,
including, without limitation, the following: legal, accounting and escrow fees;
printing, amending, supplementing, mailing and distributing costs; filing,
registration and qualification fees and taxes; telegraph and telephone costs;
and all advertising and marketing expenses, including the costs related to
investor and broker-dealer sales meetings.

                                       5
<PAGE>

      "Operating Agreement" shall mean that agreement dated as of , 2002,
between Sandalwood REIT and the Advisor as managing member, providing for the
governance of Sandalwood LLC.

      "Operating Expenses" shall mean all costs and expenses incurred by the
Companies, as determined under generally accepted accounting principles, which
in any way are related to the operation of the Companies or to Companies'
businesses, including (a) advisory fees, (b) the Asset Management Fee and (c)
the Subordinated Asset Management Fees, but excluding (i) the expenses of
raising capital such as Offering Expenses, legal, audit, accounting,
underwriting, brokerage, listing, registration, and other fees, printing and
other such expenses and tax incurred in connection with the issuance,
distribution, transfer, registration and Listing of the Shares, (ii) interest
payments, (iii) taxes, (iv) non-cash expenditures such as depreciation,
amortization and bad loan reserves, (v) the Advisor's Incentive Profit
Participation (as defined in Sandalwood LLC's Operating Agreement), (vi) any
payment of the Termination Fee and (vii) Acquisition Fees and Acquisition
Expenses, real estate commissions on the sale of property, and other expenses
connected with the acquisition, and ownership of real estate interests, mortgage
loans or other property (such as the costs of foreclosure, insurance premiums,
legal services, maintenance, repair and improvement of property).

      "Other Investments" shall mean investments made by a Company other than
investments in Properties, including, but not limited to, (i) stock, debt and
other securities in companies or other entities that own full-service hotels and
(ii) debt secured directly or indirectly by full-service hotels.

      "Permanent Financing" shall mean any line of credit or other financing to
acquire Lodging Investments, to pay any Acquisition Fees or Acquisition
Expenses, or to refinance outstanding amounts of any Permanent Financing.

      "Person" shall mean an individual, corporation, partnership, estate, trust
(including a trust qualified under Section 401(a) or 501(c)(17) of the Code), a
portion of a trust permanently set aside for or to be used exclusively for the
purposes described in Section 642(c) of the Code, association, private
foundation within the meaning of Section 509(a) of the Code, joint stock company
or other entity, or any government or any agency or political subdivision
thereof, and also includes a group as that term is used for purposes of Section
13(d)(3) of the Exchange Act.

      "Prime Rate" shall mean the base interest rate as announced from time to
time by the Wall Street Journal, or if such rate is not available, by a
replacement rate mutually agreed upon by the parties.

      "Property" or "Properties" shall mean the real properties, including the
buildings located thereon, which are acquired by a Company.

      "Prospectus" shall mean the same as that term is defined in Section 2(10)
of the Securities Act of 1933, including a preliminary Prospectus, an offering
circular as described in Rule 256 of the General Rules and Regulations under the
Securities Act of 1933 or, in the case of an intrastate offering, any document
by whatever name known, utilized for the purpose of offering and selling
securities to the public.

      "Registration Statement" shall mean the Registration Statement (No.
333-89094) on Form S-11 registering the Shares to be sold in the Offering.

      "REIT" shall mean a "real estate investment trust" under Sections 856
through 860 of the Code.

      "Sandalwood REIT" shall have the meaning provided therefore in the
Preamble.

      "Sandalwood LLC" shall have the meaning provided therefore in the
Preamble.

      "Securities" shall mean any Equity Shares, Excess Shares, as such term is
defined in Sandalwood's Articles of Incorporation, any other stock, shares or
other evidences of equity or beneficial or other interests, voting trust
certificates, bonds, debentures, notes or other evidences of indebtedness,
secured or unsecured, convertible, subordinated or otherwise, or in general any
instruments commonly known as "securities" or any certificates of interest,
shares or participations in, temporary or interim certificates for, receipts
for, guarantees of, or warrants, options or rights to subscribe to, purchase or
acquire, any of the foregoing.

      "Shares" shall mean the common shares of Sandalwood REIT.

                                       6
<PAGE>

      "SL-TRS" shall have the meaning provided therefore in the Preamble.

      "Sponsor" shall mean any Person directly or indirectly instrumental in
organizing, wholly or in part, Sandalwood REIT or any Person who will control,
manage or participate in the management of the Company, and any Affiliate of
such Person. Not included is any Person (i) whose only relationship with a
Company is that of an independent property manager of Company assets, and whose
only compensation is as such, or (ii) independent third parties such as
attorneys, accountants, and underwriters whose only compensation is for
professional services.

      "Stockholders" shall mean the registered holders of Sandalwood REIT's
Equity Shares.

      "Stockholders' 8% Return" shall mean, as of each date, an aggregate amount
equal to an 8% cumulative, noncompounded, annual return on Invested Capital.

      "Subordinated Asset Management Fee" and "Subordinated Asset Management
Fees" shall have the meanings provided therefore in Section 9.1.

      "Termination Date" shall mean the date of termination of the Agreement as
provided in Section 15.1.

      "Termination Fee" shall have the meaning provided therefore in Section
15.2.

      "Total Proceeds" shall mean the Gross Proceeds plus loan proceeds from
Permanent Financing.

                                   ARTICLE II
                             Appointment of Advisor

      Section 2.1. Appointment. The Companies hereby appoint the Advisor to
serve as their advisor on the terms and conditions set forth in this Agreement,
and the Advisor hereby accepts such appointment.

                                   ARTICLE III
                                Duties of Advisor

      Section 3.1. Asset Management Services. The Advisor undertakes to use its
best efforts to present to the Companies potential investment opportunities and
to provide a continuing and suitable investment program consistent with the
investment objectives and policies of the Companies as determined and adopted
from time to time by the Directors. In performance of this undertaking (the
"Asset Management Services"), subject to the supervision of the Directors and
consistent with the provisions of the Registration Statement, Articles of
Incorporation and Bylaws of Sandalwood REIT, the Advisor shall, either directly
or through an Affiliate:

      (a) investigate, select, and, on behalf of a Company, engage and conduct
business with such Persons as the Advisor deems necessary to the proper
performance of its obligations hereunder, including but not limited to
consultants, accountants, correspondents, lenders, technical

                                       7
<PAGE>

advisors, attorneys, brokers, underwriters, corporate fiduciaries, escrow
agents, depositaries, custodians, agents for collection, insurers, insurance
agents, banks, builders, developers, property owners, mortgagors, and any and
all agents for any of the foregoing, including Affiliates of the Advisor, and
Persons acting in any other capacity deemed by the Advisor necessary or
desirable for the performance of any of the foregoing services, including but
not limited to entering into contracts in the name of the Company with any of
the foregoing;

      (b) provide the daily management of the Sandalwood REIT and SL-TRS and
perform and supervise the various administrative functions reasonably necessary
for the management of the Companies;

      (c) serve as the investment and financial advisor for Sandalwood REIT and
SL-TRS;

      (d) consult with the officers and Directors of the Companies and assist
the Directors in the formulation and implementation of the Companies' financial
policies, and, as necessary, furnish the Directors with advice and
recommendations with respect to the making of investments consistent with the
investment objectives and policies of the Companies and in connection with any
borrowings proposed to be undertaken by the Companies;

      (e) subject to the provisions of Section 3.1(g) and Article IV hereof, (i)
locate, analyze and select potential investments in Lodging Investments, (ii)
structure and negotiate the terms and conditions of transactions pursuant to
which investment in a Lodging Investment will be made by a Company; (iii) make
investments in Lodging Investments on behalf of the Companies in compliance with
the Companies' investment objectives and policies; (iv) arrange for financing
and refinancing and make other changes in the asset or capital structure of, and
dispose of, reinvest the proceeds from the sale of, or otherwise deal with the
investments in, the Lodging Investments; and (v) enter into leases and service
contracts for Properties and, to the extent necessary, perform all other
operational functions for the maintenance and administration of such Properties;

      (f) provide the Directors with periodic reports regarding prospective
investments in Lodging Investments;

      (g) obtain the prior approval of the Directors for any and all investments
in Lodging Investments;

      (h) negotiate on behalf of the Companies with banks or lenders for loans
to be made to the Companies and negotiate on behalf of the Companies with
investment banking firms and broker-dealers or negotiate private sales of Shares
and Securities or obtain loans for the Companies, but in no event in such a way
so that the Advisor shall be acting as broker-dealer or underwriter; and
provided, further, that any fees and costs payable to third parties incurred by
the Advisor in connection with the foregoing shall be the responsibility of
management of the applicable Company;

      (i) obtain reports (which may be prepared by the Advisor or its
Affiliates), where appropriate, concerning the value of investments or
contemplated investments of the Company Lodging Investments;

                                       8
<PAGE>

      (j) from time to time, or at any time reasonably requested by the
Directors, make reports to the Directors of its performance of services to the
Companies under this Agreement;

      (k) provide the Companies with all necessary cash management services;

      (l) deliver to or maintain on behalf of the Companies copies of all
appraisals obtained in connection with the investments in the Lodging
Investments; and

      (m) notify the Board of Directors of all proposed material transactions
before they are completed.

                                   ARTICLE IV
                              Delegation to Advisor

      Section 4.1. Delegation. Pursuant to the terms of this Agreement
(including the restrictions included in this Article IV and in Article VII), and
subject to the continuing and exclusive authority of the Directors over the
management of Sandalwood REIT, the exclusive authority of Sandalwood LLC's
managing member over the management of Sandalwood LLC, and the exclusive
authority of the SL-TRS's board of directors over the management of SL-TRS, the
Companies hereby delegate to the Advisor the authority to (a) locate, analyze
and select investment opportunities, (b) structure the terms and conditions of
transactions pursuant to which investments will be made or acquired for the
Companies, (c) assist the Companies in acquiring Lodging Investments in
compliance with the investment objectives and investment strategies of the
Companies, (d) arrange for Permanent Financing and financing or refinancing of
Properties, (e) assist the Companies in entering into leases, management
agreements and service contracts for the Company's Properties, and perform other
property management services, (f) oversee non-affiliated property managers and
other non-affiliated Persons who perform services for the Companies; and (g)
undertake accounting and other record-keeping functions at the Property level.

      Section 4.2. Approval of Acquisitions. Notwithstanding the foregoing, any
investment in Lodging Investments, including any acquisition of Property by a
Company (as well as any financing acquired by the Company in connection with
such acquisition) will require the prior approval of the Directors. If a
transaction requires approval by the Independent Directors, the Advisor will
deliver to the Independent Directors all documents required by them to properly
evaluate the proposed investment in the Property. The Companies will not
purchase or lease Lodging Investments from, or sell or lease Lodging Investments
to, the Advisor or its Affiliates.

      Section 4.3. Modification or Revocation of Authority. The Companies may,
at any time upon the giving of notice to the Advisor, modify or revoke the
authority set forth in this Article IV. If and to the extent the Companies so
modify or revoke the authority contained herein, the Advisor shall henceforth
submit to the Companies for prior approval such proposed transactions involving
investments in Properties as thereafter require prior approval; provided,
however, that such modification or revocation shall be effective upon receipt by
the Advisor and shall not be applicable to investment transactions to which the
Advisor has committed a Company prior to the date of receipt by the Advisor of
such notification.

                                       9
<PAGE>

                                    ARTICLE V
                                  Bank Accounts

      Section 5.1. Establishment of Bank Accounts. The Advisor may establish and
maintain one or more bank accounts in its own name for the account of a Company
or in the name of a Company and may collect and deposit into any such account or
accounts, and disburse from any such account or accounts, any money on behalf of
a Company, under such terms and conditions as the Directors may approve,
provided that no funds shall be commingled with the funds of the Advisor; and
the Advisor shall from time to time render appropriate accountings of such
collections and payments to the Directors and to the auditors of the Companies.

                                   ARTICLE VI
                           Records; Access to Records

      Section 6.1. Maintenance of Records. The Advisor shall maintain
appropriate records of all its activities hereunder and make such records
available for inspection by the Directors and by counsel, auditors and
authorized agents of a Company, at any time or from time to time during normal
business hours. The Advisor shall at all reasonable times have access to the
books and records of the Companies.

                                   ARTICLE VII
                            Limitations on Activities

      Section 7.1. Sandalwood REIT's Status as a REIT. Anything else in this
Agreement to the contrary notwithstanding, the Advisor shall refrain from taking
any action which, in its sole judgment made in good faith, would (a) adversely
affect the status of Sandalwood REIT as a REIT, (b) subject a Company to
regulation under the Investment Company Act of 1940, or (c) violate any law,
rule, regulation or statement of policy of any governmental body or agency
having jurisdiction over a Company, its Equity Shares or its Securities, or
otherwise not be permitted by organizational documents of the Companies, except
if such action shall be ordered by the Directors, in which case the Advisor
shall notify promptly the Directors of the Advisor's judgment of the potential
impact of such action and shall refrain from taking such action until it
receives further clarification or instructions from the Directors. In such event
the Advisor shall have no liability for acting in accordance with the specific
instructions of the Directors so given. Notwithstanding the foregoing, the
Advisor, its directors, officers, employees and stockholders, and stockholders,
directors and officers of the Advisor's Affiliates shall not be liable to a
Company or to the Directors or Stockholders for any act or omission by the
Advisor, its directors, officers or employees, or stockholders, directors or
officers of the Advisor's Affiliates except as provided in Section 17.2 of this
Agreement.

                                  ARTICLE VIII
                           Relationship with Directors

      Section 8.1. Service on Board of Directors. Directors, officers and
employees of the Advisor or an Affiliate of the Advisor or any corporate parents
of an Affiliate, or directors, officers

                                       10
<PAGE>

or stockholders of any director, officer or corporate parent of an Affiliate may
serve as Directors and as officers of the Companies, except that no director,
officer or employee of the Advisor or its Affiliates who also is a Director or
officer of Sandalwood REIT shall receive any compensation from Sandalwood REIT
for serving as a Director or officer other than reasonable reimbursement for
travel and related expenses incurred in attending meetings of the Directors and
otherwise in performance of such Director's or officer's duties.

                                   ARTICLE IX
                                      Fees

      Section 9.1. Asset Management Fees. Each of the Companies shall pay to the
Advisor as compensation for Asset Management Services a quarterly fee (each, the
"Asset Management Fee" and collectively the "Asset Management Fees"), payable on
the first business day of the quarter, equal to two and a half percent (2.5%) of
the Asset Valuation of that Company's Lodging Investments, excluding any
interests in subsidiaries. Fifty percent (50%) of the Asset Management Fees
shall be subordinated to the Stockholders' 8% Return (the "Subordinated Asset
Management Fee"). Any portion of the Asset Management Fees otherwise due and
payable may or may not be taken, in whole or in part ("Deferred Asset Management
Fees"), in the sole discretion of the Advisor. Any Deferred Asset Management Fee
shall (i) bear interest at the Prime Rate, (ii) be payable out of Sandalwood
REIT's cash available for distribution and Net Capital Proceeds in any quarter
when the Stockholders' 8% Return has been fully paid, and (iii) be prepayable at
any time at the discretion of the Board of Directors.

      Section 9.2. Loans from Affiliates. If any loans are made to a Company by
the Advisor or an Affiliate of the Advisor, the maximum amount of interest that
may be charged by such Affiliate shall be equal to the Prime Rate. The terms of
any such loans shall be no less favorable than the terms available between
non-Affiliated Persons for similar commercial loans.

                                    ARTICLE X
                                    Expenses

      Section 10.1. Reimbursement of Expenses. In addition to the compensation
paid to the Advisor pursuant to Article IX hereof and in addition to the
marketing expense reimbursement paid to an Affiliate of the Advisor in
connection with the Offering, the Companies shall pay directly or reimburse the
Advisor for all reasonable expenses paid or incurred by the Advisor in
connection with the services it provides to the Companies pursuant to this
Agreement, including, but not limited to:

      (a) Sandalwood REIT's Offering Expenses;

      (b) Acquisition Expenses incurred in connection with the selection and
acquisition of Lodging Investments provided by the Advisor;

      (c) the actual cost of goods and services used by the Companies and
obtained from the Advisor and its Affiliates, including brokerage fees paid in
connection with the purchase and sale of securities, and allocated expenses of
personnel of the advisor and its Affiliates;

                                       11
<PAGE>

      (d) interest and other costs for borrowed money;

      (e) costs associated with insurance required in connection with the
business of the Companies or by the Directors, including Directors' and
Officers' insurance;

      (f) expenses of managing and operating Properties owned by the Company, if
payable to an Affiliate of the Companies or a non-affiliated Person;

      (g) all expenses in connection with payments to the Directors and meetings
of the Directors and Stockholders;

      (h) expenses associated with Listing or with the issuance and distribution
of Shares and Securities, such as selling commissions and fees, advertising
expenses, taxes, legal and accounting fees, Listing and registration fees, and
other Offering Expenses;

      (i) expenses connected with payments of Distributions in cash or otherwise
made or caused to be made by the Directors to the Stockholders;

      (j) expenses of organizing, revising, amending, converting, modifying, or
terminating any of the Companies or their organizational documents;

      (k) expenses of maintaining communications with Stockholders, including
the cost of website maintenance and online reporting, investor relations,
preparation, printing, and mailing annual reports and other Stockholder reports,
proxy statements and other reports required by governmental entities;

      (l) administrative service expenses (including personnel costs; provided,
however, that no reimbursement shall be made for costs of personnel to the
extent that such personnel perform services in transactions for which the
Advisor receives a separate fee); and

      (n) audit, accounting and legal fees; and

      (o) any other expenses reasonably incurred for the benefit of the
Companies.

      Section 10.2. Timing of Reimbursements. Expenses incurred by the Advisor
on behalf of the Companies and payable pursuant to this Article X shall be
reimbursed no less than monthly to the Advisor. The Advisor shall prepare a
statement documenting the expenses of the Companies during each month, and shall
deliver such statement to the Companies within 45 days after the end of each
month.

      Section 10.3 Reimbursement of Certain Offering Expenses in the Form of
Shares. On Sandalwood REIT's behalf, the Advisor and its Affiliates will pay
certain of the Offering Expenses, for which the Advisor will be reimbursed. The
Advisor has agreed to convert up to $1,500,000 of such reimbursable expenses
into Shares at the offering price of $18.60 a share. The Advisor (1) understands
that the Shares have not been, and will not be, registered under the Securities
Act of 1933, or any state securities laws, and are being offered and sold in
reliance upon certain transactional exemptions from the registration provisions
of such laws, (2) represents and warrants that, with respect to the Shares,
neither Advisor nor its Affiliates is an "underwriter" within the

                                       12
<PAGE>

meaning of the Securities Act of 1933, the Securities Exchange Act or 1934, or
any state securities laws, and (3) represents and warrants that the Shares
acquired pursuant to this Agreement are being acquired solely for its own
account for investment purposes and not with a view to or for sale in connection
with any distribution thereof within the meaning of the Securities Act of 1933
and the rules and regulations promulgated thereunder.

                                   ARTICLE XI
                                 Other Services

      Section 11.1. Additional Services. Should the Directors request that the
Advisor or any director, officer or employee thereof render services for a
Company other than set forth in Article III, such services shall be separately
compensated at such rates and in such amounts as are agreed by the Advisor and
the Company and, if such services are to be rendered to Sandalwood REIT, by the
Independent Directors of Sandalwood REIT, subject to the limitations contained
in the Articles of Incorporation, and shall not be deemed to be services
pursuant to the terms of this Agreement.

                                   ARTICLE XII
                                  Fidelity Bond

      Section 12.1. Bond. The Advisor shall maintain a fidelity bond for the
benefit of the Companies which bond shall insure the Companies from losses of up
to $10 million per occurrence and shall be of the type customarily purchased by
entities performing services similar to those provided to the Companies by the
Advisor. The cost for such fidelity bond shall be paid for by the Companies

                                  ARTICLE XIII
                 Other Activities of Advisor and its Affiliates

      Section 13.1. Other Activities. Nothing herein contained shall prevent the
Advisor or its Affiliates from engaging in other activities, including, without
limitation, the rendering of advice to other Persons (including other REITs) and
the management of other programs advised, sponsored or organized by the Advisor
or its Affiliates; nor shall this Agreement limit or restrict the right of any
director, officer, employee, or stockholder of the Advisor or its Affiliates to
engage in any other business or to render services of any kind to any other
partnership, corporation, firm, individual, trust or association. The Advisor
may, with respect to any investment in which a Company is a participant, also
render advice and service to each and every other participant therein. The
Advisor shall report to the Directors the existence of any condition or
circumstance, existing or anticipated, of which it has knowledge, which creates
or could create a conflict of interest between the Advisor's obligations to the
Companies and its obligations to or its interest in any other partnership,
corporation, firm, individual, trust or association. The Advisor or its
Affiliates shall promptly disclose to the Directors knowledge of such condition
or circumstance. If the Sponsor, Advisor, Director or Affiliates thereof have
sponsored other investment programs with similar investment objectives which
have investment funds available at the same time as the Company, it shall be the
duty of the Independent Directors to adopt the method set forth in the
Registration Statement or

                                       13
<PAGE>

another reasonable method by which properties are to be allocated to the
competing investment entities and to apply such method fairly to the Company.

      Section 13.2. Investments. The Advisor shall be required to use its best
efforts to present a continuing and suitable investment program to the Companies
which is consistent with the investment policies and objectives of the
Companies, but, other than pursuant to Section 13.3, neither the Advisor nor any
Affiliate of the Advisor shall be obligated generally to present any particular
investment opportunity to a Company even if the opportunity is of character
which, if presented to the Company, could be taken by the Company. The Advisor
or its Affiliates may make such an investment in a property only after (i) such
investment has been offered to the Company and all public partnerships and other
investment entities affiliated with the Company with funds available for such
investment and (ii) such investment is found to be unsuitable for investment by
the Company, such partnerships and investment entities.

      Section 13.3. Other Opportunities. In the past, Affiliates of the Advisor
have organized other investments which have invested in whole or in part in
other real estate programs, and in the future may form, offer interests in, and
manage other real estate programs in addition to the Companies; however,
although no Affiliate of the Companies or the Advisor currently owns, operates,
leases or manages lodging investments that would be suitable for the Companies.
Certain of these Affiliated real estate programs may in the future invest in
and/or lease certain types of lodging investments to operators who also lease or
operate certain of the Companies' Lodging Investments. These lodging
investments, if located in the vicinity of, or adjacent to, Lodging Investments
acquired by any of the Companies may affect a Company's Lodging Investments. The
Advisor has agreed that the Advisor and its Affiliates (1) will not purchase
more than a 10% interest in any potential Lodging Investment whenever the
Companies have at least $10 million available for investment in Lodging
Investments; (2) will not raise additional funds for investment in potential
Lodging Investments until the Offering closes; and (3) will not use any existing
funds, other than the Companies, for potential Lodging Investments until at
least 100% of the Net Offering Proceeds are committed for investment in Lodging
Investments.

                                   ARTICLE XIV
                    Relationship of Advisor and the Companies

      Section 14.1. Parties not Related. The Company and the Advisor are not
partners or joint venturers with each other, and nothing in this Agreement shall
be construed to make them such partners or joint venturers or impose any
liability as such on either of them.

                                   ARTICLE XV
                         Term; Termination of Agreement

      Section 15.1. Term. Unless terminated pursuant to Section 16.2, this
Agreement shall continue in force until a date one (1) year after the initial
closing of the Offering (the "Termination Date") subject to an unlimited number
of successive one-year renewals unless 90 days' notice of termination is given
to the Advisor by the Board of Directors. It is the duty of the Independent
Directors to evaluate the performance of the Advisor to determine whether to
renew the Agreement.

                                       14
<PAGE>

      Section 15.2. Termination. This Agreement may be terminated for Cause by
any party. Upon (i) any termination by a Company without Cause, (ii) any
termination by the Advisor for Cause, or (iii) any failure by a Company to renew
this Agreement other than for Cause, the Advisor shall be paid a termination fee
(the "Termination Fee") equal to the greater of (a) five times the last full
fiscal year's Asset Management Fee, or (b) the actual Asset Management Fee over
the ensuing five years, calculated without any subordination to the
Stockholders' 8% Return.

      Section 15.3. Responsibilities upon Termination.

      (a) After the Termination Date, the Advisor shall not be entitled to
compensation for further services hereunder except it shall be entitled to
receive from the Companies within 30 days after the effective date of such
termination all unpaid reimbursements of expenses and all earned but unpaid fees
payable to the Advisor prior to termination of this Agreement.

      (b) The Advisor shall promptly upon termination:

            (i) pay over to the Companies all money collected and held for the
account of the Companies pursuant to this Agreement, after deducting any accrued
compensation and reimbursement for its expenses to which it is then entitled;

            (ii) deliver to the Directors a full accounting, including a
statement showing all payments collected by it and a statement of all money held
by it, covering the period following the date of the last accounting furnished
to the Directors;

            (iii) deliver to the Companies all Lodging Investments and documents
of the Companies then in the custody of the Advisor; and

            (iv) cooperate with the Companies to provide an orderly management
transition.

                                   ARTICLE XVI
                           Assignment to an Affiliate

      Section 16.1. Assignment. This Agreement may be assigned by the Advisor to
an Affiliate without the approval of the Companies if the Affiliate is capable
of performing the duties of the Advisor and such assignee shall agree to be
bound hereunder in the same manner as the Advisor. The Advisor may also assign
any rights to receive fees or other payments under this Agreement without
obtaining the approval of the Companies. This Agreement may be assigned by a
Company without the consent of the Advisor if the assignment is to any successor
of all of such Company's assets, rights and obligations, in which case such
successor organization shall be bound hereunder and by the terms of said
assignment in the same manner as the Company is bound by this Agreement.

                                  ARTICLE XVII
                                 Indemnification

      Section 17.1. Indemnification by the Companies. Each of the Companies
shall indemnify and hold harmless the Advisor and its Affiliates (including
managers, members, officers, directors,

                                       15
<PAGE>

employees and agents) from all liability, claims, damages or losses arising in
the performance of their duties hereunder, and related expenses, including
reasonable attorneys' fees, to the extent such liability, claims, damages or
losses and related expenses are not fully reimbursed by insurance, subject to
any limitations imposed by the laws of the State of Maryland or the Articles of
Incorporation of the Company. Notwithstanding the foregoing, the Advisor shall
not be entitled to indemnification or be held harmless pursuant to this Section
17.1 for any activity for which the Advisor shall be required to indemnify or
hold harmless the Company pursuant to Section 17.2. Any indemnification of the
Advisor may be made only out of the net assets of the Company and not from
Stockholders.

      Section 17.2. Indemnification by Advisor. The Advisor (including the
Advisor's managers, members, officers, directors, employees and agents) shall
not be liable to the companies or their stockholders or others, except by reason
of acts constituting fraud, willful misconduct, gross negligence, or breach of
fiduciary duty and will not be responsible for any action of the Board of
Directors in following or declining to follow any advice or recommendation given
to it.

                                  ARTICLE XVIII
                                    Appraisal

      Section 18.1. Appraisal Process. The Companies' Lodging Investments will
be valued to determine their Appraised Value. The Advisor, on behalf of the
Companies, shall engage an Independent Appraiser to value annually (the
"Appraisal") all long-term assets of the Companies. Current assets will be
valued quarterly based on generally accepted accounting principles.

                                   ARTICLE XIX
                                     Notices

      Section 19.1. Notices. Any notice, report or other communication required
or permitted to be given hereunder shall be in writing unless some other method
of giving such notice, report or other communication is required by the Articles
of Incorporation, the Bylaws, or accepted by the party to whom it is given, and
shall be given by being delivered by hand or by overnight mail or other
overnight delivery service to the addresses set forth herein:

To the Companies:

      Sandalwood Lodging Investment Corporation

      _________________________________________

      _________________________________________

To the Advisor:

      Sandalwood Hospitality Advisors, LLC

      _________________________________________

      _________________________________________

Either party may at any time give notice in writing to the other party of a
change in its address for the purposes of this Section 19.1.

                                       16
<PAGE>

                                   ARTICLE XX
                           Modifications to Agreement

      Section 20.1. Changes to Agreement. This Agreement shall not be changed,
modified, terminated, or discharged, in whole or in part, except by an
instrument in writing signed by both parties hereto, or their respective
successors or assignees.

                                   ARTICLE XXI
                                  Miscellaneous

      Section 21.1. Severability. The provisions of this Agreement are
independent of and severable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other or others of them may be invalid or unenforceable in whole or in part.

      Section 21.2. Construction. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of Maryland.

      Section 21.3. Entire Agreement. This Agreement and the Operating Agreement
contain the entire agreement and understanding among the parties hereto with
respect to the subject matter hereof, and supersedes all prior and
contemporaneous agreements, understandings, inducements and conditions, express
or implied, oral or written, of any nature whatsoever with respect to the
subject matter hereof. The express terms hereof control and supersede any course
of performance and/or usage of the trade inconsistent with any of the terms
hereof. This Agreement may not be modified or amended other than by an agreement
in writing.

      Section 21.4. Delay, Not Waivers. Neither the failure nor any delay on the
part of a party to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege preclude any other or further
exercise of the same or of any other right, remedy, power or privilege, nor
shall any waiver of any right, remedy, power or privilege with respect to any
occurrence be construed as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver shall be effective unless it is
in writing and is signed by the party asserted to have granted such waiver.

      Section 21.5. Gender. Words used herein regardless of the number and
gender specifically used, shall be deemed and construed to include any other
number, singular or plural, and any other gender, masculine, feminine or neuter,
as the context requires.

      Section 21.6. Titles; Headings. The titles of paragraphs and subparagraphs
contained in this Agreement are for convenience only, and they neither form a
part of this Agreement nor are they to be used in the construction or
interpretation hereof.

      Section 21.7. Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original as against any
party whose signature

                                       17
<PAGE>

appears thereon, and all of which shall together constitute one and the same
instrument. This Agreement shall become binding when one or more counterparts
hereof, individually or taken together, shall bear the signatures of all of the
parties reflected hereon as the signatories.

                                  ARTICLE XXII
                                 Sandalwood Name

      Section 22.1. Ownership of "Sandalwood" Name. The Advisor, Sandalwood
Hospitality Advisors, LLC, has a proprietary interest in the name "Sandalwood"
and has licensed the right to use the "Sandalwood" name to the Companies,
subject to certain conditions. Accordingly, and in recognition of this right, if
at any time the Companies cease to retain Sandalwood Hospitality Advisors, LLC
or an Affiliate thereof to perform the services of Advisor, the Companies will,
promptly after receipt of written request from the Advisor, cease to conduct
business under or use the name "Sandalwood" or any derivation thereof and the
Companies shall use their best efforts to change any names of the Companies
containing the name "Sandalwood" to a name that does not contain the name
"Sandalwood" or any other word or words that might, in the sole discretion of
the Advisor, be susceptible of indication of some form of relationship between
the Companies and the Advisor or any Affiliate thereof. Consistent with the
foregoing, it is specifically recognized that the Advisor or one or more of its
Affiliates has in the past and may in the future organize, sponsor or otherwise
permit to exist other investment vehicles (including vehicles for investment in
real estate) and financial and service organizations having "Sandalwood" as a
part of their name, all without the need for any consent (and without the right
to object thereto) by any of the Companies or Sandalwood REIT's Directors.

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

      SANDALWOOD REIT:

      SANDALWOOD LODGING INVESTMENT CORPORATION

         By:
            ------------------------------
            Name:
            Its:

                                       18
<PAGE>

      SANDALWOOD LLC:

      SANDALWOOD LODGING, LLC
      By: Sandalwood Hospitality Advisors, LLC,
      Its: Managing Member

         By:
            ------------------------------
            Name:
            Its:

      SL-TRS:

      [SLTRS]

         By:
            ------------------------------
            Name:
            Its:

      ADVISOR:

      SANDALWOOD HOSPITALITY ADVISORS, LLC

         By:
            ------------------------------
            Name:
            Its:

                                       19

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