Ashford Inc (Form: 10-K, Received: 03/24/2015 16:25:20)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K



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

For the fiscal year ended December 31, 2014



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

For the transition period from to

Commission file number: 001-36400

ASHFORD INC.

(Exact name of registrant as specified in its charter)



Delaware		46-5292553
(State or other jurisdiction of incorporation or organization)		(IRS employer identification number)
14185 Dallas Parkway, Suite 1100 Dallas, Texas		75254
(Address of principal executive offices)		(Zip code)

(972) 490-9600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class		Name of each exchange on which registered
Common Stock		New York Stock Exchange MKT

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ¨ Yes þ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ¨ Yes þ No

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

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act):



Large accelerated filer o		Accelerated filer o

Non-accelerated filer þ		Smaller reporting company o

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

As of June 30, 2014, the registrant’s common stock was not publicly traded.

As of March 20, 2015 , the registrant had 1,986,851 shares of common stock issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement pertaining to the 2015 Annual Meeting of Stockholders are incorporated herein by reference into Part III of this Form 10-K.

ASHFORD INC.

YEAR ENDED DECEMBER 31, 2014

INDEX TO FORM 10-K



		Page

PART I

Item 1.	Business	3

Item 1A.	Risk Factors	13

Item 1B.	Unresolved Staff Comments	25

Item 2.	Properties	25

Item 3.	Legal Proceedings	25

Item 4.	Mine Safety Disclosures	25

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	25

Item 6.	Selected Financial Data	27

Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28

Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	34

Item 8.	Financial Statements and Supplementary Data	35

Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	55

Item 9A.	Controls and Procedures	55

Item 9B.	Other Information	55

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	55

Item 11.	Executive Compensation	55

Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	55

Item 13.	Certain Relationships and Related Transactions, and Director Independence	56

Item 14.	Principal Accounting Fees and Services	56

PART IV

Item 15.	Financial Statement Schedules and Exhibits	56

SIGNATURES

As used in this Annual Report on Form 10-K, unless the context otherwise indicates, the references to “we,” “us,” “our”, the “Company” refer to Ashford Inc., a Delaware corporation and, as the context may require, its consolidated subsidiaries, including Ashford Hospitality Advisors LLC, a Delaware limited liability company, which we refer to as “Ashford LLC” or “our operating company.” “Ashford Prime” or “AHP” refers to Ashford Hospitality Prime, Inc., a Maryland corporation, and, as the context may require, its consolidated subsidiaries, including Ashford Hospitality Prime Limited Partnership, a Delaware limited partnership, which we refer to as “Ashford Prime OP.” “Ashford Trust” or “AHT” refers to Ashford Hospitality Trust, Inc., a Maryland corporation, and, as the context may require, its consolidated subsidiaries, including Ashford Hospitality Limited Partnership, a Delaware limited partnership and Ashford Trust’s operating partnership, which we refer to as “Ashford Trust OP.” “Remington” refers to Remington Lodging and Hospitality LLC, a Delaware limited liability company, a property management company owned by Mr. Monty J. Bennett, our chief executive officer and chairman, and his father, Mr. Archie Bennett, Jr., chairman emeritus of Ashford Trust.

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS

Throughout this Form 10-K and documents incorporated herein by reference, we make forward-looking statements that are subject to risks and uncertainties. Forward looking statements are generally identifiable by use of forward looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “anticipate,” “estimate,” “approximately,” “believe,” “could,” “project,” “predict,” or other similar words or expressions. Additionally, statements regarding the following subjects are forward-looking by their nature:


•	our business and investment strategy;


•	our projected operating results and dividend rates;


•	our ability to obtain future financing arrangements;


•	our understanding of our competition;


•	market trends;


•	projected capital expenditures; and


•	the impact of technology on our operations and business.

Forward looking statements are based on certain assumptions, discuss future expectations, describe future plans and strategies, contain financial and operating projections or state other forward looking information. Our ability to predict results or the actual effect of future events, actions, plans or strategies is inherently uncertain. Although we believe that the expectations reflected in our forward looking statements are based on reasonable assumptions, taking into account all information currently available to us, our actual results and performance could differ materially from those set forth in our forward looking statements. Factors that could have a material adverse effect on our forward looking statements include, but are not limited to:


•	the factors referenced, including those set forth under the section captioned “Item 1. Business,” “Item 1A. Risk Factors” and “Item 7. Management’s Discussion and Analysis of Financial Conditions and Results of Operations;”


•	general volatility of the capital markets, the general economy or the hospitality industry, whether the result of market events or otherwise, and the market price of our common stock;


•	availability, terms and deployment of capital;


•	changes in our industry and the market in which we operate, interest rates, or the general economy;


•	the degree and nature of our competition;


•	actual and potential conflicts of interest with or between Remington, Ashford Prime and Ashford Trust, our executive officers and our non-independent directors;


•	availability of qualified personnel;


•	changes in governmental regulations, accounting rules, tax rates and similar matters;


•	legislative and regulatory changes.

When considering forward looking statements, you should keep in mind the risk factors and other cautionary statements in this annual report. The matters summarized under “Item 1A. Risk Factors” and elsewhere, could cause our actual results and performance to differ significantly from those contained in our forward looking statements. Accordingly, we cannot guarantee future results or performance. Readers are cautioned not to place undue reliance on any of these forward looking statements, which reflect our views as of the date of this Annual Report on Form 10-K. Furthermore, we do not intend to update any of our forward looking statements after the date of this annual report to conform these statements to actual results and performance, except as may be required by applicable law.

PART I

Item 1. Business

Our Company

We are a Delaware corporation, incorporated in April 2014, that provides asset management and advisory services to other entities, initially within the hospitality industry. We became a public company on November 12, 2014, when Ashford Trust, a NYSE-listed real estate investment trust (“REIT”), completed the spin-off of our company through the distribution of shares of our common stock to the Ashford Trust stockholders. We serve as the advisor to Ashford Prime, an NYSE-listed REIT that invests primarily in luxury, upper-upscale and upscale hotels and resorts, with RevPAR at least twice the national average, predominantly located in gateway markets. Ashford Prime became a publicly traded entity in November 2013 upon the completion of its spin-off from Ashford Trust. We also serve as the advisor to Ashford Trust, an NYSE-listed real estate investment trust, focused on investing in the hospitality industry across all segments and in all methods including direct real estate, equity and debt concerning hotels with RevPAR less than twice the national average. Ashford Trust has been a public company since August 2003.

In our capacity as the advisor to Ashford Trust and Ashford Prime, we are responsible for implementing the investment strategies and managing the day-to-day operations of Ashford Trust and Ashford Prime, in each case subject to the supervision and oversight of the respective board of directors of such entity. We provide the personnel and services necessary to allow each of Ashford Trust and Ashford Prime to conduct its respective business. We may also perform similar functions for new or additional platforms. We are not responsible for managing the day-to-day operations of the individual hotel properties owned by either Ashford Trust or Ashford Prime, which duties are the responsibility of the hotel management companies that operate the hotel properties owned by Ashford Trust and Ashford Prime.

We conduct our business and own substantially all of our assets through an operating entity, Ashford LLC. We own 99.8% of the outstanding common units of Ashford LLC and serve as its sole manager.

Our Business Strategy

Our principal business objectives are to provide asset management and other advisory services to other entities. Currently, we, through our operating subsidiary Ashford LLC, act as the advisor to Ashford Trust and Ashford Prime.

We earn advisory fees from each company that we advise. These fees include a quarterly base fee for managing the respective day-to-day operations of the companies we advise and the day-to-day operations of the respective subsidiaries, in each case in conformity with the respective investment guidelines of such entity. The base fee is determined as a percentage of each entity’s total market capitalization, subject to a minimum fee. We may also be entitled to receive an incentive fee from each of Ashford Trust and Ashford Prime based on their respective out-performance, as measured by the total annual stockholder return of such company compared to its peers. For the year ended December 31, 2014, we earned revenues of $12.6 million and $4.7 million from Ashford Prime and Ashford Trust, respectively.

We expect to expand our business through growth by (i) managing additional assets of the existing platforms of Ashford Trust or Ashford Prime; (ii) managing assets of newly formed platforms; (iii) acquiring other businesses that provide services to the hospitality industry (which may or may not provide such services to our advisory clients), or acquiring the expertise or personnel necessary to provide such services, and (iv) acquiring third-party asset management contracts and businesses.

Ashford Investment Management, LLC (“AIM”), an indirect subsidiary of ours, or an affiliate of AIM, currently serves, or will serve in the future, as the investment adviser to any private securities funds sponsored by us or our affiliates, which may include, but are not limited to, hedge funds, private equity funds, separately managed accounts, UCITS funds, open or closed end funds registered under the Investment Company Act of 1940, business development companies and other private or public alternative investment funds (the “Funds”). AIM became a registered investment adviser with the Securities and Exchange Commission on January 5, 2015. AIM REHE Funds GP, LP (“AIM GP”), or an affiliate of AIM GP, currently serves, or will serve in the future, as the general partner or similar capacity of any Funds. AIM or any affiliate serving as investment adviser to any Funds is entitled to a management fee or other fees or compensation for its role as investment adviser to such Funds. AIM GP, or the applicable affiliate of AIM GP serving as the general partner or similar capacity of any Funds, is entitled to a performance allocation or carried interest, based, generally, on the net profits of the investors in such Funds. AIM Management Holdco, LLC (“Management Holdco”) owns 100% of AIM. We, through Ashford LLC, own approximately 60% of Management Holdco, and Mr. Monty J. Bennett, our chief executive officer and chairman of our board of directors, and Mr. J. Robison Hays, III, our chief strategy officer and a member of our board of directors, own, in the aggregate, 40% of Management Holdco. AIM Performance Holdco, LP (“Performance Holdco”) owns 99.99% of AIM GP with the remaining 0.01% general partner interest owned by our wholly owned subsidiary, AIM General Partner, LLC. We, through Ashford LLC and our 100% ownership interest in AIM General Partner, LLC, own approximately 60% of Performance Holdco, and Mr. Monty J. Bennett and Mr. J. Robison Hays, III own, in the aggregate, 40% of Performance Holdco. AIM currently serves as investment adviser to AIM Real Estate Hedged Equity (U.S.) Fund, LP, AIM Real Estate Hedged Equity (Cayman) Fund, Ltd. and AIM Real Estate Hedged Equity Master Fund, LP (collectively the “REHE Fund”), a master-feeder private fund focused on investing in the securities of companies in the real estate, hospitality and leisure industries. AIM also currently serves as the investment adviser to Ashford Trust and Ashford Prime.

Our Initial Advisory Agreements

We currently advise two publicly traded REITs, Ashford Prime and Ashford Trust, pursuant to advisory agreements. The terms of the two advisory agreements are substantially similar, except as otherwise described below. The following summary of the terms of our advisory agreements does not purport to be complete and is subject to and qualified in its entirety by reference to a copy of the actual agreements entered into with Ashford Prime or Ashford Trust, which have been included as exhibits to other documents filed with the Securities and Exchange Commission (the “SEC”) and incorporated by reference in this Form 10-K.

General . Pursuant to our advisory agreements with Ashford Prime and Ashford Trust, we provide, or obtain on their behalf, the personnel and services necessary for each of these entities to conduct its respective business, as they have no employees of their own. All of the officers of each of Ashford Prime and Ashford Trust are our employees. We are not obligated to dedicate any of our employees exclusively to either Ashford Prime or Ashford Trust, nor are we or our employees obligated to dedicate any specific portion of time to the business of either Ashford Prime or Ashford Trust, except as necessary to perform the service required of us in our capacity as the advisor to such entities. The advisory agreements require us to manage the business affairs of each of Ashford Prime and Ashford Trust in conformity with the policies and the guidelines that are approved and monitored by the boards of such entities.

So long as we are the advisor to Ashford Prime, Ashford Prime’s governing documents permit us to designate two persons as candidates for election as director at any stockholder meeting of Ashford Prime at which directors are to be elected. Such nominees may be our executive officers.

Our Duties as Advisor . Subject to the supervision of the respective boards of directors of each of Ashford Prime and Ashford Trust, we are responsible for, among other duties: (1) performing and administering the day-to-day operations of Ashford Prime and Ashford Trust, including all of the subsidiaries and joint ventures of such entities, (2) all services relating to the acquisition, disposition and financing of hotels, (3) performing asset management duties, (4) engaging and supervising, on behalf of such companies, third parties to provide various services included but not limited to overseeing development management, property management, project management, design and construction services and other professional services, (5) performing corporate governance and other management functions, including financial, capital markets, financial reporting, internal audit, accounting, tax and risk management services, SEC and regulatory compliance, and retention of legal counsel, auditors and other professional advisors.

Any increase in the scope of duties or services to be provided by us must be jointly approved by us and either Ashford Prime or Ashford Trust, as applicable, and is subject to additional compensation.

We also have the power to delegate all or any part of our rights and powers to manage and control the business and affairs of such companies to such officers, employees, affiliates, agents and representatives of ours or such company as we may deem appropriate. Any authority delegated by us to any other person is subject to the limitations on our rights and powers specifically set forth in the advisory agreement or the charter of such company.

We have agreed to require our employees who provide services to the companies we advise to comply with the codes and the policies of such companies.

Limitations on Liability and Indemnification . The advisory agreements provide that we have no responsibility other than to render the services and take the actions described in the advisory agreements in good faith and with the exercise of due care and are not responsible for any action the board of directors of either Ashford Prime or Ashford Trust takes in following or declining to follow any advice from us. The advisory agreements provide that we, and our officers, directors, managers, employees and members, will not be liable for any act or omission by us (or our officers, directors, managers, employees or members) performed in accordance with and pursuant to the advisory agreements, except by reason of acts constituting gross negligence, bad faith, willful misconduct or reckless disregard of our duties under the applicable advisory agreement.

Each of Ashford Prime and Ashford Trust has agreed to indemnify and hold us harmless (including our partners, directors, officers, stockholders, managers, members, agents, employees and each other person or entity, if any, controlling us) to the full extent lawful, from and against any and all losses, claims, damages or liabilities of any nature whatsoever with respect to or arising from any acts or omission by us (including ordinary negligence) in our capacity as advisor, except with respect to losses, claims, damages or liabilities with respect to or arising out of our gross negligence, bad faith or willful misconduct, or reckless disregard of our duties set forth in the applicable advisory agreement (for which we have indemnified Ashford Prime or Ashford Trust, as applicable).

Term and Termination . The terms of our advisory agreements with Ashford Prime and Ashford Trust are 20 years, in each case commencing from the effective date of the applicable advisory agreement. Each advisory agreement provides for automatic one-year renewal terms on each anniversary date after the expiration of the initial term unless previously terminated as described below. Following the initial terms, the advisory agreements may be terminated by Ashford Prime or Ashford Trust, as applicable, with 180 days’ written notice prior to the expiration of the then current term, on the affirmative vote of at least two-thirds of the independent directors of such entity, based upon a good faith finding that either (a) there has been unsatisfactory performance by us that is materially detrimental to such company and the subsidiaries of such company taken as a whole, or (b) the base fee and/or incentive fee is not fair (and we do not offer to negotiate a lower fee that at least a majority of the independent directors determine is fair). If the reason for non-renewal specified by such company in the termination notice is (b) in the preceding sentence, then we may, at our option, provide a notice of proposal to renegotiate the base fee and incentive fee not less than 150 days prior to the pending termination date. Thereupon, each party has agreed to use its commercially reasonable efforts to negotiate in good faith to find a resolution on fees within 120 days following receipt by such company of the renegotiation proposal. If a resolution is achieved between us and at least a majority of the independent directors of such entity, within the 120-day period, then the applicable advisory agreement will continue in full force and effect with modification only to the agreed upon base fee and/or incentive fee, as applicable.

If no resolution on fees is reached within the 120-day period, or if Ashford Trust or Ashford Prime, as applicable, terminates the advisory agreement by reason of clause (a) above, the related advisory agreement will terminate and Ashford Trust or Ashford Prime, as applicable, will be required to pay us a termination fee equal to either:


•	if our common stock is not publicly traded, 14 times our earnings attributable to the Ashford Trust advisory agreement or the Ashford Prime advisory agreement, as applicable, less costs and expenses, including taxes (the “net earnings”) for the 12 months preceding termination of the related advisory agreement; or

•

if at the time of the termination notice, our common stock is publicly traded, 1.1 multiplied by the greater of (i) 12 times our net earnings attributable to the Ashford Trust advisory agreement or the Ashford Prime advisory agreement, as applicable, for the 12 months preceding the termination of such advisory agreement or (ii) the earnings multiple (based on net earnings after taxes) for our common stock for the 12 months preceding the termination of such advisory agreement multiplied by our net earnings attributable to the Ashford Trust advisory agreement or the Ashford Prime advisory agreement, as applicable, for the same 12 month period; or (iii) the simple average of the earnings multiples (based on net earnings after taxes) for our common stock for each of the three fiscal years preceding the termination of the Ashford Trust advisory agreement or the Ashford Prime advisory agreement, as applicable, multiplied by our net earnings attributable to such advisory agreement for the 12 months preceding the termination of the advisory agreement;

plus, in either case, a gross-up amount for federal and state tax liability, based on an assumed tax rate of 40%.

Ashford Prime or Ashford Trust may also terminate the applicable advisory agreement with 60 days’ notice upon a change of control of such entity, if the change of control transaction is conditioned upon the termination of the advisory agreement. In such a circumstance, Ashford Trust or Ashford Prime, as applicable, would be required to pay the termination fee described above.

Either Ashford Prime or Ashford Trust may also terminate the applicable advisory agreement at any time, including during the initial term, without the payment of a termination fee, upon customary events of default and our failure to cure during certain cure periods, such as our default in performance of material obligations, the filing of bankruptcy or a dissolution action and other events.

Upon any termination of either advisory agreement, we are expected to cooperate with and assist Ashford Prime or Ashford Trust, as applicable, in executing an orderly transition of the management of its assets to a new advisor, providing a full accounting of all accounts held in the name of or on behalf of such company, returning any funds held on behalf of such company and returning any and all of the books and records of such company. Ashford Prime or Ashford Trust, as applicable, will be responsible for paying all accrued fees and expenses and will be subject to certain non-solicitation obligations with respect to our employees upon any termination of the applicable advisory agreement.

Following the initial term, we may terminate either advisory agreement prior to the expiration of each successive one-year term with 180 days’ prior written notice. Additionally, we may terminate either advisory agreement if Ashford Prime or Ashford Trust, as applicable, defaults in the performance or observance of any material term, condition or covenant under the applicable advisory agreement; provided, however, before terminating the advisory agreement, we must give Ashford Prime or Ashford Trust, as applicable, written notice of the default and provide such entity with an opportunity to cure the default within 45 days, or if such default is not reasonably susceptible to cure within 45 days, such additional cure period as is reasonably necessary to cure the default (not to exceed 90 days) so long as such entity is diligently and in good faith pursuing such cure. In the event of such a termination, we will be entitled to all accrued fees and expenses.

Fees and Expenses.


•	Base Fee . The total quarterly base fee is equal to 0.70% per annum of the total market capitalization of each of Ashford Prime and Ashford Trust, subject to a minimum quarterly base fee. The “total market capitalization” for purposes of determining the base fee is calculated on a quarterly basis as follows:

(i)

the average of the volume-weighted average price per share of common stock for such entity for each trading day of the preceding quarter multiplied by the average number of shares of common stock and common units outstanding during such quarter, on a fully-diluted basis (assuming all common units and long term incentive partnership units in the applicable operating partnership which have achieved economic parity with common units in the operating partnership have been redeemed and the applicable company has elected to issue common stock of such company in satisfaction of the redemption price), plus


(ii)	the quarterly average of the aggregate principal amount of the consolidated indebtedness of such company (including its proportionate share of debt of any entity that is not consolidated but excluding its joint venture partners’ proportionate share of consolidated debt), plus


(iii)	the quarterly average of the liquidation value of any outstanding preferred equity of such company.

The minimum base fee for Ashford Prime, and the minimum base fee for Ashford Trust for each quarter beginning January 1, 2016, is equal to the greater of:


(i)	90% of the base fee paid for the same quarter in the prior year; or


(ii)	the “G&A ratio” multiplied by the total market capitalization of such company.

The minimum base fee (on an annual basis) for Ashford Trust for each fiscal quarter through December 31, 2015, is equal to the greater of:


(i)	0.70% of the total market capitalization of Ashford Trust as of November 13, 2014; or


(ii)	the “G&A ratio” multiplied by the total market capitalization of Ashford Trust as of November 13, 2014.

The “G&A ratio” is calculated as the simple average of the ratios of total general and administrative expenses, including any dead deal costs, less any non-cash expenses, paid in the applicable quarter by each member of a select peer group, divided by the total market capitalization of such peer group member. The peer group for each company may be adjusted from time-to-time by mutual agreement between us and a majority of the independent directors of such company, negotiating in good faith. The base fee is payable in cash on a quarterly basis.

•

Incentive Fee . In each year that the Total Stockholder Return (“TSR”) of Ashford Prime or Ashford Trust exceeds the “average TSR of its peer group,” Ashford Prime or Ashford Trust, as applicable is required to pay us an incentive fee. For purposes of this calculation, the TSR of such entity is calculated using a year-end stock price equal to the closing price of its common stock on the last trading day of the year as compared to the closing stock price of its common stock on the last trading day of the prior year (or, with respect to Ashford Trust, for the stub period ending December 31, 2014, the closing stock price of its common stock on November 13, 2014), in each case assuming all dividends on the common stock during such period are reinvested into additional shares of common stock of such entity. The average TSR for each member of such company’s peer group is calculated in the same manner and for the same time period, and the simple average for the entire peer group is the “average TSR for its peer group.” If the TSR of Ashford Prime or Ashford Trust exceeds the average TSR for its peer group, we will be paid an incentive fee, subject to the FCCR condition, as defined in the advisory agreement.

The annual incentive fee is calculated as (i) 5% of the amount (expressed as a percentage) by which the annual TSR of Ashford Trust or Ashford Prime, as applicable, exceeds the average TSR for its respective peer group, multiplied by (ii) the fully diluted equity value of such company at December 31 of the applicable year. The percentage by which the TSR of either Ashford Trust or Ashford Prime exceeds the TSR of its peer group is limited to 25% for purposes of calculating the incentive fee payable to us. Further, with respect to Ashford Trust, for the stub period ended December 31, 2014, the product from the incentive fee calculation was reduced proportionately based on the number of days in which the advisory agreement with Ashford Trust was in effect for the calendar year 2014 divided by 365 days. To determine the fully diluted equity value, we assume that all units in the operating partnership of Ashford Prime or Ashford Trust, as applicable, including LTIP units that have achieved economic parity with the common units, if any, are redeemed and the applicable company has elected to issue common stock of such company in satisfaction of the redemption price and that the per share value of each share of common stock of such company is equal to the closing price of its stock on the last trading day of the year. For the purpose of calculating TSR for Ashford Trust during 2014, the starting price of its common stock is based on the closing price per share of its common stock on November 13, 2014 (the first trading day following the completion of our separation from Ashford Trust), and for its peers, the closing price on the same trading day.

•

Equity Compensation . To incentivize our employees, officers, consultants, non-employee directors, affiliates and representatives to achieve the goals and business objectives of each of Ashford Prime and Ashford Trust, as established by the boards of directors of such entities, in addition to the base fee and the incentive fee described above, the boards of directors of each of Ashford Prime and Ashford Trust have the authority to make annual equity awards to us or directly to our employees, officers, consultants and non-employee directors, based on achievement of certain financial and other hurdles established by such board of directors.

•

Expense Reimbursement . We are responsible for all wages, salaries, cash bonus payments and benefits related to our employees providing services to Ashford Prime or Ashford Trust (including any of the officers of Ashford Prime or Ashford Trust who are also officers of our company), with the exception of any equity compensation that may be awarded by Ashford Prime or Ashford Trust to our employees who provide services to Ashford Prime and Ashford Trust, the provision of certain internal audit, asset management and risk management services and the international office expenses described below. Ashford Prime and Ashford Trust are each responsible to pay or reimburse us monthly for all other costs we incur on behalf of such entities or in connection with the performance of our services and duties to such companies, including, without limitation, tax, legal, accounting, advisory, investment banking and other third-party professional fees, director fees, insurance (including errors and omissions insurance and any other insurance required pursuant to the terms of the advisory agreements), debt service, taxes, underwriting, brokerage, reporting, registration, listing fees and charges, travel and entertainment expenses, conference sponsorships, transaction diligence and closing costs, dead deal costs, dividends, office space, the cost of all equity awards or compensation plans established by such companies, including the value of awards made by companies to our employees, and any other costs which are reasonably necessary for the performance by us of our duties and functions, including any expenses incurred by us to comply with new or revised laws or governmental rules or regulations that impose additional duties on Ashford Prime or Ashford Trust or us in our capacity as advisor to such entities. In addition, each of Ashford Prime and Ashford Trust pays a pro rata share of our office overhead and administrative expenses incurred in the performance of our duties and functions under the advisory agreements. There is no specific limitation on the amount of such reimbursements.

In addition to the expenses described above, each of Ashford Prime and Ashford Trust are required to reimburse us monthly for its pro rata share (as reasonably agreed to between us and a majority of the independent directors of such company or its audit committee, chairman of its audit committee or lead director) of all reasonable international office expenses, overhead, personnel costs, travel and other costs directly related to our non-executive personnel who are located internationally or that oversee the operations of international assets or related to our personnel that source, investigate or provide diligence services in connection with possible acquisitions or investments internationally. Such expenses include but are not limited to, salary, wage payroll taxes and the cost of employee benefit plans. We pay or reimburse Ashford Trust for the costs associated with Ashford Trust’s current chairman emeritus, which includes a $700,000 annual stipend and the cost of all benefits currently available to him, as well as reimbursement for reasonable expenses incurred by him in connection with his service to Ashford Trust.


•	Additional Services. If, and to the extent that, either Ashford Prime or Ashford Trust requests us to render services on behalf of such company other than those required to be rendered by us under the advisory agreement, such additional services will be compensated separately, at market rates, as defined in the advisory agreements.

The Ashford Trademark . We have a proprietary interest in the “Ashford” trademark, and we agreed to license its use to each of Ashford Prime and Ashford Trust. If at any time Ashford Prime or Ashford Trust ceases to retain us to perform advisory services for them, within 60 days following receipt of written request from us, such entity must cease to conduct business under or use the “Ashford” name or logo, as well as change its name and the names of any of its subsidiaries to a name that does not contain the name “Ashford.”

Relationship with Ashford Prime and Ashford Trust . We advise both Ashford Prime and Ashford Trust. We are also permitted to have other advisory clients, which may include other REITs operating in the real estate industry or having the same or substantially similar investment guidelines as Ashford Trust or Ashford Prime. If either Ashford Prime or Ashford Trust materially revises its initial investment guidelines without our express written consent, we are required only to use our best judgment to allocate investment opportunities to Ashford Prime, Ashford Trust and other entities we advise, taking into account such factors as we deem relevant, in our discretion, subject to any of our then existing obligations to such other entities. Ashford Prime has agreed not to revise its initial investment guidelines to be directly competitive with Ashford Trust. Ashford Trust agrees, pursuant to the terms of the Ashford Trust advisory agreement, that it will revise its investment guidelines as necessary to avoid direct competition with (i) any entity or platform that Ashford Trust may create or spin-off in the future and (ii) any other entity advised by us, provided that in the case of clause (ii), we and Ashford Trust mutually agree to the terms of such revision of Ashford Trust’s investment guidelines. The advisory agreements give each of Ashford Prime and Ashford Trust the right to equitable treatment with respect to other clients of ours, but the advisory agreements do not give any entity the right to preferential treatment, except as follows:


•	Any new individual investment opportunities that satisfy Ashford Prime’s investment guidelines will be presented to its board of directors, which has up to 10 business days to accept any such opportunity prior to it being available to Ashford Trust or another business advised by us.


•	Any new individual investment opportunities that satisfy Ashford Trust’s investment guidelines will be presented to its board of directors, which has up to 10 business days to accept any such opportunity prior to it being available to Ashford Prime or another business advised by us.

To minimize conflicts between Ashford Prime and Ashford Trust, the advisory agreements require each such entity to designate an investment focus by targeted RevPAR, segments, markets and other factors or financial metrics. After consultation with us, such entity may modify or supplement its investment guidelines from time to time by giving written notice to us; however, if either Ashford Prime or Ashford Trust materially changes its investment guidelines without our express written consent, we are required only to use our best judgment to allocate investment opportunities to Ashford Prime, Ashford Trust and other entities we may advise, taking into account such factors as we deem relevant, in our discretion, subject to any then existing obligations we have to such other entities.

When determining whether an asset satisfies the investment guidelines of either Ashford Prime or Ashford Trust, we must make a good faith determination of projected RevPAR, taking into account historical RevPAR as well as such additional considerations as conversions or reposition of assets, capital plans, brand changes and other factors that may reasonably be forecasted to raise RevPAR after stabilization of such initiative.

If Ashford Prime or Ashford Trust elect to spin-off, carve-out, split-off or otherwise consummate a transfer of a division or subset of assets for the purpose of forming a joint venture, a newly created private platform or a new publicly traded company to hold such division or subset of assets constituting a distinct asset type and/or investment guidelines, Ashford Trust and Ashford Prime have agreed that any such new entity will be advised by us pursuant to an advisory agreement containing substantially the same material terms set forth in our advisory agreement with Ashford Prime or Ashford Trust, as applicable.

Our Mutual Exclusivity Agreement

We and Ashford LLC, our operating company, entered into a mutual exclusivity agreement with Remington, that was consented and agreed to by Mr. Monty J. Bennett, regarding potential future advisory clients for us and property management clients for Remington. Mr. Monty J. Bennett and his father Mr. Archie Bennett, Jr. are the sole owners of Remington, and Mr. Monty J. Bennett is the chief executive officer of Remington. Pursuant to this agreement, we have agreed to utilize Remington to provide property management, project management and development services for all hotels that future companies we may advise or may acquire, to the extent that we have the right, or control the right, to direct such matters, subject to certain exceptions.

Our Financing Strategy

We currently do not use leverage, and therefore have no market risk sensitive instruments; however, we may decide to use leverage to meet future capital needs. Our organizational documents do not limit our capacity to use leverage or the amount we may use. Our financing objective is to manage our capital structure effectively in order to provide sufficient capital to execute our business strategies and in turn add value to stockholders. We may from time to time use derivative instruments primarily to manage interest rate risk.

Regulation

General . We, AIM and each of Ashford Prime and Ashford Trust, as applicable, are subject, in certain circumstances, to supervision and regulation by state and federal governmental authorities and are subject to various laws and judicial and administrative decisions imposing various requirements and restrictions, which, among other things regulate public disclosures, reporting obligations and capital raising activity. As an advisor to companies that own hotel properties, the operations and properties of such entities are subject to various federal, state and local laws, ordinances and regulations, including regulations relating to common areas and fire and safety requirements.

REIT Regulations . Each of Ashford Prime and Ashford Trust has elected and is qualified and expects to continue to qualify to be taxed as a REIT under Section 856 through 860 of the Code. As REITs, such companies must currently distribute, at a minimum, an amount equal to 90% of their taxable income. In addition, such companies must distribute 100% of taxable income to avoid paying corporate federal income taxes. REITs are also subject to a number of organizational and operational requirements in order to elect and maintain REIT status. These requirements include specific share ownership tests and assets and gross income composition tests. If either Ashford Prime or Ashford Trust fails to continue to qualify as a REIT in any taxable year, it is subject to federal income tax (including any applicable alternative minimum tax) on its taxable income at regular corporate tax rates. Even if such companies continue to qualify for taxation as REITs, they may be subject to state and local income taxes and to federal income tax and excise tax on their undistributed income.

Americans with Disabilities Act. As the advisor to Ashford Prime and Ashford Trust, we are responsible for ensuring that the hotels owned by such entities comply with applicable provisions of the Americans with Disabilities Act, or “ADA,”, to the extent that such hotels are “public accommodations” as defined by the ADA. Non-compliance with the ADA could result in imposition of fines or an award of damages to private litigants. The obligation to make readily achievable accommodations is an ongoing one, and we continue to assess the hotels and to advise Ashford Prime or Ashford Trust, as applicable, to make alterations as appropriate in this respect.

Environmental Matters. Under various laws relating to the protection of the environment, a current or previous owner or operator (including tenants) of real estate may be liable for contamination resulting from the presence or discharge of hazardous or toxic substances at that property and may be required to investigate and clean up such contamination at that property or emanating from that property. These costs could be substantial and liability under these laws may attach without regard to whether the owner or operator knew of, or was responsible for, the presence of the contaminants, and the liability may be joint and several. The presence of contamination or the failure to remediate contamination at the hotels owned by Ashford Prime or Ashford Trust may expose such entities, and potentially us, to third-party liability or materially and adversely affect the ability to sell, lease or develop the real estate or to incur debt using the real estate as collateral.

The hotels owned by Ashford Prime and Ashford Trust are subject to various federal, state, and local environmental, health and safety laws and regulations that address a wide variety of issues, including, but not limited to, storage tanks, air emissions from emergency generators, storm water and wastewater discharges, lead-based paint, mold and mildew and waste management. These hotels incur costs to comply with these laws and regulations, and we or the property owners could be subject to fines and penalties for non-compliance.

Some of these hotels may contain or develop harmful mold or suffer from other adverse conditions, which could lead to liability for adverse health effects and costs of remediation. The presence of significant mold or other airborne contaminants at any of the hotels owned by Ashford Prime or Ashford Trust could require a costly remediation program to contain or remove the mold or other airborne contaminants from the affected hotel or increase indoor ventilation. In addition, the presence of significant mold or other airborne contaminants could expose us to liability from guests or employees at the hotels and others if property damage or health concerns arise.

In the judgment of management, while we may incur significant expense complying with the various regulation to which we are subject, existing statutes and regulations will not have a material adverse effect on our business. However, it is not possible to forecast the nature of future legislation, regulations, judicial decisions, orders or interpretations, nor their impact upon our future business, financial condition, results of operations or prospects.

Distributions and Our Distribution Policy

Evaluation of our distribution policy and the decision to make a distribution is made solely at the discretion of our board of directors and is based on factors including, but not limited to, our ability to generate income, availability of existing cash balances, the performance of our business, capital requirements, applicable law, access to cash in the capital markets and other financing sources, general economic conditions and economic conditions that more specifically impact our business or prospects and other factors our board of directors deems relevant.

Future distribution levels are subject to adjustment based upon any one or more of the factors set forth above, the matters discussed under “Risk Factors” in this Annual Report on Form 10-K or any other document we file with the SEC under the Exchange Act and other factors that our board of directors may, from time to time, deem relevant to consider when determining an appropriate distribution. Our board of directors may also determine not to make any distribution.

Competition

The asset management industry is highly competitive. We compete on a regional, industry and niche basis based on a number of factors, including ability to raise capital, investment opportunities and performance, transaction execution skills, access to and retention of qualified personnel, reputation, range of products, innovation and fees for our services. Our clients compete with many third parties engaged in the hotel industry, including other hotel operating companies, ownership companies (including hotel REITs) and national and international hotel brands. Some of these competitors, including other REITs and private real estate companies and funds may have substantially greater financial and operational resources than Ashford Prime or Ashford Trust and may have greater knowledge of the markets in which we seek to invest. Such competitors may also enjoy significant competitive advantages that result from, among other things, a lower cost of capital and enhanced operating efficiencies. Future competition from new market entrants may limit the number of suitable investment opportunities offered to Ashford Prime and Ashford Trust. It may also result in higher prices, lower yields and a more narrow margin over the borrowing cost for Ashford Prime and Ashford Trust, making it more difficult to originate or acquire new investments on attractive terms. Certain competitors may also be subject to different regulatory regimes or rules that may provide them more flexibility or better access to pursue potential investments and raise capital for their managed companies. In addition, certain competitors may have higher risk tolerance, different risk assessment or a lower return threshold, which could allow them to consider a broader range of investments and to bid more aggressively for investment opportunities that we may want to pursue.

Ashford Prime and Ashford Trust each compete with many third parties engaged in the hotel industry. Competition in the hotel industry is based on a number of factors, most notably convenience of location, brand affiliation, price, range of services, guest amenities or accommodations offered and quality of customer service. Competition is often specific to the individual markets in which properties are located and includes competition from existing and new hotels. We believe that hotels that are affiliated with leading national brands, such as the Marriott or Hilton brands, will enjoy the competitive advantages associated with operating under such brands. Increased competition could have a material adverse effect on the occupancy rate, average daily room rate and room revenue per available room of the hotels owned by Ashford Prime or Ashford Trust or may require capital improvements that otherwise would not have to be made, which may result in decreases in the profitability of Ashford Prime or Ashford Trust and decreased advisory fees to us.

Insurance

We are required to have insurance programs to comply with our contractual obligations and as reasonably necessary for our business.

Shareholder Rights Plan

On November 16, 2014, we adopted a shareholder rights plan by entering into a Rights Agreement, dated November 17, 2014, with ComputerShare Trust Company, N.A., as rights agent (the “Rights Agreement”). We intend for the shareholder rights plan to improve the bargaining position of our board of directors in the event of an unsolicited offer to acquire our outstanding shares of common stock. Our board of directors implemented the rights plan by declaring a dividend of one preferred share purchase right that was paid on November 27, 2014, for each outstanding share of our common stock on November 27, 2014, to our stockholders of record on that date. Each of those rights becomes exercisable on the Distribution Date (defined below) and entitles the registered holder to purchase from the Company one one-thousandth of a share of our Series A Preferred Stock, par value $0.01 per share, at a price of $275 per one one-thousandth of a share of our Series A Preferred Stock represented by such a right, subject to adjustment.

Initially, the rights will be attached to all certificates representing our common stock, and no separate certificates evidencing the rights will be issued. The Rights Agreement provides that, until the date on which the rights separate and begin trading separately from our common stock (which we refer to as the “Distribution Date”), the rights will be transferred only with the shares of our common stock. The Distribution Date will occur, and the rights would separate and begin trading separately from the shares of our common stock, and certificates representing the rights will be issued to evidence the rights, on the earlier to occur of:

(i)

10 business days following a public announcement, or the public disclosure of facts indicating, that a person or group of affiliated or associated persons has acquired beneficial ownership (as defined in the Rights Agreement) of 10% or more of the outstanding shares of common stock, (referred to, subject to certain exceptions as “Acquiring Persons”) (or, in the event an exchange of the rights for shares of our common stock is effected in accordance with certain provisions of the Rights Agreement and our board of directors determines that a later date is advisable, then such later date that is not more than 20 days after such public announcement); or

(ii)

10 business days (or such later date as may be determined by action of our board of directors prior to such time as any person becomes an Acquiring Person) of 10% or more of the outstanding shares of our common stock following the commencement of, or announcement of an intention to make, a tender offer or exchange offer the consummation of which would result in the beneficial ownership by a person or group of 10% or more of the outstanding shares of our common stock.

The rights also become exercisable if a person or group that already beneficially owns 10% or more of our common stock acquires any additional shares of our common stock without the approval of our board of directors, except that the Distribution Date will not occur as a result of our company, one of our subsidiaries, one of our employee benefit plans or a trustee for one of those plans, or Mr. Monty J. Bennett and certain of his affiliates and associates (so long as they own 20% or less of our outstanding common stock), acquiring additional shares of our common stock, and those persons will not be Acquiring Persons.

If a person or group becomes an Acquiring Person at any time, with certain limited exceptions, the rights will become exercisable for shares of our common stock (or, in certain circumstances, shares of our Series A Preferred Stock or other of our securities that are similar) having a value equal to two times the exercise price of the right. From and after the announcement that any person has become an Acquiring Person, if certificated rights are or were at any time on or after the earlier of (i) the date of such announcement or (ii) the Distribution Date acquired or beneficially owned by an Acquiring Person or an associate or affiliate of an Acquiring Person, such rights shall become void, and any holder of such rights shall thereafter have no right to exercise such rights. In addition, if, at any time after a person becomes an Acquiring Person, (i) we consolidate with, or merge with and into, any other person; (ii) any person consolidates with us, or merges with and into us and we are the continuing or surviving corporation of such merger and, in connection with such merger, all or part of the shares of our common stock are or will be changed into or exchanged for stock or other securities of any other person (or of ours) or cash or any other property; or (iii) 50% or more of our consolidated assets or earning power (as defined in the Rights Agreement) are sold, then proper provision will be made so that each holder of a right will thereafter have the right to receive, upon the exercise of a right at the then current exercise price of the right, that number of shares of common stock of the acquiring company which at the time of such transaction will have a market value of two times the exercise price of the right. Upon the occurrence of an event of the type described in this paragraph, if our board of directors so elects, we will deliver upon payment of the exercise price of a right an amount of cash or securities equivalent in value to the shares of common stock issuable upon exercise of a right. If we fail to meet that obligation within 30 days following of the announcement that a person has become an Acquiring Person, we must deliver, upon exercise of a right but without requiring payment of the exercise price then in effect, shares of our common stock (to the extent available) and cash equal in value to the difference between the value of the shares of our common stock otherwise issuable upon the exercise of a right and the exercise price then in effect.

Although the rights were initially set to expire on March 15, 2015, on February 25, 2015, our board of directors extended the expiration date until the date of our 2015 annual stockholder meeting, at which time the stockholders will vote on a further extension of the expiration date to February 25, 2018. If the stockholders do not approve such further extension, the rights will expire on the date of the 2015 annual stockholder meeting.

Employees

At December 31, 2014, we had 92 full time employees. These employees directly or indirectly perform various acquisition, development, asset management, capital markets, accounting, tax, risk management, legal, redevelopment, and corporate management functions for Ashford Prime and Ashford Trust.

Emerging Growth Company Status

We are an “emerging growth company,” as defined in the JOBS Act, and we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” These exemptions include not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Although we are still evaluating the JOBS Act, we may take advantage of some or all of the reduced regulatory and reporting requirements that are available to us as long as we qualify as an emerging growth company, except that we have irrevocably elected not to take advantage of the extension of time to comply with new or revised financial accounting standards available under Section 102(b) of the JOBS Act.

We, in general, remain as an emerging growth company for up to five full fiscal years following our separation from Ashford Trust. We would cease to be an emerging growth company and, therefore, become ineligible to rely on the above exemptions, if we:


•	have more than $1 billion in annual revenue in a fiscal year;


•	issue more than $1 billion of non-convertible debt during the preceding three-year period; or

•

become a “large accelerated filer” as defined in Exchange Act Rule 12b-2, which would occur after: (i) we have filed at least one annual report pursuant to the Exchange Act; (ii) we have been an SEC-reporting company for at least 12 months; and (iii) the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter.

Access To Reports and Other Information

We maintain a website at www.ashfordinc.com. On our website, we make available free-of-charge our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and other reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after we electronically file such material with the SEC. In addition, our Code of Business Conduct and Ethics, Code of Ethics for the Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer, Corporate Governance Guidelines, and Board Committee Charters are also available free-of-charge on our website or can be made available in print upon request.

All reports filed with the SEC may also be read and copied at the SEC’s Public Reference Room at 100 F Street, N.E. Washington, DC 20549-1090. Further information regarding the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. In addition, all of our filed reports can be obtained at the SEC’s website at www.sec.gov.

Item 1A. Risk Factors

Risks Related to Our Business

The asset and investment management businesses are highly competitive.

The asset and investment management businesses are highly competitive. Competition in these businesses is driven by a variety of factors including: asset and investment performance; the quality of service provided to the companies and investment funds we advise; investor perception of an asset and investment manager’s drive, focus and alignment of interest; terms of investment, including the level of fees and expenses charged for services; our actual or perceived financial condition, liquidity and stability; the duration of relationships with investors; brand recognition; and business reputation. We expect to face competition primarily from other asset and investment management firms, private equity funds, hedge funds, other financial institutions, sovereign wealth funds, corporate buyers and other parties. A number of factors serve to increase our competitive risks:


•	other asset and investment managers may have greater financial, technical, marketing and other resources and more personnel than we do;


•	Ashford Prime, Ashford Trust, other companies that we may advise and any investment funds we manage may not perform as well as the clients of other asset or investment managers;


•	several other asset and investment managers and their clients have significant amounts of capital and many of them have similar management and investment objectives to ours which may create additional competition for investment management and advisory opportunities;


•	some of these other asset and investment managers’ clients may also have a lower cost of capital and access to funding sources that are not available to us or the companies that we advise, which may create competitive disadvantages for us with respect to funding opportunities;

•

some of these other asset managers’ clients may have higher risk tolerance, different risk assessment or a lower return threshold, which could allow them to facilitate the acquisition and management by their clients of a wider variety of assets and allow them to consider a broader range of investments and to advise their clients to bid more aggressively for investment opportunities on which we would advise our clients to bid;


•	there are relatively few barriers to entry impeding new asset or investment management companies and the successful efforts of new entrants into the asset or investment management businesses are expected to continue to result in increased competition;


•	some other asset and investment managers may have better expertise or be regarded by potential clients as having better expertise with regard to specific assets or investments;


•	other asset and investment managers may have more scalable platforms and may operate more efficiently than us;


•	other asset and investment managers may have better brand recognition than us and there is no assurance that we will maintain a positive brand in the future;


•	other industry participants may from time to time seek to recruit members of our management or investment teams and other employees away from us;


•	we face competition in the pursuit of outside investors for any investment funds we manage, acquiring investments in attractive portfolio companies, divesting our investments and other investment opportunities;


•	an increase in the allocation of capital to our asset and investment strategies by institutional and individual investors could lead to a reduction in the size and duration of pricing inefficiencies that we may seek to exploit;


•	a decrease in the allocation of capital to our asset and investment strategies could intensify competition for that capital and lead to fee reductions and redemptions in any investment funds we manage, as well as difficulty in raising new capital; and


•	the market for qualified professionals is intensely competitive and our ability to continue to compete effectively will also depend upon our ability to attract, retain and motivate our employees.

Our inability to effectively compete on these and other areas may have an adverse effect on our business, results of operations and financial condition.

The investments of the entities we currently advise are concentrated in the hotel industry; our business would be adversely affected by an economic downturn in that sector; and we will be significantly influenced by the economies and other conditions in the specific markets in which our asset management clients operate.

Substantially all of the investments of Ashford Prime and Ashford Trust are concentrated in the hotel industry. Additionally, investment funds we manage are concentrated in the hospitality, real estate and leisure industries. These concentrations may expose such entities, and therefore us, to the risk of economic downturns in the hotel real estate sector to a greater extent than if the investments of such entities were diversified across other sectors of the real estate or other industries. Similarly, we are particularly susceptible to adverse market conditions in areas in which our asset management clients have high concentrations of properties. Industry downturns, relocation of businesses, any oversupply of hotel rooms, a reduction in lodging demand or other adverse economic developments in the hotel industry generally or in areas where our asset management clients have a high concentration of properties could adversely affect us.

Failure of the hotel industry to exhibit sustained improvement or to improve as expected may adversely affect us.

Currently, our primary sources of revenues are the advisory agreements with Ashford Prime and Ashford Trust. A substantial part of the business plan of each of these entities is based on management’s belief that the lodging markets in which such entities invest will experience improving economic fundamentals in the future, despite that fundamentals have already substantially improved over the last several years. In particular, the business strategy of each of these entities is dependent on the expectation that key industry performance indicators, especially RevPAR, will continue to improve. Investment funds we manage rely in part on these assumptions, as well. There can be no assurance as to whether or to what extent, hotel industry fundamentals will continue to improve. If conditions in the industry do not sustain improvement or improve as expected, or deteriorate, we may be adversely affected.

We are subject to substantial regulation, numerous contractual obligations and extensive internal policies and failure to comply with these matters could have a material adverse effect on our business, financial condition and results of operations.

We and our subsidiaries will be subject to substantial regulation, numerous contractual obligations and extensive internal policies. Given our organizational structure, we are subject to regulation by the SEC, the IRS, and other federal, state and local governmental bodies and agencies. We also will be responsible for managing the regulatory aspects of Ashford Prime and Ashford Trust, including compliance with applicable REIT rules. These regulations are extensive, complex and require substantial management time and attention. If we fail to comply with any of the regulations that apply to our business or the businesses of Ashford Prime, Ashford Trust or other entities that we advise, we could be subjected to extensive investigations as well as substantial penalties, and our business and operations could be materially adversely affected. We also will have numerous contractual obligations that we must adhere to on a continuous basis to operate our business, the default of which could have a material adverse effect on our business and financial condition. While we have designed policies to appropriately operate our business and the entities we advise, these internal policies may not be effective in all regards and, further, if we fail to comply with our internal policies, we could be subjected to additional risk and liability.

We intend to do business internationally, which may subject us to numerous political, economic, market, reputational, operational, legal, regulatory and other risks that could adversely impact our business and results of operations.

We have limited experience operating internationally but we may do so in the near future, in our capacity as advisor to an entity with international operations. As a result of any future international operations conducted by us, our business and financial results in the future could be adversely affected due to currency fluctuations, social or judicial instability, acts or threats of terrorism, changes in governmental policies or policies of central banks, expropriation, nationalization and/or confiscation of assets, price controls, fund transfer restrictions, capital controls, exchange rate controls, taxes, inadequate intellectual property protection, unfavorable political and diplomatic developments, changes in legislation or regulations and other additional international developments or restrictive actions. These risks are especially acute in emerging markets. As in the United States, many non-U.S. jurisdictions in which we may do business have been negatively impacted by recessionary conditions. While a number of these jurisdictions are showing signs of recovery from the recession that began in late 2007, others continue to experience increasing levels of stress. In addition, the risk of default on sovereign debt in some non-U.S. jurisdictions could expose us to substantial losses. Any such unfavorable conditions or developments could have an adverse impact on our businesses and results of operations.

We may also experience difficulty entering new international markets due to regulatory barriers, the necessity of adapting to new regulatory systems and problems related to entering new markets with different cultural bases and political systems. These difficulties may prevent, or significantly increase the cost of, our international expansion.

In addition, changes in policies or laws of the U.S. or foreign governments resulting in, among other things, higher taxation, currency conversion limitations, restrictions on fund transfers or the expropriation of private enterprises, could reduce the anticipated benefits of our international expansion. Any actions by countries in which we conduct business to reverse policies that encourage investment could adversely affect our business. If we fail to realize the anticipated growth of our future international operations, our business and operating results could suffer.

Our ability to raise capital and attract investors for our existing and potential clients and our performance is critical to our ability to earn fees and grow our asset and investment management businesses.

The base advisory fees that we earn in our asset management business are based on the total market capitalization of the entities that we advise. Accordingly, our base fees are expected to increase if we are able to successfully raise capital in the equity markets for our existing and potential clients. Further, the incentive fees we earn in our asset management business will be primarily driven by the outperformance of our clients as compared with their respective peers, based on total stockholder return. Similarly, the management fees we earn in our investment management business are based upon the assets under management in these investment funds. Accordingly, our management fees are expected to increase if we are able to successfully raise capital from our existing and potential investors. Additionally, the performance allocations or incentive fees we earn in our investment management business is driven by the performance of these investment funds.

Our ability to earn these fees is subject to a number of risks, many of which are beyond our control, including monetary and fiscal policies, domestic and international economic conditions, political considerations and capital markets. To the extent that general capital markets activity slows down or comes to a halt (as was the case during the recession that began in late 2007), our clients may have difficulty growing. This risk is based on micro- and macro-economic market factors including but not limited to disruptions in the debt and equity capital markets, resulting in the lack of access to capital or prohibitively high costs of obtaining or replacing capital. Despite recent improvements, the markets could suffer another severe downturn and another liquidity crisis could emerge.

We are predominantly dependent on Ashford Prime and Ashford Trust as our only current asset management clients, the loss of either of which, or their inability to pay for our services, could substantially reduce our revenue.

Ashford Prime and Ashford Trust are the only companies for which we currently provide asset management advisory services. The loss or failure of these companies, their failure to pay us or termination of their advisory agreements, particularly if they fail to pay the termination fee, would adversely affect our revenue, results of operations and financial condition. Therefore, our business is subject to the risks of the businesses of such entities. Additionally, these companies could sell assets over time, decreasing their market capitalization, and thereby cause our advisory fees to decrease, which would adversely affect our results of operations and financial condition.

We depend on our key personnel with long-standing business relationships. The loss of such key personnel could threaten our ability to operate our business successfully.

Our future success depends, to a significant extent, upon the continued services of our management team. In particular, the hotel industry and/or investment experience of Messrs. Monty J. Bennett, Douglas A. Kessler, David A. Brooks, Deric S. Eubanks, Jeremy J. Welter, Mark L. Nunneley and J. Robison Hays, III, and the extent and nature of the relationships they have developed with hotel franchisors, operators, and owners and hotel lending and other financial institutions are critically important to the success of our business. The loss of services of one or more members of our management or investment teams could harm our business and our prospects.

The prior performance of Ashford Trust and investment funds we manage are not indicative of our future performance.

We have presented information in this Annual Report on Form 10-K regarding the historical results of Ashford Trust. When considering this information you should consider that the historical results of Ashford Trust are not indicative of the future results that you should expect from us or our common stock. There are significant differences between Ashford Trust and us, and our financial condition and results of operations could vary significantly because our investment, financing, business and other strategies differ from those of Ashford Trust.

As described elsewhere in this document, our future results are subject to many uncertainties and other factors that could cause our financial condition and results of operations to be materially different than that of Ashford Trust.

Additionally, the historical and potential future returns of the investment funds we manage are not directly linked to returns on our common stock. Therefore, readers should not conclude that positive performance of the investment funds we manage will necessarily result in positive returns on our common stock.

Investment funds we manage are subject to counterparty default and concentration risks.

Investment funds we manage may enter into numerous types of financing arrangements with counterparties globally, including loans, hedge contracts, swaps, repurchase agreements and other derivative and non-derivative contracts. The terms of these contracts are often customized and complex, and many of these arrangements occur in markets or relate to products that are not subject to regulatory oversight. Generally, investment funds we manage are not restricted from dealing with any particular counterparty or from concentrating any or all of their transactions with one counterparty. In particular, some of the investment funds we manage utilize prime brokerage arrangements with a relatively limited number of counterparties, which has the effect of concentrating the transaction volume (and related counterparty default risk) of these investment funds with these counterparties.

Investment funds we manage are subject to the risk that the counterparty to one or more of these contracts defaults, either voluntarily or involuntarily, on its performance under the contract. Any such default may occur rapidly and without notice to us. Moreover, if a counterparty defaults, we may be unable to take action to cover our exposure, either because we lack the contractual ability or because market conditions make it difficult to take effective action. This inability could occur in times of market stress, which are precisely the times when defaults may be most likely to occur. In the event of a counterparty default, particularly a default by a major investment bank, investment funds we manage could incur material losses, and the resulting market impact of a major counterparty default could harm our business, results of operations and financial condition. In the event that one of our counterparties becomes insolvent or files for bankruptcy, our ability to eventually recover any losses suffered as a result of that counterparty's default may be limited by the liquidity of the counterparty or the applicable legal regime governing the bankruptcy proceeding.

Investment funds we manage are also exposed to the risk that a counterparty will not settle a transaction in accordance with its terms and conditions because of a dispute over the terms of the contract (whether or not bona fide) or because of a credit or liquidity problem, thus causing the investment fund to suffer a loss. Counterparty risk is increased for contracts with longer maturities where events may intervene to prevent settlement, or where the investment fund has concentrated its transactions with a single or small group of counterparties. The absence of a regulated market to facilitate settlement may increase the potential for losses.

In addition, the risk-management models of investment funds we manage may not accurately anticipate the impact of market stress or counterparty financial condition, and as a result, we may not take sufficient action to reduce our risks effectively. Default risk may arise from events or circumstances that are difficult to detect, foresee or evaluate. In addition, concerns about, or a default by, one large participant could lead to significant liquidity problems for other participants, which may in turn expose us to significant losses.

Investors in investment funds we manage may redeem their investments which would lead to a decrease in our assets under management and, therefore, our revenues.

Investors in investment funds we manage may generally redeem their investments on a monthly basis, subject to the applicable fund's specific redemption provisions. Investors may decide to move their capital away from us to other investments for any number of reasons in addition to poor investment performance. Factors that could result in investors leaving investment funds we manage include the need to increase available cash reserves or to fund other capital commitments, changes in interest rates that make other investments more attractive, the publicly traded nature of the indirect parent of their investment manager, changes in investor perception regarding our focus or alignment of interest, dissatisfaction with changes in or broadening of an investment fund's investment strategy, changes in our reputation, and departures or changes in responsibilities of key investment professionals. In a declining financial market, the pace of redemptions and consequent reduction in our fee paying assets under management could accelerate. The decrease in our revenues that would result from significant redemptions in our investment business could have a material adverse effect on our business.

Our historical financial results as a carve-out of Ashford Trust may not be representative of our results as an independent company.

The historical financial information we have included in this Annual Report on Form 10-K has been prepared from the accounting records of Ashford Trust and does not necessarily reflect what our financial position, results of operations or cash flows would have been had we operated as an independent company during the periods presented. The historical costs and expenses reflected in our financial statements include an allocation for certain indirect items including salaries, equity-based compensation and general and administrative expenses pro rata based on an estimate of expenses had the business been run as an independent entity. The allocation methods include relative head count and management’s knowledge of the respective operations of the asset management and advisory business. The historical information does not necessarily indicate what our results of operations, financial position, cash flows or costs and expenses will be in the future.

If we are unable to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act or our internal control over financial reporting is not effective, the reliability of our financial statements may be questioned and our stock price may suffer.

Section 404 of the Sarbanes-Oxley Act requires any company subject to the reporting requirements of the U.S. securities laws to do a comprehensive evaluation of its and its consolidated subsidiaries’ internal control over financial reporting. To comply with this statute, we will eventually be required to document and test our internal control procedures, our management will be required to assess and issue a report concerning our internal control over financial reporting, and our independent auditors will be required to issue an opinion on their audit of our internal control over financial reporting. The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation to meet the detailed standards under the rules. During the course of its testing, our management may identify material weaknesses or deficiencies which may not be remedied in time to meet the deadline imposed by the Sarbanes-Oxley Act. If our management cannot favorably assess the effectiveness of our internal control over financial reporting or our auditors identify material weaknesses in our internal controls, investor confidence in our financial results may weaken, and our stock price may suffer.

Our platform may not be as scalable as we anticipate and we could face difficulties growing our business without significant new investment in personnel and infrastructure.

While we believe our platform for operating our business is highly scalable and can support significant growth without substantial new investment in personnel and infrastructure on a relative basis, we may be wrong in that assessment. It is possible that if our business grows substantially, we will need to make significant new investment in personnel and infrastructure to support that growth. We may be unable to make significant investments on a timely basis or at reasonable costs, and our failure in this regard could disrupt our business and operations.

If our portfolio management techniques and strategies are not effective, we may be exposed to material unanticipated losses.

Our portfolio management techniques and strategies may not fully mitigate the risk exposure of our operations in all economic or market environments, or against all types of risk, including risks that we might fail to identify or anticipate. Any failures in our portfolio management techniques and strategies to accurately quantify such risk exposure could limit our ability to manage risks in our operations and could result in losses.

We may determine to grow our business through the acquisition of asset and investment management contracts or companies, which entails substantial risk.

We may determine to grow our business through the acquisition of asset and investment management contracts or companies. Such acquisitions entail substantial risk. During our due diligence of such acquisitions, we may not discover all relevant liabilities and we may have limited, if any, recourse against the sellers. We also may not successfully integrate the asset and investment management contracts or companies that we acquire into our business and operations, which could have a material adverse effect on our results of operation and financial condition. Additionally, to the extent such acquisitions result in us entering new lines of business, we may become subject to new laws and regulations with which we are not familiar, or from which we are currently exempt, potentially leading to increased litigation and regulatory risk. Moreover, we may grow our business through joint ventures, in which case we will be subject to additional risks and uncertainties in that we may be dependent upon, and subject to liability, losses or reputational damage relating to systems, control and personnel that are not under our control.

Valuation methodologies for certain assets in investment funds we manage can be subject to significant subjectivity, and the values of assets established pursuant to such methodologies may never be realized, which could result in significant losses for these investment funds.

There may be no readily-ascertainable market prices for a number of investments in the investment funds we manage. The fair value of such investments of these investment funds is determined periodically by us based on the methodologies described in the investment funds' valuation policies. These policies are based on a number of factors, including the nature of the investment, the expected cash flows from the investment, bid or ask prices provided by third parties for the investment, the length of time the investment has been held, the trading price of securities (in the case of publicly traded securities), restrictions on transfer and other recognized valuation methodologies. The methodologies we use in valuing individual investments are based on a variety of estimates and assumptions specific to the particular investments, and actual results related to the investment therefore often vary materially from such assumptions or estimates. In addition, because investments held by these investment funds may be in industries or sectors that are unstable, in distress, or in the midst of some uncertainty, such investments are subject to rapid changes in value caused by sudden company-specific or industry-wide developments. Moreover, in many markets, transaction flow is further limited by uncertainty about accurate asset valuations, which may cause hedge fund investors to become concerned about valuations of investment funds that have illiquid or hard-to-value assets. This concern may lead to increased redemptions by investors irrespective of the performance of the investment funds. In addition, uncertainty about asset values on redemptions from investments in these investment funds may lead to an increased risk of litigation by investors over net asset values or “NAVs.”

Because there is significant uncertainty in the valuation of, or in the stability of the value of, illiquid investments, the fair values of such investments as reflected in an investment fund's NAV do not necessarily reflect the prices that would actually be obtained by us on behalf of the investment fund when such investments are sold. The SEC has announced that it is undertaking a significant review of valuation practices within the private equity industry and has instituted enforcement actions against private equity fund advisers for misleading investors about valuation, so there will be increased regulatory scrutiny in the future. Realizations at values significantly lower than the values at which investments have been reflected in investment fund NAVs would result in losses for the applicable investment fund, a decline in management fees and the loss of potential performance allocations or incentive fees. Also, a situation where asset values turn out to be materially different than values reflected in investment fund NAVs could cause investors to lose confidence in us, which would, in turn, result in redemptions from these investment funds or difficulties in raising additional capital.

Anti-takeover provisions in our constituent documents and Delaware law might discourage or delay acquisition attempts for us that you might consider favorable.

Our certificate of incorporation and bylaws will contain provisions that may make the acquisition of our company more difficult without the approval of our board of directors. These provisions:

•

authorize our board of directors, without further action by our stockholders, to provide, out of the unissued shares of preferred stock, for additional or new series of preferred stock and, with respect to each such series, to set the number of shares constituting such series, the designation of such series, the terms, preferences and relative participating, optional and other special rights, if any, voting powers, if any, and the restrictions, limitations and qualifications thereof;

•

authorize our board of directors, without further action by our stockholders, to provide, out of the unissued shares of blank check common stock, for additional or new series of blank check common stock and, with respect to each such series, to set the number of shares constituting such series, the designation of such series, the terms, preferences and relative participating, optional and other special rights, if any, voting powers, if any, and the restrictions, limitations and qualifications thereof;


•	require a classified board of directors;


•	prohibit stockholder action by written consent, without the express prior consent of our board of directors;


•	provide that stockholders are not permitted to call a special meeting of stockholders;


•	provide that directors may be removed only for cause and with the affirmative vote of at least 80% of the voting interests of our stockholders entitled to vote;


•	provide that our board of directors is expressly authorized to make, alter or repeal our bylaws; and


•	establish advance notice requirements for nominations for elections to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.

These anti-takeover provisions and other provisions under Delaware law could discourage, delay or prevent a transaction involving a change in control of our company, even if doing so would benefit our stockholders. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and to cause us to take other corporate actions you desire.

We have adopted a shareholder rights plan which could make it more difficult for a third-party to acquire us while the plan remains in effect.

We have in effect a shareholder rights plan that is intended to protect us from efforts to obtain control of our company that our board of directors believe are inconsistent with the best interests of our company and our stockholders. The rights will be exercisable ten days following the earlier of the public announcement that a stockholder (other than us, one of our subsidiaries or employee benefit plans or Mr. Monty J. Bennett and certain of his affiliates and associates (so long as they beneficially own 20% or less of our common stock)) has acquired beneficial ownership of 10% or more of our common stock without the approval of our board of directors or the announcement of a tender offer or exchange offer that would result in the ownership of 10% or more of our common stock by a person or group of persons (other than one or more of the excluded persons described above). The rights also become exercisable if a person or group that already beneficially owns 10% or more of our common stock (other than one or more of the excluded persons described above) acquires any additional shares of our common stock without the approval of our board of directors. If the rights become exercisable, all rights holders (other than the person/entity triggering the rights) will be entitled to acquire certain of our securities at a substantial discount. The rights may substantially dilute the stock ownership of a person or group attempting to take over our company without the approval of our board of directors, and the rights plan could make it more difficult for a third-party to acquire our company or a significant percentage of our outstanding shares of common stock, without first negotiating with our board of directors. The rights expire on the date of our 2015 annual stockholder’s meeting unless, at that meeting, the stockholders approve a further extension of the rights to February 25, 2018.

Stockholders have limited control over changes in our policies and operations, which increases the uncertainty and risks they face as stockholders.

Our board of directors determines our major policies, including our policies regarding growth and distributions. Our board of directors may amend or revise these and other policies without a vote of our stockholders. We may change our corporate policies without stockholder notice or consent, which could result in investments or activities that are different than, or in different proportion than, those described in this Annual Report on Form 10-K. Under the Delaware General Corporation Law (“DGCL”), our certificate of incorporation and our bylaws, stockholders will have a right to vote only on limited matters. Our board of directors’ broad discretion in setting policies and stockholders’ inability to exert control over those policies increases the uncertainty and risks stockholders face.

Our organizational documents do not limit our ability to enter into new lines of businesses, and we may expand into new investment strategies, geographic markets and businesses, each of which may result in additional risks and uncertainties in our businesses.

Our plan, to the extent that market conditions permit, is to grow our business and expand into new investment strategies, geographic markets and businesses. Our organizational documents do not limit us to the management of assets and investment funds within the hospitality industry. Accordingly, we may pursue growth through acquisitions of asset and investment management contracts or companies, acquisitions of critical business partners or other strategic initiatives. To the extent we make strategic investments or acquisitions, undertake other strategic initiatives or enter into a new line of business, we will face numerous risks and uncertainties, including risks associated with: (i) the required investment of capital and other resources; (ii) the possibility that we have insufficient expertise to engage in such activities profitably or without incurring inappropriate amounts of risk; (iii) combining or integrating operational and management systems and controls; and (iv) the broadening of our geographic footprint, including the risks associated with conducting operations in non-U.S. jurisdictions. Entry into certain lines of business may subject us to new laws and regulations with which we are not familiar, or from which we are currently exempt, and may lead to increased litigation and regulatory risk. If a new business generates insufficient revenues or if we are unable to efficiently manage our expanded operations, our results of operations will be adversely affected. Our strategic initiatives may include joint ventures, in which case we will be subject to additional risks and uncertainties in that we may be dependent upon, and subject to liability, losses or reputational damage relating to systems, controls and personnel that are not under our control.

Our constituent documents designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our constituent documents provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum for: (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders; (iii) any action asserting a claim against us arising pursuant to any provision of the DGCL, our certificate of incorporation or bylaws; or (iv) any other action asserting a claim against us that is governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of our capital stock shall be deemed to have notice of and to have consented to the provisions of our constituent documents described above. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and employees. Alternatively, if a court were to find these provisions of our constituent documents inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition and results of operations.

For as long as we are an emerging growth company, we will not be required to comply with certain reporting requirements, including those relating to accounting standards and disclosure about our executive compensation, that apply to other public companies.

We are subject to reporting and other obligations under the Exchange Act. In April 2012, the Jumpstart Our Business Startups Act (“JOBS Act”) was enacted into law. The JOBS Act contains provisions that, among other things, relax certain reporting requirements for “emerging growth companies,” including certain requirements relating to accounting standards and compensation disclosure. We are an “emerging growth company” as defined in the JOBS Act. For as long as we are an emerging growth company, which may be up to five full fiscal years, unlike other public companies, we will not be required to:


•	provide an auditor’s attestation report on management’s assessment of the effectiveness of our system of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act,


•	comply with any new or revised financial accounting standards applicable to public companies until such standards are also applicable to private companies under Section 102(b)(1) of the JOBS Act,


•	comply with any new requirements adopted by the Public Company Accounting Oversight Board (the “PCAOB”) requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer,


•	comply with any new audit rules adopted by the PCAOB after April 5, 2012, unless the SEC determines otherwise,


•	provide certain disclosure regarding executive compensation, or


•	hold stockholder advisory votes on executive compensation.

Our status as an “emerging growth company” under the JOBS Act may make it more difficult to raise capital as and when we need it.

Because of the exemptions from various reporting requirements provided to us as an “emerging growth company” and because we will have an extended transition period for complying with accounting standards newly issued or revised after April 5, 2012, we may be less attractive to investors, and it may be difficult for us to raise additional capital as and when we need it. Investors may be unable to compare our business with other companies in our industry if they believe that our financial accounting is not as transparent as other companies in our industry. If we are unable to raise additional capital as and when we need it, our financial condition and results of operations may be materially and adversely affected.

We identified a material weakness in our internal controls over financial reporting that existed for the period ended December 31, 2013. If we fail to properly remediate this material weakness, or fail to properly identify or remediate any future weaknesses or deficiencies, or achieve and maintain effective internal control, our ability to produce accurate and timely financial statements could be impaired and investors could lose confidence in our financial statements.

Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. In June 2014, we became aware of a deficiency in the operating effectiveness of our controls that led to the following errors in our financial statements: (i) a misstatement related to dividends paid on stock reserved for issuance to participants in our deferred compensation plan, (ii) a misstatement related to non-cash compensation being improperly included as a cash item in the operating section of the combined statements of cash flows and (iii) an incorrect allocation of stock-based compensation. These errors indicated an operational deficiency in our controls surrounding management’s preparation and review of carve out financial statements. We corrected these errors and restated our historical financial statements; however the lack of proper controls resulted in a material weakness in internal control over financial reporting as defined in Public Company Accounting Oversight Board Auditing Standard No. 5. As of December 31, 2014, we are still remediating the material weakness.

Although we have taken proactive steps to address the material weakness, including hiring additional accounting personnel, there can be no assurance that our remedial measures will be sufficient to address this material weakness or that our internal control over financial reporting will not be subject to additional material weaknesses in the future. If the remedial measures that we have taken and will take in the future are insufficient to address the material weakness or if additional material weaknesses or significant deficiencies in our internal control are discovered or occur in the future, our financial statements may contain material misstatements, and we could be required to restate our financial results. Additionally, we may encounter problems or delays in implementing any additional changes necessary for management to make a favorable assessment of our internal control over financial reporting. If we cannot favorably assess the effectiveness of our internal control over financial reporting, investors could lose confidence in our financial information and the price of our common stock could decline.

We are subject to financial reporting and other requirements for which our accounting, internal audit and other management systems and resources may not be adequately prepared and we may not be able to accurately report our financial results.

Following our separation from Ashford Trust, we became subject to reporting and other obligations under the Exchange Act, including the requirements of Section 404 of the Sarbanes-Oxley Act. Section 404(a) requires annual management assessments of the effectiveness of our internal controls over financial reporting. These reporting and other obligations place significant demands on our management, administrative, operational, internal audit and accounting resources and cause us to incur significant expenses. We may need to upgrade our systems or create new systems; implement additional financial and management controls, reporting systems and procedures; expand our internal audit function; and hire additional accounting, internal audit and finance staff. If we are unable to accomplish these objectives in a timely and effective fashion, our ability to comply with the financial reporting requirements and other rules that apply to reporting companies could be impaired. Any failure to achieve and maintain effective internal controls could have a material adverse effect on our business, operating results and stock price.

For as long as we are an “emerging growth company” under the JOBS Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404(b). We could be an emerging growth company for up to five years. An independent assessment of the effectiveness of our internal controls could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal controls could lead to financial statement restatements and require us to incur the expense of remediation.

We are increasingly dependent on information technology, and potential cyber-attacks, security problems or other disruption and expanding social media vehicles present new risks.

We rely on information technology networks and systems, including the Internet, to process, transmit and store electronic information, and to manage or support a variety of business processes, including financial transactions and records, personal identifying information, billing and operating data. We may purchase some of our information technology from vendors, on whom our systems depend, and rely on commercially available systems, software, tools and monitoring to provide security for processing, transmission and storage of confidential operator and other customer information. We depend upon the secure transmission of this information over public networks. Our networks and storage applications are subject to unauthorized access by hackers or others through cyber-attacks, which are rapidly evolving and becoming increasingly sophisticated, or by other means, or may be breached due to operator error, malfeasance or other system disruptions. In some cases, it will be difficult to anticipate or immediately detect such incidents and the damage caused thereby. Any significant breakdown, invasion, destruction, interruption or leakage of our systems could harm us.

In addition, the use of social media could cause us to suffer brand damage or information leakage. Negative posts or comments about us on any social networking website could damage our reputation. In addition, employees or others might disclose non-public sensitive information relating to our business through external media channels. The continuing evolution of social media will present us with new challenges and risks.

Changes in laws, regulations, or policies may adversely affect our business.

The laws and regulations governing our business or the businesses of our clients, or the regulatory or enforcement environment at the federal level or in any of the states in which we or our clients operate, may change at any time and may have an adverse effect on our business. For example, the Patient Protection and Affordable Care Act of 2010, as it is phased in over time, will significantly affect the administration of health care services and could significantly impact our cost of providing employees with health care insurance. We are unable to predict how this or any other future legislative or regulatory proposals or programs will be administered or implemented or in what form, or whether any additional or similar changes to statutes or regulations, including the interpretation or implementation thereof, will occur in the future. Any such action could affect us in substantial and unpredictable ways and could have an adverse effect on our results of operations and financial condition. Our inability to remain in compliance with regulatory requirements in a particular jurisdiction could have a material adverse effect on our operations in that market and on our reputation generally. No assurance can be given that applicable laws or regulations will not be amended or construed differently or that new laws and regulations will not be adopted, either of which could materially adversely affect our business, financial condition, or results of operations.

Risks Related to Conflicts of Interest

Our separation and distribution agreement, our advisory agreements, our mutual exclusivity agreement, the tax matters agreement and other agreements entered into in connection with our separation from Ashford Trust were not negotiated on an arm’s-length basis, and we may pursue less vigorous enforcement of their terms because of conflicts of interest with certain of our executive officers and directors and key employees of Ashford Trust and Ashford Prime.

Because our officers and two of our directors are also officers of Ashford Trust and Ashford Prime and have ownership interests in Ashford Trust and Ashford Prime, our separation and distribution agreement, our advisory agreements, our mutual exclusivity agreement, the tax matters agreement and other agreements entered into in connection with our separation from Ashford Trust were not negotiated on an arm’s-length basis, and we did not have the benefit of arm’s-length negotiations of the type normally conducted with an unaffiliated third party. As a result, the terms, including fees and other amounts payable, may not be as favorable to us as an arm’s-length agreement. Furthermore, we may choose not to enforce, or to enforce less vigorously, our rights under these agreements because of our desire to maintain our ongoing relationship with Ashford Trust, Ashford Prime and Remington. For example, we are entitled to indemnification from Ashford Trust OP in the event of breaches of certain provisions of, or misrepresentations made in, the separation and distribution agreement. We may choose not to enforce, or to enforce less vigorously, our rights under these agreements due to our ongoing relationship with Ashford Trust and Ashford Prime.

Our assumption of Ashford Trust’s deferred compensation obligations may dilute your interest in our common stock.

In connection with our separation from Ashford Trust, we assumed all of the obligations of Ashford Trust’s deferred compensation plan, which plan had only two participants, Mr. Monty J. Bennett and his father Mr. Archie Bennett, Jr. Both Mr. Monty J. Bennett and Mr. Archie Bennett, Jr. elected to invest their deferred compensation accounts in our common stock. As a result, we have an obligation to issue approximately 195,000 shares of our common stock to Mr. Monty J. Bennett over five years beginning in January 2016, which is the end of Mr. Monty Bennett’s deferral period. We also have an obligation to issue approximately 17,000 shares of our common stock to Mr. Archie Bennett, Jr., over six years beginning in March 2015, which is the end of Mr. Archie Bennett’s deferral period. The issuance of these shares of our common stock will dilute current stockholder’s and, if all such shares are issued, may result in a change of control of our company.

Our relationships with Remington, Ashford Trust, Ashford Prime and AIM could create significant conflicts of interest.

Our chief executive officer and chairman, Mr. Monty J. Bennett, serves as the chief executive officer of Remington and as the chief executive officer and chairman of the board of each of Ashford Trust and Ashford Prime. Additionally, Mr. Monty J. Bennett and his father, Mr. Archie Bennett, Jr., beneficially own 100% of Remington. Mr. Monty J. Bennett’s management obligations to Remington, Ashford Trust and Ashford Prime reduce the time and effort he spends managing our company, and his duties to us as a director and officer may conflict with his duties to, and pecuniary interest in, Remington, Ashford Trust and Ashford Prime.

We, through Ashford LLC, own approximately 60% of Management Holdco, and Mr. Monty J. Bennett, our chief executive officer and chairman of our board of directors, and Mr. J. Robison Hays, our chief strategy officer and a member of our board of directors, own, in the aggregate, 40% of Management Holdco. Performance Holdco owns 99.99% of AIM GP. We, through Ashford LLC and our 100% ownership interest in Performance Holdco's general partner, own approximately 60% of Performance Holdco, and Mr. Monty J. Bennett and Mr. J. Robison Hays own, in the aggregate, 40% of Performance Holdco. AIM currently serves as investment adviser to the REHE Fund and the Managed Accounts. Mr. Bennett’s and Mr. Hays’ duties to us as directors and officers may conflict with their duties to, and pecuniary interests in, Management Holdco and Performance Holdco.

Under the terms of our mutual exclusivity agreement with Remington, we may be obligated to utilize Remington as a property manager for hotels, if any, we may acquire in the future as well as future platforms that we advise, to the extent we have the discretion to do so, even if the utilization of Remington for such property management may not be the most advantageous for our hotels or future clients.

Our mutual exclusivity agreement with Remington requires us to utilize Remington to provide property management, project management and development services for all hotels, if any, that we may acquire as well as all hotels that future companies we advise may acquire, to the extent that we have the right, or control the right, to direct such matters, unless our independent directors either (i) unanimously vote not to utilize Remington for such services or (ii) based on special circumstances or past performance, by a majority vote elect not to engage Remington because they have determined, in their reasonable business judgment, that it would be in our best interest not to engage Remington or that another manager or developer could perform the duties materially better. In exchange for our agreement to engage Remington for such services for all hotels, if any, that we may acquire as well as all future companies that we advise, Remington has agreed to grant to any such future clients a first right of refusal to purchase any investments identified by Remington and any of its affiliates that meet the initial investment criteria of such entities, as identified in the advisory agreement between us and such entities, subject to any prior rights granted by Remington to other entities, including Ashford Trust, Ashford Prime and us. Mr. Monty J. Bennett will potentially benefit from the receipt of property management fees, project management fees and development fees by Remington from us and such future companies that we advise. See “Item 1. Business—Our Mutual Exclusivity Agreement.” Mr. Monty J. Bennett’s ownership interests in and management obligations to Remington present him with conflicts of interest in making management decisions related to the commercial arrangements between us, the clients we advise and Remington.

Under the terms of our mutual exclusivity agreement with Remington, Remington may be able to pursue lodging investment opportunities that compete with the businesses that we advise.

Pursuant to the terms of our mutual exclusivity agreement with Remington, if investment opportunities that satisfy the investment criteria of Ashford Trust, Ashford Prime or one of our future clients are identified by Remington or its affiliates, Remington will give such entity a written notice and description of the investment opportunity. The applicable entity will generally have 10 business days to either accept or reject the investment opportunity. If such entity rejects the opportunity, Remington may then pursue such investment opportunity, subject to any right of first refusal contractually granted by Remington to any other entity. As a result, it is possible that Remington could pursue an opportunity that fits within the investment criteria of an entity that we advise and compete with that entity or compete with us. In such a case, Mr. Monty J. Bennett, our chief executive officer and chairman, in his capacity as chief executive officer of Remington could be in a position of directly competing with us or an entity that we advise.

Provisions of our certificate of incorporation may result in certain corporate opportunities being assigned to Ashford Prime and Ashford Trust.

The provisions of our certificate of incorporation will provide that our directors and executive officers may also be serving as directors, officers, employees, consultants or agents of Ashford Prime, Ashford Trust and their respective subsidiaries and that we may engage in material business transactions with such entities. To the fullest extent permitted by law, we will renounce our rights to certain business opportunities, and no director or officer of ours who is also serving as a director, officer, employee, consultant or agent of Ashford Prime, Ashford Trust or any of their subsidiaries will be liable to us or to our stockholders for breach of any fiduciary duty that would otherwise exist by reason of the fact that any such individual directs a corporate opportunity (other than certain limited types of opportunities set forth in the applicable advisory agreement) to Ashford Prime, Ashford Trust or any of their respective subsidiaries instead of us, or does not refer or communicate information regarding such corporate opportunities to us.

Our executive officers, who are also executive officers of each of Ashford Trust and Ashford Prime, including our chief executive officer, who is also an executive officer of Remington, face competing demands relating to their time as well as potential conflicts of interest, and this may adversely affect our operations.

Each of our executive officers are also executive officers of each of Ashford Trust and Ashford Prime. Because our executive officers have duties to Ashford Trust and Ashford Prime as well as to our company, we do not have their undivided attention. They face conflicts in allocating their time and resources between our company, Ashford Trust and Ashford Prime, and they will continue to face increasing conflicts as we advise additional companies and platforms.

The organization and management of Ashford Prime and Ashford Trust and any companies we may advise in the future may create conflicts of interest.

We are or will be party to advisory and other agreements with Ashford Prime and Ashford Trust. These entities, along with any other businesses we may advise in the future will acquire assets consistent with their respective initial investment guidelines, but in each case, we will have discretion to determine which investment opportunities satisfy each such entity’s initial investment guidelines. If, however, either Ashford Trust or Ashford Prime materially changes its investment guidelines without our express consent, we are required to use our best judgment to allocate investment opportunities to Ashford Trust, Ashford Prime and other entities we advise, taking into account such factors as we deem relevant, in our discretion, subject to any then-existing obligations we may have to such other entities. If a portfolio investment opportunity cannot be equitably divided by asset type and acquired on the basis of such asset types in satisfaction of each such entity’s investment guidelines, we will allocate investment opportunities between Ashford Trust, Ashford Prime and any other businesses we advise in a fair and equitable manner, consistent with such entities’ investment objectives. When determining the entity for which such a portfolio investment opportunity would be the most suitable, our investment professionals have substantial discretions and may consider, among other factors, the following:


•	investment strategy and guidelines;


•	portfolio concentrations;


•	tax consequences;


•	regulatory restrictions;


•	liquidity requirements; and


•	financing availability.

We may manage additional investment vehicles in the future and, in connection with the creation of such investment vehicles, may revise these allocation procedures. The result of a revision to the allocation procedures may, among other things, be to increase the number of parties who have the right to participate in investment opportunities sourced by us, increasing the risk of conflicts of interest.

The decision of how any potential investment should be allocated among Ashford Prime, Ashford Trust and any other companies we may advise in the future, in many cases, may be a matter of subjective judgment, which will be made by us.

Appropriately dealing with conflicts of interest is complex and difficult and our reputation could be damaged if we fail, or appear to fail, to deal appropriately with one or more potential or actual conflicts of interest. Litigation in connection with conflicts of interest could have a material adverse effect on our reputation, which could materially adversely affect our business and our ability to attract investors for future vehicles.

Our fiduciary duties as the sole manager of our operating company could create conflicts of interest with our fiduciary duties to our stockholders.

We, as the sole manager of Ashford LLC, our operating company, have fiduciary duties to the other members of Ashford LLC, the discharge of which may conflict with the interests of our stockholders. The operating agreement of Ashford LLC provides that, in the event of a conflict in the fiduciary duties owed by us to our stockholders and, in our capacity as manager of our operating company, to its members, we may act in the best interest of our stockholders without violating our fiduciary duties to the members of Ashford LLC or being liable for any resulting breach of our duties to the members, subject in all cases to the implied contractual covenant of good faith and fair dealing which, pursuant to Delaware law, cannot be waived. In addition, those persons holding Ashford LLC common units will have the right to vote on certain amendments to the operating agreement (which require approval by a majority in interest of the members, including us) and individually to approve certain amendments that would adversely affect their rights. These voting rights may be exercised in a manner that conflicts with the interests of our stockholders. For example, we are unable to modify the rights of Ashford LLC members to receive distributions as set forth in the operating agreement in a manner that adversely affects their rights without their consent, even though such modification might be in the best interest of our stockholders. In addition, conflicts may arise when the interests of our stockholders and the members of our operating company diverge, particularly in circumstances in which there may be an adverse tax consequence to the members.

Our conflicts of interest policy may not adequately address all of the conflicts of interest that may arise with respect to our activities.

In order to minimize any actual or perceived conflicts of interest with our directors, officers or employees, we have adopted a conflicts of interest policy to address specifically some of the conflicts relating to our activities. Although under this policy the approval of a majority of our disinterested directors is required to approve any transaction, agreement or relationship in which any of our directors, officers, or employees, Ashford Trust or Ashford Prime has an interest, there is no assurance that this policy will be adequate to address all of the conflicts that may arise. In addition, the transactions and agreements entered into in connection with our formation prior to the separation and distribution have not been approved by any independent or disinterested persons.

Risks Related to Debt Financing

Although we do not currently have any debt, we may incur debt in the future, which may materially and adversely affect our financial condition and results of operations.

While we currently do not use leverage, our organizational documents do not limit our capacity to use leverage or limit the amount of debt that we may incur. We may, at any time, decide to use leverage to meet future capital needs. We may also, from time to time, use derivative instruments primarily to manage interest rate risk. Future indebtedness will increase our operating costs, particularly in periods of rising interest rates, and we cannot assure you that our hedging strategy and the derivatives that we use will adequately offset the risk of interest rate volatility or that our hedging transactions will not result in losses that may reduce the overall return on your investment.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

Offices

We lease our headquarters located at 14185 Dallas Parkway, Suite 1100, Dallas, Texas 75254.


Item 3.	Legal Proceedings

We are engaged in various legal proceedings which have arisen but have not been fully adjudicated. The likelihood of loss from these legal proceedings, based on definitions within contingency accounting literature, ranges from remote to reasonably possible and to probable. Based on estimates of the range of potential losses associated with these matters, management does not believe the ultimate resolution of these proceedings, either individually or in the aggregate, will have a material adverse effect on our consolidated financial position or results of operations. However, the final results of legal proceedings cannot be predicted with certainty and if we fail to prevail in one or more of these legal matters, and the associated realized losses exceed our current estimates of the range of potential losses, our consolidated financial position or results of operations could be materially adversely affected in future periods.


Item 4.	Mine Safety Disclosures

Not Applicable

PART II


Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities

Market Price and Dividend Information

Our common stock has been listed and traded on the NYSE MKT under the symbol “AINC” since November 13, 2014. Prior to that time, there was no public market for our common stock. On March 20, 2015 , there were 155 holders of record.

The following table sets forth the range of high and low sales prices of our common stock for the period beginning on November 13, 2014, the date our common stock commenced trading on the NYSE, through December 31, 2014:



	High		Low		Close
2014
Fourth quarter (began on November 13, 2014, and ended on December 31, 2014)	$	131.01	$	54.00	$	94.00

Distributions and Our Distribution Policy

No dividends have been declared or paid as of and for the year ended December 31, 2014.

Equity Compensation Plan Information

The following table sets forth certain information with respect to securities authorized and available for issuance under our equity compensation plans:



	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights	Weighted-Average Exercise Price Of Outstanding Options, Warrants, And Rights	Number of Securities Remaining Available for Future Issuance
Equity compensation plans approved by security holders	None	N/A	115,550	⁽¹⁾
Equity compensation plans not approved by security holders	None	N/A	None
Total	None	N/A	115,550

____________________

⁽¹⁾ As of December 31, 2014, 115,550 shares of our common stock, or securities convertible into 115,550 shares of our common stock, remained available for issuance under our 2014 Incentive Plan. The 2014 Incentive Plan contains a provision in which there is an automatic increase of authorized shares on January 1 of each year equal to 15% of the sum of (i) the fully diluted share count and (ii) the shares of common stock reserved for issuance under the Company’s deferred compensation plan, less shares available under the 2014 Incentive Plan as of December 31 of the previous year. After application of this provision, as of January 1, 2015, we have 375,546 shares of our common stock, or securities convertible into 375,546 shares of our common stock available for issuance under our 2014 Incentive Plan.

Performance Graph

The following graph compares the percentage change in the cumulative total stockholder return on our common stock with the cumulative total return of the S&P 500 Stock Index, and the Dow Jones Asset Manager Index for the period from November 13, 2014, the date our stock began trading on the NYSE MKT, through December 31, 2014 , assuming an initial investment of $100 in stock on November 13, 2014, with reinvestment of dividends.

The stock price performance shown below on the graph is not necessarily indicative of future price performance.

COMPARISON OF 7 WEEK CUMULATIVE TOTAL RETURNS

Among Ashford Inc., the S&P 500 and the Dow Jones Asset Manager Index


Item 6.	Selected Financial Data

You should read the following selected financial information in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical balance sheets of Ashford Inc. and our historical financial statements and related notes included in “Item 8. Financial Statements and Supplementary Data”.

The selected financial information is a combination of the historical financial information for Ashford Trust’s asset management business (comprised of Ashford LLC and certain assets, liabilities and operations of Ashford Trust OP), which was separated from Ashford Trust in November 2014. Our asset management business is reflected in the financial statements as if it were operated wholly within an entity separate from Ashford Trust, however there was no separate legal entity during all of the periods presented in such statements.

We have not presented our historical financial information because we had no activity prior to the separation from Ashford Trust on November 12, 2014, other than the issuance to Ashford Trust of 100 shares of common stock in connection with the initial capitalization of our company and activity in connection with our separation from Ashford Trust. Therefore, we do not believe a discussion of our historical results would be meaningful.

The selected historical financial information as of December 31, 2014 and 2013, and for each of the three years in the period ended December 31, 2014, has been derived from the audited financial statements included in “Item 8. Financial Statements and Supplementary Data”. The selected historical financial information as of December 31, 2012, and for the year ended December 31, 2011, has been derived from audited financial statements not included in this Annual Report on Form 10-K. The selected historical financial information as of December 31, 2011 and 2010, and for the year ended December 31, 2010, was derived from unaudited financial statements not included in this Annual Report on Form 10-K.

The selected financial information below and the financial statements included in “Item 8. Financial Statements and Supplementary Data” do not necessarily reflect what our results of operations, financial position and cash flows would have been if we had operated Ashford Trust’s asset management business as a stand-alone publicly traded company during all periods presented, and, accordingly, this historical information should not be relied upon as an indicator of our future performance.



	Year Ended December 31,
	2014			2013			2012			2011			2010
													(Unaudited)
Statement of Operations Data:
Total revenue	$	17,288		$	960		$	—		$	—		$	—
Total expenses	$	63,586		$	48,672		$	38,182		$	32,817		$	25,464
Net loss	$	(47,081	)	$	(47,719	)	$	(38,182	)	$	(32,817	)	$	(25,464	)
Net loss attributable to the Company	$	(46,410	)	$	(47,719	)	$	(38,182	)	$	(32,817	)	$	(25,464	)
Diluted loss per common share	$	(23.43	)	$	(24.09	)	$	(19.27	)	$	(16.57	)	$	(12.85	)
Weighted average diluted common shares	1,981			1,981			1,981			1,981			1,981
Balance Sheet Data:										(Unaudited)			(Unaudited)
Cash	$	29,597		$	600		$	—		$	—		$	—
Total assets	$	49,230		$	2,322		$	640		$	627		$	852
Total liabilities	$	33,912		$	8,081		$	7,055		$	5,861		$	6,595
Total equity (deficit)	$	14,894		$	(5,759	)	$	(6,415	)	$	(5,234	)	$	(5,743	)
Total liabilities and equity/deficit	$	49,230		$	2,322		$	640		$	627		$	852
Other Data:
Cash flows (used in) provided by:
Operating activities	$	(25,074	)	$	(22,445	)	$	(19,728	)	$	(20,823	)
Investing activities	$	(3,471	)	$	(366	)	$	(167	)	$	(115	)
Financing activities	$	57,542		$	23,411		$	19,895		$	20,938


Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand our results of operations and financial condition. This MD&A is provided as a supplement to, and should be read in conjunction with, our audited financial statements and the accompanying notes thereto included in Item 8. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our results and the timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under “Item 1A. Risk Factors” and elsewhere in this Annual Report on Form 10-K. See “Forward-Looking Statements.”

The following is a discussion and analysis of the financial condition and results of operations of our asset management business. Following our separation from Ashford Trust, we have continued the asset management business and operations through our operating subsidiary Ashford LLC. For accounting purposes, the historical consolidated financial statements of the asset management business of Ashford Trust (comprised of Ashford LLC and certain assets, liabilities and operations of Ashford Trust OP) became our historical consolidated financial statements at the separation. We had no operations prior to the separation. The following discussion should be read in conjunction with the financial statements and notes thereto included in “Item 8. Financial Statements and Supplementary Data” and risk factors included in “Risk Factors” of this Annual Report on Form 10-K.

Overview

We were formed as a Delaware corporation in April 2014 and became a public company on November 12, 2014, when Ashford Trust, a NYSE-listed REIT, completed the spin-off of our company through the distribution of our outstanding common stock to the Ashford Trust stockholders. As of March 20, 2015 , Ashford Trust beneficially owned approximately 598,000 shares of our common stock, representing approximately 30% of our company.

Ashford Inc.’s principal business objective is to provide asset management and other advisory services to other entities. Currently, we, through our operating subsidiary Ashford LLC, act as the advisor to Ashford Trust and Ashford Prime. In our capacity as the advisor to Ashford Trust and Ashford Prime, we are responsible for implementing the investment strategies and managing the day-to-day operations of Ashford Trust and Ashford Prime, in each case subject to the supervision and oversight of the respective board of directors of such entity. We provide the personnel and services necessary to allow each of Ashford Trust and Ashford Prime to conduct its respective business. We may also perform similar functions for new or additional platforms. We are not responsible for managing the day-to-day operations of the individual hotel properties owned by either Ashford Trust or Ashford Prime, which duties are, and will continue to be, the responsibility of the property management companies that operate the hotel properties owned by Ashford Trust and Ashford Prime, including Remington.

Recent Developments

On January 29, 2015, Ashford Trust announced that its board of directors had approved the formation of Ashford Hospitality Select, Inc. (“Ashford Select”), a company dedicated to investing primarily in existing premium branded, upscale and upper-midscale, select-service hotels. In connection with the launch of Ashford Select’s new select-service platform, we expect Ashford Select to enter into an advisory agreement (the “Select Advisory Agreement”) with us.

Our entry into a Select Advisory Agreement is contingent upon, among other factors, the negotiation of definitive agreements by Ashford Trust, Ashford Select and us, the availability of acceptable financing for Ashford Select, the receipt of all necessary third-party consents (including lender consents) by Ashford Trust, the completion of Ashford Trust’s contribution of the portfolio to Ashford Select and other customary closing conditions. The final terms of the Select Advisory Agreement, as authorized by our board of directors, will govern the advisory relationship between us and Ashford Select, and such terms have not yet been finalized.

Discussion of Presentation

The discussion below relates to the financial condition and results of operations of Ashford Inc. For periods prior to spin-off, the combined historical financial statements have been prepared on a “carve out” basis from Ashford Trust’s consolidated financial statements using the historical results of operations, cash flows, assets and liabilities and include allocations of income, expenses, assets and liabilities from Ashford Trust. These allocations reflect significant assumptions, and the financial statements do not fully reflect what our financial position, results of operations and cash flows would have been had the asset management business of Ashford Trust been operated exclusively within a stand-alone company during the periods presented. As a result, historical financial information is not necessarily indicative of our future results of operations, financial position and cash flows.

For purposes of our “carve out” presentation, general and administrative expense represents an allocation of certain Ashford Trust corporate general and administrative costs including salaries and benefits, equity-based compensation, legal and professional fees, rent expense, insurance expense, office expenses and other miscellaneous expenses either based upon specific identification or an allocation method determined by management to reflect the portion of the expenses related to the asset management business. In the opinion of management, such allocations were considered reasonable.

Results of Operations

Year Ended December 31, 2014 Compared to Year Ended December 31, 2013

The following table summarizes the changes in key line items from our statements of operations for the years ended December 31, 2014 and 2013 (in thousands):



	Year Ended December 31,
	2014			2013			$ Change			% Change
Revenue
Advisory services	$	17,144		$	960		$	16,184		1,685.8	%
Other	144			—			144
Total revenue	17,288			960			16,328			1,700.8	%
Expenses
Salaries and benefits	57,627			46,181			11,446			24.8	%
Depreciation	359			220			139			63.2	%
General and administrative	5,600			2,271			3,329			146.6	%
Total expenses	63,586			48,672			14,914			30.6	%
Loss before income taxes	(46,298		)	(47,712		)	(1,414		)	(3.0	)%
Income tax expense	(783		)	(7		)	776			11,085.7	%
Net loss	$	(47,081	)	$	(47,719	)	$	(638	)	(1.3	)%
Loss from consolidated entities attributable to noncontrolling interests	647			—			647
Net loss attributable to redeemable noncontrolling interests in Ashford LLC	24			—			24
Net income (loss) attributable to the Company	(46,410		)	(47,719		)	1,309			(2.7	)%

Advisory Services Revenue . Advisory services revenue in creased $16.2 million , from $960,000 for the year ended December 31, 2013 (“ 2013 ”), to $17.1 million for the year ended December 31, 2014 (“ 2014 ”). During 2014 , advisory services revenue was comprised of a base advisory fee of $12.7 million , reimbursable overhead and internal audit, insurance claims advisory and asset management services of $2.3 million and equity-based compensation of $2.1 million associated with equity grants of Ashford Prime’s common stock and LTIP units awarded to our officers and employees. We recorded an offsetting expense in an equal amount included in “salaries and benefits.” Ashford Prime did not grant any equity awards to our officers and employees in 2013. During 2013 , advisory services revenue was comprised of a base advisory fee of $878,000 , reimbursable overhead and internal audit reimbursements of $82,000 . No incentive management fee was earned for 2014 or 2013 in connection with our advisory agreements with Ashford Prime or Ashford Trust. For 2013, our advisory services revenue only included revenues from our advisory agreement with Ashford Prime, which began on November 19, 2013, upon its spin-off from Ashford Trust. Our 2014 advisory services revenue represented a full year of revenue from Ashford Prime. Additionally, upon our spin-off, we entered into an advisory agreement with Ashford Trust. As a result, we recognized advisory services revenue from Ashford Trust from November 13, 2014, through December 31, 2014.

Other Revenue . Other revenue represents $144,000 of other non-advisory expense reimbursements from Ashford Trust from November 13, 2014, through December 31, 2014. There was no other revenue for the year ended December 31, 2013.

Salaries and Benefits Expense . Salaries and benefits expense in creased $11.4 million , or 24.8% , to $57.6 million in 2014 . During 2014 , salaries and benefits expense included $25.8 million of cash salaries and benefits, $23.4 million of non-cash equity-based compensation and an $8.5 million non-cash expense associated with our deferred compensation plan (“DCP”). In connection with our spin-off, we assumed the DCP obligation, which was modified to give the participants various investment options including Ashford Inc. common stock for measurement, which options can be changed by the participant at any time. These modifications resulted in the DCP obligation being recorded as a liability in accordance with the applicable authoritative accounting guidance. Additionally, the DCP obligation is carried at fair value with changes in fair value reflected in earnings. Non-cash equity-based compensation consisted of $21.0 million associated with Ashford Trust equity grants, $212,000 in connection with stock option grants and $2.1 million associated with equity grants of Ashford Prime’s common stock and LTIP units awarded to our officers and employees, in which we record offsetting revenue in an equal amount. During 2013 , the $46.2 million of salaries and benefits expense included $21.2 million of cash salaries and benefits, $20.7 million of non-cash equity-based compensation and $4.3 million of non-cash deferred compensation resulting from modifications to the DCP in connection with the Ashford Prime spin-off from Ashford Trust in which plan participants were granted additional shares of Ashford Trust common stock. The in crease in cash salaries and benefits was attributable to higher salary expense of approximately $3.0 million, bonus expense of approximately $720,000 and payroll tax burden of $851,000.

Depreciation Expense . Depreciation expense in creased $139,000 , or 63.2% , to $359,000 for the year ended December 31, 2014 , as a result of furniture, fixtures and equipment additions in 2014 .

General and Administrative Expense . General and administrative expenses in creased $3.3 million , or 146.6% , to $5.6 million as a result of higher office expense of $719,000, other accounting expense of $740,000, professional fees of $845,000, director costs of $232,000, travel and other expense of $234,000, stock-based compensation for stock grants to our independent directors, which vested immediately of $250,000 and dues and subscriptions of $302,000.

Income Tax Expense . Income tax expense in creased $776,000 , from $7,000 for 2013 to $783,000 , for 2014 . The in crease in tax expense is primarily due to the provision for federal income taxes for the period after our spin-off from Ashford Trust, November 13, 2014, through December 31, 2014.

Loss from Consolidated Entities Attributable to Noncontrolling Interests . The noncontrolling interests in consolidated entities were allocated a loss of $647,000 in 2014 . At December 31, 2014, noncontrolling interests in consolidated entities represented ownership interests of 40% to 100% in two entities with a total carrying value of $(87,000) .

Net Loss Attributable to Redeemable Noncontrolling Interests in Ashford LLC. Noncontrolling interests in Ashford LLC were allocated net loss of $24,000 in 2014 , for its share of net loss from November 13, 2014, through December 31, 2014, the period subsequent to the spin-off. Redeemable noncontrolling interests represented ownership interests of 0.2% in Ashford LLC at December 31, 2014 .

Year Ended December 31, 2013 Compared to Year Ended December 31, 2012

The following table summarizes the changes in key line items from our statements of operations for the years ended December 31, 2013 and 2012 (in thousands):



	Year Ended December 31,
	2013			2012			$ Change			% Change
Revenue
Advisory services	$	960		$	—		$	960
Total revenue	960			—			960
Expenses
Salaries and benefits	46,181			35,891			10,290			28.7	%
Depreciation	220			216			4			1.9	%
General and administrative	2,271			2,075			196			9.4	%
Total expenses	48,672			38,182			10,490			27.5	%
Loss before income taxes	(47,712		)	(38,182		)	(9,530		)	25.0	%
Income tax expense	(7		)	—			(7		)
Net loss	$	(47,719	)	$	(38,182	)	$	(9,537	)	25.0	%

Advisory Services Revenue . We earned advisory services revenue of $960,000 from Ashford Prime for the year ended December 31, 2013, as a result of entering into an advisory agreement with Ashford Prime on November 19, 2013, in connection with its spin-off from Ashford Trust. Advisory services revenue was comprised of a base advisory fee of $878,000, reimbursable overhead and internal audit reimbursements of $82,000. No incentive management fee was earned for 2013 in connection with our advisory agreement with Ashford Prime. There was no advisory services revenue from Ashford Prime during the year ended December 31, 2012.

Salaries and Benefits Expense . For the year ended December 31, 2013, the $46.2 million of salaries and benefits expense included $21.2 million of cash salaries and benefits, $20.7 million of non-cash equity-based compensation and $4.3 million of non-cash deferred compensation. For the year ended December 31, 2012, the $35.9 million of salaries and benefits expense included $18.8 million of cash salaries and benefits, $16.7 million of non-cash equity-based compensation and $373,000 of non-cash deferred compensation. Salaries and benefits expense increased $10.3 million, or 28.7%, to $46.2 million for the year ended December 31, 2013. The increase was primarily attributable to higher non-cash equity-based compensation of $4.0 million due to additional expense associated with accelerated equity vestings of Ashford Trust’s chairman emeritus as a result of his retirement and $4.3 million as a result of modifications to the deferred compensation plan in connection with the Ashford Prime spin-off from Ashford Trust in which plan participants were granted additional shares of Ashford Trust common stock, offset by lower non-cash deferred compensation of $344,000. Additionally, we experienced higher salary expense of approximately $1.7 million, bonus expense of approximately $373,000 and payroll tax burden of $273,000.

Depreciation Expense . Depreciation expense increased $4,000, or 1.9%, to $220,000 for the year ended December 31, 2013, as a result of furniture, fixtures and equipment additions in 2013.

General and Administrative Expense . General and administrative expenses increased $196,000, or 9.4%, to $2.3 million as a result of higher travel and other expenses of $311,000 and higher non-employee stock-based compensation of $9,000 for certain employees of one of our affiliates, partially offset by lower office expenses of $124,000.

Income Tax Expense . We recorded income tax expense of $7,000 for the year ended December 31, 2013, for Texas margin tax. There was no income tax expense for the year ended December 31, 2012.

Liquidity and Capital Resources

Our short-term liquidity requirements consist primarily of funds necessary for operating expenses primarily attributable to paying our employees.

We expect to meet our short-term liquidity requirements generally through net cash provided by operations, existing cash balances and, if necessary, short-term borrowings under a possible revolving credit facility.

Our long-term liquidity requirements consist primarily of funds necessary to pay for operating expenses primarily attributable to paying our employees and investments to grow our business. We expect to meet our long-term liquidity requirements through various sources of capital, including net cash provided by operations and a possible revolving credit facility.

Sources and Uses of Cash

As of December 31, 2014 , and December 31, 2013 , we had $29.6 million and $600,000 of cash, respectively.

We anticipate that our principal sources of funds to meet our cash requirements will include cash on hand (including approximately $32.0 million that we received from Ashford Trust OP in connection with our separation from Ashford Trust) and positive cash flow from operations. We anticipate using funds necessary for operating expenses primarily attributable to paying our employees.

Net Cash Flows Used in Operating Activities . Net cash flows used in operating activities were $25.1 million and $22.4 million for the years ended December 31, 2014 and 2013 , respectively. The increase in cash flows used in operating activities was primarily due to the timing of receipt of advisory fees from Ashford Trust and Ashford Prime. Cash flows from operations are also impacted by the timing of paying vendors.

Net Cash Flows Used in Investing Activities . For the years ended December 31, 2014 and 2013 , investing activities used net cash flows of $3.5 million and $366,000 , respectively. These cash outlays were attributable to purchases of computer software, furniture, fixtures and equipment.

Net Cash Flows Provided by Financing Activities . For the year ended December 31, 2014 , net cash flows provided by financing activities was $57.5 million . These cash inflows consisted of cash contributions from Ashford Trust to fund operations of $56.6 million and proceeds of $1.2 million from the sale of a noncontrolling interest in a consolidated entity slightly offset by advances to employees of $211,000 . For the year ended December 31, 2013 , net cash flows provided by financing activities was $23.4 million , which consisted of cash contributions from Ashford Trust to fund operations.

Off-Balance Sheet Arrangements

During 2014 , we did not maintain any off-balance sheet arrangements and do not currently anticipate entering into any such arrangements.

Contractual Obligations and Commitments

The table below summarizes future obligations for our deferred compensation plan as of December 31, 2014 (in thousands):



	Payments Due by Period
	< 1 Year		1-3 Years		3-5 Years		>5 Years		Total
Contractual obligations:
Deferred compensation plan ⁽¹⁾	$	175	$	7,668	$	7,982	$	4,130	$	19,955
Total contractual obligations	$	175	$	7,668	$	7,982	$	4,130	$	19,955

__________

⁽¹⁾ Distributions under the deferred compensation plan are made in cash, unless the participant has elected Ashford Inc. common stock as the investment option, in which any such distributions would be made in Ashford Inc. common stock. The deferred compensation plan obligation is carried at fair value based on the underlying investment(s).

As of December 31, 2014 , we had no long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or other long-term liabilities reflected on our balance sheet.

Critical Accounting Policies

Our accounting policies are fully described in Note 2 of Notes to Financial Statements included in “Item 8. Financial Statements and Supplementary Data.” We believe that the following discussion addresses our most critical accounting policies, representing those policies considered most vital to the portrayal of our financial condition and results of operations and requiring management’s most difficult, subjective, and complex judgments.

Revenue Recognition . Revenues primarily consist of advisory fees and expense reimbursements that are recognized when services have been rendered. Advisory fees consist of base management fees and incentive fees. Base management fees are earned at a fixed percentage of total market capitalization. Base management fees are recognized based on the contractual terms specified in the underlying advisory agreements. Reimbursement for overhead and internal audit, insurance claims advisory and asset management services, including compensation, benefits and travel expense reimbursements are recognized when services have been rendered. We also record advisory revenue for equity grants of Ashford Prime and Ashford Trust common stock and LTIP units awarded to our officers and employees in connection with providing advisory services equal to the fair value of the award in proportion to the requisite service period satisfied during the period, as well an offsetting expense in an equal amount included in “salaries and benefits.” The incentive fee is earned annually in each year that Ashford Prime’s and/or Ashford Trust’s total stockholder return exceeds the total stockholder return for each company’s respective peer group, subject to the FCCR condition, as defined in the advisory agreements.

Income Taxes . We are a taxable corporation for federal and state income tax purposes. Income tax expense includes U.S. federal and state income taxes. In accordance with authoritative accounting guidance, we account for income taxes using the asset and liability method under which deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized. At December 31, 2014, we recorded a valuation allowance of $7.5 million to fully reserve our deferred tax asset. As a result of uncertainties regarding the future realization of deductible temporary differences, we believe that it is more likely than not our deferred tax assets will not be realized, and therefore, have provided a valuation allowance to reserve against the balance. The analysis utilized by us in determining our deferred tax asset valuation allowance involves considerable management judgment and assumptions.

The “Income Taxes” topic of the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification addresses the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The guidance requires us to determine whether tax positions we have taken or expect to take in a tax return are more likely than not to be sustained upon examination by the appropriate taxing authority based on the technical merits of the positions. Tax positions that do not meet the more likely than not threshold would be recorded as additional tax expense in the current period. We analyze all open tax years, as defined by the statute of limitations for each jurisdiction, which includes the federal jurisdiction and various states. We classify interest and penalties related to underpayment of income taxes as income tax expense. We and our subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and cities. Tax years 2013 through 2014 remain subject to potential examination by certain federal and state taxing authorities.

Depreciation Expense . Our furniture, fixtures and equipment and computer software are depreciated over the estimated useful lives of the assets. Leasehold improvements are depreciated over the shorter of the lease term or the estimated useful life of the related assets. Presently, our furniture and equipment are depreciated using the straight-line method over a five year life, and computer software placed into service is amortized on a straight-line basis over estimated useful lives ranging from three to five years. As of December 31, 2014, no computer software has been placed into service and no amortization has been taken related to those assets. While we believe our estimates are reasonable, a change in estimated useful lives could affect depreciation expense and net loss as well as resulting gains or losses on potential sales.

Equity-Based Compensation . We adopted an equity incentive plan that provides for the grant of restricted or unrestricted shares of our common stock, options to purchase our common stock and other share awards, share appreciation rights, performance shares, performance units and other equity-based awards or any combination of the foregoing. Equity-based compensation will be recognized as an expense in the financial statements over the vesting period and measured at the fair value of the award on the date of grant. The amount of the expense may be subject to adjustment in future periods depending on the specific characteristics of the equity-based award and the application of the accounting guidance. Additionally, our officers and employees can be granted common stock and LTIP units from Ashford Trust and Ashford Prime in connection with providing advisory services that results in expense equal to the fair value of the award in proportion to the requisite service period satisfied during the period, as well as offsetting revenue in an equal amount included in “advisory services fee.”

Recently Issued Accounting Standards

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 is a comprehensive new revenue recognition model, which requires a company to recognize revenue to depict the transfer of promised goods or services to a customer in an amount that reflects the consideration the company expects to receive in exchange for those goods or services. The update will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. ASU 2014-09 is effective in fiscal periods beginning after December 15, 2016. Early adoption is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. We are evaluating the effect that ASU 2014-09 will have on our consolidated financial statements and related disclosures. We have not yet selected a transition method.

In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”), to provide guidance on management's responsibility to perform interim and annual assessments of an entity’s ability to continue as a going concern and to provide related disclosure requirements. ASU 2014-15 applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. We do not expect the adoption of this standard will have an impact on our financial position, results of operations or cash flows.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We currently do not hold any financial instruments that subject us to market risk.


Item 8.	Financial Statements and Supplementary Data

Index to Financial Statements



Report of Independent Registered Public Accounting Firm	36

Balance Sheets — December 31, 2014 and 2013	37

Statements of Operations and Comprehensive Loss — Years Ended December 31, 2014, 2013 and 2012	38

Statements of Equity (Deficit) — Years Ended December 31, 2014, 2013 and 2012	39

Statements of Cash Flows — Years Ended December 31, 2014, 2013 and 2012	40

Notes to Financial Statements	41

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of

Ashford Inc. and subsidiaries

We have audited the accompanying balance sheets of Ashford Inc. and subsidiaries (the Company) as of December 31, 2014 and 2013, and the related statements of operations and comprehensive loss, equity (deficit) and cash flows for each of the three years in the period ended December 31, 2014. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Ashford Inc. and subsidiaries at December 31, 2014 and 2013, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2014, in conformity with U.S. generally accepted accounting principles.



	/s/ Ernst & Young LLP

Dallas, Texas
March 24, 2015

ASHFORD INC. AND SUBSIDIARIES

BALANCE SHEETS

(in thousands, except share and per share amounts)



	December 31,
	2014			2013
Assets
Current assets:
Cash and cash equivalents	$	29,597		$	600
Restricted cash	3,337			—
Prepaid expenses and other	1,360			216
Due from Ashford Trust OP, net	8,202			—
Due from Ashford Prime OP	2,546			960
Total current assets	45,042			1,776
Furniture, fixtures and equipment, net	4,188			546
Total assets	$	49,230		$	2,322
Liabilities and Equity (Deficit)
Current liabilities:
Accounts payable and accrued expenses	$	9,307		$	7,828
Due to affiliate	1,313			232
Deferred compensation plan	175			—
Other liabilities	3,337			—
Total current liabilities	14,132			8,060
Deferred income	—			21
Deferred compensation plan	19,780			—
Total liabilities	33,912			8,081
Commitments and contingencies (Note 6)
Redeemable noncontrolling interests in Ashford LLC	424			—
Equity (deficit):
Preferred stock, $0.01 par value, 50,000,000 shares authorized—
Series A cumulative preferred stock, no shares issued and outstanding at December 31, 2014 and 2013	—			—
Common stock, $0.01 par value, 100,000,000 shares authorized, 1,986,851 and no shares issued and outstanding at December 31, 2014 and 2013, respectively	20			—
Additional paid-in capital	228,003			162,360
Accumulated deficit	(213,042		)	(168,119		)
Total stockholders’ equity (deficit) of the Company	14,981			(5,759		)
Noncontrolling interests in consolidated entities	(87		)	—
Total equity (deficit)	14,894			(5,759		)
Total liabilities and equity/deficit	$	49,230		$	2,322

See Notes to Financial Statements.

ASHFORD INC. AND SUBSIDIARIES

STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

(in thousands, except per share amounts)



	Year Ended December 31,
	2014			2013			2012
Revenue
Advisory services	$	17,144		$	960		$	—
Other	144			—			—
Total revenue	17,288			960			—
Expenses
Salaries and benefits	57,627			46,181			35,891
Depreciation	359			220			216
General and administrative	5,600			2,271			2,075
Total expenses	63,586			48,672			38,182
Loss before income taxes	(46,298		)	(47,712		)	(38,182		)
Income tax expense	(783		)	(7		)	—
Net loss	(47,081		)	(47,719		)	(38,182		)
Loss from consolidated entities attributable to noncontrolling interests	647			—			—
Net loss attributable to redeemable noncontrolling interests in Ashford LLC	24			—			—
Net loss attributable to the Company	$	(46,410	)	$	(47,719	)	$	(38,182	)
Comprehensive loss attributable to the Company	$	(46,410	)	$	(47,719	)	$	(38,182	)
Loss per share – basic and diluted:
Loss attributable to common stockholders	$	(23.43	)	$	(24.09	)	$	(19.27	)
Weighted average common shares outstanding – basic and diluted	1,981			1,981			1,981

See Notes to Financial Statements.

ASHFORD INC. AND SUBSIDIARIES

STATEMENTS OF EQUITY (DEFICIT)

(in thousands)



	Common Stock			Additional Paid-in Capital			Accumulated Deficit			Noncontrolling Interests in Consolidated Entities			Total			Redeemable Noncontrolling Interests in Ashford LLC
	Shares	Amounts		Additional Paid-in Capital			Accumulated Deficit			Noncontrolling Interests in Consolidated Entities			Total			Redeemable Noncontrolling Interests in Ashford LLC
Balance at January 1, 2012	—	$	—	$	76,036		$	(81,270	)	$	—		$	(5,234	)	$	—
Dividends associated with deferred compensation plan	—	—		—			(411		)	—			(411		)	—
Capital contributions	—	—		37,412			—			—			37,412			—
Net loss	—	—		—			(38,182		)	—			(38,182		)	—
Balance at December 31, 2012	—	$	—	$	113,448		$	(119,863	)	$	—		$	(6,415	)	$	—
Dividends associated with deferred compensation plan	—	—		—			(537		)	—			(537		)	—
Capital contributions	—	—		48,912			—			—			48,912			—
Net loss	—	—		—			(47,719		)	—			(47,719		)	—
Balance at December 31, 2013	—	$	—	$	162,360		$	(168,119	)	$	—		$	(5,759	)	$	—
Equity-based compensation	—	—		462			2,423			—			2,885			—
Issuance of common stock	1,987	20		(20		)	—			—			—			—
Dividends associated with deferred compensation plan	—	—		—			(567		)	—			(567		)	—
Reclass redeemable noncontrolling interests in Ashford LLC	—	—		(79		)	—			—			(79		)	79
Reclass deferred compensation plan to liability	—	—		(11,460		)	—			—			(11,460		)	—
Employee advances	—	—		(211		)	—			—			(211		)	—
Sale of consolidated noncontrolling interest	—	—		640			—			560			1,200			—
Capital contributions	—	—		76,311			—			—			76,311			—
Redemption value adjustment	—	—		—			(369		)	—			(369		)	369
Net loss	—	—		—			(46,410		)	(647		)	(47,057		)	(24		)
Balance at December 31, 2014	1,987	$	20	$	228,003		$	(213,042	)	$	(87	)	$	14,894		$	424

See Notes to Financial Statements.

ASHFORD INC. AND SUBSIDIARIES

STATEMENTS OF CASH FLOWS

(in thousands)



	Year Ended December 31,
	2014			2013			2012
Cash Flows from Operating Activities
Net loss	$	(47,081	)	$	(47,719	)	$	(38,182	)
Adjustments to reconcile net loss to net cash flows used in operating activities:
Depreciation	359			220			216
Straight-line rent amortization	(21		)	(62		)	(62		)
Non-cash deferred compensation expense	8,495			—			—
Equity-based compensation	21,505			25,037			17,125
Changes in operating assets and liabilities—
Restricted cash	(3,337		)	—			—
Prepaid expenses and other	(497		)	24			(62		)
Due from Ashford Trust OP, net	(8,849		)	—			—
Due from Ashford Prime OP	(1,586		)	(960		)	—
Accounts payable and accrued expenses	1,934			963			1,181
Due to affiliate	667			52			56
Other liabilities	3,337			—			—
Net cash used in operating activities	(25,074		)	(22,445		)	(19,728		)
Cash Flows from Investing Activities
Additions to furniture, fixtures and equipment	(3,471		)	(366		)	(167		)
Net cash used in investing activities	(3,471		)	(366		)	(167		)
Cash Flows from Financing Activities
Proceeds from sale of consolidated noncontrolling interest	1,200			—			—
Employee advances	(211		)	—			—
Contributions from owner	56,553			23,411			19,895
Net cash provided by financing activities	57,542			23,411			19,895
Net change in cash	28,997			600			—
Cash at beginning of year	600			—			—
Cash at end of year	$	29,597		$	600		$	—
Supplemental Cash Flow Information
Interest paid	$	—		$	—		$	—
Income taxes paid	215			—			—
Supplemental Disclosure of Non Cash Investing and Financing Activities
Non-cash contributions associated with non-cash compensation	$	18,620		$	25,037		$	17,125
Non-cash dividends associated with deferred compensation plan	567			537			411
Non-cash contributions associated with deferred compensation plan	747			464			392
Non-cash dividends declared but not paid	—			180			107
Capital expenditures accrued but not paid	530			—			—

See Notes to Financial Statements.

ASHFORD INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

1. Organization and Description of Business

Ashford Hospitality Trust, Inc. (“Ashford Trust”) is a real estate investment trust (“REIT”) as defined in the Internal Revenue Code (“Code”) and was formed in Maryland in May 2003. Ashford Trust commenced operations in August 2003 and has been focused on investing in the hospitality industry across all segments and in all methods including direct real estate, equity and debt. Ashford Trust owns its lodging investments and conducts its business through the majority-owned Ashford Hospitality Limited Partnership (“Ashford Trust OP”), an operating partnership that was formed in Delaware in May 2003.

On February 27, 2014, Ashford Trust announced that its Board of Directors unanimously approved a plan to spin-off its asset management business into a separate publicly traded company in the form of a taxable special distribution. The distribution was comprised of common stock in Ashford Inc., a Delaware corporation formed on April 2, 2014, and common units of Ashford Hospitality Advisors LLC (“Ashford LLC”), a Delaware limited liability company formed on April 5, 2013. Ashford LLC had no operations until November 19, 2013, the date of the Ashford Hospitality Prime, Inc. (“Ashford Prime”) spin-off. Ashford Prime is an NYSE-listed REIT that invests primarily in high revenue per available room luxury, upper-upscale and upscale hotels and resorts, predominantly located in gateway markets. Ashford Prime became a publicly traded entity in November 2013 upon the completion of its spin-off from Ashford Trust. As part of the Ashford Inc. spin-off from Ashford Trust, Ashford LLC became a subsidiary of Ashford Inc. on November 12, 2014. Ashford Inc. provides advisory services to Ashford Trust and Ashford Prime and conducts its business and owns substantially all of its assets through Ashford LLC.

The spin-off was completed on November 12, 2014, with a pro rata taxable distribution of Ashford Inc.’s common stock to Ashford Trust stockholders of record as of November 11, 2014. The distribution was comprised of one share of Ashford Inc. common stock for every 87 shares of Ashford Trust common stock held by its stockholders. In addition, for each common unit of Ashford Trust OP, the holder received one common unit of Ashford LLC. Each holder of common units of Ashford LLC could exchange up to 99% of those units for shares of Ashford Inc. stock at the rate of one share of Ashford Inc. common stock for every 55 common units. Immediately following the completion of the exchange offer, Ashford LLC effected a reverse split of its common units such that each common unit was automatically converted into 1/55 of a common unit. The distribution was completed on October 7, 2014, and the exchange and reverse split were completed on November 12, 2014. Following the spin-off, Ashford Trust continues to hold approximately 598,000 shares of Ashford Inc. common stock for the benefit of its common stockholders, which represented an approximate 30% ownership interest in Ashford Inc. at the time of the spin-off. In connection with the spin-off, we entered into a 20-year advisory agreement with Ashford Trust. Ashford Inc. is listed on the NYSE MKT Exchange.

Ashford Investment Management, LLC (“AIM”), is an indirect subsidiary, which was established, as an investment adviser to any private securities funds sponsored by us or our affiliates (the “Funds”). AIM became a registered investment adviser with the Securities and Exchange Commission on January 5, 2015. AIM REHE Funds GP, LP (“AIM GP”), or an affiliate of AIM GP, serves as the general partner of any Funds. AIM Management Holdco, LLC (“Management Holdco”) owns 100% of AIM. We, through Ashford LLC, own approximately 60% of Management Holdco, and Mr. Monty J. Bennett, our chief executive officer and chairman of our board of directors, and Mr. J. Robison Hays, III, our chief strategy officer and a member of our board of directors, own, in the aggregate, 40% of Management Holdco. AIM Performance Holdco, LP (“Performance Holdco”) owns 99.99% of AIM GP with the remaining 0.01% general partner interest owned by our wholly owned subsidiary, AIM General Partner, LLC . We, through Ashford LLC and our 100% ownership interest in AIM General Partner, LLC, own approximately 60% of Performance Holdco, and Mr. Monty J. Bennett and Mr. J. Robison Hays, III own, in the aggregate, 40% of Performance Holdco. AIM currently serves as investment adviser to AIM Real Estate Hedged Equity (U.S.) Fund, LP, AIM Real Estate Hedged Equity (Cayman) Fund, Ltd. and AIM Real Estate Hedged Equity Master Fund, LP (collectively the “REHE Fund”), a master-feeder private fund focused on investing in the securities of companies in the real estate, hospitality and leisure industries. AIM also serves as the investment adviser to Ashford Trust and Ashford Prime. As of December 31, 2014, the REHE Fund had no investments.

The accompanying financial statements reflect the operations of the asset management business of Ashford Trust that provided asset management, accounting and legal services to Ashford Trust and Ashford Prime. In this report, the terms the “Company,” “we,” “us” or “our” refers to Ashford Inc. and all entities included in its financial statements.

2. Significant Accounting Policies

Basis of Presentation and Principles of Consolidation and Combination —The accompanying consolidated financial statements, subsequent to our spin-off include the accounts of Ashford Inc., its majority-owned subsidiaries and entities which it controls. All significant inter-company accounts and transactions between these entities have been eliminated in these historical consolidated financial statements.

ASHFORD INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

(Continued)

For periods prior to the spin-off, the accompanying historical financial statements of Ashford Inc. have been “carved out” of Ashford Trust’s consolidated financial statements and reflect significant assumptions and allocations. These financial statements were prepared by combining the financial position and results of operations of Ashford LLC and certain assets, liabilities and operations of Ashford Trust OP (both Ashford LLC and Ashford Trust OP were under common control) related to certain activities that were historically accounted for by Ashford Trust. These activities include asset management, accounting and legal services to Ashford Trust and Ashford Prime. In addition, the combined statements of operations and comprehensive loss include allocations of general and administrative expenses from Ashford Trust, which in the opinion of management, are reasonable. All significant inter-company accounts and transactions between combined entities were eliminated. The historical financial information is not necessarily indicative of the Company’s future results of operations, financial position and cash flows.

Since the Company was a consolidated subsidiary of Ashford Trust and there was no advisory agreement between Ashford Trust and the Company, the accompanying statements of operations and comprehensive loss do not report revenue associated with its management and advisory services provided to Ashford Trust for the historical periods presented prior to the spin-off. It does include revenue associated with the advisory services provided to Ashford Prime upon its spin-off from Ashford Trust on November 19, 2013. Therefore, 2014 only reflects revenue associated with the management of Ashford Trust for 49 days and 2013 only reflects revenue associated with the management of Ashford Prime for 43 days.

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

Cash and Cash Equivalents —Cash and cash equivalents include cash on hand or held in banks and short-term investments with an initial maturity of three months or less at the date of purchase.

Restricted Cash —Restricted cash represents reserves for casualty insurance claims and the associated ancillary costs. At the beginning of each year, Ashford’s Risk Management department collects funds, from the Ashford Trust/Prime properties and their respective management companies, of an amount equal to the actuarial forecast of that year’s expected casualty claims and associated fees. These funds are deposited into restricted cash and used to pay casualty claims throughout the year as they are incurred. The offset to restricted cash amounts is included in other liabilities. For purposes of the statements of cash flows, changes in restricted cash caused by using such funds are shown as operating activities.

Noncontrolling Interests —The redeemable noncontrolling interests in Ashford LLC represent the members’ proportionate share of equity in earnings/losses of Ashford LLC, which is an allocation of net income/loss attributable to the common unit holders based on the weighted average ownership percentage of these members’ common unit holdings throughout the period. The redeemable noncontrolling interests in Ashford LLC is classified in the mezzanine section of the balance sheet as these redeemable operating units do not meet the requirements for equity classification prescribed by the authoritative accounting guidance because the redemption feature requires the delivery of cash or registered shares at our option. The carrying value of the noncontrolling interests in Ashford LLC is based on the greater of the accumulated historical cost or the redemption value.

The noncontrolling interests in consolidated entities represents noncontrolling ownership interests of 40% and 100% in two entities at December 31, 2014.

We hold a variable interest, in the form of a note receivable, in the aforementioned entity above in which the noncontrolling interest holder has a 100% interest. Variable Interest Entities (“VIE”), as defined by authoritative accounting guidance, must be consolidated by a reporting entity if the reporting entity is the primary beneficiary because it has (i) the power to direct the VIE’s activities that most significantly impact the VIE’s economic performance, (ii) an implicit financial responsibility to ensure that a VIE operates as designed, and (iii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE. As we meet the conditions above, we are considered the primary beneficiary of the entity and therefore we consolidate it. As of December 31, 2014, the note receivable had an outstanding balance of $420,000, which is eliminated in consolidation.

ASHFORD INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

(Continued)

Revenue Recognition —Revenues primarily consist of advisory fees and expense reimbursements that are recognized when services have been rendered. Advisory fees consist of base management fees and incentive fees. The quarterly base fee is equal to 0.70% per annum of the total market capitalization of Ashford Prime and Ashford Trust, as defined in the advisory agreements, subject to certain minimums. Reimbursements for overhead, travel expenses, risk management and internal audit services are recognized when services have been rendered. We also record advisory revenue for equity grants of Ashford Prime and Ashford Trust common stock and LTIP units awarded to our officers and employees in connection with providing advisory services equal to the fair value of the award in proportion to the requisite service period satisfied during the period, as well an offsetting expense in an equal amount included in “salaries and benefits.” The incentive fee is earned annually in each year that Ashford Prime’s and/or Ashford Trust’s total stockholder return exceeds the total stockholder return for each company’s respective peer group, subject to the FCCR condition, as defined in the advisory agreements.

Salaries and Benefits —Salaries and benefits are expensed as incurred. Prior to the spin-off, salaries and benefits included an allocation of 100% of salaries and benefits of the employees of Ashford Trust and an allocation of 100% of employee equity-based compensation from Ashford Trust. All such expenses were allocated to Ashford Inc. because these expenses have historically been incurred by the asset management business of Ashford Trust. In the opinion of management, such allocations were considered reasonable. Salaries and benefits also includes expense for equity grants of Ashford Prime common stock and LTIP units awarded to our officers and employees in connection with providing advisory services equal to the fair value of the award in proportion to the requisite service period satisfied during the period. There is an offsetting amount, included in “advisory services” revenue.

General and Administrative Expense —General and administrative costs are expensed as incurred. Prior to the spin-off, general and administrative expense represents an allocation of certain Ashford Trust OP corporate general and administrative costs including rent expense, insurance expense, office expenses and other miscellaneous expenses either based upon specific identification or an allocation method determined by management to reflect the portion of the expenses related to Ashford Inc. With the exception of audit fees, these costs were allocated 100% to Ashford Inc. as management believes these costs were directly incurred by Ashford Trust in connection with its asset management business and will be ongoing costs of Ashford Inc. Audit fees were allocated based on management’s estimate of the audit costs incurred to audit the activities of Ashford Trust’s asset management business. In the opinion of management, such allocations were considered reasonable.

Depreciation —Our furniture, fixtures and equipment and computer software are depreciated over the estimated useful lives of the assets. Leasehold improvements are depreciated over the shorter of the lease term or the estimated useful life of the related assets. Presently, our furniture and equipment are depreciated using the straight-line method over a five year life and computer software placed into service is amortized on a straight-line basis over estimated useful lives ranging from three to five years. While we believe our estimates are reasonable, a change in estimated useful lives could affect depreciation expense and net loss as well as resulting gains or losses on potential sales.

Advertising Costs —Advertising costs are charged to expense as incurred. For 2014, we incurred advertising costs of $58,000. No advertising costs were incurred for 2013 and 2012. Advertising costs are included in “General and administrative expense” in the accompanying statements of operations and comprehensive loss.

Equity-Based Compensation —Equity-based compensation included in salaries and benefits is accounted for at fair value based on the market price of the shares/options on the date of grant in accordance with applicable authoritative accounting guidance. The fair value is charged to compensation expense on a straight-line basis over the vesting period of the shares/options. Grants of restricted stock to independent directors are recorded at fair value based on the market price of our shares at grant date and this amount is fully expensed in “general and administrative” expense as the grants of stock are fully vested on the date of grant. Our officers and employees can be granted common stock and LTIP units from Ashford Trust and Ashford Prime in connection with providing advisory services that results in expense, included in “salaries and benefits,” equal to the fair value of the award in proportion to the requisite service period satisfied during the period, as well as offsetting revenue in an equal amount included in “advisory services fee.”

Prior to the spin-off, all equity-based compensation of Ashford Trust employees was allocated to the Company as all Ashford Trust employees became employees of the Company.

Other Comprehensive Loss —As there are no transactions requiring presentation in other comprehensive loss, but not in net loss, the Company’s net loss equates to other comprehensive loss.

Due to Affiliate —Due to affiliate represents current payables resulting from general and administrative expense and furniture, fixture and equipment reimbursements. Due to affiliate is generally settled within a period not exceeding one year.

ASHFORD INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

(Continued)

Due from Ashford Prime OP —Due from Ashford Prime OP represents current receivables related to the advisory services fee and reimbursable expenses. Due from Ashford Prime OP is generally settled within a period not exceeding one year.

Due to/from Ashford Trust OP, net —Due to/from Ashford Trust OP, net, represents current receivables and payables resulting primarily from costs associated with our spin-off as well as receivables related to the advisory services fee and reimbursable expenses. Due to/from Ashford Trust OP, net, is generally settled within a period not exceeding one year.

Income (Loss) Per Share —For periods prior to the spin-off, basic income (loss) per share was calculated by dividing net loss attributable to the Company by the 1.9 million shares of common stock outstanding upon the completion of the distribution including 4,000 shares for initial grants to the five independent members of our board of directors and excluding 5,000 unvested restricted shares. For the years ended December 31, 2013 and 2012, the diluted loss per share was calculated by dividing the net loss attributable to the Company by 2.0 million shares which excludes 10,000 shares comprised of 5,000 unvested restricted shares and 5,000 shares issuable on the conversion of Ashford LLC common units held by Ashford LLC unit holders as the effect of including these shares would have been anti-dilutive.

For periods after the spin-off, basic income (loss) per common share is calculated by dividing net income (loss) attributable to the Company by the weighted average common shares outstanding during the period using the two-class method prescribed by applicable authoritative accounting guidance. Diluted income (loss) per common share is calculated using the two-class method, or the treasury stock method, if more dilutive. Diluted income (loss) per common share reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted into common shares, whereby such exercise or conversion would result in lower income per share.

Deferred Compensation Plan —Effective January 1, 2008, Ashford Trust established a nonqualified deferred compensation plan (“DCP”) for certain executive officers, which was assumed by the Company in connection with the separation from Ashford Trust. The plan allows participants to defer up to 100% of their base salary and bonus and select an investment fund for measurement of the deferred compensation obligation. In connection with our spin-off and the assumption of the DCP obligation by the Company, the DCP was modified to give the participants various investment options, including Ashford Inc. common stock, for measurement that can be changed by the participant at any time. These modifications resulted in the DCP obligation being recorded as a liability in accordance with the applicable authoritative accounting guidance. Distributions under the DCP are made in cash, unless the participant has elected Ashford Inc. common stock as the investment option, in which case any such distributions would be made in Ashford Inc. common stock. Additionally, the DCP obligation is carried at fair value with changes in fair value reflected in “salaries and benefits” in our statements of operations and comprehensive loss.

Income Taxes —The Company is subject to federal and state corporate income taxes. In accordance with authoritative accounting guidance, we account for income taxes using the asset and liability method under which deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized.

Prior to the spin-off, the Company’s taxable income was “carved out” of Ashford Trust OP, a partnership, and its wholly-owned disregarded limited liability company which are not subject to U.S. federal income taxes. Rather, the partnership’s revenues and expenses passed through to and were taxed to the owners. Therefore, the Company did not provide for federal income taxes. Partnerships are subject to the Texas Margin Tax. In accordance with authoritative accounting guidance, we provided for the Texas Margin Tax. Income tax expense was calculated on a separate stand-alone basis, although the Company’s operations were historically included in the tax returns filed by Ashford Trust OP of which the Company’s business was a part.

The “Income Taxes” Topic of the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification addresses the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. The guidance requires us to determine whether tax positions we have taken or expect to take in a tax return are more likely than not to be sustained upon examination by the appropriate taxing authority based on the technical merits of the positions. Tax positions that do not meet the more likely than not threshold would be recorded as additional tax expense in the current period. We analyze all open tax years, as defined by the statute of limitations for each jurisdiction, which includes the federal jurisdiction and various states. We classify interest and penalties related to underpayment of income taxes as income tax expense. We and our subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and cities. Tax years 2013 through 2014 remain subject to potential examination by certain federal and state taxing authorities.

ASHFORD INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

(Continued)

Reclassifications —Amounts within equity as of December 31, 2013, December 31, 2012, and January 1, 2012, have been reclassified to conform with the current year presentation. These reclassifications have no effect on our cash flows, equity or net loss previously reported.

Recently Issued Accounting Standards — In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 is a comprehensive new revenue recognition model, which requires a company to recognize revenue to depict the transfer of promised goods or services to a customer in an amount that reflects the consideration the company expects to receive in exchange for those goods or services. The update will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. ASU 2014-09 is effective in fiscal periods beginning after December 15, 2016. Early adoption is not permitted. The standard permits the use of either the retrospective or cumulative effect transition method. We are evaluating the effect that ASU 2014-09 will have on our financial statements and related disclosures. We have not yet selected a transition method.

3. Furniture, Fixtures and Equipment, net

Furniture, fixtures and equipment, net, consisted of the following (in thousands):



	December 31,
	2014			2013
Furniture, fixtures and equipment	$	1,245		$	737
Leasehold improvements	460			770
Computer software	3,013			—
Total cost	4,718			1,507
Accumulated depreciation	(530		)	(961		)
Furniture, fixtures and equipment, net	$	4,188		$	546

For the years ended December 31, 2014 , 2013 and 2012 , depreciation expense was $359,000 , $220,000 and $216,000 , respectively. As of December 31, 2014, no computer software has been placed into service and no amortization has been taken related to those assets.

4. Fair Value Measurements

Fair Value Hierarchy —Our financial instruments measured at fair value either on a recurring or a non-recurring basis are classified in a hierarchy for disclosure purposes consisting of three levels based on the observability of inputs in the market place as discussed below:


•	Level 1: Fair value measurements that are quoted prices (unadjusted) in active markets that we have the ability to access for identical assets or liabilities. Market price data generally is obtained from exchange or dealer markets.

•

Level 2: Fair value measurements based on inputs other than quoted prices included in Level 1, that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.


•	Level 3: Fair value measurements based on valuation techniques that use significant inputs that are unobservable. The circumstances for using these measurements include those in which there is little, if any, market activity for the asset or liability.

ASHFORD INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

(Continued)

Assets and Liabilities Measured at Fair Value on a Recurring Basis

At December 31, 2014, the deferred compensation plan had a liability with a fair value of $20.0 million . The fair value of the deferred compensation plan is carried at fair value based on the closing prices of the underlying investments. This is considered a Level 1 valuation technique. At December 31, 2013, there were no assets or liabilities measured at fair value on a recurring basis.

Effect of Fair Value Measured Liabilities on Statements of Operations and Comprehensive Loss

The following table summarizes the effect of fair value measured liabilities on the statements of operations and comprehensive loss (in thousands):



	Loss Recognized
	Year Ended December 31,
	2014				2013		2012
Liabilities
Deferred compensation plan	$	(8,495	)	⁽¹⁾	$	—	$	—

________


⁽¹⁾	Reported as a component of “salaries and benefits” in the statement of operations and comprehensive loss.

5. Summary of Fair Value of Financial Instruments

Some of our financial instruments are not measured at fair value on a recurring basis. The estimates presented are not necessarily indicative of the amounts at which these instruments could be purchased, sold or settled. The carrying amounts and estimated fair values of financial instruments were as follows (in thousands):



	December 31, 2014				December 31, 2013
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial liabilities measured at fair value:
Deferred compensation plan	$	19,955	$	19,955	$	—	$	—
Financial assets not measured at fair value:
Financial assets:
Cash and cash equivalents	$	29,597	$	29,597	$	600	$	600
Restricted cash	3,337		3,337		—		—
Due from Ashford Trust OP, net	8,202		8,202		—		—
Due from Ashford Prime OP	2,546		2,546		960		960
Financial liabilities not measured at fair value:
Financial liabilities:
Accounts payable and accrued expenses	$	9,307	$	9,307	$	7,828	$	7,828
Due to affiliate	1,313		1,313		232		232
Other liabilities	3,337		3,337		—		—

Deferred compensation plan. The liability resulting from the deferred compensation plan is carried at fair value based on the closing prices of the underlying investments. This is considered a Level 1 valuation technique.

Cash and cash equivalents, restricted cash, due from Ashford Trust OP, net, due from Ashford Prime OP, accounts payable and accrued expenses, due to affiliate and other liabilities . The carrying values of these financial instruments approximate their fair values due to the short-term nature of these financial instruments. This is considered a Level 1 valuation technique.

ASHFORD INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

(Continued)

6. Commitments and Contingencies

Litigation —The Company is engaged in various legal proceedings which have arisen but have not been fully adjudicated. The likelihood of loss for these legal proceedings, based on definitions within contingency accounting literature, ranges from remote to reasonably possible and to probable. Based on estimates of the range of potential losses associated with these matters, management does not believe the ultimate resolution of these proceedings, either individually or in the aggregate, will have a material adverse effect upon the financial position or results of operations of the Company. However, the final results of legal proceedings cannot be predicted with certainty and if the Company failed to prevail in one or more of these legal matters, and the associated realized losses were to exceed the Company’s current estimates of the range of potential losses, the Company’s financial position or results of operations could be materially adversely affected in future periods.

7. Income Taxes

Prior to the spin-off, income tax expense for the Company was calculated on a separate stand-alone basis, although the Company’s operations were historically included in the tax returns filed by Ashford Trust OP of which the Company’s business was a part. As a partnership, Ashford Trust OP was not subject to federal income taxes. However, Ashford Trust OP was subject to the Texas Margin Tax and its operations were included in Texas filings that combined substantially all of Ashford Trust’s subsidiaries. After the spin-off, as a stand-alone company, the Company will file tax returns on its own behalf and its deferred taxes and the effective tax rate may differ from those in the periods prior to the spin-off. For the period after the spin-off from November 12, 2014, through December 31, 2014, the Company recognized a book loss before income taxes of $10.3 million and income tax expense was separately determined under the Ashford Inc. ownership structure.

The following table reconciles the income tax benefit at statutory rates to the actual income tax expense recorded (in thousands):



	Year Ended December 31,
	2014			2013			2012
Income tax benefit at federal statutory income tax rate of 35%	$	3,606		$	—		$	—
State income tax expense, net of federal income tax benefit	(74		)	(7		)	—
Income passed through to common unit holders and noncontrolling interests	(90		)	—			—
Permanent differences	(712		)	—			—
Valuation allowance	(3,513		)	—			—
Total income tax expense	$	(783	)	$	(7	)	$	—

The components of income tax expense are as follows (in thousands):



	Year Ended December 31,
	2014			2013			2012
Current:
Federal	$	(696	)	$	—		$	—
State	(87		)	(7		)	—
Total current	(783		)	(7		)	—
Deferred:
Federal	—			—			—
State	—			—			—
Total deferred	—			—			—
Total income tax expense	$	(783	)	$	(7	)	$	—

For the years ended December 31, 2014 , 2013 and 2012 , no interest and penalties were paid or were due to taxing authorities.

ASHFORD INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

(Continued)

At December 31, 2014 and 2013 , our net deferred tax asset on the balance sheets, consisted of the following (in thousands):



	December 31,
	2014			2013
Deferred compensation	$	6,984		$	—
Accrued expenses	330			—
Equity-based compensation	206			—
Tax property basis greater than book basis	4			—
Deferred tax asset	7,524			—
Valuation allowance	(7,524		)	—
Net deferred tax asset	$	—		$	—

At December 31, 2014 , we recorded a valuation allowance of $7.5 million to fully reserve our deferred tax asset. The Company’s deferred tax asset valuation allowance is the result of uncertainties regarding the future realization of deductible temporary differences. These uncertainties are primarily attributable to a lack of historical operating results under the Ashford Inc. ownership structure and a consolidated book loss for the period from November 12, 2014, through December 31, 2014. In addition, there are uncertainties as to the amount and the timing of the future reversals of the deductible temporary differences.

The following table summarizes the changes in the valuation allowance (in thousands):



	Year Ended December 31,
	2014		2013		2012
Balance at beginning of year	$	—	$	—	$	—
Additions	7,524		—		—
Balance at end of year	$	7,524	$	—	$	—

8. Equity

Noncontrolling Interests in Consolidated Entities —Noncontrolling interests in consolidated entities represents noncontrolling ownership interests of 40% to 100% in two entities with a total carrying value of $(87,000) at December 31, 2014 . Loss from consolidated entities attributable to these noncontrolling interests was $647,000 for the year ended December 31, 2014 . There was no noncontrolling interests in consolidated entities at December 31, 2013. There was no income/loss from consolidated entities attributable to noncontrolling interests for each of the years ended December 31, 2013 and 2012.

Preferred Stock —In accordance with Ashford Inc.’s charter, we are authorized to issue 50 million shares of preferred stock which currently includes up to two million shares of series A cumulative preferred stock. The holders of series A cumulative preferred stock are entitled to receive dividends in preference to holders of shares of any class or series of stock ranking junior to it, equal to 1,000 multiplied by the aggregate per share amount of all dividends of common stock. Each share of series A cumulative preferred stock shall entitle the holder to 1,000 votes on all matters submitted to a vote of the stockholders of Ashford Inc. No shares of series A cumulative preferred stock are currently outstanding.

Shareholder Rights Plan —On November 16, 2014, our board of directors adopted a shareholder rights plan (the “2014 Rights Plan”). Pursuant to the 2014 Rights Plan, our board of directors declared a dividend of one preferred share purchase right (a “Right”) payable on November 27, 2014, for each outstanding share of common stock, par value $0.01 per share (the “Common Shares”), outstanding on November 27, 2014 (the “Record Date”) to the stockholders of record on that date. Each Right initially entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Preferred Stock, par value $0.01 per share (the “Preferred Shares”), of the Company, at a price of $275 per one one-thousandth of a Preferred Share represented by a Right (the “Purchase Price”), subject to adjustment. The Rights become exercisable upon certain conditions, as defined in the rights agreement, related to unsolicited offers to acquire a specified percentage of our outstanding common stock. At any time prior to the time any person or group becomes an Acquiring Person, as defined in the rights agreement, the board of directors of the Company may redeem the Rights in whole, but not in part, at a price of $0.001 per Right. The value of the rights is de minimis. The 2014 Rights Plan is intended to improve the bargaining position of our board of directors in the event of an unsolicited offer to acquire our outstanding shares of common stock.

ASHFORD INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

(Continued)

9. Redeemable Noncontrolling Interests in Ashford LLC

Redeemable noncontrolling interests in Ashford LLC represents certain members’ proportionate share of equity and their allocable share of equity in earnings/losses of Ashford LLC, which is an allocation of net income/loss attributable to the members based on the weighted average ownership percentage of these members’ interest. Beginning one year after issuance, each common unit of member interest may be redeemed, by the holder, for either cash or, at our sole discretion, one share of our common stock.

In connection with our spin-off, Ashford Trust OP unit holders received one common unit in Ashford LLC for every 55 units held in Ashford Trust OP. Each holder of common units of Ashford LLC could then exchange up to 99% of the Ashford LLC common units for shares of Ashford Inc. common stock. During the year ended December 31, 2014 , approximately 356,000 units were exchanged for shares of Ashford Inc. common stock. at the rate of one share of Ashford Inc. common stock for every 55 Ashford LLC common units. Following the completion of the exchange offer, Ashford LLC effected a reverse stock split of its common units such that each common unit was automatically converted into 1/55 of a common unit. Redeemable noncontrolling interests in Ashford LLC as of December 31, 2014 , was $424,000 , which represented ownership of approximately 0.2%. The carrying value of redeemable noncontrolling interests as of December 31, 2014 , included adjustments of $369,000 to reflect the excess of redemption value over the accumulated historical cost. There was no redeemable noncontrolling interests as of December 31, 2013 . For the year ended December 31, 2014 , we allocated net loss of $24,000 to the redeemable noncontrolling interests. No net income/loss was allocated to redeemable noncontrolling interests for each of the years ended December 31, 2013 and 2012.

A summary of the activity of the member interest units is as follow (in thousands):



	Year Ended December 31, 2014
Units outstanding at beginning of year	—
Units issued in connection with spin-off	361
Units converted to common shares	(356	)
Units outstanding at end of year	5
Units convertible/redeemable at end of year	—

10. Loss Per Share

The following table reconciles the amounts used in calculating basic and diluted loss per share (in thousands, except per share amounts):



	Year Ended December 31,
	2014			2013			2012
Net loss attributable to common stockholders – Basic and diluted:
Net loss attributable to the Company	$	(46,410	)	$	(47,719	)	$	(38,182	)

Weighted average common shares outstanding:
Weighted average common shares outstanding – basic	1,981			1,981			1,981
Weighted average common shares outstanding – diluted	1,981			1,981			1,981

Loss per share – basic:
Net loss allocated to common stockholders per share	$	(23.43	)	$	(24.09	)	$	(19.27	)
Loss per share – diluted:
Net loss allocated to common stockholders per share	$	(23.43	)	$	(24.09	)	$	(19.27	)

ASHFORD INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

(Continued)

Due to their anti-dilutive effect, the computation of diluted loss per share does not reflect the adjustments for the following items (in thousands):



	Year Ended December 31,
	2014			2013		2012
Net loss allocated to common stockholders is not adjusted for:
Loss attributable to redeemable noncontrolling interests in Ashford LLC	$	(24	)	$	—	$	—
Total	$	(24	)	$	—	$	—
Weighted average diluted shares are not adjusted for:
Effect of unvested restricted shares	5			5		5
Effect of assumed conversion of Ashford LLC units	5			5		5
Total	10			10		10

11. Segment Reporting

We currently operate in one business segment: asset management. Advisory services refers to managing the day-to-day operations of Ashford Prime and its subsidiaries and Ashford Trust and its subsidiaries in conformity with each company’s investment guidelines.

12. Related Party Transactions

In connection with our spin-off from Ashford Trust on November 12, 2014, we entered into an advisory agreement with Ashford Trust OP. The quarterly base fee is equal to 0.70% per annum of the total market capitalization, as defined in the advisory agreement, of Ashford Trust, subject to a minimum quarterly base fee, as payment for managing its day-to-day operations in accordance with its investment guidelines. Reimbursement for overhead and internal audit, insurance claims advisory and asset management services, including compensation, benefits and travel expense reimbursements, are billed quarterly to Ashford Trust based on a pro rata allocation as determined by the ratio of Ashford Trust’s net investment in hotel properties in relation to the total net investment in hotel properties for both Ashford Trust and Ashford Prime. We will also record advisory revenue for equity grants of Ashford Trust common stock and LTIP units awarded to our officers and employees in connection with providing advisory services equal to the fair value of the award in proportion to the requisite service period satisfied during the period, as well an offsetting expense in an equal amount included in “salaries and benefits.” We are also entitled to an incentive fee that is earned annually in each year that Ashford Trust’s total stockholder return exceeds the total stockholder return for Ashford Trust’s peer group, as defined in the advisory agreement.

For the period from November 13, 2014, through December 31, 2014 , we recorded advisory services revenue of $4.5 million from Ashford Trust OP. The advisory services revenue was comprised of a base advisory fee of $4.0 million and reimbursable overhead and internal audit, insurance claims advisory and asset management services of $549,000 . No incentive management fee was earned for the period from November 13, 2014, through December 31, 2014 . We also recorded other revenue of $144,000 related to non-advisory expense reimbursements from Ashford Trust for the period November 13, 2014, through December 31, 2014. At December 31, 2014 , we had a net receivable of $8.2 million from Ashford Trust OP associated with reimbursable expenses in connection with the spin-off and the advisory services fee discussed above.

On November 19, 2013, Ashford LLC entered into an advisory agreement with Ashford Prime OP. In connection with our separation from Ashford Trust, Ashford LLC became our operating company, and we assumed the advisory agreement with Ashford Prime OP. The quarterly base fee is equal to 0.70% per annum of the total market capitalization, as defined in the advisory agreement, of Ashford Prime, subject to a quarterly minimum base fee, as payment for managing its day-to-day operations in accordance with its investment guidelines. Reimbursement for overhead and internal audit, insurance claims advisory and asset management services, including compensation, benefits and travel expense reimbursements, are billed quarterly to Ashford Prime based on a pro rata allocation as determined by the ratio of Ashford Prime’s net investment in hotel properties in relation to the total net investment in hotel properties for both Ashford Trust and Ashford Prime.We also record advisory revenue for equity grants of Ashford Prime common stock and LTIP units awarded to our officers and employees in connection with providing advisory services equal to the fair value of the award in proportion to the requisite service period satisfied during the period, as well an offsetting expense in an equal amount included in “salaries and benefits.” We are also entitled to an incentive fee that is earned annually in each year that Ashford Prime’s total stockholder return exceeds the total stockholder return for Ashford Prime’s peer group, as defined in the advisory agreement.

ASHFORD INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

(Continued)

For the year ended December 31, 2014 , and the period from November 19, 2013, through December 31, 2013 , we recorded revenues of $12.6 million and $960,000 , respectively, from Ashford Prime. During 2014 , advisory services revenue was comprised of a base advisory fee of $8.7 million , reimbursable overhead and internal audit, insurance claims advisory and asset management services of $1.8 million and equity-based compensation of $2.1 million , associated with equity grants of Ashford Prime’s common stock and LTIP units awarded to our officers and employees. During the period from November 19, 2013, through December 31, 2013 , advisory services revenue was comprised of a base advisory fee of $878,000 , reimbursable overhead and internal audit reimbursements of $82,000 . No incentive management fee was earned for 2014 or the period from November 19, 2013 through December 31, 2013 . At December 31, 2014 and 2013 , we had receivables of $2.5 million and $960,000 , respectively, from Ashford Prime OP associated with advisory service fee discussed above.

We have a management agreement with Remington, which is beneficially owned by our Chairman and Chief Executive Officer and Ashford Trust’s Chairman Emeritus. Ashford Trust and Ashford Prime have similar management agreements with Remington. Transactions related to these agreements are included in the accompanying financial statements. Under the agreements, we pay Remington general and administrative expense reimbursements, approved by our independent directors, including rent, payroll, office supplies, travel and accounting. These charges are allocated based on various methodologies, including headcount and actual amounts incurred. Prior to the spin-off, these costs were paid by Ashford Trust and were included in our carve-out financial statements. For the years ended December 31, 2014 , 2013 and 2012 , these reimbursements totaled $2.0 million , $1.5 million and $1.5 million , respectively and are included in general and administrative expenses on the statements of operations and comprehensive loss. The amounts due under these arrangements as of December 31, 2014 and 2013 are included in “due to affiliate” on our balance sheets.

Certain employees of Remington who perform work on behalf of Ashford Trust were granted shares of restricted stock under the Ashford Trust Stock Plan. These share grants were accounted for under the applicable accounting guidance related to share-based payments granted to non-employees. Therefore, adjustments were made to record the liability related to unvested restricted stock awards at fair value, with the changes in fair value recorded in general and administrative expense. Expense of $4,000 , $28,000 and $19,000 , respectively, was recognized in the statements of operations and comprehensive loss for the years ended December 31, 2014 , 2013 and 2012 .

For periods prior to the spin-off, the operations of the Company have been principally funded by Ashford Trust OP. Ashford Trust OP uses a centralized approach to cash management and the financing of its operations. During the periods through November 12, 2014, covered by these carve-out financial statements, Ashford Trust OP provided the capital to fund our operating and investing activities, which are presented as a component of additional paid-in capital. Amounts funded by Ashford Trust OP were $56.6 million , $23.4 million and $19.9 million for the period from January 1, 2014, through November 12, 2014, and the years ended December 31, 2013 and 2012 , respectively.

As the Company’s financial statements through November 12, 2014, have been carved out of Ashford Trust OP, salaries and benefits and general and administrative expense represents an allocation of certain Ashford Trust OP corporate general and administrative costs. See Note 2.

13. Equity-Based Compensation

Under the 2014 Incentive Plan, we are authorized to grant 420,000 shares of our common stock as incentive stock awards. At December 31, 2014 , 115,550 shares were available for future issuance under the 2014 Incentive Plan. The 2014 Incentive Plan contains a provision in which there is an automatic increase of authorized shares on January 1 of each year equal to 15% of the sum of (i) the fully diluted share count and (ii) the shares of common stock reserved for issuance under the Company’s deferred compensation plan less shares available under the 2014 Incentive Plan as of December 31 of the previous year. After application of this provision, as of January 1, 2015, we have 375,546 shares of our common stock, or securities convertible into 375,546 shares of our common stock, available for issuance under our 2014 Incentive Plan.

ASHFORD INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

(Continued)

During 2014, we granted 300,000 stock options to employees with a grant date fair value of $11.6 million. The grant price of the options was the market value of our stock on the date of grant. The options have a term of eight years and vest three years from the grant date. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option pricing model. Due to our lack of history, we do not have adequate historical exercise/cancellation behavior on which to base the expected life assumption. We will continue to evaluate the expected life as we accumulate more data. Additionally, we do not have adequate historical stock price information on which to base the expected volatility assumption. In order to estimate the expected life, we assumed the midpoint of the average time to vest and the contractual term, adjusted for forfeitures, which assume the full contractual term. In order to estimate volatility, we utilized the weighted average of our mean reversion volatility based on daily data points over the period our common stock has been traded and the average of the most recent 5.7-year volatilities of our peer group (or full history if the peer has less than 5.7 years of trading history).

The weighted average assumptions used in the model are outlined in the following table:




	Year Ended
	December 31, 2014
Weighted-average grant date fair value	$	38.56
Weighted average assumptions used:
Expected volatility	46.3		%
Expected term (in years)	5.7
Risk-free interest rate	1.7		%
Expected dividend yield	—		%

A summary of stock option activity is as follows:



	Number of Shares	Weighted Average Exercise Price		Weighted Average Contractual Term
	(In thousands)	(per share)		(In years)
Outstanding, January 1, 2014	—	$	—	—
Granted	300	85.97		8.00
Exercised	—	—		—
Forfeited, canceled or expired	—	—		—
Outstanding, December 31, 2014	300	$	85.97	7.95
Options exercisable at December 31, 2014	—	$	—	—

The aggregate intrinsic value represents the difference between the exercise price of the stock options and the quoted closing common stock price of $94.00 per share as of December 31, 2014, for those awards that have an exercise price currently below the closing price. As of December 31, 2014, the aggregate intrinsic value of stock options outstanding was $2.4 million, with a weighted-average remaining term of 7.95 years. At December 31, 2014, the Company had approximately $11.4 million of total unrecognized compensation expense, related to stock options that will be recognized over the weighted average period of 2.95 years. Stock-based compensation expense of $212,000 was recognized for the year ended December 31, 2014, in connection with our stock options.

ASHFORD INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

(Continued)

A summary of our restricted stock activity is as follows (shares in thousands):



	Year Ended December 31,
	2014
	Restricted Shares		Weighted Average Price Per Share at Grant
Outstanding at beginning of year	—		$	—
Restricted shares granted	4		56.20
Restricted shares issued in connection with spin-off	5		56.20
Restricted shares vested	(4	)	56.20
Outstanding at end of year	5		$	56.20

Stock-based compensation expense of $250,000 was recognized for the year ended December 31, 2014, in connection with the stock grants of 4,000 restricted shares to our independent directors, which vested immediately.

Prior to the spin-off, equity-based compensation, included in salaries and benefits, has been allocated to the Company as described in Note 2. Additionally, as a result of the spin-off, we assumed all of the unrecognized equity-based compensation associated with prior Ashford Trust equity grants. As a result, we will continue to recognize equity-based compensation expense related to these grants. Equity-based compensation expense of $21.5 million , $20.7 million and $16.7 million was recognized for the years ended December 31, 2014 , 2013 and 2012 , respectively. There was also equity-based compensation associated with employees of an affiliate, included in general and administrative expense, of $4,000 , $28,000 and $19,000 , respectively, for the years ended December 31, 2014 , 2013 and 2012 , as described in Note 12. At December 31, 2014 , the outstanding restricted stock/units related to the allocated equity-based compensation had vesting schedules between March 2015 and April 2017. The restricted stock/units that vested during 2014 had a fair value of $18.2 million at the date of vesting. At December 31, 2014 , the unrecognized cost of these unvested shares of restricted stock/units was $17.8 million , which will be amortized over a period of 2.3 years . At December 31, 2014 , these outstanding restricted shares/units had an aggregate intrinsic value of $30.9 million .

14. Concentration of Risk

Currently all of our revenue is derived from the advisory agreements with Ashford Prime and Ashford Trust.

Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and cash equivalents. We are exposed to credit risk with respect to cash held at financial institutions. At December 31, 2014, our cash is held at one financial institution.

15. Employee Benefit Plans

401(k) Plan —Effective January 1, 2006, Ashford Trust established its 401(k) Plan, a qualified defined contribution retirement plan that covers employees 21 years of age or older who have completed one year of service and work a minimum of 1,000 hours annually. The 401(k) Plan allows eligible employees to contribute, subject to IRS imposed limitations, to various investment funds. Ashford Trust makes matching cash contributions of 50% of each participant’s contributions, based on participant contributions of up to 6% of compensation. Participant contributions vest immediately, whereas company matches vest 25% annually. For the years ended December 31, 2014 , 2013 and 2012 , our results of operations included matching expense of $293,000 , $211,000 , and $211,000 , respectively. In connection with our spin-off, the Company now administers the 401(k) Plan.

Employee Savings and Incentive Plan (“ESIP”) —Ashford Trust established a nonqualified compensation plan that covers employees who work at least 25 hours per week, allows eligible employees to contribute up to 100% of their compensation to various investment funds. Ashford Trust matches 25% of the first 10% each employee contributes. Matches are only made for employees not participating in the 401(k) Plan. Employee contributions vest immediately, whereas company contributions vest 25% annually. For the years ended December 31, 2014 , 2013 and 2012 , our results of operations included matching expenses of $14,000 , $1,000 and $4,000 , respectively. In connection with our spin-off, the Company now administers the ESIP.

ASHFORD INC. AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

(Continued)

Deferred Compensation Plan —Effective January 1, 2008, Ashford Trust established a nonqualified DCP for certain executive officers, which was assumed by the Company in connection with the separation from Ashford Trust. The plan allows participants to defer up to 100% of their base salary and bonus and select an investment fund for measurement of the deferred compensation obligation. For the periods the DCP was administered by Ashford Trust, the participants elected Ashford Trust common stock as their investment fund. In accordance with the applicable authoritative accounting guidance, the deferred amounts and any dividends earned received equity treatment and were included in additional paid-in capital. In connection with our spin-off and the assumption of the DCP obligation by the Company, the DCP was modified to give the participants various investment options, including Ashford Inc. common stock, for measurement that can be changed by the participant at any time. These modifications resulted in the DCP obligation being recorded as a liability in accordance with the applicable authoritative accounting guidance. Distributions under the DCP are made in cash, unless the participant has elected Ashford Inc. common stock as the investment option, in which case any such distributions would be made in Ashford Inc. common stock. Additionally, the DCP obligation is carried at fair value with changes in fair value reflected in “salaries and benefits” in our statements of operations and comprehensive loss. For the year ended December 31, 2014, we recorded an unrealized loss of $8.5 million .

For the years ended December 31, 2013 and 2012, deferred compensation expense was $4.3 million and $372,000, respectively. During 2013, Ashford Trust recorded deferred compensation expense of $4.3 million as a result of modifications to its deferred compensation plan in connection with the Ashford Prime spin-off in which plan participants were granted additional shares of Ashford Trust stock. The remaining deferred compensation expense of $28,000 for the year ended December 31, 2013, and the deferred compensation expense of $372,000 for the year ended December 31, 2012, was comprised of salary deferrals. Additionally, for the years ended December 31, 2014, 2013 and 2012, dividends associated with the deferred compensation plan totaled $567,000 , $537,000 and $411,000 , respectively, and were included as a component of accumulated deficit. Dividends accrued, but not yet settled, were $0 and $180,000 as of December 31, 2014 and 2013, respectively.

16. Selected Financial Quarterly Data (Unaudited)

The following is a summary of the quarterly results of operations for the years ended December 31, 2014 and 2013 (in thousands, except per share data):



	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Full Year
2014
Total revenue	$	2,312		$	3,913		$	3,020		$	8,043		$	17,288
Total operating expenses	11,110			17,368			11,882			23,226			63,586
Operating loss	$	(8,798	)	$	(13,455	)	$	(8,862	)	$	(15,183	)	$	(46,298	)
Net loss	$	(8,813	)	$	(13,475	)	$	(8,871	)	$	(15,922	)	$	(47,081	)
Net loss attributable to the Company	$	(8,813	)	$	(13,475	)	$	(8,701	)	$	(15,421	)	$	(46,410	)
Diluted loss attributable to common stockholders per share	$	(4.45	)	$	(6.80	)	$	(4.39	)	$	(7.78	)	$	(23.43	)
Weighted average diluted common shares	1,981			1,981			1,981			1,981			1,981



	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Full Year
2013
Total revenue	$	—		$	—		$	—		$	960		$	960
Total operating expenses	13,894			9,749			10,204			14,825			48,672
Operating loss	$	(13,894	)	$	(9,749	)	$	(10,204	)	$	(13,865	)	$	(47,712	)
Net loss	$	(13,894	)	$	(9,749	)	$	(10,204	)	$	(13,872	)	$	(47,719	)
Net loss attributable to the Company	$	(13,894	)	$	(9,749	)	$	(10,204	)	$	(13,872	)	$	(47,719	)
Diluted loss attributable to common stockholders per share	$	(7.01	)	$	(4.92	)	$	(5.15	)	$	(7.00	)	$	(24.09	)
Weighted average diluted common shares	1,981			1,981			1,981			1,981			1,981

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.


Item 9A.	Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2014. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as a result of the material weakness in our internal control over financial reporting, as of December 31, 2014, our disclosure controls and procedures were not effective to ensure that (i) information required to be disclosed in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures. See “Risk Factors-We identified a material weakness in our internal controls over financial reporting that existed for the period ended December 31, 2013. If we fail to properly remediate this material weakness, or fail to properly identify or remediate any future weaknesses or deficiencies, or achieve and maintain effective internal control, our ability to produce accurate and timely financial statements could be impaired and investors could lose confidence in our financial statements.” Notwithstanding this material weakness, management has concluded that the Company’s consolidated financial statements for the period covered by and included in this Annual Report on Form 10-K are fairly stated in all material respects in accordance with generally accepted accounting principles.

Management’s Report on Internal Control over Financial Reporting

This annual report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of the company’s registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.

Changes in Internal Control over Financial Reporting

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


Item 9B.	Other Information

None.

PART III


Item 10.	Directors, Executive Officer, and Corporate Governance

The information required in response to this Item 10 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.


Item 11.	Executive Compensation

The information required in response to this Item 11 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.


Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required in response to this Item 12 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.


Item 13.	Certain Relationships and Related Transactions, and Director Independence

The information required in response to this Item 13 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.


Item 14.	Principal Accountant Fees and Services

The information required in response to this Item 14 is incorporated herein by reference to our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A promulgated under the Exchange Act not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K.

PART IV


Item 15.	Financial Statement Schedules and Exhibits


(a)	Financial Statements and Schedules

See “Item 8. Financial Statements and Supplementary Data,” on pages 35 through 54 hereof, for a list of our financial statements and report of independent registered public accounting firm.

All other financial statement schedules have been omitted because such schedules are not required under the related instructions, such schedules are not significant, or the required information has been disclosed elsewhere in the financial statements and related notes thereto.


(b)	Exhibits

Exhibits required by Item 601 of Regulation S-K: The exhibits filed in response to this item are listed in the Exhibit Index.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 24, 2015.



	ASHFORD INC.

	By:	/s/ MONTY J. BENNETT
		Monty J. Bennett
		Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below, by the following persons, on behalf of the Registrant in the capacities and on the dates indicated.



Signature	Title	Date

/s/ MONTY J. BENNETT	Chairman of the Board of Directors and Chief Executive Officer (Principal Executive Officer)	March 24, 2015
Monty J. Bennett

/s/ DOUGLAS A. KESSLER	President	March 24, 2015
Douglas A. Kessler

/s/ DERIC S. EUBANKS	Chief Financial Officer (Principal Financial Officer)	March 24, 2015
Deric S. Eubanks

/s/ MARK L. NUNNELEY	Chief Accounting Officer (Principal Accounting Officer)	March 24, 2015
Mark L. Nunneley

/s/ J. ROBISON HAYS, III	Chief Strategy Officer and Director	March 24, 2015
J. Robison Hays, III

/s/ DINESH P. CHANDIRAMANI	Director	March 24, 2015
Dinesh P. Chandiramani

/s/ DARRELL T. HAIL	Director	March 24, 2015
Darrell T. Hail

/s/ JOHN MAULDIN	Director	March 24, 2015
John Mauldin

/s/ GERALD J. REIHSEN	Director	March 24, 2015
Gerald J. Reihsen

/s/ BRIAN WHEELER	Director	March 24, 2015
Brian Wheeler

EXHIBIT INDEX



Exhibit		Description
2.1		Separation and Distribution Agreement, dated October 31, 2014, by and between Ashford Hospitality Trust, Inc., Ashford OP Limited Partner LLC, Ashford Hospitality Limited Partnership, Ashford Inc. and Ashford Hospitality Advisors LLC (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed on November 6, 2014)
3.1*		Amended and Restated Certificate of Incorporation of Ashford Inc.
3.2		Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on November 6, 2014)
3.3		Certificate of Designation of Series A Preferred Stock of Ashford Inc., as filed with the Secretary of State of the State of Delaware on November 17, 2014 (incorporated by reference to Exhibit 3.3 to the Current Report on Form 8-K filed on November 17, 2014)
4.1		Specimen Common Stock Certificate of Ashford Inc. (incorporated by reference to Exhibit 4.1 to Amendment No. 6 to the Registration Statement on Form 10 filed on October 3, 2014)
4.2		Rights Agreement, dated November 17, 2014, between Ashford Inc. and Computershare Trust Company, N.A., as Rights Agent, which includes the Form of Certificate of Designation of Series A Preferred Stock as Exhibit A, the Form of Rights Certificate as Exhibit B, and the Summary of Rights as Exhibit C (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed on November 17, 2014)
10.1		Tax Matters Agreement, dated October 31, 2014, between Ashford Inc., Ashford Hospitality Advisors LLC, Ashford Hospitality Trust, Inc. and Ashford Hospitality Limited Partnership (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on November 6, 2014)
10.2		Advisory Agreement, dated as of November 12, 2014 by and between Ashford Hospitality Trust, Inc., Ashford Hospitality Limited Partnership and Ashford Hospitality Advisors LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on November 18, 2014)
10.3*		Second Amended and Restated Advisory Agreement between Ashford Hospitality Prime, Inc., Ashford Hospitality Limited Partnership and Ashford Hospitality Advisors LLC, dated as of November 3, 2014.
10.3.1*		Amendment No. 1 to Second Amended and Restated Advisory Agreement by and between Ashford Hospitality Prime, Inc., Ashford Hospitality Prime Limited Partnership, Ashford Inc. and Ashford Hospitality Advisors LLC, dated as of March 23, 2015
10.4		Mutual Exclusivity Agreement, dated as of November 12, 2014 by and between Ashford Hospitality Advisors LLC, Ashford Inc. and Remington Lodging & Hospitality, LLC (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on November 18, 2014)
10.5		Assignment and Assumption Agreement, dated as of November 12, 2014 by and between Ashford Hospitality Trust, Inc., Ashford Hospitality Limited Partnership and Ashford Hospitality Advisors LLC Re: Ashford Trademarks (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed on November 18, 2014)
10.6		Licensing Agreement, dated as of November 12, 2014 by and between Ashford Hospitality Advisors LLC, Ashford Hospitality Trust, Inc. and Ashford Hospitality Limited Partnership (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed on November 18, 2014)
10.7		Registration Rights Agreement, dated as of November 12, 2014 by Ashford Inc. for the benefit of the holders of common units in Ashford Hospitality Advisors LLC (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K filed on November 18, 2014)
10.8.1		Employment Agreement, effective November 12, 2014, with Monty J. Bennett (incorporated by reference to Exhibit 10.6.1 to the Current Report on Form 8-K filed on November 18, 2014)
10.8.2		Employment Agreement, effective November 12, 2014, with Douglas A. Kessler (incorporated by reference to Exhibit 10.6.2 to the Current Report on Form 8-K filed on November 18, 2014)
10.8.3		Employment Agreement, effective November 12, 2014, with David Brooks (incorporated by reference to Exhibit 10.6.3 to the Current Report on Form 8-K filed on November 18, 2014)
10.8.4		Employment Agreement, effective November 12, 2014, with Deric Eubanks (incorporated by reference to Exhibit 10.6.4 to the Current Report on Form 8-K filed on November 18, 2014)
10.9		Form of Indemnification Agreement, dated as of Novmeber 6, 2014 between Ashford Inc. and each of its executive officers and directors (incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K filed on November 18, 2014)
10.1		Ashford Inc. 2014 Incentive Plan (incorporated by reference to Exhibit 10.8 to the Current Report on Form 8-K filed on November 18, 2014)
10.11		Amended and Restated Nonqualified Deferred Compensation Plan (incorporated by reference to Exhibit 10.9 to the Current Report on Form 8-K filed on November 18, 2014)



Exhibit		Description
10.12		Investment Management Agreement, dated December 10, 2014 between AHT SMA, LP and Ashford Investment Management LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on December 16, 2014)
10.13*		Investment Management Agreement, dated as of December 10, 2014 between AHP SMA, LP and Ashford Investment Management, LLC
10.14*		Amended and Restated Limited Liability Company Agreement of Ashford Hospitality Advisors LLC, dated October 8, 2014
21 *		List of Subsidiairies of Ashford Inc.
23.1*		Consent of Ernst & Young LLP
31.1*		Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of Securities Exchange Act of 1934, as amended
31.2*		Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of Securities Exchange Act of 1934, as amended
32.1*		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

___________________________________

* Filed herewith.

EXHIBIT 3.1

AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ASHFORD INC.

Ashford Inc. (the “ Corporation ”), a corporation organized and existing under the General Corporation Law of the State of Delaware (the “ DGCL ”), does hereby certify as follows:

(1) The original certificate of incorporation of the Corporation (the “ Original Certificate ”) was filed with the office of the Secretary of State of the State of Delaware on April 2, 2014.

(2) This amended and restated certificate of incorporation (the “ Certificate of Incorporation ”) was duly adopted by the board of directors of the Corporation (the “ Board ”) and by the stockholders of the Corporation in accordance with Sections 228, 242 and 245 of the DGCL.

(3) This Certificate of Incorporation restates and integrates and amends the Original Certificate.

(4) Effective as of October 8, 2014, the text of the Original Certificate is amended and restated in its entirety as follows:

ARTICLE I

Name

The name of the corporation is Ashford Inc. (the “ Corporation ”).

ARTICLE II

Registered Agent

The address of the Corporation’s registered office in the State of Delaware is 2711 Centerville Road, Suite 400, Wilmington, County of New Castle, Delaware 19808. The name of the Corporation’s registered agent at such address is Corporation Service Company.

ARTICLE III

Purpose

The purpose for which the Corporation is organized is to engage in any lawful act or activity for which corporations may be organized under the DGCL.

ARTICLE IV

Capital Stock

Section 4.1 Authorized Capital Stock . The aggregate number of shares of capital stock which the Corporation shall have authority to issue is two hundred million (200,000,000) shares of capital stock, consisting of (i) one hundred million (100,000,000) shares of common stock, par value one cent ($0.01) per share (“ Common Stock ”), (ii) fifty million (50,000,000) shares of blank check common stock, par value one cent ($0.01) per share (“ Blank Check Common Stock ”) and (iii) fifty million (50,000,000) shares of preferred stock, par value one cent ($0.01) per share (“ Preferred Stock ”).

Section 4.2 Common Stock . The powers, preferences and rights, and the qualifications, limitations and restrictions, of the Common Stock are as follows:

(a) Voting . Except as otherwise expressly provided herein or required by Law or the relevant Preferred Stock Designation (as defined in Section 4.4(a)) of any series of Preferred Stock or the relevant Blank Check Common Stock Designation (as defined in Section 4.3(a)) of any series of Blank Check Common Stock, each holder of record of shares of Common Stock shall have the exclusive right to vote for the election of directors and shall be entitled to vote on all other matters requiring stockholder action, each share being entitled to one vote; provided, however, that, except as otherwise required by applicable Law or by the terms of any series of Preferred Stock, holders of Common Stock shall not be entitled to vote on any amendment to this Certificate of Incorporation (including any Preferred Stock Designation or any Blank Check Common Stock Designation) that relates solely to the terms of one or more outstanding series of Preferred Stock or Blank Check Common Stock if the holders of such affected series or Preferred Stock or Blank Check Common Stock are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Certificate of Incorporation (including any Preferred Stock Designation or Blank Check Common Stock Designation) or pursuant to the DGCL.

(b) Dividends . Subject to applicable Law and the preferential rights, if any, as to dividends of the holders of any shares of Preferred Stock at the time outstanding and to the rights, if any, as to dividends of any shares of Blank Check Common Stock at the time outstanding, the holders of shares of Common Stock shall be entitled to receive, when, as and if declared by the Board, out of assets of the Corporation legally available therefor, such dividends as may be declared from time to time by the Board.

(c) Liquidation . In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary (a “ Liquidation Event ”), the holders of shares of Common Stock shall be entitled to receive, subject to the preferential rights as to distributions upon such Liquidation Event of each of the creditors of the Corporation and the holders of any shares of Preferred Stock at the time outstanding and to the rights of any shares of Blank Check Common Stock at the time outstanding, their ratable and proportionate share of the remaining assets of the Corporation. A Liquidation Event shall not be deemed

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to be occasioned by or to include any voluntary consolidation or merger of the Corporation with or into any other corporation or entity or other corporations or entities or a sale, lease, or conveyance of all or substantially all of the Corporation’s assets.

(d) No Cumulative Voting Rights . No holder of shares of Common Stock shall have cumulative voting rights.

(e) Other Rights . No holder of shares of Common Stock shall be entitled to preference, conversion, exchange, sinking fund, redemption or preemptive rights.

Section 4.3 Blank Check Common Stock

(a) The Board is hereby expressly authorized to provide for the issuance of all or any shares of the Blank Check Common Stock in one or more series, by filing a certificate pursuant to Section 151(g) of the DGCL (hereinafter referred to as a “ Blank Check Common Stock Designation ”), to establish from time to time the number of shares to be included in each such series, and to fix for each such series, such voting powers, full or limited, or no voting powers, and, such designations, preferences and relative, participating, optional or other special rights and such restrictions, limitations and qualifications thereof, as shall be authorized by the Board and stated in the applicable Blank Check Common Stock Designation, providing for the issuance of such series, including, without limitation, the authority to provide that any such series may be (i) subject to redemption at such time or times and at such price or prices; (ii) entitled to receive dividends (which may be cumulative or non-cumulative) at such rates, on such conditions, including without limitation a condition that relates to the performance of specified assets or a specified line or lines of business, and at such times, and payable in such relation to, the dividends payable on any other class or classes or any other series; (iii) entitled to such rights upon the dissolution of, or upon any distribution of all or specified assets of, or a specified line of business of the Corporation; or (iv) convertible into, or exchangeable for, shares of any other class or classes of stock, or of any other series of the same or any other class or classes of stock, of the Corporation at such price or prices or at such rates of exchange and with such adjustments; all as may be stated in such Blank Check Common Stock Designation.

(b) The rights, powers and privileges of the Blank Check Common Stock shall be subject to the express terms of any series of Preferred Stock. Except as required by a Blank Check Common Stock Designation or applicable Law, holders of Blank Check Common Stock shall not be entitled to vote at or receive notice of any meeting of stockholders.

(c) Except as otherwise provided by a Blank Check Common Stock Designation, the number of authorized shares of Blank Check Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote generally in the election of directors irrespective of the provisions of Section 242(b)(2) of the DGCL.

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Section 4.4 Preferred Stock .

(a) The Board is hereby expressly authorized to provide for the issuance of all or any shares of the Preferred Stock in one or more series, by filing a certificate pursuant to Section 151(g) of the DGCL (hereinafter referred to as a “ Preferred Stock Designation ”), to establish from time to time the number of shares to be included in each such series, and to fix for each such series such voting powers, full or limited, or no voting powers, and such designations, preferences and relative, participating, optional or other special rights and such restrictions, limitations and qualifications thereof, as shall be authorized by the Board and stated in the applicable Preferred Stock Designation, providing for the issuance of such series, including, without limitation, the authority to provide that any such series may be (i) subject to redemption at such time or times and at such price or prices; (ii) entitled to receive dividends (which may be cumulative or non-cumulative) at such rates, on such conditions, and at such times, and payable in preference to, or in such relation to, the dividends payable on any other class or classes or any other series; (iii) entitled to such rights upon the dissolution of, or upon any distribution of the assets of, the Corporation; or (iv) convertible into, or exchangeable for, shares of any other class or classes of stock, or of any other series of the same or any other class or classes of stock, of the Corporation at such price or prices or at such rates of exchange and with such adjustments; all as may be stated in such Preferred Stock Designation.

(b) The rights, powers and privileges of the Common Stock shall be subject to the express terms of any series of Preferred Stock. Except as required by a Preferred Stock Designation or applicable Law, holders of Preferred Stock shall not be entitled to vote at or receive notice of any meeting of stockholders.

(c) Except as otherwise provided by a Preferred Stock Designation, the number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the stock of the Corporation entitled to vote generally in the election of directors irrespective of the provisions of Section 242(b)(2) of the DGCL.

ARTICLE V

Board of Directors

Section 5.1 Number . The business and affairs of the Corporation shall be managed by or under the direction of a Board consisting of not fewer than one nor more than fifteen members, the exact number of which shall be fixed from time to time pursuant to the Bylaws of the Corporation (the “ Bylaws ”).

Section 5.2 Classes . From and after the date of the first meeting of the Board following the Listing, the directors (other than those directors elected by the holder of any series of Preferred Stock provided for or fixed pursuant to a Preferred Stock Designation or a Blank Check Common Stock Designation) shall be divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third of the total number of directors

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constituting the Board. The initial division of the Board into classes shall be made by the decision of the affirmative vote of a majority of the Board. The term of the initial Class I directors assigned at the time of Listing shall terminate on the date of the first annual meeting of stockholders held after the Listing, the term of the initial Class II directors assigned at the time of the Listing shall terminate on the date of the second annual meeting of stockholders held after the Listing, and the term of the initial Class III directors assigned at the time of the Listing shall terminate on the date of the third annual meeting of stockholders held after the Listing. Beginning at the annual meeting of stockholders held in 2015 and at each succeeding annual meeting thereafter, successors to the class of directors whose term expires at that annual meeting shall be elected for a three-year term and until their successors are duly elected and qualified. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible.

Section 5.3 Removal . Except as otherwise required by applicable Law and subject to any Preferred Stock Designation or any Blank Check Common Stock Designation, any director may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least 80% of the voting power of the then issued and outstanding shares of capital stock of the Corporation entitled to vote in the election of directors. The vacancy or vacancies in the Board caused by any such removal shall be filled by the Board as provided in Section 5.5.

Section 5.4 Term of Office . A director shall hold office until the annual meeting for the year in which his or her term expires and until his or her successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office.

Section 5.5 Vacancies and Newly Created Directorships . Unless otherwise required by Law, and subject to any Preferred Stock Designation or any Blank Check Common Stock Designation, any vacancy on the Board that results from an increase in the number of directors may be filled by a majority of the Board then in office, provided that a quorum is present, and any other vacancy occurring on the Board may be filled by a majority of the Board then in office, even if less than a quorum, or by a sole remaining director. Any director of any class elected to fill a vacancy resulting from an increase in the number of directors of such class shall hold office for a term that shall coincide with the remaining term of that class. Any director elected to fill a vacancy not resulting from an increase in the number of directors shall have the same remaining term as that of his or her predecessor.

Section 5.6 Voting . At all meetings of the Board or of any committee thereof at which a quorum is present, except as otherwise provided for by Law, the Certificate of Incorporation or the Bylaws, any action required or permitted to be taken by the Board shall be approved by the affirmative vote of a majority of the directors then present; provided , however , that a majority of the disinterested directors shall be required to approve any transaction or agreement involving the Corporation, its wholly-owned subsidiaries or Ashford Hospitality Advisors LLC and a director or officer of the Corporation or an Affiliate of any director or officer of the Corporation or an entity in which a director or officer is a director or an officer or has a financial interest. The proviso in the preceding sentence, however, shall not apply to the fixing by the Board of reasonable compensation for a director.

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Section 5.7 Powers . In addition to the powers and authority expressly conferred upon the directors herein or by applicable Law, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation which are not reserved to the stockholders pursuant to applicable Law, this Certificate of Incorporation, or the Bylaws.

Section 5.8 Special Meetings of Stockholders . Special meetings of the stockholders, for any purpose or purposes (i) may be called by the Chairman of the Board or the CEO and (ii) shall be called by the CEO or Secretary at the request in writing of a majority of the members of the Board, and may not be called by any other person or persons. Such request of the Board shall state the purpose or purposes of the proposed meeting. Business transacted at any special meeting shall be limited to the purpose or purposes stated in the notice.

Section 5.9 Agreements . The Board may authorize the execution and performance by the Corporation of one or more agreements with any person, corporation, association, company, trust, partnership (limited or general) or other organization (including, without limitation, any one or more Affiliates of the Corporation and the Corporation’s directors) whereby, subject to the supervision and control of the Board, any such other person, corporation, association, company, trust, partnership (limited or general) or other organization (including, without limitation, any one or more Affiliates of the Corporation and/the Corporation’s directors) shall render or make available to the Corporation managerial, operational, investment, either or both advisory and related services, office space and other services and facilities (including, if deemed advisable by the Board, the management or supervision of the operations of the Corporation and its subsidiaries) upon such terms and conditions as may be provided in such agreement or agreements (including, if deemed fair and equitable by the Board, the compensation payable thereunder by the Corporation).

Section 5.10 Personal Liability of Directors . No director of the Corporation shall be personally liable to the Corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability for:


◦	any breach of the director’s duty of loyalty to the Corporation or its stockholders;


◦	acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of Law;


◦	payments of unlawful distributions or unlawful stock repurchases or redemptions; or


◦	any transaction from which the director derived an improper personal benefit.

Any amendment, repeal or modification of this Section 5.10 shall not adversely affect any right or protection of a director of the Corporation existing at the time of such amendment, repeal or modification with respect to acts or omissions occurring prior to such amendment, repeal or modification.

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Section 5.11 No Written Ballot Required for Director Elections. Unless and except to the extent that the Bylaws shall so require, the election of directors of the Corporation need not be by written ballot.

ARTICLE VI

Indemnification

The Corporation shall indemnify and hold harmless, to the fullest extent authorized or permitted by Delaware Law, as now or hereafter in effect, any person (a “ Covered Person ”) who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “proceeding”), by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees) reasonably incurred by such Covered Person. Such right to indemnification shall continue as to a Covered Person who has ceased to be a director, officer, employee or agent of the Corporation and shall inure to the benefit of such Covered Person’s heirs, executors, and personal and legal representatives; provided , however , that, except for proceedings to enforce rights to indemnification, the Corporation shall not be obligated to indemnify any Covered Person (or such Covered Person’s heirs, executors or personal or legal representatives) in connection with a proceeding (or part thereof) initiated by such Covered Person unless such proceeding (or part thereof) was authorized or consented to by the Board. The right to indemnification conferred by this Article VI shall, to the fullest extent not prohibited by applicable Law, include the right to be paid by the Corporation the expenses (including attorneys’ fees) incurred in defending or otherwise participating in any proceeding in advance of its final disposition upon receipt by the Corporation of an undertaking by or on behalf of the Covered Person requesting advancement to repay the amount advanced if it shall ultimately be determined that such Covered Person is not entitled to be indemnified by the Corporation under this Article VI.

The Corporation may, to the extent authorized from time to time by the Board, provide rights to indemnification and to the advancement of expenses to employees and agents of the Corporation similar to those conferred in this Article VI to the Covered Persons.

The rights to indemnification and to the advance of expenses conferred in this Article VI shall not be exclusive of any other right which any person may have or hereafter acquire under the Certificate of Incorporation (as it may be amended and restated from time to time), the Bylaws (as they may be amended and restated from time to time), any statute, agreement, vote of stockholders or disinterested directors or otherwise.

The Corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was or has agreed to become a director, officer, employee or agent of the Corporation against any liability asserted against him or her and incurred by him or her or on his or her behalf

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in such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or her against such liability.

Any repeal or modification of this Article VI shall not adversely affect any rights to indemnification and to the advancement of expenses of a Covered Person existing at the time of such repeal or modification with respect to any acts or omissions occurring prior to such repeal or modification.

ARTICLE VII

Consent of Stockholders in Lieu of Meeting

Any action required or permitted to be taken by the stockholders of the Corporation must be taken at a meeting of stockholders; provided , however , that, with the express prior approval of the Board, such action may be taken without a meeting if a consent or consents in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.

ARTICLE VIII

Meetings of Stockholders

Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws may provide. The books of the Corporation may be kept (subject to any provision contained in the DGCL) outside the State of Delaware at such place or places as may be designated from time to time by the Board or in the Bylaws.

ARTICLE IX

Bylaws

Section 9.1 The Bylaws may establish procedures regulating the submission by stockholders of nominations, proposals and other business for consideration at meetings of stockholders of the Corporation.

Section 9.2 The Bylaws may be altered, amended or repealed, in whole or in part, or new bylaws may be adopted by the Board; provided , however , that notice of such alteration, amendment, repeal or adoption of new bylaws be contained in the notice of such meeting (if there is one) of the Board. All such alterations, amendments, repeals or adoptions must be approved by a majority of the Board.

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ARTICLE X

Miscellaneous

Section 10.1 Definitions . The following definitions are used herein:

“ Affiliate ” means, with respect to a given person, any other person that, directly or indirectly, controls, is controlled by or is under common control with, such person. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”) as applied to any person, means the possession, directly or indirectly, of Beneficial Ownership of, or the power to vote, ten percent (10%) or more of the securities having voting power for the election of directors (or other persons acting in similar capacities) of such person or the power otherwise to direct or cause the direction of the management and policies of such person, whether through the ownership of voting securities, by contract or otherwise.

“ Beneficial Ownership ” means ownership of shares of Common Stock by a Person, whether the interest in the shares of Common Stock is held directly or indirectly (including by a nominee), and shall include (in addition to direct ownership and indirect ownership through a nominee or similar arrangement) interests that would be treated as owned through the application of Rules 13d-3 and 13d-5 under the Exchange Act. The terms “Beneficial Owner,” “Beneficially Owns” and “Beneficially Owned” shall have the correlative meanings.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

“ Governmental Entity ” means any national, state, provincial, municipal, local or foreign government, any court, arbitral tribunal, administrative agency or commission, or other governmental or regulatory authority, commission, or agency, or any non-governmental, self-regulatory authority, commission, or agency.

“ Law ” means any statute, law, code, ordinance, rule, or regulation of any Governmental Entity.

“ Listing ” means the listing of the Common Stock on the NYSE MKT or other national securities exchange.

“ NYSE MKT ” means NYSE MKT LLC.

“ Person ” means an individual, corporation, partnership, estate, trust, association, private foundation, joint stock company, limited liability company, or other entity and also includes a group as that term is used for purposes of Section 13(d)(3) of the Exchange Act.

Section 10.2 Potential Business Opportunity . If a director or officer of the Corporation who is also a director or officer of Ashford Hospitality Trust, Inc., Ashford Hospitality Prime, Inc. or their respective Affiliates or successors (such person, an “ Overlap Person ” and such entity, an “ Other Entity ”) is presented or offered, or otherwise acquires knowledge of, a potential transaction

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or matter that may constitute or present a business opportunity for the Corporation or any of its subsidiaries, in which the Corporation or any of its subsidiaries could have an interest or expectancy (any such transaction or matter, and any such actual or potential business opportunity, a “ Potential Business Opportunity ”):

(i) such director or officer will, to the fullest extent permitted by Law, have no duty or obligation to refrain from referring such Potential Business Opportunity to any Other Entity and, if such Overlap Person refers such Potential Business Opportunity to any Other Entity, such Overlap Person, to the fullest extent permitted by Law, shall have no duty or obligation to refer such Potential Business Opportunity to the Corporation or to any of its subsidiaries or to give any notice to the Corporation or to any of its subsidiaries regarding such Potential Business Opportunity (or any matter related thereto);

(ii) if such Overlap Person refers such Potential Business Opportunity to any Other Entity, such Overlap Person, to the fullest extent permitted by Law, will not be liable to the Corporation or to any of its subsidiaries, as a director, officer, stockholder or otherwise, for any failure to refer such Potential Business Opportunity to the Corporation, or for referring such Potential Business Opportunity to any Other Entity, or for any failure to give any notice to the Corporation regarding such Potential Business Opportunity or any matter relating thereto;

(iii) any Other Entity may participate, engage or invest in any such Potential Business Opportunity notwithstanding that such Potential Business Opportunity may have been referred to such entity by an Overlap Person; and

(iv) if a director or officer who is an Overlap Person refers a Potential Business Opportunity to any Other Entity, then, as between the Corporation and/or its subsidiaries, on the one hand, and such Other Entity, on the other hand, the Corporation and its subsidiaries, to the fullest extent permitted by Law, shall be deemed to have renounced any interest, expectancy or right in or to such Potential Business Opportunity or to receive any income or proceeds derived therefrom solely as a result of such Overlap Person having been presented or offered, or otherwise acquiring knowledge of such Potential Business Opportunity;

unless in each case referred to in clauses (i), (ii), (iii) or (iv) above, the opportunity was offered to such Overlap Person exclusively in his or her capacity as a director or officer of the Corporation (an opportunity meeting all of such conditions, a “ Restricted Potential Business Opportunity ”). To the fullest extent permitted by Law, the Corporation shall be deemed to have renounced any interest or expectancy in any Potential Business Opportunity that is not a Restricted Potential Business Opportunity. In the event that the Board declines to pursue a Potential Business Opportunity, the Overlap Persons are free to refer such Potential Business Opportunity to any Other Entity.

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Section 10.3 Ambiguity . For the avoidance of doubt and in furtherance of the foregoing, nothing contained in this Article X amends or modifies, or will amend or modify, in any respect, any written contractual arrangement between Ashford Inc. or any of its Affiliates and each of Ashford Hospitality Trust, Inc., Ashford Hospitality Prime, Inc. and any of their respective Affiliates.

Section 10.4 Application of Provision . This Article X shall apply as set forth above except as otherwise provided by Law. It is the intention of this Article X to take full advantage of statutory amendments, the effect of which may be to specifically authorize or approve provisions such as this Article X. No alteration, amendment, termination, expiration or repeal of this Article X nor the adoption of any provision of the Certificate of Incorporation inconsistent with this Article X shall eliminate, reduce, apply to or have any effect on the protections afforded hereby to any director, officer, employee or stockholder of Ashford Hospitality Trust, Inc., Ashford Hospitality Prime, Inc. or any of their respective Affiliates for or with respect to any investments, activities or opportunities of which such director, officer, employee or stockholder becomes aware prior to such alteration, amendment, termination, expiration, repeal or adoption, or any matters occurring, or any cause of action, suit or claim that, but for this Article X, would accrue or arise, prior to such alteration, amendment, termination, expiration, repeal or adoption.

Section 10.5 Deemed Notice . Any person or entity purchasing or otherwise acquiring any interest in any shares of the capital stock of the Corporation shall be deemed to have notice of and to have consented to the provisions of this Article X.

Section 10.6 Severability . If this Article X or any portion hereof shall be invalidated or held to be unenforceable on any ground by any court of competent jurisdiction, the decision of which shall not have been reversed on appeal, this Article X shall be deemed to be modified to the minimum extent necessary to avoid a violation of Law and, as so modified, this Article X and the remaining provisions hereof shall remain valid and enforceable in accordance with their terms to the fullest extent permitted by Law.

Neither the alteration, amendment or repeal of this Article X nor the adoption of any provision of the Certificate of Incorporation inconsistent with this Article X shall eliminate or reduce the effect of this Article X in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article X, would accrue or arise, prior to such alteration, amendment, repeal or adoption. Following the expiration of this Article X, any contract, agreement, arrangement or transaction involving a Potential Business Opportunity shall not by reason thereof result in any breach of any fiduciary duty or duty of loyalty or failure to act in good faith or in the best interests of the Corporation or derivation of any improper benefit or personal economic gain, but shall be governed by the other provisions of the Certificate of Incorporation, the Bylaws, the DGCL and other applicable Law.

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ARTICLE XI

Amendments and Repeal

The Corporation reserves the right at any time and from time to time to amend, alter, change or repeal any provision contained in the Certificate of Incorporation and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted in the manner now or hereafter prescribed in the Certificate of Incorporation, the Bylaws or the DGCL, and all rights, preferences and privileges herein conferred upon stockholders, directors or any other person by and pursuant to this Certificate of Incorporation in its present form or as hereafter amended are granted subject to such reservation.

ARTICLE XII

Forum

Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or employee of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim against the Corporation arising pursuant to any provision of the DGCL, the Certificate of Incorporation or the Bylaws or (iv) any other action asserting a claim against the Corporation governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article XII.

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IN WITNESS WHEREOF, Ashford Inc. has caused this Amended and Restated Certificate of Incorporation to be executed by its duly executed officer on this 8th day of October, 2014.

By: /s/ David A. Brooks
Name: David A. Brooks
Title: Chief Operating Officer

[Signature Page]

EXHIBIT 10.3

SECOND AMENDED AND RESTATED
ADVISORY AGREEMENT

THIS SECOND AMENDED AND RESTATED ADVISORY AGREEMENT (this “ Agreement ”), is dated as of November 3, 2014 (the “ Effective Date ”), by and between ASHFORD HOSPITALITY PRIME, INC., a Maryland corporation (“ Ashford Prime ”), ASHFORD HOSPITALITY PRIME LIMITED PARTNERSHIP, a Delaware limited partnership (the “Operating Partnership” ), and ASHFORD HOSPITALITY ADVISORS LLC, a Delaware limited liability company (the “ Advisor ”).

WHEREAS, Ashford Prime, through its interest in the Operating Partnership, is in the business of investing in the hospitality industry including, the acquiring, developing, owning, asset managing and disposing of hotels (for purposes hereof, unless the context otherwise requires, the term “ Company ” shall collectively include Ashford Prime and the Operating Partnership);

WHEREAS, Ashford Prime, the Operating Partnership and the Advisor entered into an Advisory Agreement dated and effective on November 19, 2013, which was amended and restated on May 13, 2014 (the “ Original Advisory Agreement ”), pursuant to which the Advisor agreed to perform certain advisory services identified in such agreement, on behalf of, and subject to the supervision of, the board of directors of Ashford Prime (the “Board of Directors’), in exchange for the compensation set forth therein;

WHEREAS, the board of directors of Ashford Prime desires to renegotiate certain provisions of the Original Advisory Agreement and the Advisor is willing to do so;

WHEREAS, the Company desires to continue to avail itself of the experience, brand relationships, lender and capital provider sources and relationships, asset management expertise, sources of information, advice, assistance and certain facilities of the Advisor and to have the Advisor continue to provide the services hereinafter set forth, on behalf of, and subject to the supervision of, the Board of Directors, all as provided herein; and

WHEREAS, the Advisor is willing to continue to provide such services to the Company on the terms set forth herein;

NOW, THEREFORE, in consideration of the mutual covenants set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, the parties agree as follows:

1. APPOINTMENT OF ADVISOR. The Company acknowledges the appointment of the Advisor as the exclusive advisor and asset manager of the Company pursuant to the terms of the Original Advisory Agreement and acknowledges the continued role of the Advisor as the exclusive advisor and asset manager of the Company, to provide the management and real estate services specified herein on the terms and conditions set forth in this Agreement, and the Advisor hereby acknowledges and accepts such continued appointment.

2. DUTIES OF ADVISOR. Subject to the supervision of the Board of Directors, the Advisor will be responsible for the day-to-day operations of the Company (and all subsidiaries and joint ventures of the Company) and shall perform (or cause to be performed) all services relating to the acquisition and disposition of hotels, asset management, financing and operations of the Company as may be reasonably required, which shall include the following related to the Company’s hotel assets:

(a) source, investigate and evaluate acquisitions and dispositions consistent with the Company’s Investment Guidelines (as defined in Section 9.2(a) below) and make recommendations to the Board of Directors;

(b) engage and supervise, on the Company’s behalf and at the Company’s expense, third parties to provide development management, property management, project management, design and construction services, investment banking services, financial services, property disposition brokerage services, independent accounting and auditing services and tax reviews and advice, transfer agent and registrar services, feasibility studies, appraisals, engineering studies, environmental property inspections and due diligence services, underwriting review services, consulting services and all other services reasonably necessary for Advisor to perform its duties hereunder;

(c) negotiate, on the Company’s behalf, any acquisitions, dispositions, financings, restructurings or other transactions with sellers, purchasers, lenders, brokers, agents and other applicable representatives;

(d) coordinate and manage joint ventures with the Company, including monitoring and enforcing compliance with applicable joint venture or partnership governing documents;

(e) negotiate, on behalf of the Company, terms of hotel management agreements, franchise agreements and other contracts or agreements of the Company, and modifications, extensions, waivers or terminations thereof including, without limitation, the negotiation and approval of annual operating and capital budgets thereunder;

(f) on behalf of the Company, enforce, monitor and manage compliance of hotel management agreements, franchise agreements and other contracts or agreements of the Company, and modifications, extensions, waivers or terminations thereof;

(g) negotiate, on behalf of the Company, terms of loan documents for the Company’s financings;

(h) enforce, monitor and manage compliance of loan documents to which the Company is a party, in each case, on behalf of the Company;

(i) administer bookkeeping and accounting functions as are required for the management and operation of the Company, contract for audits and prepare or cause to be prepared such periodic reports and filings as may be required by any governmental authority in connection with the ordinary conduct of the Company’s business, and otherwise advise and assist the Company with its compliance with applicable legal and regulatory requirements, including without limitation, periodic reports, returns or statements required under the Securities Exchange Act of 1934, as amended, the Code and any regulations or rulings thereunder, the securities and tax statutes of any jurisdiction in which the Company is obligated to file such reports, or the rules and regulations promulgated under any of the foregoing;

(j) advise and assist in the preparation and filing of all offering documents, registration statements, prospectuses, proxies, and other forms or documents filed with the Securities and Exchange Commission (the “ SEC ”) pursuant to the Securities Act of 1933, as amended, or any state securities regulators (it being understood that the Company shall be responsible for the content of any and all of its offering documents, SEC filings or state regulatory filings, including, without limitation, those filings referred to in subparagraph 2(i) above, and Advisor shall not be held liable for any costs or liabilities arising out of any misstatements or omissions in the Company’s offering documents, SEC filings, state regulatory filings or other filings referred to in subparagraphs 2(i) and (j), whether or not material, and the Company shall promptly indemnify Advisor for such costs and liabilities);

(k) retain counsel, consultants and other third party professionals on behalf of the Company, coordinate, supervise and manage all consultants, third party professionals and counsel, and investigate, evaluate, negotiate and oversee the processing of claims by or against the Company;

(l) advise and assist with the Company’s risk management and oversight function;

(m) provide office space, office equipment and personnel necessary for the performance of services;

(n) perform or supervise the performance of such administrative functions reasonably necessary for the establishment of bank accounts, related controls, collection of revenues and the payment of Company debts and obligations;

(o) communicate with the Company’s investors and analysts as required to satisfy reporting or other requirements of any governing body or exchange on which the Company’s securities are traded and to maintain effective relations with such investors;

(p) advise and assist the Company with respect to the Company’s public relations, preparation of marketing materials, website and investor relation services;

(q) counsel the Company regarding qualifying, and maintaining Ashford Prime’s qualification as a REIT;

(r) assist the Company in complying with all regulatory requirements applicable to the Company (subject to the Company providing appropriate, necessary and timely funding of capital);

(s) counsel the Company in connection with policy decisions to be made by the Board of Directors;

(t) furnish reports and statistical and economic research to the Company regarding the Company’s activities, investments, financing and capital market activities and services performed for the Company by the Advisor;

(u) asset manage and monitor the operating performance of the Company’s real estate investments, including the management and implementation of capital improvement programs, pursue property tax appeals (as appropriate), and provide periodic reports with respect to the Company’s investments to the Board of Directors, including comparative information with respect to such operating performance and budgeted or projected operating results;

(v) maintain cash in U.S. Treasuries or bank accounts (with the understanding that Advisor’s duties shall not include providing or assisting in proactive investment management strategies or investment in securities other than U.S. Treasuries), and make payment of fees, costs and expenses, or the payment of distributions to stockholders of the Company;

(w) advise the Company as to its capital structure and capital raising;

(x) take all actions reasonably necessary to enable the Company to comply with and abide by all applicable laws and regulations in all material respects subject to the Company providing appropriate, necessary and timely funding of capital;

(y) provide the Company with an internal audit staff with the ability to satisfy any applicable regulatory requirements, including, requirements of the New York Stock Exchange and the SEC, and any additional duties that are determined reasonably necessary or appropriate by the Company’s audit committee; and

(z) take such other actions and render such other services as may reasonably be requested by the Company consistent with the purpose of this Agreement and the aforementioned services.

The Advisor shall make available sufficient experienced and appropriate personnel to perform the services and functions specified including, without limitation, the positions of the chief executive officer, president, chief financial officer, chief accounting officer, executive vice president-asset management, senior vice president-corporate strategy and senior vice president-

finance (collectively, “ Executives ”) or such positions as Advisor deems reasonably necessary. The Advisor shall not be obligated to dedicate any of its officers or other personnel exclusively to the Company nor is the Advisor, its Affiliates or any of its officers or other employees obligated to dedicate any specific portion of its or their time to the Company or its business, except as necessary to perform the services provided above. The Advisor shall be entitled to rely on qualified experts and professionals (including, without limitation, accountants, legal counsel and other professional service providers) hired by the Advisor at the Company’s sole cost and expense. The Advisor may retain, for and on behalf, and at the sole cost and expense, of the Company, such services of any individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization or other entity (each, a “ Person ”) as the Advisor deems necessary or advisable in connection with the management and operations of the Company.

Any waiver, consent, approval, modification, enforcement matter or election required to be made by the Company under the Mutual Exclusivity Agreement between the Company, Remington Lodging and Hospitality LLC (“ Remington ”) and Monty J. Bennett, dated as of November 19, 2013, as the same may be amended from time to time, or the Master Management Agreement between the Company and Remington, dated as of November 19, 2013, as the same may be amended or supplemented from time to time, shall be within the exclusive discretion and control of a majority of the Independent Directors (or higher vote thresholds specifically set forth in such agreements) unless specifically delegated to the Advisor by a majority of the Independent Directors. For purposes of this Agreement, “ Independent Director ” shall mean any director of Ashford Prime who, on the date at issue, is currently serving on the Board of Directors and is “independent” as determined by application of the current rules and regulations of the New York Stock Exchange in effect as of the Effective Date of this Agreement. For purposes of this Agreement, “ Affiliate ” shall mean a Person that directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with the Person in question and any officer, director, trustee, key decision-making employee, stockholder or partner of any Person referred to in the preceding clause, except that for purposes of this Agreement, the Company shall not be considered an Affiliate of the Advisor.

Any increase in the scope of duties or services to be provided by the Advisor must be jointly approved by the Company and the Advisor and will be subject to additional compensation determined in accordance with the provisions of Section 6.4 and the process set forth in Section 9.3 below.

3. AUTHORITY OF ADVISOR. Subject to the express limitations set forth in this Agreement and the continuing authority of the Board of Directors over the management of the Company, the power to direct the management, operation and policies of the Company shall be vested in the Advisor. Notwithstanding the foregoing, all material decisions with respect to annual capital plans, brand conversions, the commencement or settlement of litigation matters, investment decisions, capital market transactions, annual budgets and management and franchise options recommended by the Advisor, including the acquisition, sale, financing and refinancing of assets, shall be subject to the prior authorization of the Board of Directors, except to the extent such authority is expressly delegated by the Board of Directors to the Advisor. Additionally, if the charter or Maryland General Corporation Law requires the prior approval of the Board of Directors, the Advisor may not take any action on behalf of the Company without the prior approval of the Board

of Directors or duly authorized committees thereof. In such cases where prior approval is required, the Advisor will deliver to the Board of Directors such documents and supporting information as may be reasonably requested by the Board of Directors to evaluate a proposed investment (and any related financing) or other matter requiring the Board of Directors’ authorization.

4. BANK ACCOUNTS. The Advisor may establish and maintain, subject to any applicable conditions or limitations of loan documents applicable to the Company, one or more bank accounts in its own name for the account of the Company or in the name of the Company and may collect and deposit into any account or accounts, and disburse from any such account or accounts, any money on behalf of the Company, under such terms and conditions as the Board of Directors may approve, provided that no funds shall be comingled with the funds of the Advisor. The Advisor shall from time to time render appropriate accountings of such collections and payments to the Board and the independent auditors of the Company.

5. PAYMENT OF EXPENSES. In addition to the compensation paid to the Advisor pursuant to Section 6 hereof, the Company shall pay directly or reimburse the Advisor, on a monthly basis, for all of the expenses paid or incurred by the Advisor or its Affiliates on behalf of the Company or in connection with the services provided to the Company pursuant to this Agreement, including, but not limited to, tax, legal, accounting, advisory, investment banking and other third party professional fees, Board of Directors’ fees, debt service, taxes, insurance (including errors and omissions insurance and any additional insurance required by Section 8.2 ), underwriting, brokerage, reporting, registration, listing fees and charges, travel and entertainment expenses, conference sponsorships, transaction diligence and closing costs, dead deal costs, dividends, office space, the cost of all equity awards or compensation plans established by the Company, including the value of awards made by the Company to the employees, officers, Affiliates and representatives of the Advisor, and any other costs which are reasonably necessary for the performance by the Advisor of its duties and functions under this Agreement and also including any expenses incurred by Advisor to comply with new or revised laws or governmental rules or regulations that impose additional duties on the Company or the Advisor in its capacity as advisor to the Company, including any personnel costs incurred to satisfy such additional duties. In addition, the Company shall pay its pro rata share of the office overhead and administrative expenses of the Advisor incurred in providing its duties pursuant to this Agreement.

The Advisor shall be responsible for all wages, salaries, cash bonus payments and benefits related to all employees of the Advisor providing services to the Company (including any officers of the Company who are also officers of the Advisor), excluding expenses related to (i) the provision of internal audit services as described in the next sentence and (ii) equity compensation awarded by the Company to employees, officers, Affiliates and representatives of the Advisor pursuant to Section 6.3 below. The Company shall reimburse the Advisor, on a monthly basis, the Company’s pro-rata portion (as reasonably agreed to between the Advisor and a majority of the Company’s Independent Directors or Ashford Prime’s audit committee, chairman of the audit committee or lead director) of all expenses related to (i) employment of the Advisor’s internal audit managers and other employees of the Advisor who are actively engaged in providing internal audit services to the Company, (ii) the reasonable travel and other out-of-pocket costs of the Advisor relating to the activities of the Advisor’s internal audit employees and the reasonable third party expenses which

the Advisor incurs, in each case, in connection with providing internal audit services, and (iii) all reasonable international office expenses, overhead, personnel costs, travel and other costs directly related to Advisor’s non-Executive personnel that are located internationally or that oversee the operations of international assets or related to Advisor’s personnel that source, investigate or provide diligence services in connection with possible acquisitions or investments internationally . Such expenses shall include, but are not limited to, salary, wages, payroll taxes and the cost of employee benefit plans.

6. COMPENSATION.

6.1 Base Fee . The Company shall pay to the Advisor a quarterly base fee (the “ Base Fee ”) payable in arrears in cash, for services provided by the Advisor in the preceding quarter.

For purposes of this Agreement, the “Base Fee” will be equal to 0.70% per annum of the Total Market Capitalization of the Company, subject to the payment of a minimum quarterly base fee (“ Minimum Base Fee ”), if applicable. For purposes of this Agreement, “Total Market Capitalization” shall be calculated on a quarterly basis as (i) the average of the volume-weighted average price per share of Ashford Prime’s common stock for each trading day of the preceding quarter multiplied by the average number of shares of Ashford Prime’s common stock outstanding during such quarter, on a fully-diluted basis (assuming all common units and long term incentive partnership units in the Operating Partnership which have achieved economic parity with common units in the Operating Partnership have been converted to common stock in the Company), plus (ii) the quarterly average of the aggregate principal amount of the Company’s consolidated indebtedness (including the Company’s proportionate share of debt of any entity that is not consolidated but excluding the Company’s joint venture partners’ proportionate share of consolidated debt), plus (iii) the quarterly average of the liquidation value of the Company’s outstanding preferred equity. The Minimum Base Fee for each quarter will be equal to the greater of (i) 90% of the Base Fee paid for the same quarter in the prior year and (ii) the G&A Ratio multiplied by the Company’s Total Market Capitalization. For purposes of this Agreement, the “ G&A Ratio ” will be calculated as the simple average of the ratios of total general and administrative expenses, less any non-cash expenses but including any dead deal costs, paid in the applicable quarter by each member of a select peer group set forth in Exhibit A (each, a “ Peer Group Member ” and collectively, the “ Peer Group ”), divided by the total enterprise value of such Peer Group Member (calculated in the same manner as the Company’s Total Market Capitalization). The G&A Ratio for each Peer Group Member will be calculated based on the financial information presented in such Peer Group Member’s Form 10-Q or 10-K periodic filings with the SEC following the end of each quarter. The Peer Group may be modified from time to time by mutual written agreement of the Advisor and a majority of the Independent Directors, negotiating in good faith.

The Base Fee, as calculated above, shall be payable in arrears no later than the 15th day following the end of each quarter ( i.e. , one-fourth of 0.70% of the Total Market Capitalization of the Company). The Minimum Base Fee shall be calculated as soon as practicable following the end of the quarter, and to the extent the Minimum Base Fee exceeds the Base Fee paid to the Advisor with respect to any quarter, the Company will pay the Advisor the difference between Minimum Base Fee and the Base Fee within 5 business days of final calculation of the Minimum Base Fee.

For purposes of payment of the Base Fee for a partial quarter relating to the first quarter in which this Agreement is effective or for the last quarter in which this Agreement is terminated, the Base Fee shall be calculated as 0.70% of the Total Market Capitalization of the Company, calculated using each trading day of such partial quarter prior to termination, multiplied by the number of days in the applicable quarter in which this Agreement is in effect divided by 365 or 366 days, as applicable. The Minimum Base Fee shall be similarly reduced proportionately based on the number of days in the applicable quarter in which this Agreement is in effect divided by 365 or 366 days, as applicable.

6.2 Incentive Fee . In each year that the Company’s total shareholder return exceeds the average total shareholder return for the Peer Group (the “ Incentive Fee Threshold ”), the Company shall pay to the Advisor an incentive fee (the “ Incentive Fee ”), calculated as set forth in the following paragraph. For purposes of this Agreement, beginning with the calendar year ending December 31, 2014, the Company’s total shareholder return will be calculated using the year-end stock price equal to the closing price of Ashford Prime’s common stock on the last trading day of the year, assuming all dividends on the common stock are reinvested into additional shares of Ashford Prime common stock as compared to the closing stock price of Ashford Prime’s common stock on the last trading day of the prior year. The average total shareholder return for each Peer Group Member will be calculated in the same manner, and the average for the Peer Group will be the simple average of the total shareholder return for each Peer Group Member.

If the Company’s total shareholder return exceeds the Incentive Fee Threshold with respect to any calendar year (or stub period), the annual Incentive Fee for such calendar year (or stub period) shall be calculated, for each year (or stub period) beginning with the year ending December 31, 2014, as (i) 5% of the amount (expressed as a percentage but in no event greater than 25%) by which the Company’s annual total shareholder return exceeds the Incentive Fee Threshold, multiplied by (ii) the Fully Diluted Equity Value (defined below) of the Company at December 31 of such calendar year. The Company’s “ Fully Diluted Equity Value ” shall be calculated by assuming that all units in the Operating Partnership, including long term incentive partnership units of the Operating Partnership that have achieved economic parity with the common units of the Operating Partnership, if any, are converted into common stock and that the per share value of each share of Company common stock is equal to the closing price of the Company’s common stock on the last trading day of the year.

If this Agreement is terminated on a day other than the last trading day of a calendar year, then the Company’s total shareholder return, the Incentive Fee Threshold and the total shareholder return for each Peer Group Member will be calculated using the stock price of Ashford Prime’s common stock and each Peer Group Member’s common stock closing price on the last trading day immediately preceding the date of termination of this Agreement.

The Incentive Fee, if any, subject to the FCCR Condition (defined below), shall be payable in arrears in three (3) equal annual installments with the first installment payable on January 15 following the applicable year for which the Incentive Fee relates and on January 15 of the next two successive years. Notwithstanding the foregoing, upon any termination of this Agreement for any reason, any unpaid Incentive Fee (including any Incentive Fee installment for the stub period ending on the

termination date) shall become fully earned and immediately due and payable without regard to the FCCR Condition defined below. Except in the case when the Incentive Fee is payable on the date of termination of this Agreement, up to 50% of the Incentive Fee may be paid by the Company, at the option of the Company, in shares of common stock of Ashford Prime or common units of the Operating Partnership, with the balance payable in cash, unless at the time for payment of the Incentive Fee, the Advisor (or its Affiliates) owns common stock or common units in an amount (determined with reference to the closing price of the Company’s common stock on the last trading day of the year or stub period) greater than or equal to three times the Base Fee for the preceding four quarters or payment in such securities would cause the Advisor to be subject to the provisions of the Investment Company Act, in which case, the entire Incentive Fee will be paid by the Company in cash.

Upon the determination of the Incentive Fee, except in the case of any termination of this Agreement in which case the Incentive Fee for the stub period and all unpaid installments of an Incentive shall be deemed earned and fully due and payable, each one-third installment of the Incentive Fee shall not be deemed earned by Advisor or otherwise payable by the Company unless the Company, as of the December 31 immediately preceding the due date for the payment of the Incentive Fee installment, has a FCCR of .20x or greater (the “ FCCR Condition ”). For purposes hereof, “FCCR” shall mean the Company’s fixed charge coverage ratio being the ratio of adjusted EBITDA for the previous four consecutive fiscal quarters to fixed charges, which includes all (i) interest expense of the Company and its subsidiaries, (ii) regularly scheduled principal payments of the Company and its subsidiaries, other than balloon or similar principal payments which repay indebtedness in full and payments under cash flow mortgages applied to principal, and (iii) preferred dividends paid by the Company.

6.3 Equity Compensation . To incentivize employees, officers, consultants, non-employee directors, Affiliates or representatives of the Advisor to achieve goals and business objectives of the Company, as established by the Board of Directors, in addition to the Base Fee and the Incentive Fee set forth above, the Board of Directors will have the authority to and shall make recommendations of annual equity awards to the Advisor or directly to employees, officers, consultants, non-employee directors, Affiliates or representatives of the Advisor, based on the achievement by the Company of certain financial or other objectives established by the Board of Directors.

The Company, at its option, may choose to issue such compensation in the form of equity awards in Ashford Prime or the Operating Partnership, unless and to the extent that receipt of such equity awards would adversely affect the Company’s status as a REIT, in which case, the equity awards shall be limited to equity awards in the Operating Partnership. For a period of one year from the date of issuance, any such equity awards in the Operating Partnership shall not be transferable, except by operation of law, without the written consent of the General Partner which consent may be withheld in the sole and absolute discretion of the General Partner; provided, however, the Advisor may assign, without the consent of the General Partner, such equity awards to employees, officers, consultants, non-employees, directors, Affiliates or representatives of Advisor provided the one-year restriction on transfer shall remain applicable to such assignee. In addition, except as expressly provided above, any transfer of such equity awards at any time must comply with the transfer

restrictions of Ashford Prime OP’s partnership agreement or the Company’s charter and bylaws, as applicable.

6.4 Additional Services . If, and to the extent that, the Company requests the Advisor to render services on behalf of the Company other than those required to be rendered by the Advisor under this Agreement, such additional services shall be compensated separately at Market Rates as determined in accordance with the process set forth in Section 9.3 below.

7. LIMITATION ON ACTIVITIES. Notwithstanding anything in this Agreement to the contrary, the Advisor shall not take any action (unless directed by the Board of Directors, in which case the Company shall indemnify and hold harmless Advisor and each of its officers, directors, employees, members, managers, agents and representatives, from and against any and all claims, liabilities, costs and expenses threatened or incurred by Advisor or any other indemnified person, which, directly or indirectly, results from the Advisor following the directive of the Board of Directors), which would (a) adversely affect the status of the Company as a REIT, (b) subject the Company to regulation under the Investment Company Act of 1940, as amended, (c) knowingly and intentionally violate any law, rule or regulation of any governmental body or agency having jurisdiction over the Company (provided that without adequate assurance of funding by the Company necessary for compliance, Advisor shall not be responsible for such violations and the Company shall indemnify and hold harmless Advisor and each of its officers, directors, employees, members, managers, agents and representatives, from and against all claims, liabilities, costs and expenses threatened or incurred by Advisor, directly or indirectly, as a result of the Company’s failure to timely fund adequate capital to comply with any applicable law, rule or regulation), (d) violate any of the rules or regulations of any exchange on which the Company’s securities are listed or (e) violate the Company’s charter, bylaws or resolutions of the Board of Directors, all as in effect from time to time.

The Advisor acknowledges receipt of the Company’s Code of Business Conduct and Ethics, Code of Conduct for CEO, CFO and CAO, and Policy on Insider Training, and agrees to require its employees who provide services to the Company to comply with such codes and policies.

8. LIMITATION OF LIABILITY AND INDEMNIFICATION.

8.1 Limitation on Liability . The Advisor shall have no responsibility other than to render the services and take the actions described herein in good faith and with the exercise of due care and shall not be responsible for any action of the Board of Directors in following or declining to follow any advice or recommendation of the Advisor. The Advisor (including its officers, directors, managers, employees and members) will not be liable for any act or omission by the Advisor (or its officers, directors, managers, employees and members) performed in accordance with and pursuant to this Agreement, except by reason of acts constituting gross negligence, bad faith, willful misconduct or reckless disregard of its duties under this Agreement.

8.2 Insurance Coverage of the Advisor . The Advisor shall maintain errors and omissions insurance coverage and other insurance coverage in amounts which are customarily carried by asset managers performing functions similar to those of the Advisor under this Agreement. No fidelity bond shall be required.

8.3 Indemnification .

(a) The Company shall reimburse, indemnify and hold harmless the Advisor and its partners, directors, officers, stockholders, managers, members, agents, employees and each other Person, if any, controlling the Advisor (each, an “ Advisor Indemnified Party ”), to the full extent lawful, from and against any and all losses, claims, damages or liabilities of any nature whatsoever (“ Losses ”) with respect to or arising from any acts or omission of the Advisor (including ordinary negligence) in its capacity as such, except with respect to losses, claims, damages or liabilities with respect to or arising out of such Advisor Indemnified Party’s gross negligence, bad faith or willful misconduct, or reckless disregard of its duties under this Agreement.

(b) The Advisor shall reimburse, indemnify and hold harmless the Company, and its partners, directors, officers, stockholders, managers, members, agents, employees and each other Person, if any, controlling the Company (each, a “ Company Indemnified Party ”; Advisor Indemnified Party and Company Indemnified Party are each sometimes hereinafter referred to as an “ Indemnified Party ”) of and from any and all Losses in respect of or arising from (i) any acts or omissions of the Advisor constituting bad faith, willful misconduct, gross negligence or reckless disregard of duties of the Advisor under this Agreement or (ii) any claims by the Advisor’s employees relating to the terms and conditions of their employment by the Advisor.

(c) Notwithstanding the indemnification provisions in Section 8.3(a) and Section 8.3(b) above, indemnification will not be allowed for any liability arising from or out of a violation of state or federal securities laws by an Indemnified Party. Indemnification will be allowed for settlements and related expenses of lawsuits alleging securities law violations, and for expenses incurred in successfully defending such lawsuits, provided that a court either (i) approves the settlement and finds that indemnification of the settlement and related costs should be made, or (ii) approves indemnification of litigation costs if a successful defense is made. If indemnification is unavailable as a result of this Section 8.3(c) , the indemnifying party shall contribute to the aggregate losses, claims, damages or liabilities to which the Indemnified Party may be subject in such amount as is appropriate to reflect the relative benefits received by each of the indemnifying party and the party seeking contribution on the one hand and the relative faults of the indemnifying party and the party seeking contribution on the other, as well as any other relevant equitable considerations.

(d) Promptly after receipt by an Indemnified Party of notice of the commencement of any action, such Indemnified Party shall, if a claim in respect thereof is to be made pursuant hereto, notify the indemnifying party in writing of the commencement thereof; but the omission to so notify the indemnifying party shall not relieve it from any liability that it may have to any Indemnified Party pursuant to this Section 8.3 . In case any such action shall be brought against an Indemnified Party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, to assume the defense thereof, with counsel satisfactory to such Indemnified Party and, after notice from the indemnifying party to such

Indemnified Party of its election to assume the defense thereof, the indemnifying party shall not be liable to such Indemnified Party under Section 8.3(a) or (b) hereof, as applicable, for any legal expenses of other counsel or any of the expenses, in each case subsequently incurred by such Indemnified Party, unless (i) the indemnifying party and the Indemnified Party shall have mutually agreed to the retention of such counsel, or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and Indemnified Party and representation of both parties by the same counsel would be inappropriate in the reasonable opinion of the Indemnified Party, due to actual or potential differing interests between them. The obligations of the indemnifying party under this Section 8.3 shall be in addition to any liability which the indemnifying party otherwise may have.

(e) The Company shall be required to advance funds to an Indemnified Party for legal expenses and other costs incurred as a result of any legal action or proceeding if a claim in respect thereof is to be made pursuant hereto and if requested by such Indemnified Party if (i) such suit, action or proceeding relates to or arises out of, or is alleged to relate to or arise out of or has been caused or alleged to have been caused in whole or in part by, any action or inaction on the part of the Indemnified Party in the performance of its duties or provision of its services on behalf of the Company; and (ii) the Indemnified Party undertakes to repay any funds advanced pursuant to this Section 8.3(3) in cases in which such Indemnified Party would not be entitled to indemnification under Section 8.3(a) . If advances are required under this Section 8.3(3) , the Indemnified Party shall furnish the Company with an undertaking as set forth in clause (ii) of the preceding sentence and shall thereafter have the right to bill the Company for, or otherwise require the Company to pay, at any time and from time to time after such Indemnified Party shall become obligated to make payment therefor, any and all reasonable amounts for which such Indemnified Party is entitled to indemnification under Section 8.3 , and the Company shall pay the same within thirty (30) days after request for payment. In the event that a determination is made by a court of competent jurisdiction or an arbitrator that the Company is not so obligated in respect of any amount paid by it to a particular Indemnified Party, such Indemnified Party will refund such amount within sixty (60) days of such determination, and in the event that a determination by a court of competent jurisdiction or an arbitrator is made that the Company is so obligated in respect to any amount not paid by the Company to a particular Indemnified Party, the Company will pay such amount to such Indemnified Party within thirty (30) days of such final determination, in either case together with interest at the current prime rate plus two percent (2%) from the date paid until repaid or the date it was obligated to be paid until the date actually paid.

9. RELATIONSHIP OF ADVISOR AND COMPANY.

9.1 Relationship .

(a) 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. Nothing herein contained shall prevent the Advisor from engaging in other

activities, including, without limitation, the rendering of advice to other Persons (including other REITs) and to the management of Ashford Hospitality Trust, Inc. (“ Ashford Trust ”), the Advisor’s parent, or other programs advised, sponsored or organized by the Advisor or its Affiliates. The Company shall not revise its Investment Guidelines to be directly competitive with all or any portion of the Investment Guidelines of Ashford Trust as of the date hereof. The Company acknowledges that Ashford Trust’s investment guidelines as of the date hereof include all segments of the hospitality industry (including, without limitation, direct, joint venture and debt investments in hotels, condo-hotels, time-shares and other hospitality related assets), with RevPAR criteria less than two times the then-current U.S. average RevPAR, and the Company further acknowledges that any subsequent change to Ashford Trust’s Investment Guidelines, including in connection with any future spin-off, carve-out, split-off or other consummation of a transfer of a division or subset of assets for the purpose of forming a joint venture, a newly created private platform or a new publicly traded company will not have any impact on or change the “Investment Guidelines of Ashford Trust as of the date hereof” for purposes of enforcing this Section 9. Except as described in this Section 9.1 , this Agreement shall not limit or restrict the right of any manager, director, officer, employee or equityholder of the Advisor or its Affiliates to engage in any other business or to render services of any kind to any other Person. The Advisor may, with respect to any investment in which the Company is a participant, also render advice and service to each and every other participant therein. While the information and recommendations provided to the Company shall, in the Advisor’s reasonable and good faith judgment, be appropriate under the circumstances, they may be different from those supplied to other persons.

(b) To the extent the Advisor deems an investment opportunity suitable for recommendation, the Advisor must present any such individual investment opportunity that satisfies the Company’s Initial Investment Guidelines (as set forth and subject to the limitations in Section 9.2 below) to the Company, and the Board of Directors will have 10 business days to accept such opportunity prior to it being available to Ashford Trust or any other Person advised by the Advisor. Except as set forth in the preceding sentence, the Company recognizes that it is not entitled to preferential treatment and is only entitled to equitable treatment in receiving information, recommendations and other services. The Company shall have the benefit of the Advisor’s best judgment and effort, and the Advisor shall not undertake any activities that, in its good faith judgment, will materially and adversely affect the performance of its obligations under this Agreement.

(c) The parties hereto agree and acknowledge that each of the Company, the Advisor and Ashford Trust, as well as other companies that the Advisor may advise in the future, may benefit from the strategic relationships between such companies and accordingly intend to cooperate to achieve results that are in the best interests of each such entities’ respective shareholders. From time to time, as may be determined by the independent directors of the Advisor, the Company, Ashford Trust and any other company subsequently advised by the Advisor, each such entity may provide financial accommodations, guaranties, back-stop guaranties, and other forms of financial assistance to the other entities on terms that the respective Independent Directors determine to be fair and reasonable.

9.2 Conflicts of Interest .

(f) To minimize conflicts with Ashford Trust and the Company, both of which are advised by the Advisor, Ashford Trust and the Company have identified the asset type that such party intends to select as its principal investment focus and to set parameters for its real estate investments, including parameters primarily relating to RevPAR, segments, markets and other factors or financial metrics. The asset type, together with the relevant parameters for investments are referred to as such Person’s “ Investment Guidelines ,” and the “ Initial Investment Guidelines ” of the Company are the Investment Guidelines of the Company as set forth below. The Board of Directors may modify or supplement, after consultation with Advisor, the Company’s Investment Guidelines upon written notice to the Advisor from time to time (subject, however, to the prohibition in Section 9.1(a) restricting the Company from changing its Initial Investment Guidelines to be directly competitive with all or any portion of Ashford Trust’s Investment Guidelines as of the date hereof). As of the Effective Date, the Advisor is a subsidiary of Ashford Trust and advises Ashford Trust and also advises the Company. The Advisor may enter into an advising relationship with additional companies in the future. The Company hereby declares its Initial Investment Guidelines to be hotel real estate assets primarily consisting of equity or ownership interests, as well as debt investments when such debt is acquired with the intent of obtaining an equity or ownership interest, in:

(i)

full service and urban select service hotels with trailing twelve (12) month average RevPAR or anticipated twelve (12) month average RevPAR of at least twice the then-current U.S. national average RevPAR for all hotels as determined with reference to the most current Smith Travel Research reports, generally in the 20 most populous metropolitan statistical areas, as estimated by the United States Census Bureau and delineated by the U.S. Office of Management and Budget;


(ii)	upscale, upper-upscale and luxury hotels meeting the RevPAR criteria set forth in clause (i) above and situated in markets that may be generally recognized as resort markets; and

(iii)

international hospitality assets predominantly focused in areas that are general destinations or in close proximity to major transportation hubs or business centers, such that the area serves as a significant entry or departure point to a foreign country or region of a foreign country for business or leisure travelers and meet the RevPAR criteria set forth in clause (i) above (after any applicable currency conversion to U.S. dollars).

When determining whether an asset satisfies the Company’s Investment Guidelines, the Advisor shall make a good faith determination of projected RevPAR, taking into account historical RevPAR as well as such additional considerations as conversions or reposition of assets, capital plans, brand changes and other factors that may reasonably be forecasted to raise RevPAR after stabilization of such initiative.

(g) If the Company materially modifies its Initial Investment Guidelines set forth in Section 9.2(a) above without the written consent of the Advisor, the Advisor will not have an obligation to present investment opportunities to the Company as set forth in Section 9.1(b) above at any time thereafter, regardless of any subsequent modifications by the Company to its Investment Guidelines. Instead, the Adviser shall use its best judgment in determining how to allocate investment opportunities to Persons (including Ashford Trust and the Company) which Advisor advises, taking into account such factors as the Advisor deems relevant, in its discretion, subject to any then existing or future obligations that the Advisor may have to other Persons. The Company acknowledges that if it materially modifies its Initial Investment Guidelines, it will not be entitled to preferential treatment from the Advisor and only will be entitled to the Advisor’s best judgment in allocating investment opportunities.

(h) In the event that the Advisor obtains a portfolio acquisition opportunity composed of asset types that satisfies the Initial Investment Guidelines of the Company and Ashford Trust or, as applicable, one or more other Persons managed by the Advisor, the Advisor will endeavor in its good faith judgment to present such opportunity to the Board of Directors, Ashford Trust and, if applicable, such other Person(s) to the extent the portfolio can be reasonably divided by asset type and acquired on the basis of such asset types in satisfaction of each Person’s Investment Guidelines. If the board of directors of Ashford Trust, the Board of Directors and, if applicable, such other Person(s) approve its portion of such acquisition, Ashford Trust, the Company and, if applicable, such other Person(s) will cooperate in good faith in completing the acquisition of the portfolio. If the portfolio cannot be reasonably separated by asset type, the Advisor shall allocate portfolio investment opportunities between the Company, Ashford Trust and, if applicable, other Persons advised by the Advisor, in a fair and equitable manner consistent with the investment objectives of the Company, Ashford Trust and, if applicable, other Persons advised by the Advisor. In making this determination, the Advisor will consider, in its sole discretion, the Investment Guidelines and investment strategy of each entity with respect to the acquisition of properties, portfolio concentrations, tax consequences, regulatory restrictions, liquidity requirements, leverage and other factors deemed appropriate by the Advisor. Notwithstanding the foregoing, if the Company materially modifies its Initial Investment Guidelines set forth in Section 9.2(a) above without the written consent of the Advisor, the Advisor will not have an obligation to present portfolio acquisition opportunities to the Company as set forth in this Section 9.2(c) at any time thereafter, regardless of any subsequent modifications by the Company to its Investment Guidelines. Instead, the Adviser shall use its best judgment in determining how to allocate such portfolio investment opportunities to Persons (including Ashford Trust and the Company) which Advisor advises, taking into account such factors as the Advisor deems relevant, in its discretion, subject to any then existing or future obligations that the Advisor may have to other Persons. In making the allocation determination with respect to any portfolio opportunity, the Advisor will have no obligation to make any such portfolio investment opportunity available to the Company.

9.3 Exclusive Provider of Products or Services . At any time the Company desires to engage a third party for the performance of services or delivery of products and provided that

the Company has the right to control the decision on the award of the applicable contract, the Advisor shall have the exclusive right to provide such service or product at market rates for the provision of such services (“ Market Rates ”). For purposes of this Agreement, Market Rates shall be determined by reference to fees charged by third party providers who are not discounting such fees as a result of fees generated from other sources.

If the Company, after consultation with the Advisor, intends to solicit bids or enter the market for a particular service or product, the Company shall afford the Advisor the opportunity to provide such service or product. In any event, the Advisor shall be provided at least 20 days to elect to provide such service or product at Market Rates. If a majority of the Independent Directors of the Company affirmatively vote that the proposed pricing of the Advisor is not at Market Rates, then the Company and Advisor shall engage a consultant acceptable to the parties to determine the Market Rate for such services. If the consultant’s opinion reflects fees lower than the pricing proposed by the Advisor, the Advisor will pay the expenses of the Consultant and shall have the option to provide the services or product at the Market Rate as determined by the consultant. If the Consultant determines that the proposed pricing by the Advisor is at or below Market Rates, then the Company shall pay the expenses of the Consultant and shall engage Advisor at the Market Rate as determined by the consultant.

9.4 The Ashford Name . The Advisor and its Affiliates have a proprietary interest in the trademarked “Ashford” name and logo. The Advisor hereby grants to the Company a non-transferable, non-assignable, non-exclusive royalty-free right and license to use the “Ashford” name and logo during the term of this Agreement. Accordingly, and in recognition of this right, if at any time the Company ceases to retain the Advisor or one of its Affiliates to perform advisory services for the Company, the Company will, within 60 days after receipt of written request from the Advisor, cease to conduct business under or use the name “Ashford” or any derivative thereof and the Company shall change its name and the names of any of its subsidiaries to a name that does not contain the name “Ashford” or any other word or words that might, in the reasonable discretion of the Advisor, be susceptible of indication of some form of relationship between the Company and the Advisor or any its Affiliates. At such time, the Company will also make any changes to any trademarks, servicemarks, logos, or other marks necessary to remove any references to the word “Ashford.” 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 “Ashford” as a part of their name and using the “Ashford” logo, all without the need for any consent (and without the right to object thereto) by the Company.

10. BOOKS AND RECORDS. All books and records compiled by the Advisor in the course of discharging its responsibilities under this Agreement shall be the property of the Company and shall be delivered by the Advisor to the Company immediately upon any termination of this Agreement regardless of the grounds for such termination (including, but not limited to, a breach by the Company of this Agreement); provided, however, that the Advisor shall have reasonable access to such books and records to the extent reasonably necessary in connection with the conduct of its services hereunder. The Advisor shall not maintain or assert any lien against or upon any of the books and records. During the term of this Agreement, the books and records of the Company

maintained by the Advisor shall be accessible for inspection by any designated representative of the Company upon reasonable advance notice and during normal business hours.

11. CONFIDENTIALITY. The Advisor shall keep confidential any and all non-public information (“ Confidential Information ”), written or oral, obtained by it in connection with the performance of services to the Company except that the Advisor may share such Confidential Information (i) with Affiliates, officers, directors, employees, agents and other parties who need such Confidential Information for the Advisor to be able to perform its duties hereunder, (ii) with appraisers, lenders, bankers and other parties as necessary in the ordinary course of the Company’s business, (iii) in connection with any governmental or regulatory filings of the Company, filings with the New York Stock Exchange or other applicable securities exchanges or markets, or disclosure or presentations to Company investors (subject to compliance with Regulation FD), (iv) with governmental officials having jurisdiction over the Company and (v) as required by law.

Nothing will prevent the Advisor from disclosing Confidential Information (i) upon the order of any court or administrative agency, (ii) upon the request or demand of, or pursuant to any law or regulation to, any regulatory agency or authority, (iii) to the extent reasonably required in connection with the exercise of any remedy under this Agreement, or (iv) to the Advisor’s legal counsel or independent auditors; provided, however that with respect to (i) and (ii), so long as legally permissible, the Advisor will give notice to the Company so that the Company may seek, at its sole expense, an appropriate protective order or waiver.

For purposes of this Agreement, Confidential Information shall not include (i) information that is available to the public from a source other than the Advisor, (ii) information that is released in writing by the Company to the public or to persons who are not under similar obligations of confidentiality to the Company, or (iii) information that is obtained by the Advisor from a third-party which, to the best of the Advisor’s knowledge, does not constitute a breach by such third-party of an obligation of confidence.

12. TERM AND TERMINATION.

(a) This Agreement shall have an initial term of twenty 20 years from the Effective Date and shall be automatically extended for successive one year terms thereafter without further action by either the Company or the Advisor unless earlier terminated, as provided herein. This Agreement shall be automatically renewed for additional five (5) year terms commencing on the 20th anniversary of the Effective Date unless:


(i)	the Advisor gives written notice to the Company of termination at least 180 days prior to the expiration of the then current term; or

(ii)

the Company gives written notice to the Advisor of termination (a “ Termination Notice ”) at least 180 days prior to the expiration of the then current term; provided, however, that any such termination must receive the affirmative vote of at least two-thirds of the Independent Directors of the Company based on a good faith finding that either (A) there has been unsatisfactory performance by the Advisor that is materially detrimental to

the Company and its subsidiaries taken as a whole, or (B) the Base Fee and/or Incentive Fee is not fair (and the Advisor does not offer to negotiate a lower fee that at least a majority of the Independent Directors of the Company determines is fair.)

If the reason for non-renewal specified by the Company in its Termination Notice is (ii)(B) above, then the Advisor may, at its option, provide a notice of proposal to renegotiate the Base Fee and Incentive Fees (a “ Renegotiation Proposal ”) not less than 150 days prior to the pending termination date. Thereupon, each party shall use its commercially reasonable efforts to negotiate in good faith to find a resolution on fees within 120 days following the Company’s receipt of the Renegotiation Proposal. If a resolution is achieved between the Advisor and at least a majority of the Independent Directors of the Company within the 120 day period, then the Advisory Agreement shall continue in full force and effect with modification only to the agreed upon Base Fee and/or Incentive Fee.

(b) The Advisor may also, at any time, terminate this Agreement upon a default by the Company in the performance or observance of any material term, condition or covenant under this Agreement; provided, however, that the Advisor must, before terminating this Agreement, give written notice of the default to the Company and provide the Company with an opportunity to cure the default within 45 days, or if such cure is not reasonably susceptible to cure within 45 days, such additional cure period as is necessary to cure the default so long as the Company is diligently and in good faith pursuing such cure and the additional cure period does not exceed 90 days.

(i)

upon a default by the Advisor in the performance or observance of any material term, condition or covenant under this Agreement; provided, however, that the Company must, before terminating this Agreement, give written notice of the default to the Advisor and provide the Advisor with an opportunity to cure the default within 60 days, or if such cure is not reasonably susceptible to cure within 60 days, such additional cure period as is reasonably necessary to cure the default so long as the Advisor is diligently and in good faith pursuing such cure;

(ii)

immediately upon providing written notice to the Advisor following an event rendering the Advisor insolvent (an “ Insolvency Event ”); provided the Advisor shall notify the Company no later than 30 days following the Advisor’s knowledge of an Insolvency Event. For purposes of this Agreement, an “ Insolvency Event” is any occurrence in which the Advisor shall (A) authorize or agree to the commencement of a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency, receivership or other similar law now or hereafter in effect or the appointment of a trustee,

receiver, liquidator, custodian or other similar official of it or any substantial part of its property if the Advisor has not filed a motion to assume this Agreement with the appropriate court within 120 days of the commencement of such case or proceeding, (B) make a general assignment for the benefit of its creditors, (C) have an involuntary or other proceeding commenced against it seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or thereafter in effect, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period exceeding one hundred twenty (120) days or (D) commence an action for dissolution;


(iii)	immediately upon providing written notice to the Advisor, following the advisor’s conviction (including a plea or nolo contendere) of a felony;

(iv)

immediately upon providing written notice to the Advisor, if the Advisor commits an act of fraud against the Company, misappropriates the funds of the Company or acts in a manner constituting willful misconduct, gross negligence or reckless disregard in the performance of its material duties under this Agreement (including a failure to act); provided, however, that if any such actions or omissions described in this Section 12(c)(iv) are caused by an employee and/or an officer of the Advisor (or an Affiliate of the Advisor) and the Advisor takes all reasonable necessary and appropriate action against such person and cures the damage caused by such actions or omissions within 45 days of the Advisor’s actual knowledge of its commission or omission, the Company will not have the right to terminate this Agreement pursuant to this Section 12(c)(iv) ; and


(v)	immediately upon providing written notice to the Advisor following an Advisor Change of Control unless such Advisor Change of Control constitutes a permissible assignment under Section 14 hereof.

“ Advisor Change of Control ” shall be deemed to have occurred upon any of the following events affecting Ashford Trust or Advisor; provided, however, if Advisor is no longer a subsidiary of Ashford Trust as a result of a permitted assignment under Section 14 hereof or otherwise through a transaction not constituting an Advisor Change of Control, then an Advisor Change of Control shall be deemed to have occurred upon any of the following events that affect Advisor only (and no Advisor Change of Control shall be deemed to have occurred if such event affects Ashford Trust):

any “person” (as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and as modified in Section 13(d) and 14(d) of the Exchange Act) other than (A) Ashford Trust, the Advisor or any of their respective subsidiaries, (B) any employee benefit plan of Ashford Trust, the Advisor or any of their respective subsidiaries, (C) Remington or any Affiliate of Remington,

(D) a company owned, directly or indirectly, by stockholders of Ashford Trust or the Advisor in substantially the same proportions as their ownership of Ashford Trust or the Advisor, as applicable, or (E) an underwriter temporarily holding securities pursuant to an offering of such securities, becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of Ashford Trust or the Advisor representing 50% or more of the shares of voting stock of Ashford Trust or the Advisor, as applicable, then outstanding; provided, however, if any of the Chief Executive Officer, President, Chief Operating Officer, or Chief Financial Officer of the Advisor or Ashford Trust, as applicable, immediately before the event (collectively, the “ Advisor Key Officers ”) remain in such capacity or similar capacity with the Advisor or Ashford Trust, as applicable, immediately after the event, or if a majority of the board of directors of Advisor or Ashford Trust, as applicable, immediately before the event remain on the board of directors of Advisor or Ashford Trust, as applicable, immediately after the event, then no Advisor Change of Control shall be deemed to have occurred;

the consummation of any merger, organization, business combination or consolidation of Ashford Trust or the Advisor, as applicable, or one of its respective subsidiaries, as applicable, with or into any other company, other than a merger, reorganization, business combination or consolidation which would result in the holders of the voting securities of Ashford Trust or the Advisor, as applicable, outstanding immediately prior thereto holding securities which represent immediately after such merger, reorganization, business combination or consolidation more than 50% of the combined voting power of the voting securities of Ashford Trust or the Advisor, as applicable, or the surviving company or the parent of such surviving company, provided, however, if any of the Advisor Key Officers remain in such capacity or similar capacity with the Advisor, Ashford Trust or surviving entity immediately after the event, or if a majority of the board of directors of Advisor or Ashford Trust, as applicable, immediately before the event remain on the board of directors of Advisor, Ashford Trust or surviving entity immediately after the event, then no Advisor Change of Control shall be deemed to have occurred; or


C.	the consummation of a sale or disposition by Ashford Trust or the Advisor, as applicable, of all or substantially all of such entity’s assets, other than a sale or disposition if the holders of the voting securities of such entity outstanding immediately prior thereto hold securities immediately thereafter which represent more than 50% of the

combined voting power of the voting securities of the acquiror, or parent of the acquiror, of such assets provided, however, if any of the Advisor Key Officers remain in such capacity or similar capacity with the Advisor, Ashford Trust or acquiring entity immediately after the event, or if a majority of the board of directors of Advisor, Ashford Trust or acquiring entity immediately before the event remain on the board of directors of Advisor or Ashford Trust, as applicable, immediately after the event, then no Advisor Change of Control shall be deemed to have occurred.

(d) Upon any termination of this Agreement (including a termination pursuant to Section 16 hereof), the parties shall have the following obligations (“ Termination Obligations ”):


(iv)	The Company shall pay all Base Fees, Incentive Fees and expense reimbursements due and owing through the date of termination, including, without limitation, any unpaid Incentive Fee installments which shall, upon any termination, become immediately earned by Advisor and due from the Company (collectively, “ Accrued Fees ”).


(v)	Upon any termination pursuant to Section 12(a)(ii) , based on unsatisfactory performance by the Advisor or unfair fees with no resolution within the time period set forth in Section 12(a)(ii) , the Company shall pay a termination fee (the “ Termination Fee ” calculated as follows:


(A)	So long as Advisor’s common stock is not publicly traded:

(1) 14 multiplied by the earnings of the Advisor attributable to this Agreement, after costs and expenses (including taxes) of the Advisor attributable to the performance of its duties under this Agreement (“ Net Earnings ”) for the 12-month period preceding the termination date of this Agreement; plus

(2) an additional amount such that the total net amount received by Advisor after the reduction by assumed state and federal income taxes at an assumed combined rate of 40% on the amounts described in Section 12(d)(ii)(A)(1) above and this Section 12(d)(ii)(A)(2) shall equal the amount described in Section 12(d)(ii)(A)(1).


(B)	If at the time the Transaction Notice is given to Advisor, Advisor’s common stock is publicly traded separate from the common stock of Ashford Trust:


(1)	1.1 times the greater of:


(I)	12 multiplied by the Net Earnings of the Advisor for the 12-month period preceding the termination date of this Agreement; or


(II)	the earnings multiple (based on net earnings after taxes) for the Advisor’s common stock for the 12-month period preceding the termination date of this Agreement multiplied by the Net Earnings of the Advisor for the 12-month period preceding the termination date of this Agreement; or


(III)	the simple average of the earnings multiples (based on net earnings after taxes) for the Advisor’s common stock for each of the three fiscal years preceding the termination date of this Agreement, multiplied by the Net Earnings of the Advisor for the 12-month period preceding the termination date of this Agreement, plus


(2)	an additional amount such that the total net amount received by Advisor after the reduction by assumed state and federal income taxes at an assumed combined rate of 40% on the amounts described in Section 12(d)(ii)(B)(1) above and this Section 12(d)(ii)(B)(2) shall equal the amount described in Section 12(d)(ii)(B)(1).

The Termination Fee shall be payable to Advisor on or before the termination date of this Agreement.


(vi)	In the event of any termination of this Agreement other than an Advisor Change of Control, the Company (and any of its Affiliates) shall not, without the consent of the Advisor, solicit for employment, employ or otherwise retain (directly or indirectly) any employee of the Advisor (or any of its Affiliates) for a period of two years.

(vii)

Immediately upon termination, the Advisor shall promptly (a) pay over all money collected and held for the account of the Company, provided that the Advisor shall be permitted to deduct any Accrued Fees in lieu of receiving payment for such Accrued Fees pursuant to Section 12(d)(i) ; (b) deliver a full accounting of all accounts held by the Advisor in the name of or on behalf of the Company; (c) deliver all property, documents, files, contracts and assets of the Company to the Company; and (d) cooperate with and assist

the Company in executing an orderly transition of the management of the company’s assets to a new advisor.

(e) The following Sections, including the rights and obligations contained therein, shall survive the termination of this Agreement:


(i)	The parties’ Termination Obligations pursuant to Section 12(d) and the obligations pursuant to Section 16 ;


(ii)	The Advisor’s confidentiality obligations pursuant to Section 11 ;


(iii)	The limitation of the Advisor’s liability pursuant to Section 8.1 ;


(iv)	The parties’ indemnification obligations pursuant to Section 8.3 ; and


(v)	The Company’s obligations to cease using the trademarked name “Ashford” and other obligations pursuant to Section 9.4.

13. NOTICES. Any notices, instructions or other communications required or contemplated by this Agreement shall be deemed to have been properly given and to be effective upon delivery if delivered in person, sent electronically or upon receipt if sent by courier service. All such communications to the Company shall be addressed as follows:

Ashford Hospitality Prime, Inc.

14185 Dallas Parkway, Suite 1100

Dallas, TX 75254

Attn: Chief Executive Officer

With a copy to:

Ashford Hospitality Prime, Inc.

14185 Dallas Parkway, Suite 110

Dallas, TX 75254

Attn: General Counsel

All such communications to the Advisor shall be addressed as follows:

Ashford Hospitality Advisors LLC

14185 Dallas Parkway, Suite 1100

Dallas, TX 75254

Attn: Chief Executive Officer

With a copy to:

Ashford Hospitality Advisors LLC

14185 Dallas Parkway, Suite 1100

Dallas, TX 75254

Attn: General Counsel

Either party hereto may designate a different address by written notice to the other party delivered in accordance with this Section 13 .

14. DELEGATION OF RESPONSIBILITY AND ASSIGNMENT.

(a) Notwithstanding anything in this Agreement, the Advisor shall have the power to delegate all or any part of its rights and powers to manage and control the business and affairs of the Company to such officers, employees, Affiliates, agents and representatives of the Advisor or the Company as it may deem appropriate. Any authority delegated by the Advisor to any other person shall be subject to the limitations on the rights and powers of the Advisor specifically set forth in this Agreement or the charter of the Company.

The Advisor may assign this Agreement to any Affiliate that remains under the control of Ashford Trust without the consent of the Company. The Advisor may also assign this Agreement to a newly formed publicly traded company without Company approval in connection with a spin-off, carve-out, split-off or distribution to the Advisor’s or Ashford Trust’s stockholders.

(b) The Company may not assign this Agreement without the prior written consent of the Advisor, except in the case of assignment by the Company to another REIT or other organization that is a successor, by merger, consolidation, purchase of assets, or other similar transaction, to the Company.

15. FUTURE SPIN-OFF BY THE COMPANY. If the Company elects to spin-off, carve-out, split-off or otherwise consummate a transfer of a division or subset of assets for the purpose of forming a joint venture, a newly created private platform or a new publicly traded company to hold such division or subset of assets constituting a distinct asset type and/or Investment Guidelines (collectively, a “ Spin-Off Company” ), the Company and Advisor agree that such Spin-Off Company shall be externally advised by the Advisor pursuant to an advisory agreement containing substantially the same material terms set forth in this Agreement.

16. TERMINATION FOR CONVENIENCE UPON CHANGE OF CONTROL OF COMPANY. Upon a Company Change of Control (defined below), the Company shall have the right, at its election, to terminate this Agreement upon the payment of the COC Termination Fee (defined below) and subject to the conditions and terms of this Section 16 .

(a) “Company Change of Control ” shall mean any of the following events:


(vi)	any “person” (as defined in Section 3(a)(9) of the Exchange Act , and as modified in Section 13(d) and 14(d) of the Exchange Act) other than (A) the Company or any of its subsidiaries, (B) any employee benefit plan of the Company or any of its subsidiaries, (C) a company owned, directly or indirectly, by stockholders of Ashford Prime in substantially the same

proportions as the ownership of Ashford Prime, or (D) an underwriter temporarily holding securities pursuant to an offering of such securities, becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of Ashford Prime representing 35% or more of the shares of voting stock of Ashford Prime then outstanding;

(vii)

the consummation of any merger, reorganization, business combination or consolidation of the Company, or one of its respective subsidiaries, as applicable, with or into any other company, other than a merger, reorganization, business combination or consolidation which would result in the holders of the voting securities of Ashford Prime outstanding immediately prior thereto holding securities which represent immediately after such merger, reorganization, business combination or consolidation more than 50% of the combined voting power of the voting securities of the Company or the surviving company or the parent of such surviving company;

(viii)

the consummation of a sale or disposition by the Company of all or substantially all of its assets, other than a sale or disposition if the holders of the voting securities of Ashford Prime outstanding immediately prior thereto hold securities immediately thereafter which represent more than 50% of the combined voting power of the voting securities of the acquirer, or parent of the acquirer, of such assets.

(b) If the Company desires to enter into a transaction which constitutes a Company Change of Control and the Board of Directors approves (subject to diligence, shareholder approval, conditions or otherwise) such proposed transaction, the Company shall promptly notify the Advisor in writing (the “ Transaction Notice ”), or in any event within five (5) business days following the Board approval. The Transaction Notice shall set forth in reasonable detail the material terms of the proposed Company Change of Control transaction, the proposed timing, pricing, identity of the acquirer(s), and all material conditions including, without limitation, whether or not the proposed transaction is conditioned upon the termination of this Agreement. If the proposed Company Change in Control transaction is not conditioned upon a termination of this Agreement, this Agreement shall continue in full force and effect following the closing of the Company Change of Control transaction with the Company, the acquirer or successor, as the case may be. If the proposed Company Change in Control transaction is conditioned upon the termination of this Agreement, then subject to the payment of the COC Termination Fee, together will all other Base Fees, Incentive Fees, and other charges, costs and reimbursements accrued through the date of termination of this Agreement required to be paid to Advisor pursuant to the terms of this Agreement, the Company may elect to terminate this Agreement by setting forth its election in the Transaction Notice or by written notice to Advisor, which notice must be delivered at least sixty (60) days prior to the closing of the Company Change of Control transaction. As a condition to the effectiveness of a termination of this Agreement, the Company shall pay to Advisor the COC Termination Fee (together with all other Base Fees, Incentive Fees, and other charges, costs and reimbursements accrued through the date

of termination of this Agreement) on the closing of the Company Change of Control transaction. If an election to terminate this Agreement is not timely made by the Company, this Agreement shall continue in full force and effect with the Company, acquirer or successor, as the case may be.

(c) If a Company Change in Control occurs by reason of an action not taken by the Board but through an involuntary action, then, within ten (10) days following the occurrence of such Company Change in Control, the Company may elect by delivering written notice thereof to Advisor, subject to the payment of the COC Termination Fee (together with all Base Fees, Incentive Fees, and other charges, costs and reimbursements accrued through the date of termination of this Agreement required to be paid to Advisor pursuant to the terms of this Agreement), to terminate this Agreement, which such termination may occur no earlier than thirty (30) days or greater than sixty (60) days following the date such written election is received by Advisor. If such election is timely made by the Company, the Company shall pay to Advisor, on the termination date of this Agreement, the COC Termination Fee and all Base Fees, Incentive Fees, and other charges, costs and reimbursements accrued through the date of termination of this Agreement required to be paid pursuant to the terms of this Agreement. If an election to terminate this Agreement is not timely made by the Company, this Agreement shall continue in full force and effect with the Company, acquirer or successor, as the case may be.

(d) The “ COC Termination Fee ” payable to the Advisor in cash, for purposes of a termination of this Agreement shall be calculated as follows:


(i)	So long as Advisor’s common stock is not publicly traded:

(A) 14 multiplied by the earnings of the Advisor attributable to this Agreement, after costs and expenses (including taxes) of the Advisor attributable to the performance of its duties under this Agreement (“ Net Earnings ”) for the 12-month period preceding the termination date of this Agreement; plus

(B) an additional amount such that the total net amount received by Advisor after the reduction by assumed state and federal income taxes at an assumed combined rate of 40% on the amounts described in (A) and (B) shall equal the amount described in (A).


(ii)	If at the time the Transaction Notice is given to Advisor, Advisor’s common stock is publicly traded separate from the common stock of Ashford Trust:

(A) 1.1 times the greater of:

(I) 12 multiplied by the Net Earnings of the Advisor for the 12-month period preceding the termination date of this Agreement; or

(II) the earnings multiple (based on net earnings after taxes) for the Advisor’s common stock for the 12-month period preceding the termination date of this Agreement multiplied by the Net Earnings of the Advisor for the 12-month period preceding the termination date of this Agreement; or

(III) the simple average of the earnings multiples (based on net earnings after taxes) for the Advisor’s common stock for each of the three fiscal years preceding the termination date of this Agreement, multiplied by the Net Earnings of the Advisor for the 12-month period preceding the termination date of this Agreement, plus

(e) Following the closing of a Company Change in Control Transaction and termination of this Agreement pursuant to this Section 16 , the Advisor will reasonably cooperate in an orderly transition of management for a period of up to thirty (30) days for the payment of Base and Incentive Fees based on the average monthly amounts for the three (3) months prior to the Transaction Notice, or in the case of a termination pursuant to Section 16(c) above, based on the average monthly amounts for the three (3) months prior to the public announcement of the Company Change in Control.

1. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE ADVISOR. The Advisor represents and warrants to, and covenants and agrees with, the Company as follows:

(a) The Advisor, taking into account its own personnel and the personnel available to it through its Affiliates, has access to personnel trained and experienced in the business of acquisitions, leasing of hotels, asset management, financing, the ownership and dispositions of hotels and such other areas as may be necessary and sufficient to enable the Advisor to perform its obligations under this Agreement.

(b) The Advisor shall comply with all laws, rules, regulations and ordinances applicable to the performance of its obligations under this Agreement.

Neither the Advisor nor any of its Affiliates is party to or otherwise bound by or, during the term of this Agreement (including any extension thereof), will become party to or otherwise bound by, any agreement that would restrict or prevent (i) the Advisor from performing any obligation contemplated by this Agreement or (ii) the Company from operating its business as proposed to be conducted, including, without limitation, acquiring any hotel in any geographic market in the United States or any foreign country.

1. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas, without regard to the conflict of laws principals thereof.

2. ENTIRE AGREEMENT. This Agreement reflects the entire understanding of the parties hereto with respect to the subject matter hereof and supersedes and replaces all agreements between the Company and the Advisor with respect to the subject matter hereof.

3. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be binding upon the parties to this Agreement and their respective successors and permitted assigns, and no other Person shall acquire or have any right under, or by virtue of, this Agreement. The Company shall be entitled to assign this Agreement to any successor to all or substantially all of its assets, rights and/or obligations; the Advisor shall have the right to assign this Agreement to any Affiliate (as such term is defined in Section 2 ).

4. AMENDMENT, MODIFICATIONS AND WAIVER. This Agreement hereto shall not be altered or otherwise amended in any respect, except pursuant to an instrument in writing signed by the parties hereto; provided, that any additions to or deletions from the Peer Group Members identified in Exhibit A shall only be made with the approval of a majority of the Independent Directors of the Company and so long as Ashford Trust remains the indirect parent of the Advisor, a majority of the Independent Directors of Ashford Trust. The waiver by a party of a breach of any provisions of this Agreement shall not operate or be construed as a waiver of any subsequent breach.

5. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, and all of which shall constitute one and the same agreement.

(SIGNATURES BEGIN ON NEXT PAGE)

* * * * *

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

ASHFORD PRIME:

Ashford Hospitality Prime, Inc.

By: /s/ DAVID A. BROOKS

Name: David A. Brooks

Title: Chief Operating Officer

OPERATING PARTNERSHIP:

Ashford Hospitality Prime Limited Partnership

By: Ashford Prime OP General Partner LLC, its general partner

By: /s/ DAVID A. BROOKS

Name: David A. Brooks

Title: Vice President

ADVISOR:

Ashford Hospitality Advisors LLC

By: /s/ DAVID A. BROOKS

Name: David A. Brooks

Title: Vice President

[Signature page to the Second Amended and Restated Advisory Agreement]

Exhibit A

Peer Group Members

Strategic Hotels and Resorts, Inc.

Chesapeake Lodging Trust

DiamondRock Hospitality Co.

Lasalle Hotel Properties

Pebblebrook Hotel Trust

Sunstone Hotel Investors, Inc.

A-1

EXHIBIT 10.3.1

AMENDMENT NO. 1 TO
SECOND AMENDED AND RESTATED

ADVISORY AGREEMENT

THIS AMENDMENT NO. 1 TO SECOND AMENDED AND RESTATED ADVISORY AGREEMENT (this “ Amendment ”) is entered into as of March 23, 2015, effective as of November 13, 2014 (the “ Effective Date ”), by and between ASHFORD HOSPITALITY PRIME, INC., a Maryland corporation (“ Ashford Prime ”), ASHFORD HOSPITALITY PRIME LIMITED PARTNERSHIP, a Delaware limited partnership (the “Operating Partnership” ), ASHFORD INC., a Delaware corporation, and ASHFORD HOSPITALITY ADVISORS LLC, a Delaware limited liability company (“ Ashford Advisor, ” and together with Ashford Advisor, the “ Advisor ”), which is the operating company of Ashford Inc.

RECITALS

WHEREAS, Ashford Prime, through its interest in the Operating Partnership, is in the business of investing in the hospitality industry including the acquiring, developing, owning, asset managing and disposing of hotels (for purposes hereof, unless the context otherwise requires, the term “ Company ” shall collectively include Ashford Prime and the Operating Partnership);

WHEREAS, Ashford Prime, the Operating Partnership and Ashford Advisor entered into an Advisory Agreement dated and effective on November 19, 2013, which was amended and restated on May 13, 2014, and further amended and restated on November 3, 2014 (the “ Original Advisory Agreement ”), pursuant to which the Ashford Advisor agreed to perform certain advisory services identified in such agreement, on behalf of, and subject to the supervision of, the board of directors of Ashford Prime, in exchange for the compensation set forth therein;

WHEREAS, on the Effective Date, Ashford Advisor was party to a spin-off transaction completed by Ashford Hospitality Trust, Inc., pursuant to which Ashford Advisor became the operating company of Ashford Inc., and the parties hereto desire to clarify certain terms of the Original Advisory Agreement necessary as a result of the spin-off and cause Ashford Inc. to become a party to such agreement; ;

ARTICLE I

DEFINITIONS

Capitalized terms used and not otherwise defined herein have the respective meanings assigned to such terms in the Original Advisory Agreement.

ARTICLE II

AMENDMENTS TO THE ORIGINAL ADVISORY AGREEMENT

Section 2.01. The first paragraph of Section 12(a) of the Original Advisory Agreement is hereby amended by replacing the last three words in the first sentence (“as provided herein”) with the words “as follows” and deleting the next partial sentence preceding clause (i).

Section 2.02. Section 12(c) of the Original Advisory Agreement is hereby amended as follows:


•	The following parenthetical is added to end of the lead-in sentence preceding clause (i): “(without penalty to the Company, including without payment of the Termination Fee):”


•	The lead-in sentence to the definition of “Advisor Change of Control” in clause (v) is amended to state: “Advisor Change of Control” shall be deemed to have occurred upon any of the following events affecting Advisor:


•	All references to Ashford Trust in clause (v)(A)-(C) are hereby deleted.

Section 2.03. The second paragraph of Section 14(a) of the Original Advisory Agreement is hereby amended and restated in its entirety to read as follows:

“The Advisor may assign this Agreement to any Affiliate that remains under the control of the Advisor without the consent of the Company.”

Section 2.04. Section 21 of the Original Advisory Agreement is hereby amended to delete the phrase “and so long as Ashford Trust remains the indirect parent of the Advisor, a majority of the Independent directors of Ashford Trust” in the first sentence.

ARTICLE III

MISCELLANEOUS

Section 3.01. In the event of any inconsistencies between the terms and conditions of this Amendment and the terms and conditions of the Original Advisory Agreement, the terms and conditions of this Amendment shall control.

Section 3.02. Except as modified pursuant hereto, no other changes or modifications to the Agreement are intended or implied and in all other respects the Original Advisory Agreement is hereby specifically ratified and confirmed by all parties hereto effective as of the date hereof. The Original Advisory Agreement and this Amendment shall be read and construed as one agreement.

Section 3.03. This Amendment shall be binding upon and inure to the benefit of each of the parties hereto and their respective successors and assigns.

Section 3.04. This Amendment may be executed in two or more counterparts each of which shall deemed to be an original, but all of which taken together shall constitute one and the same instrument. When counterparts have been executed by all parties, they shall have the same effect as if the signatures to each counterpart or copy were upon the same document and copies of such documents shall be deemed valid as originals. The parties agree that all such signatures may be transferred to a single document upon the request of any party.

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

THE COMPANY:

Ashford Hospitality Prime, Inc.

By: /s/ David A. Brooks

David A. Brooks

Chief Operating Officer

Ashford Hospitality Prime Limited Partnership

By: Ashford Prime OP General Partner LLC, its general partner

By: /s/ David A. Brooks

David A. Brooks

Vice President

ADVISOR:

Ashford Inc.

By: /s/ David A. Brooks

David A. Brooks

Chief Operating Officer

Ashford Hospitality Advisors LLC

By: /s/ David A. Brooks

David A. Brooks

Chief Operating Officer

EXHIBIT 10.13

INVESTMENT MANAGEMENT AGREEMENT

THIS INVESTMENT MANAGEMENT AGREEMENT (the “Agreement”), made as of the 10th day of December, 2014, by AHP SMA, LP , a Delaware limited partnership and wholly-owned subsidiary of Ashford Hospitality Prime, Inc. (hereinafter called the “Client”), and ASHFORD INVESTMENT MANAGEMENT LLC , a Delaware limited liability company and indirect subsidiary of Ashford Inc. (hereinafter called the “Manager”).

WITNESSETH:

WHEREAS, the Client desires to retain and appoint the Manager as investment manager of the Client and to delegate to the Manager certain rights, powers, duties and discretion under this Agreement, and the Manager desires to accept such appointment and delegation, pursuant to the provisions of this Agreement.

THEREFORE, for and in consideration of the premises and of the mutual covenants herein contained, the parties hereby agree as follows:

Appointment and Status as Investment Manager . The Client hereby appoints the Manager as the “Investment Manager” with respect to the Account (as defined below). The Manager does hereby accept said appointment and by its execution of this Agreement the Manager represents, warrants and covenants that (i) it is currently exempt from registration as an investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the “Advisers Act”), (ii) it has applied for registration under the Advisors Act, and (iii) it will notify Client when such registration has become effective. The Manager represents and warrants that: (a) it has all requisite authority and licenses to perform its obligations under this Agreement; (b) the terms of this Agreement do not conflict with any obligation by which the Manager is bound, whether arising by contract, operation of law or otherwise; and (c) this Agreement has been duly authorized by the Manager by all appropriate action, and constitutes the valid and binding obligation of the Manager, enforceable against the Manager in accordance with its terms. The Manager shall make applicable regulatory filings with respect to its advisory role on the Account.


2.	Notice from Manager .

a. From time to time, upon written request of the Client, the Manager shall disclose the total assets under management in the Fund (as defined in Exhibit A attached hereto) and the total aggregate assets under management in other investment vehicles it advises executing an investment strategy substantially similar to the Fund (“Similar Funds”), including, noted separately, the assets of the Manager invested in the Fund and Similar Funds and the redemption terms applicable to investors in the Fund and Similar Funds.

b. In the event of the death, disability or departure of Rob Hays or Monty Bennett from the Manager, or the failure of Rob Hays or Monty Bennett to perform his duties for the Manager for a period of 90 consecutive days, the Manager must provide the Client with prompt written notice after the occurrence of such event, and the Client will have the special opportunity to make withdrawals as of the end of each calendar month for a three-month period after receipt of such notice and upon at least 15 calendar days’ notice to the Manager, in accordance with the withdrawal terms set forth below in paragraph 19.

Representations by and Obligations of Client . The Client represents and warrants that: (a) it has all requisite authority and licenses to appoint the Manager and perform its obligations under this Agreement; (b) it is not an “investment company” as defined by the Investment Company Act of 1940, as amended (the “Investment Company Act”), a “private investment company” as defined by Rule 205-3 under the Advisers Act, or a “business development company” as defined by Section 202(a)(22) of the Advisers Act; (c) it is a “qualified client” as defined by Rule 205-3 under the Advisers Act; (d) the terms of this Agreement do not conflict with any obligation by which the Client is bound, whether arising by contract, operation of law or otherwise; (e) this Agreement has been duly authorized by the Client by all appropriate action, and constitutes the valid and binding obligation of the Client, enforceable against the Client in accordance with its terms; and (f) the Account is not subject to the Employee Retirement Income Security Act of 1974, as amended.

The Client acknowledges that, in compliance with applicable anti-money laundering laws, regulations and orders, the Manager may be required to release or share information provided by the Client or about the Client to relevant regulatory or police authorities.

The Client shall provide a properly completed IRS Form W-9, W-8BEN, W-8IMY or W-8EXP or other applicable U.S. tax status form and any information required to comply with Sections 1471-1474 of the U.S. Internal Revenue Code of 1986, as amended, in each case as reasonably requested by the Manager (i) upon the execution of this Agreement, (ii) promptly upon reasonable demand by the Manager, and (iii) promptly upon any form previously provided becoming obsolete, incorrect or expired.


4.	Management Services .

The Manager shall be responsible for the investment and reinvestment of those assets designated in writing by the Client as subject to the Manager’s management (which assets, together with all additions, substitutions and alterations thereto made pursuant to the terms of this Agreement are hereinafter called the “Account”) in accordance with the investment guidelines attached hereto as Exhibit A , (the “Investment Guidelines”). The Account may include all securities and instruments permitted by the Investment Guidelines. It is the Manager’s policy to allocate investment

opportunities fairly and equitably over time. This means that such opportunities will be allocated among the Account, Fund and Similar Funds, for which participation in the respective opportunity is considered appropriate, taking into account a variety of considerations, among others, such as: (a) whether the risk-return profile of the proposed investment is consistent with the account's objectives, whether such objectives are considered (i) solely in light of the specific investment under consideration or (ii) in the context of the portfolio's overall holdings; (b) the potential for the proposed investment to create an imbalance in the account's portfolio; (c) liquidity requirements of the account; (d) potentially adverse tax consequences; (e) legal or regulatory restrictions that would or could limit an account's ability to participate in a proposed investment; (f) structural and/or financing restrictions; (g) the need to re-size risk in the account's portfolio; (h) redemptions and subscriptions and (i) others as may be agreed from time to time. Such considerations are expected to generally dictate an allocation between the Account, Fund and any Similar Funds pro rata on the basis of their respective net asset values. However, such considerations will also often result in allocations among the Account, Fund and any Similar Funds on other than a pro rata basis. The Client does hereby delegate to the Manager all of its powers, duties and responsibilities with regard to such investment and reinvestment and hereby appoints the Manager as its agent in fact with full authority to buy, sell or otherwise effect investment transactions involving the assets in its name and for the Account, including without limitation, the power to execute swap, futures, options and other agreements, including collateral agreements, with counterparties (but not to open and close accounts in connection therewith, which requires Client approval), on the Client's behalf as the Manager deems appropriate from time to time in order to carry out the Manager's responsibilities hereunder. The Client shall, for so long as this Agreement is in effect, retain no rights to dispose or vote the securities in the Account. Said powers, duties and responsibilities shall be exercised exclusively by the Manager pursuant to and in accordance with its fiduciary responsibilities and the provisions of this Agreement. In addition, in accordance with the Manager’s guidelines in effect from time to time and its fiduciary duties to the Client, the Manager or its agent is authorized, but shall not be required, to: (1) vote, tender or convert any securities in the Account; (2) execute waivers, consents and other instruments with respect to such securities; (3) endorse, transfer or deliver such securities; or (4) consent to any class action, plan of reorganization, merger, combination, consolidation, liquidation or similar plan with reference to such securities; provided that the Manager shall not incur any liability to the Client by reason of any exercise of, or failure to exercise, any such discretion in the absence of gross negligence or bad faith.


5.	Risk Acknowledgment . The Client acknowledges that the Manager does not guarantee the future performance of the Account, or any specific level of

performance, nor the success of the Manager's overall management of the assets subject to the Investment Guidelines or this Agreement.


6.	Investment Costs and Expenses . The Manager and Client agree that all investment costs and expenses incurred pursuant to this Agreement shall be paid in accordance with Schedule 6 attached hereto.

Accounting and Reports . At such intervals as shall be mutually agreed upon between the parties, the Manager shall furnish the Client with appraisals of the Account, performance tabulations, a summary of purchases and sales and such other reports as shall be agreed upon from time to time, including, without limitation, the performance reports regularly provided to the Fund’s investors. The Manager shall also reconcile accounting, transaction, and asset-summary data with custodian reports at times that are mutually agreeable to the Manager and the Client. In addition, the Manager shall promptly communicate and resolve any significant discrepancies with the custodian.


8.	Other Services . The Manager shall, on invitation and at times and locations that are mutually agreeable to the Manager and Client, attend meetings with representatives of the Client to discuss the position of the Account and the immediate investment outlook.


9.	No Compensation . Unless otherwise mutually agreed, the Manager shall not be compensated by the Client for its services hereunder.

10.

Custodian . The securities in the Account shall be held by a custodian duly appointed by the Client, and the Manager is authorized to give instructions to the custodian with respect to all investment decisions regarding the Account. Nothing contained herein shall be deemed to authorize the Manager to take or receive physical possession of any of the assets for the Account, it being intended that sole responsibility for safekeeping thereof (in such investments as the Manager may direct) and the consummation of all purchases, sales, deliveries and investments made pursuant to the Manager’s direction shall rest upon the custodian. The Manager shall not have responsibility, liability, duty, or obligation with respect to the acts, omissions or other conduct of the custodian, including investment by the custodian of cash in the Account, pricing, reporting functions, the security of data maintained by the Account, whether electronically stored or otherwise, or the custodian’s failure to obtain and maintain adequate insurance for the Account, nor for any fees, charges or expenses that may be owed to the custodian. The Client represents that the custodian furnishes the Client with quarterly statements of the Account containing a description of all activity in the Account during the preceding quarter, including all transactions made on behalf of the Account, all contributions and withdrawals made to or from the Account, all fees and expenses charged to the Account and the value of the Account at the beginning and end of the period.


11.	Brokerage . The Client hereby delegates to the Manager authority to designate the brokers or dealers through whom purchases and sales of securities on behalf of the Account will be made on a basis consistent with such practices applicable to the Fund.

12.

Confidential Information . Any information received by either party to this Agreement relating to the Account, this Agreement or any other information related thereto including, but not limited to, the Account’s holdings (“Confidential Information”), shall be kept confidential by such party who receives such Confidential Information, shall not be used by such party to make investments outside of the Account (provided that nothing shall preclude the receiving party from making any investments outside of the Account pursuant to the receiving party’s research and analysis independent of the Manager’s services under this Agreement), and shall not be disclosed to any other person without the prior written consent of each of the parties to this Agreement, except as follows:

a. Where disclosure is permitted under the terms of this Agreement;

b. Where disclosure is required for the purpose of making, acquiring, settling or realizing an investment in accordance with the terms of this Agreement and the Investment Guidelines on behalf of the Account;

c. Where disclosure is required by law or the order of any court or pursuant to any request or requirement of any government or regulatory authority, bank examiner or statutory auditor;


d.	Where the disclosure is or becomes public by no fault of the other party; or


e.	Where the disclosure is required by any applicable rules and regulations promulgated under the Securities and Exchange Act of 1934, as amended;

but in an event under paragraph (c) or (e) above, and unless precluded from doing so by applicable law or the obligation of immediate disclosure, the disclosing party shall give the other party, before making the disclosure, an opportunity to oppose the disclosure, and shall coordinate the wording of such disclosure with such other party (to the extent permitted by law). The Manager shall be entitled to disclose information received by the Client to the Manager’s affiliates, employees, service providers and professional advisors wherever located with respect to this Agreement (provided that such disclosure is for the sole purpose of supporting the provision of services under this Agreement and such affiliates, employees, service providers and professional advisors are also bound by the same confidentiality obligations as noted above).

Notwithstanding the foregoing, the Client shall be permitted to disclose information about the Account and, on at least a ninety (90) day delayed basis, the Account’s holdings to its investors, affiliates, employees, service providers and professional

advisors wherever located with respect to the Account and this Agreement (provided that such persons are bound by obligations no less stringent than those set forth in this Section 12 ).


13.	Directions to the Manager . All directions by or on behalf of the Client to the Manager shall be in writing signed by one or more of the following persons and/or such other persons as identified in writing by the Client from time to time:

Name Title

Monty Bennett President of its General Partner

David A. Brooks Vice President and Secretary of its General Partner

The Manager shall be fully protected in relying upon any direction in accordance with the previous paragraph with respect to any instruction, direction or approval of the Client, and shall be so protected also in relying upon a certification duly executed on behalf of the Client as to the names of persons authorized to act for it and in continuing to rely upon such certification until receipt of written notice by the Client to the contrary.

The Manager shall be fully protected in acting upon any instrument, certificate or paper believed by it to be genuine and to be signed or presented by the proper persons or to any statement contained in any such writing and may accept the same as conclusive evidence of the truth and accuracy of the statements therein contained.

14.

Liabilities of the Manager and the Client . The Manager’s standard of care in managing the Account, rights of exculpation and to indemnification and responsibility for trading errors shall be identical to the standard of care, rights of exculpation and to indemnification and responsibility for trading errors as set forth in the PPM which are applicable to the General Partner and Investment Manager (as such terms are defined in the PPM).

15.

Non-Exclusive Management . The Client understands that the Manager and its affiliates will continue to furnish investment management and advisory services to others, including, without limitation, to the Fund, and that the Manager and such affiliates shall be at all times free, in its or their discretion, to make recommendations to others which may be the same as, or may be different from, those made for the Account.


16.	Allocation of Orders . All allocations of orders for both the Client and other clients sharing the same or substantially similar investment guidelines (including, without limitation, the Fund) shall be distributed to Client on a basis determined by the Manager to be fair and equitable over time.


17.	Conflict of Interest; Affiliated Transactions . The Manager will abide by all applicable laws, as well as all policies and procedures set forth in the PPM in connection with conflicts of interest, affiliated transactions, cross trades, agency cross trades and similar matters.


18.	Effective Period of Agreement and Amendments . This Agreement shall become effective on the date hereof. Any amendment to this Agreement shall be written and signed by both parties to this Agreement.

19.

Deposits and Withdrawals . Unless otherwise set forth in the Investment Guidelines, the Client may deposit additional assets into the Account at such times and in such amounts as the Client and the Manager may mutually agree. The Client may withdraw assets from the Account at the end of any month upon forty-five (45) days’ prior written notice to the Manager. The Manager may always waive the notice requirements of this Section 19 and generally permit withdrawals by Client upon shorter notice periods.

20.

Termination of Agreement . Each of the Manager or Client may terminate this Agreement at any time upon forty-five (45) days’ prior written notice to the other party and upon receiving or giving the written notice of termination, the Client may instruct the Manager to either commence liquidation of the Account’s investments or continue to manage the account pursuant to the Investment Guidelines. Notwithstanding the foregoing, the Manager and Client may mutually determine to terminate this Agreement at any time. The Manager has notified the Client that upon receipt of any such notice of termination, or request for early termination, the Manager has a responsibility to notify limited partners of the Fund, whom may request withdrawal of their capital accounts in the Fund effective as of the same time as the Manager is liquidating the Account for the Client.

21.

Assignment . This Agreement may not be assigned, nor may any obligations hereunder be transferred or delegated, by either party without the prior written consent of the other, except that, without the prior written consent of the Client, the Manager may assign its rights and obligations under this Agreement to an affiliate. Any assignment made without the required consent shall be null and void for all purposes. Subject to the foregoing, this Agreement shall inure to the benefit of and be binding upon the parties hereto, their successors and permitted assigns.


22.	Severable . Any term or provision of this Agreement which is invalid or unenforceable in any applicable jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms or provisions of this Agreement in any jurisdiction.


23.	Applicable Law . NOTWITHSTANDING THE PLACE WHERE THIS AGREEMENT MAY BE EXECUTED BY ANY OF THE PARTIES THERETO, THE PARTIES EXPRESSLY AGREE THAT ALL TERMS AND PROVISIONS

HEREOF SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.


24.	Notices . All notices required or permitted to be sent under this Agreement shall be sent, if to the Manager:

if to the Client: AHP SMA, LP

14185 Dallas Parkway

Suite 1100

Dallas, Texas 75254

Attention: David A. Brooks, Vice President

or by facsimile to: 972-490-9605

or by Email: DBrooks@AshfordInc.com

or such other name or address as may be given in writing to the other party. All notices hereunder shall be sufficient if delivered by facsimile or overnight mail. Any notices shall be deemed given only upon actual receipt.


25.	Counterparts . This Agreement may be executed in counterparts, each of which shall be an original but all of which together shall constitute one agreement.

26.

Entire Agreement . This Agreement, including any and all Exhibits attached hereto, sets forth the entire agreement and understanding of the parties with respect to the matters set forth herein. All prior discussions, negotiations and agreements, whether oral or written, with respect to the subject matter hereof are superseded hereby and incorporated herein. To the extent any provisions in this Agreement conflict or are inconsistent with the terms and provisions of the PPM, the provisions set forth in this Agreement shall control.


27.	No Third Party Beneficiaries . Neither party intends for this Agreement to benefit any third party not expressly named in this Agreement. Notwithstanding the foregoing, each of the persons named in Section 13 shall be third party beneficiaries of this Agreement with respect to the matters set forth in Section 13.


28.	Expenses . Each party shall bear its own expenses related to the preparation and negotiation of this Agreement.

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

CLIENT:

AHP SMA, LP

a Delaware limited partnership


By:	AHP SMA GP, LLC , a Delaware limited liability company, its General Partner

By: /s/ David A. Brooks

David A. Brooks, Vice President

MANAGER:

ASHFORD INVESTMENT MANAGEMENT LLC

a Delaware limited liability company

By: /s/ Rob Hays

Rob Hays, Manager

EXHIBIT A

INVESTMENT GUIDELINES

The Manager shall manage the Account in a manner that is consistent with its management of AIM Real Estate Hedged Equity (U.S.) Fund, LP (the “Fund”) and as described in the attached Confidential Private Placement Memorandum dated as of November 2014 (a copy of which has been provided by the Manager to the Client) subject to such changes as may be otherwise agreed in writing .

-Exhibit A

SCHEDULE 6

COSTS AND EXPENSES

Organizational Expenses. The Client shall bear all costs and expenses of the establishment and ongoing maintenance of the Account.

Investment and Operational Expenses . The Client bears all costs and expenses directly related to its investment program conducted through the Account, including, but not limited to, all costs, fees and expenses directly related to investments or prospective investments (whether or not consummated) for the Account, including research and due diligence costs related to an investment; brokerage commissions and other execution and transaction costs, interest on, and commitment fees and expenses arising out of, debit balances or borrowings; exchange, clearing and settlement charges; technology-related trading costs, including, but not limited to, order management and accounting systems; fees and expenses of any third-party providers of “back office” and “middle office” services relating to trade settlement; market data and analytics services, including, but not limited to, Bloomberg terminals and data services provided through Bloomberg; travel expenses; appraisal fees; specific expenses incurred in obtaining, maintaining or performing systems, research and other information, including information service subscriptions, utilized with respect to the Account’s investment program, including, without limitation, for portfolio management, valuations and accounting purposes, including the costs of statistics and pricing services, service contracts for quotation equipment and related hardware, software, phone and internet charges; investment banking fees and expenses; borrowing charges on investments sold short; custody fees; and fees of consultants and finders relating to investments or prospective investments of the Account; any withholding, transfer or other taxes imposed on, or payable by, the Client; and any expenses relating to organizing investment subsidiaries through which investments may be made.

The Client also bears all out-of-pocket costs of the administration of the Account, including, but not limited to, any governmental, regulatory, compliance, licensing, filing or registration fees incurred by the Manager in compliance with the rules of any self-regulatory organization or any federal, state or local or other applicable laws; to the extent permitted by applicable law, any legal fees and costs (including settlement costs) arising in connection with any litigation or regulatory investigation instituted against the Manager in its capacity as such, or otherwise, involving Account activities; the cost of the audit (if any) of the Account; the fees and expenses for financial and tax accounting, bookkeeping and reporting services, and administrative services performance by any person on behalf of the Account; the fees and expenses of the Manager’s counsel in connection with advice directly relating to the Account’s legal affairs and tax-related or regulatory-related issues; the costs of any litigation or investigation involving activities of the Account; the costs and fees of any outside appraisers, accountants, administrators, attorneys or other experts engaged by the Manager; the costs and expenses associated with meetings with the Client; the costs associated with maintaining “directors and officers” or similar liability insurance for the benefit of the Manager; all reasonable costs and expenses associated with reporting and providing information to the Client; and any costs or expenses of winding up and liquidating the Account.

However, the Manager may, in its sole discretion, choose to absorb any such expenses incurred on behalf of the Client.

The Client and the Account will not reimburse the Manager for salaries, office rent, marketing-related expenses and other general overhead costs of the Manager. A portion of the commissions generated on the Account’s brokerage transactions may generate “soft dollar” credits that the Manager is authorized to use to pay for research and research related services and products used by the Manager.

-Exhibit A

EXHIBIT 10.14

AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

ASHFORD HOSPITALITY ADVISORS LLC

DATED: October 8, 2014

TABLE OF CONTENTS

PAGE

ARTICLE I DEFINED TERMS 1

ARTICLE II COMPANY CONTINUATION; ADMISSION OF MEMBERS; NAME; PLACE OF BUSINESS AND REGISTERED AGENT 10


Section 2.1	CONTINUATION 10


Section 2.2	CERTIFICATE OF FORMATION; OTHER FILINGS 10


Section 2.3	ADDITIONAL MEMBERS 11


Section 2.4	NAME, OFFICE AND REGISTERED AGENT 11

ARTICLE III BUSINESS AND TERM OF COMPANY 11


Section 3.1	BUSINESS 11


Section 3.2	TERM 11

ARTICLE IV CAPITAL CONTRIBUTIONS 11


Section 4.1	MANAGER 11


Section 4.2	MEMBERS 11


Section 4.3	ADDITIONAL CAPITAL CONTRIBUTIONS AND ISSUANCES OF ADDITIONAL MEMBERSHIP INTERESTS 12


Section 4.4	ADDITIONAL FUNDING 17


Section 4.5	INTEREST 17


Section 4.6	RETURN OF CAPITAL 17


Section 4.7	PERCENTAGE INTEREST 17


Section 4.8	ADMISSIONS 17


Section 4.9	REVERSE SPLIT OF COMMON UNITS 17

ARTICLE V PROFITS, LOSSES AND ACCOUNTING 18


Section 5.1	ALLOCATION OF PROFITS AND LOSSES 18


Section 5.2	ACCOUNTING 19


Section 5.3	MEMBERS’ CAPITAL ACCOUNTS 20


Section 5.4	SECTION 754 ELECTIONS 21


Section 5.5	SPECIAL ALLOCATION OF GAIN TO LTIP UNITHOLDERS 21

ARTICLE VI POWERS, DUTIES, LIABILITIES, COMPENSATION AND VOTING OF THE MANAGER 22


Section 6.1	POWERS OF MANAGER 22


Section 6.2	DELEGATION OF AUTHORITY 25


Section 6.3	DUTIES OF MANAGER 25


Section 6.4	LIABILITIES OF MANAGER; INDEMNIFICATION 26


Section 6.5	COMPENSATION OF MANAGER; REIMBURSEMENT 28


Section 6.6	RELIANCE ON ACT OF MANAGER 29


Section 6.7	OUTSIDE SERVICES; DEALINGS WITH AFFILIATES; OUTSIDE ACTIVITIES 29


Section 6.8	ADDITIONAL LOANS TO THE COMPANY 30


Section 6.9	CONTRIBUTION OF ASSETS 30


Section 6.10	RESIGNATION OR TERMINATION OF MANAGER 30

ARTICLE VII RIGHTS, PROHIBITIONS AND REPRESENTATIONS WITH RESPECT TO MEMBERS 31


Section 7.1	RIGHTS OF MEMBERS 31


Section 7.2	PROHIBITIONS WITH RESPECT TO THE MEMBERS 32


Section 7.3	REDEMPTION RIGHT 32


Section 7.4	BASIS ANALYSIS 35


Section 7.5	MEMBER GUARANTEES 35


Section 7.6	CONVERSION OF LTIP UNITS 35


Section 7.7	VOTING RIGHTS OF LTIP UNITS 38

ARTICLE VIII DISTRIBUTIONS AND PAYMENTS TO MEMBERS 39


Section 8.1	DISTRIBUTIONS OF CASH FLOW 39


Section 8.2	NO RIGHT TO DISTRIBUTIONS IN KIND 40


Section 8.3	WITHDRAWALS 40


Section 8.4	AMOUNTS WITHHELD 40

ARTICLE IX TRANSFERS OF INTERESTS 42


Section 9.1	ASHFORD INC. 42


Section 9.2	RESTRICTIONS ON TRANSFER OF MEMBERSHIP INTERESTS 43


Section 9.3	ADMISSION OF SUBSTITUTE MEMBER 44


Section 9.4	RIGHTS OF ASSIGNEES OF MEMBERSHIP INTERESTS 45


Section 9.5	EFFECT OF BANKRUPTCY, DEATH, INCOMPETENCE OR TERMINATION OF A MEMBER 46


Section 9.6	JOINT OWNERSHIP OF INTERESTS 46


Section 9.7	TRANSFEREES 46


Section 9.8	ABSOLUTE RESTRICTION 47


Section 9.9	INVESTMENT REPRESENTATION 47

ARTICLE X TERMINATION OF THE COMPANY 47


Section 10.1	TERMINATION 47


Section 10.2	PAYMENT OF DEBTS 48


Section 10.3	DEBTS TO MEMBERS 48


Section 10.4	REMAINING DISTRIBUTION 48


Section 10.5	RESERVE 49


Section 10.6	FINAL ACCOUNTING 49

ARTICLE XI AMENDMENTS 49


Section 11.1	AUTHORITY TO AMEND 49


Section 11.2	NOTICE OF AMENDMENTS 50


Section 11.3	IMPLEMENTATION OF AMENDMENT 50

ARTICLE XII POWER OF ATTORNEY 50


Section 12.1	POWER 50


Section 12.2	SURVIVAL OF POWER 51

ARTICLE XIII CONSENTS, APPROVALS, VOTING AND MEETINGS 51


Section 13.1	METHOD OF GIVING CONSENT OR APPROVAL 51


Section 13.2	MEETINGS OF MEMBERS 52


Section 13.3	OPINION 52


Section 13.4	SUBMISSIONS TO MEMBERS 52

ARTICLE XIV MISCELLANEOUS 53


Section 14.1	GOVERNING LAW 53


Section 14.2	AGREEMENT FOR FURTHER EXECUTION 53


Section 14.3	ENTIRE AGREEMENT 53


Section 14.4	SEVERABILITY 53


Section 14.5	NOTICES 53


Section 14.6	TITLES AND CAPTIONS 53


Section 14.7	COUNTERPARTS 53


Section 14.8	TERMS 54


Section 14.9	SURVIVAL OF RIGHTS 54

EXHIBIT A – List of Members

EXHIBIT B – Federal Income Tax Matters

EXHIBIT C – Notice of Exercise of Redemption Right

EXHIBIT D – Notice of Election by Member to Convert LTIP Units into Common
Units

EXHIBIT E – Notice of Election by the Company to Force Conversion of LTIP Units into Common Units

iii

AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

ASHFORD HOSPITALITY ADVISORS LLC

RECITALS:

This Amended and Restated Limited Liability Company Agreement is entered into effective October 8, 2014 (the “ Effective Date ”).

WHEREAS, Ashford Hospitality Advisors LLC (the “ Company ”) was formed as a limited liability company under the laws of the State of Delaware by the filing of a Certificate of Formation with the Secretary of State of Delaware on April 5, 2013;

WHEREAS, Ashford Hospitality Limited Partnership (“ Ashford Trust OP ”) executed the Limited Liability Company Agreement of Ashford Hospitality Advisors LLC as of April 5, (the “ Prior Agreement ”);

WHEREAS, before the Effective Date, the Company was classified as a disregarded entity for U.S. federal income tax purposes;

WHEREAS, on the Effective Date and simultaneously with the execution of this Agreement, Ashford Trust OP distributed all of the Common Units of the Company pro rata to the limited partners of Ashford Trust OP in accordance with their ownership of common units of Ashford Trust OP;

WHEREAS, Ashford OP Limited Partner LLC and Ashford Advisors Inc. desire to, and pursuant to the terms of the Prior Agreement have the authority to, amend and restate the Prior Agreement, as of the Effective Date, to make the revisions to the Prior Agreement set forth below and to provide for the admission as Members of the Company each of the other Persons identified on Exhibit A attached to this Agreement; and

NOW, THEREFORE, in consideration of the foregoing, of the mutual covenants between the parties to this Agreement, and of other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties to this Agreement amend and restate the Prior Agreement and agree as follows:

ARTICLE I
DEFINED TERMS

Whenever used in this Agreement, the following terms have the meanings respectively assigned to them in this Article I , unless otherwise expressly provided in this Agreement or unless the context otherwise requires:

“ Act ” means the Delaware Limited Liability Company Act, 6 Del C. § 18-101, et. seq., as amended, supplemented or restated from time to time, and any successor to such statute.

“ Additional Funds ” has the meaning set forth in Section 4.4 .

“ Additional Member ” means a Person admitted to this Company as a Member pursuant to and in accordance with Section 2.3 .

“ Additional Securities ” means any additional Ashford Inc. Shares (other than Ashford Inc. Shares issued in connection with a redemption pursuant to Section 7.3 or issued in exchange for shares of Ashford Inc. Common Stock on or about the Exchange Date) or rights, options, warrants or convertible or exchangeable securities containing the right to subscribe for or purchase Ashford Inc. Shares, as set forth in Section 4.3(a)(ii) .

“ Adjustment Event ” has the meaning set forth in Section 4.3(d) .

“ Affiliate ” of another Person means (a) any Person directly or indirectly owning, controlling or holding with power to vote ten percent (10%) or more of the outstanding voting securities of such other Person; (b) any Person ten percent (10%) or more of whose outstanding voting securities are directly or indirectly owned, controlled or held with power to vote by such other Person; (c) any Person directly or indirectly controlling, controlled by, or under common control with, such other Person; (d) any officer, director, member or partner of such other Person; and (e) if such other Person is an officer, director, member or partner in a company, the company for which such Person acts in any such capacity.

“ Agreed Value ” means the fair market value of Contributed Property as agreed to by the contributing Member and the Company, using such reasonable method of valuation as they may adopt except that the Agreed Value of all property constituting Contributed Property as of the Effective Date shall be determined by Manager.

“ Agreement ” means this Amended and Restated Limited Liability Company Agreement of Ashford Hospitality Advisors LLC, as amended from time to time.

“ Ashford Inc. ” means Ashford Inc., a Delaware corporation.

“ Ashford Inc. Common Stock ” means the common stock of Ashford Inc.

“ Ashford Inc. Common Stock Amount ” means a whole number of shares of Ashford Inc. Common Stock equal to the product of the number of Common Units offered for redemption by a Redeeming Member, multiplied by the Conversion Factor in effect on the Specified Redemption Date (rounded down to the nearest whole number if such product is not a whole number); provided, however, that if Ashford Inc. at any time issues to all holders of Ashford Inc. Common Stock rights, options, warrants or convertible or exchangeable securities entitling the stockholders to subscribe for or purchase Ashford Inc. Common Stock, or any other securities or property (collectively, the “ Rights ”), which Rights have

not expired pursuant to their terms, then the Ashford Inc. Common Stock Amount thereafter shall also include such Rights that a holder of that number of shares of Ashford Inc. Common Stock would be entitled to receive.

“ Ashford Inc. Expenses ” means (i) costs and expenses relating to the formation and continuity of existence of Ashford Inc. and any of its Subsidiaries (which Subsidiaries shall, for purposes of this definition, be included within the definition of Ashford Inc.), including taxes, fees and assessments associated therewith, any and all costs, expenses or fees payable to any director, officer, or employee of Ashford Inc., (ii) costs and expenses relating to the public offering and registration of securities or private offering of securities by Ashford Inc. and all statements, reports, fees and expenses incidental thereto, including underwriting discounts and selling commissions applicable to any such offering of securities, (iii) costs and expenses associated with the preparation and filing of any periodic reports by Ashford Inc. under federal, state or local laws or regulations, including filings with the Commission, (iv) costs and expenses associated with compliance by Ashford Inc. with laws, rules and regulations promulgated by any regulatory body, including the Commission, and (v) all other operating or administrative costs of Ashford Inc., including, without limitation, insurance premiums, and legal, accounting and directors’ fees, incurred in the ordinary course of its business on behalf of or in connection with the Company.

“ Ashford Inc. Preferred Stock ” means the preferred stock of Ashford Inc.

“ Ashford Inc. Share ” means a share of Ashford Inc. Common Stock or a share of Ashford Inc. Preferred Stock.

“ Bankruptcy Code ” means the United States Bankruptcy Code, as amended, 11 U.S.C. ss.ss. 101 ET SEQ., and as hereafter amended from time to time.

“ Business Day ” means any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in New York, New York are authorized or required by law, regulation or executive order to close.

“ Capital Account ” means, as to any Member, the account established and maintained for such Member pursuant to Section 5.3 .

“ Capital Account Limitation ” has the meaning set forth in Section 7.6(b) .

“ Capital Contribution ” means the amount in cash or the Agreed Value of Contributed Property (net of liabilities secured by the Contributed Property that the Company is considered to assume or take subject to under Code Section 752) contributed by each Member (or its original predecessor in interest) to the capital of the Company for its interest in the Company.

“ Carrying Value ” means, with respect to any property, the adjusted basis of such property for federal income tax purposes as of the time of determination except as follows: (a) the initial Carrying Value of any property contributed by a Member to the Company shall

be its Agreed Value, (b) the Carrying Value of property distributed to a Member shall the fair market value of such property, as determined by the

Manager, and (c) the Carrying Value of property shall be adjusted as provided by Exhibit B , items A.1., B.1(c), B.3., and B.4.

“ Cash Amount ” means an amount of cash per Common Unit equal to the Value on the Valuation Date of the Ashford Inc. Common Stock Amount.

“ Cash Flow ” means the excess of cash revenues actually received by the Company in respect of Company operations for any period, the amount of any reduction in reserves of the Company, and, to the extent determined by Manager, the net proceeds received by the Company from the disposition of any Company Property over Operating Expenses for such period.

“ Certificate of Formation ” means the certificate of formation of the Company filed with the Secretary of State of the State of Delaware, as amended or restated from time to time.

“ Certificate of Incorporation ” means the certificate of incorporation of the Manager filed with the Secretary of State of the State of Delaware, as amended or restated from time to time.

“ Code ” means the Internal Revenue Code of 1986, as amended, and as hereafter amended from time to time. Reference to any particular provision of the Code means that provision in the Code at the Effective Date and any succeeding provision of the Code.

“ Commission ” means the U.S. Securities and Exchange Commission.

“ Common Membership Interest ” means an interest in the Company, other than a Preferred Membership Interest, and includes a limited liability company interest in the Company and any and all other benefits to which the holder of such an interest in the Company may be entitled as provided in this Agreement or the Act, together with all obligations of such Person to comply with the terms and provisions of this Agreement and the Act.

“ Common Unit ” means a fractional, undivided share of the Common Membership Interests issued under this Agreement. At all times after the Exchange Date there shall be maintained an economic equivalency of a Common Unit and a share of Ashford Inc. Common Stock (subject to the effect of the Conversion Factor and to the effect of income taxation of Ashford Inc.’s taxable income), except as otherwise provided in this Agreement.

“ Common Unit Distribution ” has the meaning set forth in Section 4.3(d)(ii) .

“ Common Unit Distribution Period ” means any quarter or shorter period with respect to which a distribution is to be made to the holders of the Common Units.

“ Common Unit Economic Balance ” has the meaning set forth in Section 5.5 .

“ Common Percentage Interest ” means the percentage ownership interest in the Common Units of each Member, as determined by dividing the Common Units owned by a Member by the total number of Common Units then outstanding, subject to Sections 4.3(d) and 4.3(e) which treat LTIP Units as Common Units for this purpose.

“ Company ” means Ashford Hospitality Advisors LLC, a Delaware limited liability company.

“ Constituent Person ” has the meaning set forth in Section 7.6(f) .

“ Contributed Property ” means a Member’s interest in property or other consideration (excluding services and cash) contributed to the Company by such Member.

“ Conversion Date ” has the meaning set forth in Section 7.6(b) .

“ Conversion Factor ” means 1.0; provided, however, that if Ashford Inc. (i) declares or pays a dividend on its outstanding Ashford Inc. Common Stock in shares of Ashford Inc. Common Stock or makes a distribution to all holders of its outstanding Ashford Inc. Common Stock in shares of Ashford Inc. Common Stock, (ii) subdivides its outstanding Ashford Inc. Common Stock, or (iii) combines its outstanding Ashford Inc. Common Stock into a smaller number of Ashford Inc. Common Stock, the Conversion Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the numerator of which shall be the number of shares of Ashford Inc. Common Stock issued and outstanding on the record date for such dividend, distribution, subdivision or combination (assuming for such purposes that such dividend, distribution, subdivision or combination has occurred as of such time), and the denominator of which shall be the actual number of shares of Ashford Inc. Common Stock (determined without the above assumption) issued and outstanding on the record date for such dividend, distribution, subdivision or combination. Any adjustment to the Conversion Factor shall become effective immediately after the effective date of such event retroactive to the record date, if any, for such event; PROVIDED, HOWEVER, that if the Manager receives a Notice of Redemption after the record date, but prior to the effective date of such dividend, distribution, subdivision or combination, the Conversion Factor shall be determined as if the Manager had received the Notice of Redemption immediately prior to the record date for such dividend, distribution, subdivision or combination.

“ Conversion Notice ” has the meaning set forth in Section 7.6(b) .

“ Conversion Right ” has the meaning set forth in Section 7.6(a) .

“ Distribution Payment Date ” means the a date upon which the Manager makes distributions in accordance with Section 8.1 .

“ Economic Capital Account Balance ” has the meaning set forth in Section 5.5 .

“ Effective Date ” has the meaning set forth in the Recitals.

“ Event of Bankruptcy ” means as to any Person the filing of a petition for relief as to such Person as debtor or bankrupt under the Bankruptcy Code or similar provision of law of any jurisdiction (except if such petition is contested by such Person and has been dismissed within ninety (90) days of the filing thereof); insolvency of such Person as finally determined by a court of competent jurisdiction; filing by such Person of a petition or application to accomplish the same or for the appointment of a receiver or a trustee for such Person or a substantial part of such Person’s assets; commencement of any proceedings relating to such Person as a debtor under any other reorganization, arrangement, insolvency, adjustment of debt or liquidation law of any jurisdiction, whether now in existence or hereinafter in effect, either by such Person or by another, but if such proceeding is commenced by another, only if such Person indicates his approval of such proceeding, or such proceeding is contested by such Person and has not been finally dismissed within ninety (90) days.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended.

“ Exchange Date ” means the date, if any, that Ashford OP Limited Partner LLC first exchanges Common Units for shares of Ashford Inc. Common Stock with Ashford Inc.

“ Forced Conversion ” has the meaning set forth in Section 7.6(c) .

“ Forced Conversion Notice ” has the meaning set forth in Section 7.6(c) .

“ Full Distribution Amount ” has the meaning set forth in Section 8.1(a) .

“ Indemnitee ” means (i) any Person made a party to a proceeding by reason of its status as (A) the Manager or (B) a director, officer, employee or agent of the Company or the Manager, and (ii) such other Persons (including Affiliates of the Manager or the Company) as the Manager may designate from time to time (whether before or after the event giving rise to potential liability), in its sole and absolute discretion.

“ Ineligible Unit ” has the meaning set forth in Section 5.5 .

“ Initiating Member ” has the meaning set forth in Section 7.5 .

“ IRS ” means the Internal Revenue Service.

“ Liquidating Events ” has the meaning set forth in Section 10.1 .

“ LTIP Unit ” means a Unit that is designated as an LTIP Unit and which has the rights, preferences and other privileges designated in Sections 4.3(d) and 4.3(e) and elsewhere in this Agreement in respect of LTIP Unitholders. The allocation of LTIP Units among the Members shall be set forth on Exhibit A , as may be amended by the Manager from time to time.

“ LTIP Unitholder ” means a Member that holds LTIP Units.

“ Manager ” means Ashford Inc., in its position as a Manager of the Company, and any Person who becomes a manager as provided in this Agreement, and any of their successors as Manager each of whom shall constitute a “manager” of the Company for purposes of the Act.

“ Member ” means any Person named as a Member on Exhibit A and any Person who becomes a Substitute Member pursuant to Section 9.3 or an Additional Member pursuant to Section 2.3 , in such Person’s capacity as a Member of the Company for so long as such Person holds any Units.

“ Membership Interest ” means an interest in the Company and includes a limited liability company interest and any and all other benefits to which the holder of such an interest in the Company may be entitled as provided in this Agreement or the Act, together with all obligations of such Person to comply with the terms and provisions of this Agreement and the Act.

“ Newly Issued Common Unit ” means with respect to any Common Unit Distribution Period, a Common Unit issued during such Common Unit Distribution Period, other than to Ashford Inc. and other than Common Units outstanding on the Effective Date.

“ Notice of Redemption ” means the Notice of Exercise of Redemption Right substantially in the form of Exhibit C .

“ Operating Expenses ” means (i) all administrative and operating costs and expenses incurred by the Company, (ii) those administrative costs and expenses of the Manager, including any salaries or other payments to directors, officers or employees of the Manager, and any accounting and legal expense of the Manager, which expenses, the Members have agreed, are expenses of the Company and not the Manager, and (iii) to the extent not included in clause (ii) above, Ashford Inc. Expenses; PROVIDED, HOWEVER, that Operating Expenses shall not include any administrative costs and expenses incurred by the Manager that are attributable to properties or partnership interests in a Subsidiary that are owned by the Manager or Ashford Inc. directly.

“ Person ” means any individual, partnership, corporation, limited liability company, trust or other entity.

“ Plan ” means the Ashford Inc. 2014 Equity Incentive Plan, as amended and/or one or more successor or additional equity incentive plans or programs that Ashford Inc. has adopted or may adopt, as amended (each individually and all of them collectively, as the context requires).

“ Preferred Membership Interest ” means an interest in the Company evidenced by a designated series of Preferred Units, having a preference in payment of distributions or on liquidation as determined by the Manager for such series of Preferred Units and as set forth in an amendment to this Agreement, and includes a limited liability company interest and all other benefits to which the holder of such an interest in the Company may be entitled as

provided in this Agreement or the Act, together with all obligations of such Person to comply with the terms and provisions of this Agreement and the Act.

“ Preferred Percentage Interest ” with respect to a series of Preferred Units, means the percentage ownership interest in the Preferred Units of each Member holding Preferred Units of such specified series, as determined by dividing the Preferred Units of such series owned by a Member by the total number of Preferred Units of that series then outstanding.

“ Preferred Return ” means any payment made or to be made on any Preferred Unit corresponding to any dividend paid or to be paid on the related series of preferred stock issued by Ashford Inc., in accordance with Section 4.3 .

“ Preferred Unit ” means a fractional, undivided share of Preferred Membership Interests in the specified series issued under this Agreement.

“ Prior Agreement ” has the meaning assigned to such term in the Recitals.

“ Property ” means any property or other investment in which the Company holds an ownership interest.

“ Record Date ” means the record date established by the Manager for the distribution of Cash Flow pursuant to Section 8.1 , which record date, as to Common Units, shall be the corresponding record date established by Ashford Inc. with respect to the Ashford Inc. Common Stock and which record date, as to a series of Preferred Units, shall be the corresponding record date established by Ashford Inc. with respect to the corresponding series of Ashford Inc. Preferred Stock.

“ Redeeming Member ” has the meaning provided in Section 7.3(a) .

“ Redemption Right ” has the meaning provided in Section 7.3(a) .

“ Safe Harbor ” means, the election described in the Safe Harbor Regulation, pursuant to which a partnership and all of its partners may elect to treat the fair market value of a partnership interest that is transferred in connection with the performance of services as being equal to the liquidation value of that interest.

“ Safe Harbor Election ” means the election by a partnership and its partners to apply the Safe Harbor, as described in the Safe Harbor Regulation and Internal Revenue Service Notice 2005-43.

“ Safe Harbor Regulation ” means Proposed Treasury Regulations Section 1.83-3(l).

“ Specified Redemption Date ” means, with respect to a given Member and Notice of Redemption, the later of any date so specified in the Notice of Redemption and the third (3rd) Business Day after receipt by the Manager of the Notice of Redemption, provided that no Specified Redemption Date may occur with respect to any Unit before one year after such Unit is issued by the Company.

“ Subsidiary ” means, with respect to any Person, any corporation or other entity of which a majority of (i) the voting power of the voting equity securities, or (ii) the outstanding equity interests, are owned, directly or indirectly, by such Person.

“ Substitute Member ” means any Person admitted to the Company as a Member pursuant to Section 9.3 .

“ Surviving Entity ” has the meaning set forth in Section 9.1(c) .

“ Target Balance ” has the meaning set forth in Section 5.5 .

“ Tax Matters Member ” means the Member appointed pursuant to Section 5.2(d) to be tax matters partner of the Company within the meaning of Section 6231(a)(7) of the Code.

“ Transaction ” has the meaning set forth in Section 9.1(b) .

“ Transfer ” has the meaning set forth in Section 9.2(a) .

“ Treasury Regulations ” means the regulations promulgated by the United States Department of the Treasury pursuant to and in respect of provisions of the Code.

“ Unit ” means a Common Unit, a Preferred Unit, an LTIP Unit, or any other fractional, undivided share of the Membership Interests that the Manager has authorized pursuant to this Agreement. The Units of the Members shall be set forth on Exhibit A , as may be amended by the Manager from time to time.

“ Unit Transaction ” has the meaning set forth in Section 7.6(f) .

“ Unvested Incentive Units ” has the meaning set forth in Section 4.3(e)(i) .

“ Valuation Date ” means the date of receipt by the Manager of a Notice of Redemption or, if such date is not a Business Day, the first Business Day thereafter.

“ Value ” means, with respect to a share of Ashford Inc. Common Stock, the average of the daily market price for the ten (10) consecutive trading days immediately preceding the Valuation Date. The market price for each such trading day shall be: (i) if the Ashford Inc. Common Stock is listed or admitted to trading on any securities exchange or the NASDAQ National Market System, the closing price, regular way, on such day, or if no such sale takes place on such day, the average of the closing bid and asked prices on such day; (ii) if the Ashford Inc. Common Stock is not listed or admitted to trading on any securities exchange or the NASDAQ National Market System, the last reported sale price on such day or, if no sale takes place on such day, the average of the closing bid and asked prices on such day, as reported by a reliable quotation source designated by the Manager; or (iii) if the Ashford Inc. Common Stock is not listed or admitted to trading on any securities exchange or the NASDAQ National Market System and no such last reported sale price or closing bid and asked prices are available, the average of the reported high bid and low asked prices

on such day, as reported by a reliable quotation source designated by the Manager, or if there shall be no bid and asked prices on such day, the average of the high bid and low asked prices, as so reported, on the most recent day (not more than ten (10) days prior to the date in question) for which prices have been so reported; provided, however, that if there are no bid and asked prices reported during the ten (10) days prior to the date in question, the Value of the Ashford Inc. Common Stock shall be determined by the Manager acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate. If the Ashford Inc. Common Stock Amount includes rights that a holder of Ashford Inc. Common Stock would be entitled to receive, and the Manager acting in good faith determines that the value of such rights is not reflected in the Value of the Ashford Inc. Common Stock determined as aforesaid, then the Value of such rights shall be determined by the Manager acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate.

“ Vested LTIP Units ” has the meaning set forth in Section 4.3(e)(i) .

“ Vesting Agreement ” means each or any, as the context implies, LTIP Unit Award Agreement entered into by a LTIP Unitholder upon acceptance of an award of LTIP Units under the Plan (as such agreement may be amended, modified or supplemented from time to time).

ARTICLE II
COMPANY CONTINUATION; ADMISSION OF MEMBERS; NAME; PLACE OF BUSINESS AND REGISTERED AGENT

Section 2.1 CONTINUATION . By this Agreement, the Members agree to continue the Company pursuant to the provisions of the Act and upon the terms and conditions set forth in this Agreement. Except as expressly provided in this Agreement, the rights and obligations of the Members and the administration and termination of the Company shall be governed by the Act. The Membership Interest of each Member shall be personal property for all purposes.

Section 2.2 CERTIFICATE OF FORMATION; OTHER FILINGS . The Manager shall prepare (or caused to be prepared), execute, acknowledge, record and file at the expense of the Company, a Certificate of Formation and all requisite fictitious name statements and notices in such places and jurisdictions as may be required by the Act or necessary to cause the Company to be treated as a limited liability company under, and otherwise to comply with, the laws of each state or other jurisdiction in which the Company conducts business.

Section 2.3 ADDITIONAL MEMBERS . The Manager shall in timely fashion amend this Agreement and, if required by the Act, the Certificate of Formation filed for record to reflect the admission pursuant to the terms of this Agreement of a Person as a Member.

Section 2.4 NAME, OFFICE AND REGISTERED AGENT . The name of the Company shall be Ashford Hospitality Advisors LLC. The principal place of business of

the Company shall be at 14185 Dallas Parkway, Suite 1100, Dallas, Texas 75254. The Manager may at any time change the location of such office, provided the Manager gives notice to the Members of any such change. The name and address of the Company’s statutory agent for service of process on the Company in Texas is Ashford Inc., 14185 Dallas Parkway, Suite 1100, Dallas, Texas 75254. The name and address of the Company’s statutory agent for service of process on the Company in Delaware is Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808.

ARTICLE III
BUSINESS AND TERM OF COMPANY

Section 3.1 BUSINESS . The purpose and nature of the business of the Company is to conduct any business that may lawfully be conducted by a limited liability company organized pursuant to the Act. To consummate the foregoing and to carry out the obligations of the Company in connection therewith or incidental thereto, the Manager shall have the authority, in accordance with and subject to the limitations set forth elsewhere in this Agreement, to make, enter into, perform and carry out any arrangements, contracts or agreements of every kind for any lawful purpose, without limit as to amount or otherwise, with any corporation, association, partnership, limited liability company, firm, trustee, syndicate, individual or any political or governmental division, subdivision or agency, domestic or foreign, and generally to make and perform agreements and contracts of every kind and description and to do any and all things necessary or incidental to the foregoing for the protection and enhancement of the assets of the Company.

Section 3.2 TERM . The Company shall continue in perpetuity and shall have perpetual existence, unless earlier dissolved pursuant to law or the provisions of this Agreement. The existence of the Company as a separate legal entity shall continue until the cancellation of the Certificate of Formation pursuant to the Act.

ARTICLE IV
CAPITAL CONTRIBUTIONS

Section 4.1 MANAGER . The Manager, as manager, has not contributed, and shall not be required to contribute, cash or other assets to the capital of the Company.

Section 4.2 MEMBERS . The Members are admitted to the Company as members of the Company effective as of simultaneous with the cessation of Ashford Trust OP to be a member of the Company. The Members have contributed cash and their respective interests in the Contributed Properties to the Company as identified on Exhibit A . The Agreed Values of the Members’ proportionate interest in the Contributed Properties as of the date of contribution are set forth on Exhibit A .

Section 4.3 ADDITIONAL CAPITAL CONTRIBUTIONS AND ISSUANCES OF ADDITIONAL MEMBERSHIP INTERESTS . Except as provided in this Section 4.3 or in Section 4.4 , the Members have and shall have no preemptive or other right or obligation to make any additional Capital Contributions or loans to the Company. Ashford Inc. may

contribute additional capital or property to the Company, from time to time, and receive additional Membership Interests in respect thereof, in the manner contemplated in this Section 4.3 .

(a) ISSUANCES OF ADDITIONAL MEMBERSHIP INTERESTS.

(i) GENERAL. The Manager is authorized to cause the Company to issue such additional Membership Interests in the form of Common Units and Preferred Units for any Company purpose at any time or from time to time, to the Members or to other Persons for such consideration and on such terms and conditions as shall be established by the Manager in its sole and absolute discretion, all without the approval of any of the Members. Any additional Membership Interest issued as provided in the prior sentence may be issued in one or more classes, or one or more series of any of such classes, with such designations, preferences and relative, participating, optional or other special rights, powers and duties, including rights, powers and duties senior to Membership Interests, all as shall be determined by the Manager in its sole and absolute discretion and without the approval of any Member, subject to Delaware law, and all as may be set forth in an Exhibit to this Agreement, each of which Exhibit shall be incorporated into and become part of this Agreement upon adoption by the Manager, including, without limitation, (i) the allocations of items of Company income, gain, loss, deduction and credit to each such class or series of Membership Interests; (ii) the right of each such class or series of Membership Interests to share in Company distributions; (iii) the rights of each class or series of Membership Interests upon dissolution and liquidation of the Company and (iv) the right to vote; PROVIDED, HOWEVER, that no additional Membership Interests shall be issued to Ashford Inc. unless:

(ii) (1) (A) The additional Membership Interests are issued in connection with an issuance of Ashford Inc. Shares of or other interests in Ashford Inc., all such that the economic interests are substantially similar to the designations, preferences and other rights of the additional Membership Interests issued to Ashford Inc. by the Company in accordance with this Section 4.3 (but taking into account that Ashford Inc. is subject to income tax on its taxable income) and (B) Ashford Inc. shall make, directly or through one or more Affiliates, a Capital Contribution to the Company in an amount equal to the proceeds raised or other property received by Ashford Inc., directly or through one or more Affiliates, in connection with the issuance of such stock or other interests in Ashford Inc., (2) the additional Membership Interests are issued in exchange for property owned by Ashford Inc., with a fair market value, as determined by the Manager, in good faith, equal to the value of the Membership Interests or in connection with issuances by Ashford Inc. of Additional Securities pursuant to the Plan, or (3) the additional Membership Interests are issued to all Members in proportion to their

respective Common Percentage Interests or Preferred Percentage Interests, as applicable.

Without limiting the foregoing, the Manager is expressly authorized to cause the Company to issue Common Units or Preferred Units for less than fair market value, so long as the Manager concludes in good faith that such issuance is in the best interests of Ashford Inc. and the Company. There are no Preferred Membership Interests or Preferred Units outstanding on the Effective Date, but the Manager is authorized to cause the Company to issue Preferred Membership Interests or Preferred Units after the Effective Date.

(b) UPON ISSUANCE OF ADDITIONAL SECURITIES. After the Effective Date, Ashford Inc. shall not issue any Additional Securities other than to all holders of Ashford Inc. Shares, unless (A) the Manager shall cause the Company to issue to Ashford Inc. or its Affiliates, Membership Interests or rights, options, warrants or convertible or exchangeable securities of the Company having designations, preferences and other rights, all such that the economic interests are substantially similar to those of the Additional Securities (but taking into account that Ashford Inc. is subject to income tax on its taxable income), and (B) Ashford Inc. contributes, directly or through one or more Affiliates, the proceeds or other property received from the issuance of such Additional Securities and from any exercise of rights contained in such Additional Securities to the Company. For the avoidance of doubt, Ashford Inc. may in any event issue Additional Securities pursuant to the Plan.

Without limiting the foregoing, Ashford Inc. may issue Additional Securities for less than fair market value, and as a result the Manager is expressly authorized to cause the Company to issue to Ashford Inc. or its Affiliates corresponding Membership Interests, so long as (x) Ashford Inc. concludes in good faith that such issuance is in the best interests of Ashford Inc. and the Company, and (y) Ashford Inc., directly or through one or more Affiliates, contributes all proceeds or other property received from such issuance to the Company. For example, if Ashford Inc. issues Ashford Inc. Common Stock for a cash purchase price and contributes, directly or through one or more Affiliates, all of the proceeds of such issuance to the Company as required under this Agreement, Ashford Inc. or its Affiliates shall be issued a number of additional Common Units equal to the product of (A) the number of shares of such Ashford Inc. Common Stock issued by Ashford Inc., the proceeds of which were so contributed, multiplied by (B) a fraction, the numerator of which is 100%, and the denominator of which is the Conversion Factor in effect on the date of such contribution.

(c) CERTAIN DEEMED CONTRIBUTIONS OF PROCEEDS OF ISSUANCE OF ASHFORD INC. SHARES. In connection with any and all issuances of Ashford Inc. Shares, Ashford Inc., directly or through one or more Affiliates, shall contribute all of the proceeds raised in connection with such issuance to the Company

as Capital Contributions, PROVIDED THAT if the proceeds actually received and contributed by Ashford Inc. or its Affiliates are less than the gross proceeds of such issuance as a result of any underwriter’s discount or other expenses paid or incurred in connection with such issuance, then Ashford Inc., directly or through one or more Affiliates, shall be deemed to have made Capital Contributions to the Company in the aggregate amount of the gross proceeds of such issuance and the Company shall be deemed simultaneously to have paid such offering expenses in connection with the required issuance of additional Units to Ashford Inc. or its Affiliates for such Capital Contributions pursuant to Section 4.3(a) .

(d) LTIP UNITS. The Manager may from time to time issue LTIP Units to Persons who provide services to the Company, for such consideration as the Manager may determine to be appropriate, and admit such Persons as Members. The Capital Accounts of such LTIP Unitholders shall be credited with the amount of their respective Capital Contributions pursuant to Section 5.3 . Except to the extent a Capital Contribution is made with respect to an LTIP Unit, an LTIP Unit is intended to qualify as a “profits interest” in the Company. Subject to the provisions of Sections 4.3(d) and 4.3(e) and the special provisions of Sections 5.5 , 7.6 and 7.7 , LTIP Units shall be treated as Common Units, with all of the rights, privileges and obligations attendant thereto. For purposes of computing the Common Percentage Interests, holders of LTIP Units shall be treated as Common Unitholders and LTIP Units shall be treated as Common Units. In particular, the Company shall comply with the following procedures:

(i) If an Adjustment Event (as defined below) occurs, then the Manager shall make a corresponding adjustment to the LTIP Units to maintain a one-for-one conversion and economic equivalence ratio between Common Units and LTIP Units. The following shall be “ Adjustment Events ”: (A) the Company makes a distribution on all outstanding Common Units in Units, (B) the Company subdivides the outstanding Common Units into a greater number of units or combines the outstanding Common Units into a smaller number of Units, or (C) the Company issues any Units in exchange for its outstanding Common Units by way of a reclassification or recapitalization of its Common Units. If more than one Adjustment Event occurs, the adjustment to the LTIP Units need be made only once using a single formula that takes into account each and every Adjustment Event as if all Adjustment Events occurred simultaneously. For the avoidance of doubt, the following shall not be Adjustment Events: (x) the issuance of Units in a financing, reorganization, acquisition or other similar business transaction, (y) the issuance of Units pursuant to any employee benefit or compensation plan or distribution reinvestment plan, or (z) the issuance of any Units to Ashford Inc. in respect of a capital contribution to the Company of proceeds from the sale of securities by Ashford Inc. If the Company takes an action affecting the Common Units other than actions specifically described above as “Adjustment Events” and in the opinion of the Manager such action would

require an adjustment to the LTIP Units to maintain the one-to-one correspondence described above, the Manager shall have the right to make such adjustment to the LTIP Units, to the extent permitted by law and by the Plan, in such manner and at such time as the Manager, in its sole discretion, may determine to be appropriate under the circumstances. If an adjustment is made to the LTIP Units as provided in this Section 4.3 the Company shall promptly file in the books and records of the Company an officer’s certificate setting forth such adjustment and a brief statement of the facts requiring such adjustment, which certificate shall be conclusive evidence of the correctness of such adjustment absent manifest error. Promptly after filing of such certificate, the Company shall mail a notice to each LTIP Unitholder setting forth the adjustment to his or her LTIP Units and the effective date of such adjustment; and

(ii) Subject to the provisions of Section 10.4 , the LTIP Unitholders shall, in respect of each Distribution Payment Date, when, as and if authorized and declared by the Manager out of assets legally available for that purpose, be entitled to receive distributions in an amount per LTIP Unit equal to the distributions per Common Unit (the “ Common Unit Distribution ”), paid to holders of record on the same Record Date established by the Manager with respect to such Distribution Payment Date. The term “ Newly Issued Common Unit ” shall be deemed to include LTIP Units issued during a Common Unit Distribution Period and Section 8.1(a) shall apply in full to LTIP Units. During any Common Unit Distribution Period, so long as any LTIP Units are outstanding, except upon liquidation of the Company and as provided in the following sentence and Section 10.4 , no distributions (whether in cash or in kind) shall be authorized, declared or paid on Common Units, unless equal distributions have been or contemporaneously are authorized, declared and paid on the LTIP Units for such Common Unit Distribution Period.

The LTIP Units shall rank pari passu with the Common Units as to the payment of regular and special periodic or other distributions and distribution of assets upon liquidation, dissolution or winding up, provided upon liquidation the amount distributed with respect to a LTIP Unit shall be limited to the related Capital Account balance as provided by Section 10.4 . As to the payment of distributions and as to distribution of assets upon liquidation, dissolution or winding up, any class or series of Units or Membership Interests which by its terms specifies that it shall rank junior to, on a parity with, or senior to the Common Units shall also rank junior to, or pari passu with, or senior to, as the case may be, the LTIP Units. Subject to the terms of any Vesting Agreement, a LTIP Unitholder shall be entitled to transfer his or her LTIP Units to the same extent, and subject to the same restrictions as holders of Common Units are entitled to transfer their Common Units pursuant to Article IX .

(e) TERMS OF LTIP UNITS. LTIP Units shall be subject to the following special provisions:

(i) VESTING AGREEMENTS. LTIP Units may, in the sole discretion of the Manager, be issued subject to vesting, forfeiture and additional restrictions on transfer pursuant to the terms of a Vesting Agreement. The terms of any Vesting Agreement may be modified by the Manager from time to time in its sole discretion, subject to any restrictions on amendment imposed by the relevant Vesting Agreement or by the Plan, if applicable. LTIP Units that have vested under the terms of a Vesting Agreement are referred to as “ Vested LTIP Units ”; all other LTIP Units shall be treated as “ Unvested Incentive Units .”

(ii) FORFEITURE. Unless otherwise specified in the Vesting Agreement, upon the occurrence of any event specified in a Vesting Agreement as resulting in the right of the Company to repurchase LTIP Units at a specified purchase price or some other forfeiture of any LTIP Units, then if the Company exercises such right to repurchase or forfeiture in accordance with the applicable Vesting Agreement, then the relevant LTIP Units shall immediately, and without any further action, be treated as cancelled and no longer outstanding for any purpose. Unless otherwise specified in the Vesting Agreement, no consideration or other payment shall be due with respect to any LTIP Units that have been forfeited, other than any distributions declared with respect to a Record Date prior to the effective date of the forfeiture. In connection with any repurchase or forfeiture of LTIP Units, the balance of the portion of the Capital Account of the LTIP Unitholder that is attributable to all of his or her LTIP Units shall be reduced by the amount, if any, by which it exceeds the Target Balance contemplated by Section 5.5 , calculated with respect to the LTIP Unitholder’s remaining LTIP Units, if any, with such reduction being accomplished by an allocation of gross deductions or losses to the applicable LTIP Unitholder.

(iii) ALLOCATIONS. LTIP Units shall generally be treated as Common Units for purposes of Article V , but LTIP Unitholders shall also be entitled to certain special allocations of gain under Section 5.5 .

(iv) REDEMPTION. The Redemption Right provided to Members under Section 7.3 shall not apply with respect to LTIP Units unless and until they are converted to Common Units as provided in clause (vi) below and Section 7.6 .

(v) LEGEND. Any certificate evidencing an LTIP Unit shall bear an appropriate legend indicating that additional terms, conditions and restrictions on transfer, including without limitation any Vesting Agreement, apply to the LTIP Unit.

(vi) CONVERSION TO COMMON UNITS. Vested LTIP Units are eligible to be converted into Common Units under Section 7.6 .

(vii) VOTING. LTIP Units have the voting rights provided in Section 7.7 .

(viii) ISSUANCE. An LTIP Unit shall be considered issued to an LTIP Unitholder upon the later to occur of: (i) execution of a counterpart signature page to this Agreement, unless such Person is already a Member, (ii) execution by such LTIP Unitholder and the Company of a Vesting Agreement with respect to such LTIP Unit, if applicable, and (iii) payment to the Company of the Capital Contribution, if any, provided for in the related Vesting Agreement.

Section 4.4 ADDITIONAL FUNDING . If the Manager determines that it is in the best interests of the Company to provide for additional Company funds (“ Additional Funds ”) for any Company purpose, the Manager may (i) cause the Company to obtain such funds from outside borrowings, or (ii) elect to have the Manager provide such Additional Funds to the Company through loans or otherwise.

Section 4.5 INTEREST . No interest shall be paid on the Capital Contribution of any Member.

Section 4.6 RETURN OF CAPITAL . Except as expressly provided in this Agreement, no Member shall be entitled to demand or receive the return of its Capital Contribution.

Section 4.7 PERCENTAGE INTEREST . If the number of outstanding Common Units increases or decreases during a taxable year, the Manager shall adjust each holder’s Common Percentage Interest, as reflected on Exhibit A , to a percentage equal to the number of Common Units held by such Member divided by the aggregate number of outstanding Common Units.

Section 4.8 ADMISSIONS . Any Person issued Units pursuant to this Article IV shall, to the extent not already a Member, be admitted to the Company as a Member upon its execution of a counterpart or amendment to this Agreement.

Section 4.9 REVERSE SPLIT OF COMMON UNITS . On the Exchange Date immediately upon the completion on that date of all exchanges of Common Units for shares of Ashford Inc. Common Stock, each outstanding Common Unit will be automatically converted into one fifty-fifth (1/55) of a Common Unit.

ARTICLE V
PROFITS, LOSSES AND ACCOUNTING

Section 5.1 ALLOCATION OF PROFITS AND LOSSES . Except as otherwise provided in this Agreement or in Exhibit B , profits earned and losses incurred by the Company shall be allocated among the Members as follows:

(a) Profits for each year shall be allocated among the Members, and shall be credited to the respective Capital Accounts of the Members, in the following order and priority:

(i) First, items of gross income to the holders of Preferred Units in the amount necessary so that the cumulative amount of gross income allocated to holders of Preferred Units pursuant to this Section 5.1(a)(i) is equal to the cumulative amount of distributions of Preferred Return (as defined, for each series of Preferred Units, in the exhibit, if any, to this Agreement setting forth the terms of such Preferred Units) distributed to holders of Preferred Units;

(ii) Second, to the Members to the extent of losses, in the proportions and in the reverse order in which losses were allocated to them pursuant to Section 5.1(b) , until the cumulative amounts allocated to each Member pursuant to this Section 5.1(a)(ii) are equal to the cumulative losses so allocated to such Member;

(iii) Third, any remaining profits shall be allocated to the holders of Common Units in accordance with their Common Percentage Interests.

(b) Losses for each year shall be allocated among the Members, and shall be debited to the respective Capital Accounts of the Members, in the following order and priority:

(iii) First, to the holders of Common Units pro rata in accordance with, and to the extent of, the positive balances in their Adjusted Capital Account Balances (as defined in Exhibit B ) attributable to Common Units;

(iv) Second, to the holders of Preferred Units pro rata in accordance with, and to the extent of, the positive balances in their Adjusted Capital Account Balances (as defined in Exhibit B ) attributable to Preferred Units; and

(v) Thereafter, any remaining losses will be allocated to the holders of Common Units in accordance with their Common Percentage Interests.

(c) If the Company issues additional Units pursuant to the provisions of this Agreement, the Manager is authorized to make revisions to this Section 5.1 as it determines are necessary or desirable to reflect the terms of the issuance of such additional Units, including, without limitation, making preferential allocations to

certain classes of Units. For purposes of determining the profits and losses or any other items allocable to any period, profits and losses, and any such other items shall be determined on a daily, monthly, or other basis, as determined by the Manager using any permissible method under Code Section 706 and the Treasury Regulations thereunder.

(d) Notwithstanding the provisions of Section 5.1(a) and Section 5.1(b) , upon liquidation of the Company or upon redemption of any redeemable Preferred Units, items of gross income or items of deduction or loss shall be allocated to the holders of the Preferred Units or the Common Units, such that the Capital Accounts attributable to the Preferred Units equal, after all allocations of profit and loss are completed, the amount to be distributed to the Preferred Units.

Section 5.2 ACCOUNTING .

(f) The books of the Company shall be kept on the accrual basis and in accordance with generally accepted accounting principles consistently applied.

(g) The fiscal year of the Company shall be the calendar year.

(h) The terms “profits” and “losses,” as used in this Agreement, means all items of income, gain, expense or loss as determined utilizing federal income tax accounting principles and shall also include each Member’s share of income described in Section 705(a)(1)(B) of the Code, any expenditures described in Section 705(a)(2)(B) of the Code, any expenditures described in Section 709(a) of the Code which are not deducted or amortized in accordance with Section 709(b) of the Code, losses not deductible pursuant to Sections 267(a) and 707(b) of the Code and adjustments made pursuant to Exhibit B .

(i) Ashford Inc. shall be the “tax matters partner” of the Company within the meaning of Section 6231(a)(7) of the Code (as such, the “ Tax Matters Member ”). As Tax Matters Member, Ashford Inc. shall have the right and obligation to take all actions authorized and required by the Code for the Tax Matters Member. Ashford Inc. shall have the right to retain professional assistance in respect of any audit of the Company by the IRS, and all out-of-pocket expenses and fees incurred by Ashford Inc. on behalf of the Company as Tax Matters Member shall constitute Operating Expenses of the Company.

(j) Except as specifically provided in this Agreement, all elections required or permitted to be made by the Company under the Code shall be made by the Manager in its sole discretion.

(k) Any Member shall have the right to a private audit of the books and records of the Company, provided such audit is made at the expense of the Member desiring it, and it is made during normal business hours.

(l) The Members agree that the Company shall be authorized and directed to make the Safe Harbor Election and the Company and each Member (including any person to whom a Membership Interest is transferred in connection with the performance of services) agrees to comply with all requirements of the Safe Harbor with respect to all Membership Interests transferred in connection with the performance of services while the Safe Harbor Election remains effective. Ashford Inc., as the Tax Matters Member, shall be authorized to (and shall) prepare, execute, and file the Safe Harbor Election.

Section 5.3 MEMBERS’ CAPITAL ACCOUNTS .

(a) There shall be maintained a Capital Account for each Member in accordance with this Section 5.3 and the principles set forth in Exhibit B . The amount of cash and the Agreed Value of property contributed to the Company by each Member, net of liabilities assumed by the Company or securing property contributed by such Member, shall be credited to its Capital Account, and from time to time, but not less often than annually, the share of each Member in profits, losses and Carrying Value of distributions (net of liabilities secured by the distributed property that such Member is considered to assume or take subject to) shall be credited or debited to its Capital Account. The determination of Members’ Capital Accounts, and any adjustments thereto, shall be made consistent with tax accounting and other principles set forth in Section 704(b) of the Code and applicable Treasury Regulations thereunder and Exhibit B .

(b) Except as otherwise specifically provided in this Agreement, as required by the Act or other law, or in a deficit restoration obligation agreement or in a guarantee of a Company liability signed by a Member, no Member shall be required to make any further contribution to the capital of the Company to restore a loss, to discharge any liability of the Company or for any other purpose, nor shall any Member personally be liable for any liabilities of the Company or of the Manager. All Members waive their right of contribution which they may have against other Members in respect of any payments made by them under any guarantee of Company debt.

(c) Immediately following the transfer of any Membership Interest, the Capital Account of the transferee Member attributable to the transferred interest shall be equal to the Capital Account of the transferor Member attributable to the transferred interest.

(d) For purposes of computing the amount of any item of income, gain, deduction or loss to be reflected in the Members’ Capital Accounts, the determination, recognition and classification of any such item shall be the same as its determination, recognition and classification for federal income tax purposes, taking into account any adjustments required pursuant to Section 704(b) of the Code and the applicable Treasury Regulations thereunder as more fully described in Exhibit B .

(e) The provisions of the Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner consistent with such Treasury Regulations. If the Manager shall determine that it is prudent to modify the manner in which the Capital Accounts, or any debits or credits thereto (including, without limitation, debits or credits relating to liabilities which are secured by contributed or distributed property or which are assumed by the Company or the Members) are computed in order to comply with such Treasury Regulations, the Manager may make such modification, provided that it is not likely to have a material effect on the amounts distributable to any Person upon the dissolution of the Company. The Manager also shall (i) make any adjustments that are necessary or appropriate to maintain equality between the Capital Accounts of the Members and the amount of Company capital reflected on the Company’s balance sheet, as computed for book purposes, in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(q) and (ii) make appropriate modifications if unanticipated events might otherwise cause this Agreement not to comply with Treasury Regulations Sections 1.704-1(b) or 1.704-2.

Section 5.4 SECTION 754 ELECTIONS . The Manager shall elect, pursuant to Section 754 of the Code, to adjust the basis of the Company’s assets for (i) all Transfers of Membership Interests, and (ii) any distribution of Company property as described in Section 734 of the Code, if such election would benefit any Member or the Company.

Section 5.5 SPECIAL ALLOCATION OF GAIN TO LTIP UNITHOLDERS . Notwithstanding the provisions of Section 5.1 above, but subject to the prior allocation of income, gain, deduction and loss under the terms of the Agreement in respect of any class of Membership Interests ranking senior to the LTIP Units with respect to return of capital or any preferential or priority return, any gains realized in connection with the actual or hypothetical sale of all or substantially all of the assets of the Company, including but not limited to, gain realized in connection with an adjustment to the Carrying Value of Company assets under Section 704(b) of the Code, shall first be allocated to the LTIP Unitholders until the Economic Capital Account Balances of such Members, to the extent attributable to their ownership of LTIP Units, are equal to (i) the Common Unit Economic Balance, multiplied by (ii) the number of their LTIP Units. For this purpose, the “ Economic Capital Account Balances ” of the LTIP Unitholders will be equal to their Capital Account balances, plus the amount of their shares of any Member Minimum Gain or Company Minimum Gain, in each case to the extent attributable to their ownership of LTIP Units. For clarification, each Member will have only one Capital Account as to all Membership Interests it owns, but solely for determining the Economic Capital Account Balance of LTIP Units of an LTIP Unitholder its Capital Account will be separately computed for each group of LTIP Units having the same issue date. Similarly, the “ Common Unit Economic Balance ” means (i) the Capital Account Balance of Ashford Inc., plus the amount of Ashford Inc.’s share of any Member Minimum Gain or Company Minimum Gain, in either case to the extent attributable to Ashford Inc.’s ownership of Common Units and computed on a hypothetical basis after taking into account all allocations under Article V through the date on which any allocation

is made under this Section 5.5 , divided by (ii) the number of Ashford Inc.’s Common Units (with respect to each holder, the “ Target Balance ”). Any such allocations shall be made among the LTIP Unitholders in proportion to the amounts required to be allocated to each under this Section 5.5 , provided, however, that no amounts will be allocated with respect to any particular LTIP Unit (each, an “ Ineligible Unit ”) until all special allocations pursuant to Part A of Exhibit B with respect to such LTIP Unit have been reversed to the extent required by paragraph 10 of Part A of Exhibit B . If, notwithstanding the foregoing, not all LTIP Units (including Ineligible Units) are fully booked up, an LTIP Unitholder may determine how gains shall be allocated among such LTIP Unitholder’s LTIP Units (other than Ineligible Units); provided, however, if such LTIP Unitholder does not make such a determination, gains shall generally be allocated so that the Economic Capital Account Balance of the maximum amount of Vested LTIP Units held by such LTIP Unitholder is equal to the Common Unit Economic Balance on a per LTIP Unit basis; provided, further, that such gains may only be allocated to LTIP Units that are held by such LTIP Unitholder on the date of the allocation under this Section 5.5 . The parties agree that the intent of this Section 5.5 is to make the Capital Account balances of the LTIP Unitholders with respect to their LTIP Units economically equivalent to the Capital Account balance of Ashford Inc. (on a per-Unit basis) with respect to its Common Units.

ARTICLE VI
POWERS, DUTIES, LIABILITIES, COMPENSATION
AND VOTING OF THE MANAGER

Section 6.1 POWERS OF MANAGER . The Manager’s discretion and authority are subject to the limitations imposed by law and by the Manager’s Certificate of Incorporation. Subject to the foregoing and to other limitations imposed by this Agreement, the Manager shall have full, complete and exclusive discretion to manage and control the business and affairs of the Company and make all decisions affecting the business and assets of the Company. Without limiting the generality of the foregoing (but subject to the restrictions specifically contained in this Agreement), the Manager shall have the power and authority to take the following actions on its own behalf in its capacity as Manager or on behalf of the Company:

(m) to acquire, purchase, own, manage, operate, lease and dispose of any real property and any other property or assets that the Manager determines are necessary or appropriate or in the best interests of conducting the business of the Company;

(n) to construct buildings and make other improvements (including renovations) on or to the properties owned or leased by the Company;

(o) to borrow money for the Company, issue evidences of indebtedness in connection therewith, refinance, guarantee, increase the amount of, modify, amend or change the terms of, or extend the time for the payment of, any indebtedness or obligation of or to the Company, and secure such indebtedness by mortgage, deed of trust, pledge or other lien on the Company’s assets;

(p) to pay, either directly or by reimbursement, for all Operating Expenses to third parties or to the Manager (as set forth in this Agreement);

(q) to lease all or any portion of any of the Company’s assets, whether or not the terms of such leases extend beyond the termination date of the Company and whether or not any portion of the Company’s assets so leased are to be occupied by the lessee, or, in turn, subleased in whole or in part to others, for such consideration and on such terms as the Manager may determine;

(r) to prosecute, defend, arbitrate, or compromise any and all claims or liabilities in favor of or against the Company, on such terms and in such manner as the Manager may reasonably determine, and similarly to prosecute, settle or defend litigation with respect to the Members, the Company, or the Company’s assets;

(s) to file applications, communicate, and otherwise deal with any and all governmental agencies having jurisdiction over, or in any way affecting, the Company’s assets or any other aspect of the Company business;

(t) to make or revoke any election permitted or required of the Company by any taxing authority;

(u) to maintain such insurance coverage for public liability, fire and casualty, and any and all other insurance for the protection of the Company, for the conservation of Company assets, or for any other purpose convenient or beneficial to the Company, in such amounts and such types as the Manager shall determine from time to time;

(v) to determine whether or not to apply any insurance proceeds for any Property to the restoration of such Property or to distribute the same;

(w) to retain providers of services of any kind or nature in connection with the Company business and to pay therefor such reasonable remuneration as the Manager may deem proper;

(x) to negotiate and conclude agreements on behalf of the Company with respect to any of the rights, powers and authority conferred upon the Manager, including, without limitation, management agreements as to the Company, management agreements of other Persons by the Company as manager, franchise agreements, and agreements with operators of Company property;

(y) to maintain accurate accounting records and to file promptly all federal, state and local income tax returns on behalf of the Company;

(z) to form or acquire an interest in, and contribute property to, any further limited or general partnerships, joint ventures or other relationships that it deems desirable (including, without limitation, the acquisition of interests in, and the

contributions of property to, the Company’s Subsidiaries and any other Person in which it has an equity interest from time to time);

(aa) to distribute Company cash or other Company assets in accordance with this Agreement;

(bb) to establish Company reserves for working capital, capital expenditures, contingent liabilities or any other valid Company purpose;

(cc) to authorize, issue, sell, redeem or otherwise purchase any Membership Interests or any securities (including secured and unsecured debt obligations of the Company, debt obligations of the Company convertible into any class or series of Membership Interests, or options, rights, warrants or appreciation rights relating to any Membership Interests) of the Company;

(dd) subject to the provisions of Section 9.1 , to merge, consolidate or combine the Company with or into another Person (to the extent permitted by applicable law);

(ee) to do any and all acts and things necessary or prudent to ensure that the Company will not be classified as a "publicly traded partnership" for purposes of Section 7704 of the Code;

(ff) to issue additional Membership Interests pursuant to Section 4.3 ;

(gg) to pay cash to redeem Units held by a Member in connection with a Member’s exercise of its Redemption Right under Section 7.3 or in connection with a redemption of any Preferred Unit;

(hh) to amend and restate Exhibit A to reflect accurately at all times the Capital Contributions, Common Percentage Interests and Preferred Percentage Interests of the Members as the same are adjusted from time to time to the extent necessary to reflect redemptions, Capital Contributions, the issuance of Units, the admission of any Additional Member or any Substitute Member or otherwise, which amendment and restatement, notwithstanding anything in this Agreement to the contrary, shall not be deemed an amendment to this Agreement, as long as the matter or event being reflected in Exhibit A otherwise is authorized by this Agreement;

(ii) to take whatever action the Manager deems appropriate to maintain the economic equivalency of a Common Unit and a share of Ashford Inc. Common Stock (subject in each case to the effect of the Conversion Factor and to the effect of income taxation of Ashford Inc.’s taxable income) and a Preferred Unit of a series and a share of Ashford Inc. Preferred Stock of the corresponding series, respectively (subject in each case to the effect of the Conversion Factor and to the effect of income taxation of Ashford Inc.’s taxable income); and

(jj) to take such other action, execute, acknowledge, swear to or deliver such other documents and instruments, and perform any and all other acts the Manager deems necessary or appropriate for the formation, continuation and conduct of the business and affairs of the Company and to possess and enjoy all of the rights and powers of a manager as provided by the Act.

Each of the Members agrees that the Manager is authorized to execute, deliver and perform the above-mentioned agreements and transactions on behalf of the Company without any further act, approval or vote of the Members (except as provided in the last sentence of Section 6.10 , Section 7.7 or Article XI ), notwithstanding any other provisions of the Act or any applicable law, rule or regulation to the fullest extent permitted under the Act or other applicable law, rule or regulation. The execution, delivery or performance by the Manager or the Company of any agreement authorized or permitted under this Agreement shall not constitute a breach by the Manager of any duty that the Manager may owe the Company or the Members or any other persons under this Agreement or of any duty stated or implied by law or equity.

Except as otherwise provided in this Agreement, to the extent the duties of the Manager require expenditures of funds to be paid to third parties, the Manager shall not have any obligations under this Agreement except to the extent that Company funds are reasonably available to it for the performance of such duties, and nothing in this Agreement contained shall be deemed to authorize or require the Manager, in its capacity as such, to expend its individual funds for payment to third parties or to undertake any individual liability or obligation on behalf of the Company.

Section 6.2 DELEGATION OF AUTHORITY . The Manager may delegate, including by appointment of officers of the Company, any or all of its powers, rights and obligations under this Agreement, and may appoint, employ, contract or otherwise deal with any Person for the transaction of the business of the Company, which Person may, under supervision of the Manager, perform any acts or services for the Company as the Manager may approve.

Section 6.3 DUTIES OF MANAGER .

(a) The Manager, subject to the limitations contained elsewhere in this Agreement, shall manage or cause to be managed the affairs of the Company in a prudent and businesslike manner and shall devote sufficient time and effort to the Company affairs.

(b) In carrying out its obligations, the Manager shall:

(iii) Render annual reports to all Members with respect to the operations of the Company;

(iv) Mail to all persons who were Members at any time during the Company’s prior fiscal year an annual report of the Company, including all

necessary tax information, and any other information regarding the Company and its operations during the prior fiscal year deemed by the Manager to be material;

(v) Maintain complete and accurate records of all business conducted by the Company and complete and accurate books of account (containing such information as shall be necessary to record allocations and distributions), and make such books of account available for inspection and audit by any Member (at the sole expense of such Member) to the extent provided in Section 7.1(b) ; and

(vi) Cause to be filed such certificates and do such other acts as may be required by law to qualify and maintain the Company as a limited liability company under the laws of the State of Delaware.

(c) The Manager shall take such actions as it deems necessary to maintain the economic equivalency of a Common Unit and a share of Ashford Inc. Common Stock (subject in each case to the effect of the Conversion Factor and to the effect of income taxation of Ashford Inc.’s taxable income) and a Preferred Unit of a series and a share of Ashford Inc. Preferred Stock of the corresponding series, respectively, required by this Agreement (subject in each case to the effect of the Conversion Factor and to the effect of income taxation of Ashford Inc.’s taxable income). The Members acknowledge that Ashford Inc. is taxable on its distributive share of the Company’s taxable income for federal, state and local income tax purposes as a C corporation.

Section 6.4 LIABILITIES OF MANAGER; INDEMNIFICATION .

(a) The Manager shall not be liable for the return of all or any part of the Capital Contributions of the Members. Any returns shall be made solely from the assets of the Company according to the terms of this Agreement.

(b) Notwithstanding anything to the contrary set forth in this Agreement, none of the Manager or Ashford Inc. nor any of their officers, directors, agents or employees shall be liable or accountable in damages or otherwise to the Company, any Members or any assignees who are bound by this Agreement, or any of their successors or assigns, for any losses sustained, liabilities incurred or benefits not derived, as a result of errors in judgment or mistakes of fact or law or any act or omission if the Manager, Ashford Inc., or such officers, directors, agents or employees acted in good faith. The Manager shall not be responsible for any misconduct or negligence on the part on any agent appointed by it in good faith pursuant to Section 6.2 . The Members expressly acknowledge that the Manager is acting on behalf of the Company, the Manager, and Ashford Inc.’s stockholders collectively, and that the Manager is under no obligation to consider the separate interests of the Members (including, without limitation, the tax consequences to Members or their assignees) in deciding whether to cause the Company to take (or

decline to take) any actions. In the event of a conflict between the interests of the stockholders of Ashford Inc. on one hand and the Members on the other, the Manager shall endeavor in good faith to resolve the conflict in a manner not adverse to either the stockholders of Ashford Inc. or the Members; provided, however, that, notwithstanding any duty otherwise existing at law or in equity, to the fullest extent permitted by law, for so long as Ashford Inc. owns a controlling interest, directly or indirectly, in the Company, any such conflict that cannot be resolved in a manner not adverse to either the stockholders of Ashford Inc. or the Members shall be resolved in favor of the stockholders of Ashford Inc. Subject to the implied contractual covenant of good faith and fair dealing, the Manager shall not be liable for monetary damages for losses sustained, liabilities incurred, or benefits not derived by Members in connection with such decisions, provided that the Manager has acted in good faith.

(c) The Company shall indemnify each Indemnitee to the fullest extent permitted by law and save and hold it harmless from and against, and in respect of, any and all losses, claims, damages, liabilities (joint or several), expenses (including legal fees and expenses), judgments, fines, settlements, and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, that relate to the operations of the Company in which any Indemnitee may be involved, or is threatened to be involved, as a party or otherwise; provided, however, that this indemnification shall not apply if: (A) the act or omission of the Indemnitee was material to the matter giving rise to the proceeding and either was committed in bad faith or was the result of active and deliberate dishonesty; (B) the Indemnitee actually received an improper personal benefit in money, property or services; or (C) in the case of any criminal proceeding, the Indemnitee had reasonable cause to believe that the act or omission was unlawful. The termination of any proceeding by judgment, order or settlement does not create a presumption that the Indemnitee did not meet the requisite standard of conduct set forth in this Section 6.4(c) . The termination of any proceeding by conviction or upon a plea of nolo contendere or its equivalent, or an entry of an order of probation prior to judgment, creates a rebuttable presumption that the Indemnitee acted in a manner contrary to that specified in this Section 6.4(c) . Any indemnification pursuant to this Section 6.4 shall be made only out of the assets of the Company, and any insurance proceeds from the liability policy covering the Manager and any Indemnitee.

(d) The Company shall reimburse an Indemnitee for reasonable expenses incurred by an Indemnitee who is a party to a proceeding in advance of the final disposition of the proceeding upon receipt by the Company of (i) a written affirmation by the Indemnitee of the Indemnitee’s good faith belief that the standard of conduct necessary for indemnification by the Company as authorized in this Section 6.4 has been met, and (ii) a written undertaking by or on behalf of the Indemnitee to repay the amount if it shall ultimately be determined that the standard of conduct has not been met.

(e) The indemnification provided by this Section 6.4 shall be in addition to any other rights to which an Indemnitee or any other Person may be entitled under any agreement, pursuant to any vote of the Members, as a matter of law or otherwise, and shall continue as to an Indemnitee who has ceased to serve in such capacity.

(f) The Company may purchase and maintain insurance on behalf of the Indemnitees, and such other Persons as the Manager shall determine, against any liability that may be asserted against or expenses that may be incurred by such Person in connection with the Company’s activities, regardless of whether the Company would have the power to indemnify such Person against such liability under the provisions of this Agreement.

(g) For purposes of this Section 6.4 , the Company shall be deemed to have requested an Indemnitee to serve as fiduciary of an employee benefit plan whenever the performance by the Indemnitee of its duties to the Company also imposes duties on, or otherwise involves services by, the Indemnitee to the plan or participants or beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect to an employee benefit plan pursuant to applicable law shall constitute fines within the meaning of this Section 6.4 ; and actions taken or omitted by the Indemnitee with respect to an employee benefit plan in the performance of its duties for a purpose reasonably believed by the Indemnitee to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose which is not opposed to the best interests of the Company.

(h) In no event may an Indemnitee subject the Members to personal liability by reason of the indemnification provisions set forth in this Agreement.

(i) An Indemnitee shall not be denied indemnification in whole or in part under this Section 6.4 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement.

(j) Any amendment, modification or repeal of this Section 6.4 or any provision of this Section 6.4 shall be prospective only and shall not in any way affect the limitations on the Manager’s liability to the Company and the Members under this Section 6.4 as in effect immediately prior to such amendment, modification or repeal with respect to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when claims relating to such matters may arise or be asserted. The provisions of this Section 6.4 are for the benefit of the Indemnitees, their heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons.

Section 6.5 COMPENSATION OF MANAGER; REIMBURSEMENT . The Manager, as such, shall not receive any compensation for services rendered to the Company. Notwithstanding the preceding sentence, the Manager shall be entitled, in accordance with the provisions of Section 6.7 below, to pay reasonable compensation to its Affiliates and

other entities in which it may be associated for services performed. The Manager shall be reimbursed on a monthly basis, or such other basis as the Manager may determine in its sole and absolute discretion, for all Ashford Inc. Expenses.

Section 6.6 RELIANCE ON ACT OF MANAGER . No financial institution or any other person, firm or corporation dealing with the Manager or the Company shall be required to ascertain whether the Manager is acting in accordance with this Agreement, but such financial institution or such other person, firm or corporation shall be protected in relying solely upon the assurance of and the execution of any instrument or instruments by the Manager.

Section 6.7 OUTSIDE SERVICES; DEALINGS WITH AFFILIATES; OUTSIDE ACTIVITIES .

(a) Notwithstanding any provision of this Article VI to the contrary, the Manager may employ such agents, accountants, attorneys and others as it shall deem advisable, including its directors, officers, members, and its Affiliates and entities with which the Manager, any Member or their respective Affiliates may be associated, Ashford Inc.’s directors, officers and stockholders, and may pay them reasonable compensation from Company funds for services performed, which compensation shall be reasonably believed by the Manager to be comparable to and competitive with fees charged by unrelated Persons who render comparable services which could reasonably be made available to the Company. The Manager shall not be liable for the neglect, omission or wrongdoing of any such Person so long as it appointed such Person in good faith.

(b) The Company may lend or contribute to its Subsidiaries or other Persons in which it has an equity investment Company funds on terms and conditions established in the sole and absolute discretion of the Manager. The foregoing authority shall not create any right or benefit in favor of any Subsidiary or any other Person.

(c) The Company may transfer assets to joint ventures, other partnerships, corporations or other business entities in which it is or becomes a participant upon such terms and subject to such conditions as are consistent with this Agreement and applicable law.

(d) Except as expressly permitted by this Agreement, no Member nor any of its Affiliates shall sell, transfer or convey any property to, or purchase any property from, the Company, directly or indirectly, except pursuant to transactions that are on terms that are fair and reasonable to the Company.

(e) Subject to the Certificate of Incorporation and any agreements entered into by Ashford Inc. or its Affiliates with the Company or a Subsidiary, any officer, director, employee, agent, trustee, or Affiliate of Ashford Inc. shall be entitled to and may have business interests and engage in business activities in addition to

those relating to the Company, including business interests and activities substantially similar or identical to those of the Company. Neither the Company nor any of the Members shall have any rights by virtue of this Agreement in any business ventures of such person.

Section 6.8 ADDITIONAL LOANS TO THE COMPANY . If additional funds are required by the Company for any purpose relating to the business of the Company or for any of its obligations, expenses, costs, or expenditures, including operating deficits, the Company may borrow such funds as are needed from time to time from any Person (including, without limitation, the Manager or any Affiliate of the Manager; provided, however, that the terms of any loan from the Manager or any Affiliate of the Manager shall be substantially equivalent to the terms that could be obtained from a third party on an arm’s-length basis) on such terms as the Manager and such other Person may agree.

Section 6.9 CONTRIBUTION OF ASSETS . Ashford Inc., directly or through one or more of its Affiliates, shall contribute to the capital of the Company from time to time each asset it owns from time to time during the existence of the Company, but it is not required to so contribute:

(a) its direct or indirect interest in any entity in a chain of entities of which Ashford Inc. is the sole beneficial owner, so long as all of the assets or other ownership interests in the entity in that chain furthest removed from Ashford Inc. are contributed directly or indirectly to the Company; or

(b) any equity interest in any entity of which Ashford Inc. is the sole beneficial owner that is created or used solely by Ashford Inc. in connection with any borrowing transaction in whole or in part for the benefit of the Company.

Section 6.10 RESIGNATION OR TERMINATION OF MANAGER . Ashford Inc. shall not, by any means, resign as, cease to be or be replaced as Manager except in compliance with this Section 6.10 . No termination or replacement of Ashford Inc. as Manager shall be effective unless proper provision is made, in compliance with this Agreement, so that the obligations of Ashford Inc., its successor (if applicable) and any new Manager and the rights of all Members under this Agreement and applicable law remain in full force and effect. No appointment of a Person other than Ashford Inc. (or its successor, as applicable) as Manager shall be effective unless Ashford Inc. (or its successor, as applicable) and the new Manager (as applicable) provide all other Members with contractual rights, directly enforceable by such other Members against Ashford Inc. (or its successor, as applicable) and the new Manager (as applicable), to cause (a) Ashford Inc. to comply with all Ashford Inc.’s obligations under this Agreement other than those that must necessarily be taken in its capacity as Manager and (b) the new Manager to comply with all the Manager’s obligations under this Agreement. Ashford Inc. may appoint a new Person as Manager, subject to the provisions of this Section 6.10 . If Ashford Inc. ceases to be the Manager and fails to appoint a new manager, then notwithstanding Section 7.1(a) nor Section 7.2(a) , Members holding more than fifty percent (50%) of the Common Percentage Interests of all Members shall promptly appoint a new Person as Manager.

ARTICLE VII
RIGHTS, PROHIBITIONS AND REPRESENTATIONS
WITH RESPECT TO MEMBERS

Section 7.1 RIGHTS OF MEMBERS .

(f) The Company may engage the Members or persons or firms associated with them for specific purposes and may otherwise deal with such Members on terms and for compensation to be agreed upon by any such Member and the Company; provided, however, that no Member shall be entitled to participate in the management or control of the business of the Company, in its capacity as a Member, except as provided with respect to the Tax Matters Member in Section 5.2(d) .

(g) Each Member shall be entitled to have the Company books kept at the principal place of business of the Company and at all times, during reasonable business hours and at such Member’s sole expense, upon written demand shall be entitled to inspect and copy any of them for any purpose reasonably related to the Member’s interest as a Member and demand in writing true and full information of all things affecting the Company and a formal accounting of Company affairs whenever circumstances render it just and reasonable and reasonably related to the Member’s interest as a Member; provided, however, that any such demand shall state the purpose of such demand; and provided, further, for such period of time as the Manager determines in its sole and absolute discretion to be reasonable, the Manager may keep confidential from the Members any information that (i) the Manager believes to be in the nature of trade secrets or other information the disclosure of which the Manager in good faith believes is not in the best interest of the Company or could damage the Company or its business or (ii) the Company or the Manager is required by law or by agreements with unaffiliated third parties to keep confidential; provided, further, that as long as Ashford Inc. is a Member in the Company, the Company and the Manager shall timely provide such information as Ashford Inc. reasonably requests such that Ashford Inc., Ashford Hospitality Trust, Inc., Ashford Hospitality Prime, Inc. and any other entity to which Ashford Inc. provides management services, may prepare all of its tax returns and prepare its financial statements and filings with the applicable government authorities and laws.

(h) No Member shall be liable for any debts, liabilities, contracts or obligations of the Company solely as a result of being a member of the Company. A Member shall be liable to the Company only to make payments of its Capital Contribution, if any, and any other payments provided for in this Agreement, as and when due under this Agreement or pursuant to any separate deficit restoration agreement executed by the Member for benefit of the Company. After its Capital Contribution is fully paid, no Member shall, except as otherwise required by the Act or pursuant to any separate deficit restoration agreement executed by the Member

for the benefit of the Company, be required to make any further Capital Contributions or other payments or lend any funds to the Company.

Section 7.2 PROHIBITIONS WITH RESPECT TO THE MEMBERS . No Member shall have the right:

(d) To take part in the control or management of the Company business, to transact business for or on behalf of the Company or to sign for or to bind the Company, such powers being vested solely in the Manager as set forth in this Agreement except as provided with respect to the Tax Matters Member in Section 5.2(d) ;

(e) To have such Member’s Capital Contributions repaid except to the extent provided in this Agreement;

(f) To require partition of Company property or to compel any sale or appraisement of Company assets or sale of a deceased Member’s interests in any Company property or Company assets, notwithstanding any provisions of law to the contrary; or

(g) To sell or assign all or any portion of such Member’s Membership Interest in the Company or to constitute the vendee or assignee thereunder a Substitute Member, except as provided in Article IX .

Section 7.3 REDEMPTION RIGHT .

(k) The provisions of this Section 7.3 shall only apply after the Exchange Date. Subject to Section 7.3(b) and Section 7.3(c) , and the provisions of any agreements between the Company and one or more Members, each Member other than Ashford Inc., shall have the right (the “ Redemption Right ”) to require the Company to redeem on a Specified Redemption Date all or a portion of the Common Units held by such Member (the “ Redeeming Member ”) at a redemption price per Common Unit equal to and in the form of the Cash Amount to be paid by the Company on the Specified Redemption Date. The Redemption Right shall be exercised pursuant to a Notice of Redemption delivered to the Company (with a copy to the Manager) by the Redeeming Member. A Member may not exercise the Redemption Right for less than one thousand (1,000) Common Units or, if such Member holds less than one thousand (1,000) Common Units, all of the Common Units held by such Member. Neither the Redeeming Member nor any permitted or purported assignee of any Member shall have any right, with respect to any Common Units so redeemed, to receive any distributions paid after the Specified Redemption Date except as provided in Section 7.3(b) . Each Redeeming Member agrees to provide such representations and related indemnities regarding good and unencumbered title, and to execute such documents, as the Manager may reasonably require in connection with any redemption.

(l) The provisions of Section 7.3(b) may be applied by the Manager, if the Manager is Ashford Inc. or Ashford Inc. otherwise agrees. Notwithstanding the provisions of Section 7.3(a) , if a Member elects to exercise the Redemption Right, the Manager at the direction of Ashford Inc., directly or indirectly through one or more Affiliates, may, in its sole and absolute discretion, elect to assume directly and satisfy a Redemption Right by paying to the Redeeming Member either (i) the Cash Amount, as provided for in Section 7.3(a) , or (ii) the Ashford Inc. Common Stock Amount, as elected by the Manager, as directed by Ashford Inc. (in its sole and absolute discretion) on the Specified Redemption Date, provided that if the Manager has not affirmatively notified the Redeeming Member on or before one Business Day before the Specified Redemption Date that either the Company, the Manager or its Affiliates will pay the Cash Amount then the Manager shall be deemed to have elected, directly or through one or more Affiliates, to pay the Ashford Inc. Common Stock Amount to the Redeeming Member on the Specified Redemption Date, and Ashford Inc. agrees that it will provide such Ashford Inc. Common Stock on the Specified Redemption Date, subject to the other provisions of this Section 7.3 . On any such election of the Manager to assume and satisfy a Redemption Right, Ashford Inc., directly or indirectly through one or more of its Affiliates, shall acquire the Common Units offered for redemption by the Redeeming Member and shall be treated for all purposes of this Agreement as the owner of such Common Units. Unless the Manager, as directed by Ashford Inc. (in its sole and absolute discretion) shall exercise its right to assume and satisfy the Redemption Right, or unless the Manager has been deemed to assume the Redemption Right as provided in this Section 7.3(b) , neither the Manager nor Ashford Inc. itself shall have any obligation to the Redeeming Member or to the Company with respect to the Redeeming Member’s exercise of the Redemption Right. If the Manager shall exercise its right, or shall be deemed to have elected, to satisfy the Redemption Right in the manner described in this Section 7.3(b) , except as provided in the following paragraph, the Company shall have no obligation to pay any amount to the Redeeming Member with respect to such Redeeming Member’s exercise of the Redemption Right, and each of the Redeeming Member, the Company, and Ashford Inc. shall treat the transaction between Ashford Inc. and the Redeeming Member for federal income tax purposes as a sale of the Redeeming Member’s Common Units to Ashford Inc. or its Affiliates; provided that if the Redeeming Member is redeeming all of its Common Units, the Company shall redeem any fractional Common Unit (constituting less than one Common Unit) owned by the Redeeming Member by paying the Cash Amount with respect to such fractional Common Unit to such Redeeming Member. Each Redeeming Member agrees to provide such representations and related indemnities regarding good title, and to execute such documents, as Ashford Inc. may reasonably require in connection with the issuance of Ashford Inc. Common Stock upon exercise of the Redemption Right. If the Redemption Right is satisfied by the delivery of Ashford Inc. Common Stock, the Redeeming Member shall be deemed to become a holder of Ashford Inc. Common Stock as of the close of business on the Specified Redemption Date or on such later

date permitted by this Section 7.3(b) that Ashford Inc. delivers Ashford Inc. Common Stock, as the case may be.

Notwithstanding anything to the contrary in Section 7.3(a) or this Section 7.3(b) , and in addition to the right of Ashford Inc. to deliver Ashford Inc. Common Stock in satisfaction of the Redemption Right, as provided above, should the Manager, elect, or be deemed to elect, to satisfy a Redemption Right by paying the Redeeming Member the Ashford Inc. Common Stock Amount, and it is necessary to obtain Ashford Inc. stockholder approval in order for it to issue sufficient Ashford Inc. Common Stock to satisfy such Redemption Right in full, then Ashford Inc. shall have one hundred twenty (120) days beyond the Specified Redemption Date in which to obtain such stockholder approval and to pay the Ashford Inc. Common Stock Amount, and the redemption date shall be required to occur by ten (10) days after stockholder approval of the issuance of the Ashford Inc. Common Stock has been obtained, if it is obtained. If such stockholder approval is not obtained within one hundred and thirty (130) days after such Common Units are presented for redemption or the stockholders have voted against the issuance of the Ashford Inc. Common Stock and payment of the Ashford Inc. Common Stock, the Company will distribute to the Redeeming Member any distributions pursuant to Section 8.1 that were not made after the Specified Redemption Date with respect to the Common Units redeemed because of the provisions of Section 7.3(a) , the Company shall pay to the Redeeming Member the Cash Amount no later than the earlier of (i) ten (10) days after stockholders have voted against the issuance of the Ashford Inc. Common Stock, or (ii) one hundred and thirty (130) days after such Common Units are presented for redemption, together with interest on such Cash Amount from the Specified Redemption Date to the date of payment at the rate equal to the lesser of (i) Ashford Inc.’s annual dividend rate on Ashford Inc. Common Stock for the twelve (12) month period prior to the Valuation Date and based upon the Cash Amount for Common Units redeemed, or (ii) eight percent (8%).

(m) Notwithstanding the provisions of Section 7.3(a) and Section 7.3(b) , a Member shall not be entitled to receive Ashford Inc. Common Stock if the delivery of Ashford Inc. Common Stock to such Member on the Specified Redemption Date (or such later date permitted by Section 7.3(b) , as applicable) by Ashford Inc. pursuant to Section 7.3(b) would be prohibited under the Articles of Incorporation of Ashford Inc., as amended or restated from time to time. Without limiting the effect of the preceding sentence, no Person shall be permitted to receive Ashford Inc. Common Stock if as a result of, and after giving effect to, such exercise any Person would Beneficially Own (as defined in the Articles of Incorporation of Ashford Inc., as amended or restated from time to time) more than 9.8% of the total number of issued of shares of outstanding Ashford Inc. Common Stock, unless waived by the board of directors of Ashford Inc. in its sole discretion. To the extent any attempted redemption for Ashford Inc. Common Stock would be a violation of this Section 7.3(c) , it shall, to the fullest extent permitted by law, be null and void

ab initio. The Cash Amount shall be paid in such instances, in accordance with the terms set forth in Section 7.3(a) or Section 7.3(b) .

(n) Each Member covenants and agrees with the Manager and the Company that all Common Units delivered for redemption shall be delivered to the Company, Ashford Inc. or its Affiliates, as the case may be, free and clear of all liens and, notwithstanding anything contained in this Agreement to the contrary, neither the Manager, Ashford Inc. (nor any of its Affiliates) nor the Company shall be under any obligation to acquire Common Units which are or may be subject to any liens. Each Member further agrees that, if any state or local property transfer tax is payable as a result of the transfer of its Common Units to the Company or Ashford Inc., such Member shall assume and pay such transfer tax.

(o) Ashford Inc. Common Stock issued pursuant to Section 7.3(b) may contain such legends regarding restrictions on transfer as Ashford Inc. in good faith determines to be necessary or advisable in order to comply with restrictions on transfer under the Securities Act and applicable state securities laws.

Section 7.4 BASIS ANALYSIS . Upon the request of any Member but subject to the Manager’s agreement, which may be withheld in the Manager’s sole discretion, the Manager may, prior to the end of each calendar year, beginning in 2014, cause accountants to prepare and provide to the Members a study analyzing each refinancing, reduction (other than scheduled periodic amortization of principal) of debt or other event that occurred during that year that reduced the amount of any nonrecourse liabilities of the Company that a Member may include in the tax basis of its Membership Interests.

Section 7.5 MEMBER GUARANTEES . Upon the request of the Manager, or upon a Member’s own election but subject to the Manager’s agreement, which may be withheld in the Manager’s sole discretion, a Member (the “ Initiating Member ”) from time to time, may, but shall not be required to, guarantee or otherwise provide credit support for Company indebtedness or a deficit restoration obligation as such Member may elect. All Members are entitled to notice of any such guarantee or credit support, and shall have the right to provide guarantees or credit support on the same terms and conditions as the Initiating Member does, and all Members interested in providing such guarantee or credit support shall cooperate with the Manager and each other in considering any guarantee or credit support proposal, and the Manager will cooperate in permitting or obtaining any consents for such guarantees or credit support.

Section 7.6 CONVERSION OF LTIP UNITS .

(f) An LTIP Unitholder shall have the right (the “ Conversion Right ”), at his or her option, at any time to convert all or a portion of his or her Vested LTIP Units into Common Units; provided, however, that a holder may not exercise the Conversion Right for less than one thousand (1,000) Vested LTIP Units or, if such holder holds less than one thousand Vested LTIP Units, all of the Vested LTIP Units held by such holder. LTIP Unitholders shall not have the right to convert Unvested

Incentive Units into Common Units until they become Vested LTIP Units; provided, however, that when a LTIP Unitholder is notified of the expected occurrence of an event that will cause his or her Unvested Incentive Units to become Vested LTIP Units, such LTIP Unitholder may give the Company a Conversion Notice conditioned upon and effective as of the time of vesting and such Conversion Notice, unless subsequently revoked by the LTIP Unitholder, shall be accepted by the Company subject to such condition. The Manager shall have the right at any time to cause a conversion of Vested LTIP Units into Common Units. In all cases, the conversion of any LTIP Units into Common Units shall be subject to the conditions and procedures set forth in this Section 7.6 .

(g) A holder of Vested LTIP Units may convert such LTIP Units into an equal number of fully paid and non-assessable Common Units, giving effect to all adjustments (if any) made pursuant to Sections 4.3(d) , 4.3(e) and 5.5 . Notwithstanding the foregoing, in no event may a holder of Vested LTIP Units convert a number of Vested LTIP Units that exceeds (x) the Economic Capital Account Balance of such LTIP Unitholder, to the extent attributable to its ownership of LTIP Units, divided by (y) the Common Unit Economic Balance, in each case as determined as of the effective date of conversion (the “ Capital Account Limitation ”).

In order to exercise his or her Conversion Right, a LTIP Unitholder shall deliver a notice (a “ Conversion Notice ”) in the form of Exhibit D (with a copy to the Manager) not less than 3 Business Days nor more than 10 Business Days prior to a date for conversion (the “ Conversion Date ”) specified in such Conversion Notice; provided, however, that if the Manager has not given to the LTIP Unitholders notice of a proposed or upcoming Unit Transaction (as defined below) at least thirty (30) days prior to the effective date of such Unit Transaction, then LTIP Unitholders shall have the right to deliver a Conversion Notice until the earlier of (x) the tenth (10th) day after such notice from the Manager of a Unit Transaction or (y) the third Business Day immediately preceding the effective date of such Unit Transaction. A Conversion Notice shall be provided in the manner provided in Section 14.5 . Each LTIP Unitholder covenants and agrees with the Company that all Vested LTIP Units to be converted pursuant to this Section 7.6 shall be free and clear of all liens. Notwithstanding anything in this Agreement to the contrary, a holder of LTIP Units may deliver a Redemption Notice pursuant to Section 7.3 relating to those Common Units that will be issued to such holder upon conversion of such LTIP Units into Common Units in advance of the Conversion Date; provided, however, that the redemption of such Common Units by the Company shall in no event take place until on or after the Conversion Date. For clarity, it is noted that the objective of this paragraph is to put a LTIP Unitholder in a position where, if he or she so wishes, the Common Units into which his or her Vested LTIP Units will be converted can be redeemed by the Company simultaneously with such conversion, with the further consequence that, if the Manager elects to assume the Company’s redemption obligation with respect to such Common Units under Section 7.3(b) by delivering to such holder Ashford Inc. Common Stocks rather than cash, then such holder can

have such Ashford Inc. Common Stocks issued to him or her simultaneously with the conversion of his or her Vested LTIP Units into Common Units. The Manager shall cooperate with a LTIP Unitholder to coordinate the timing of the different events described in the foregoing sentence.

(h) The Company, at any time at the election of the Manager, may cause any number of Vested LTIP Units held by a LTIP Unitholder to be converted (a “ Forced Conversion ”) into an equal number of Common Units, giving effect to all adjustments (if any) made pursuant to Sections 4.3(d) , 4.3(e) and 5.5 ; provided, however, that the Company may not cause a Forced Conversion of any LTIP Units that would not at the time be eligible for conversion at the option of such LTIP Unitholder pursuant to Section 7.6(b) . In order to exercise its right of Forced Conversion, the Company shall deliver a notice (a “ Forced Conversion Notice ”) in the form of Exhibit E to the applicable LTIP Unitholder not less than 10 nor more than 60 days prior to the Conversion Date specified in such Forced Conversion Notice. A Forced Conversion Notice shall be provided in the manner provided in Section 14.5 .

(i) A conversion of Vested LTIP Units for which the holder thereof has given a Conversion Notice or the Company has given a Forced Conversion Notice shall occur automatically after the close of business on the applicable Conversion Date without any action on the part of such LTIP Unitholder, as of which time such LTIP Unitholder shall be credited on the books and records of the Company with the issuance as of the opening of business on the next day of the number of Common Units issuable upon such conversion. After the conversion of LTIP Units as aforesaid, the Company shall deliver to such LTIP Unitholder, upon his or her written request, a certificate of the Manager certifying the number of Common Units and remaining LTIP Units, if any, held by such person immediately after such conversion. The assignee of any Member pursuant to Article IX may exercise the rights of such Member pursuant to this Section 7.6 and such Member shall be bound by the exercise of such rights by the assignee.

(j) For purposes of making future allocations under Section 5.5 and applying the Capital Account Limitation, the portion of the Economic Capital Account Balance of the applicable LTIP Unitholder that is treated as attributable to his or her LTIP Units shall be reduced, as of the date of conversion, by the product of the number of LTIP Units converted and the Common Unit Economic Balance.

(k) If the Company or Ashford Inc. shall be a party to any transaction (including without limitation a merger, consolidation, unit exchange, self tender offer for all or substantially all Common Units or other business combination or reorganization, or sale of all or substantially all of the Company’s assets, but excluding any transaction which constitutes an Adjustment Event) in each case as a result of which Common Units shall be exchanged for or converted into the right, or the holders of such Units shall otherwise be entitled, to receive cash, securities

or other property or any combination thereof (each of the foregoing being referred to in this Agreement as a “ Unit Transaction ”), then the Manager may, immediately prior to the Unit Transaction, exercise its right to cause a Forced Conversion with respect to the maximum number of LTIP Units then eligible for conversion, taking into account any allocations that occur in connection with the Unit Transaction or that would occur in connection with the Unit Transaction if the assets of the Company were sold at the Unit Transaction price or, if applicable, at a value determined by the Manager in good faith using the value attributed to the Units in the context of the Unit Transaction (in which case the Conversion Date shall be the effective date of the Unit Transaction).

In anticipation of such Forced Conversion and the consummation of the Unit Transaction, the Company shall use commercially reasonable efforts to cause each LTIP Unitholder to be afforded the right to receive in connection with such Unit Transaction in consideration for the Common Units into which his or her LTIP Units will be converted the same kind and amount of cash, securities and other property (or any combination thereof) receivable upon the consummation of such Unit Transaction by a holder of the same number of Common Units, assuming such holder of Common Units is not a Person with which the Company consolidated or into which the Company merged or which merged into the Company or to which such sale or transfer was made, as the case may be (a “ Constituent Person ”), or an Affiliate of a Constituent Person. If holders of Common Units have the opportunity to elect the form or type of consideration to be received upon consummation of the Unit Transaction, prior to such Unit Transaction the Manager shall give written notice to each LTIP Unitholder of such election, and shall use commercially reasonable efforts to afford the LTIP Unitholders the right to elect, by written notice to the Manager, the form or type of consideration to be received upon conversion of each LTIP Unit held by such holder into Common Units in connection with such Unit Transaction. If a LTIP Unitholder fails to make such an election, such holder (and any of its transferees) shall receive upon conversion of each LTIP Unit held him or her (or by any of his or her transferees) the same kind and amount of consideration that a holder of a Common Unit would receive if such Common Unit holder failed to make such an election.

Subject to the rights of the Company, the Manager and Ashford Inc., under any Vesting Agreement and the Plan, the Company shall use commercially reasonable effort to cause the terms of any Unit Transaction to be consistent with the provisions of this Section 7.6(f) and to enter into an agreement with the successor or purchasing entity, as the case may be, for the benefit of any LTIP Unitholders whose LTIP Units will not be converted into Common Units in connection with the Unit Transaction that will (i) contain provisions enabling the holders of LTIP Units that remain outstanding after such Unit Transaction to convert their LTIP Units into securities as comparable as reasonably possible under the circumstances to the Common Units and (ii) preserve as far as reasonably possible under the circumstances

the distribution, special allocation, conversion, and other rights set forth in this Agreement for the benefit of the LTIP Unitholders.

Section 7.7 VOTING RIGHTS OF LTIP UNITS . LTIP Unitholders shall (a) have those voting rights required from time to time by applicable law, if any, (b) have the same voting rights as a holder of Common Units, with the LTIP Units voting as a single class with the Common Units and having one vote per LTIP Unit; and (c) have the additional voting rights that are expressly set forth below. So long as any LTIP Units remain outstanding, the Company shall not, without the affirmative vote of the holders of at least a majority of the LTIP Units outstanding at the time, given in person or by proxy, either in writing or at a meeting (voting separately as a class), amend, alter or repeal, whether by merger, consolidation or otherwise, the provisions of this Agreement applicable to LTIP Units so as to materially and adversely affect any right, privilege or voting power of the LTIP Units or the LTIP Unitholders as such, unless such amendment, alteration, or repeal affects equally, ratably and proportionately the rights, privileges and voting powers of the holders of Common Units; but subject, in any event, to the following provisions:

(a) With respect to any Unit Transaction, so long as the LTIP Units are treated in accordance with Section 7.6(f) , the consummation of such Unit Transaction shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers of the LTIP Units or the LTIP Unitholders as such; and

(b) Any creation or issuance of any Units or of any class or series of Membership Interest including without limitation additional Common Units, LTIP Units or Preferred Units, whether ranking senior to, junior to, or on a parity with the LTIP Units with respect to distributions and the distribution of assets upon liquidation, dissolution or winding up, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers of the LTIP Units or the LTIP Unitholders as such.

The foregoing voting provisions will not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required will be effected, all outstanding LTIP Units shall have been converted into Common Units.

ARTICLE VIII
DISTRIBUTIONS AND PAYMENTS TO MEMBERS

Section 8.1 DISTRIBUTIONS OF CASH FLOW .

(h) The Manager shall cause the Company to distribute on a quarterly basis such portion of the Cash Flow of the Company as the Manager shall determine in its sole discretion. Except as provided in Section 10.4 , such distributions shall be made to the Members who are Members on the applicable Record Date as follows:

first , to the holders of the Preferred Units, an amount equal to the unpaid portion of the Preferred Return due to the holders of the

Preferred Units on the applicable Record Date, as determined pursuant to the applicable exhibit to this Agreement setting forth the terms of such Preferred Units;

second , to all Members who are Members on the applicable Record Date and who beneficially own Common Units, in accordance with their respective Common Percentage Interests;

provided , however , if for any Common Unit Distribution Period, a Newly Issued Common Unit is outstanding on the Record Date for such period, there shall not be distributed in respect of such Newly Issued Common Unit the amount (the “ Full Distribution Amount ”) that would otherwise be distributed in respect of such Unit in accordance with its respective Common Percentage Interest, but rather, the Manager shall cause to be distributed with respect to each such Newly Issued Common Unit an amount equal to the Full Distribution Amount multiplied by a fraction, the numerator of which equals the number of days such Newly Issued Common Unit has been outstanding during the Common Unit Distribution Period and the denominator of which equals the total number of days in such Common Unit Distribution Period.

Any Cash Flow not distributed to the holders of Units by operation of this provision shall be retained by the Company and applied toward future distributions or payment of Company expenses.

(i) In no event may a Member receive a distribution of Cash Flow with respect to a Unit if such Member is entitled to receive a dividend out of Ashford Inc.’s share of such Cash Flow with respect to an Ashford Inc. Share for which all or part of such Unit has been exchanged.

(j) If the Company issues additional Units pursuant to the provisions of this Agreement, the Manager is authorized to make such revisions to this Article VIII as it determines are necessary or desirable to reflect the issuance of such additional Units, including without limitation, making preferential distributions to certain classes of Units.

Section 8.2 NO RIGHT TO DISTRIBUTIONS IN KIND . No Member shall be entitled to demand property other than cash in connection with any distribution by the Company. A Member may be compelled to accept a distribution in kind of any asset from the Company, whether or not pro rata as to each asset so distributed.

Section 8.3 WITHDRAWALS . No Member shall be entitled to make withdrawals from its Capital Account, or withdraw as a Member, except as expressly provided in this Agreement.

Section 8.4 AMOUNTS WITHHELD .

(a) Notwithstanding any other provision of this Agreement, the Manager is authorized to take any action that it determines to be necessary or appropriate to cause the Company to comply with any withholding requirements established under the Code or any other federal, state or local law including, without limitation, pursuant to Sections 1441, 1442, 1445 and 1446 of the Code. To the extent that the Company is required to withhold and pay over to any taxing authority any amount resulting from the allocation or distribution of income to any Member or assignee (including by reason of Section 1446 of the Code), either (i) if the actual amount to be distributed to the Member equals or exceeds the amount required to be withheld by the Company, the amount withheld shall be treated as a distribution of cash in the amount of such withholding to such Member, or (ii) if the actual amount to be distributed to the Member is less than the amount required to be withheld by the Company, the actual amount shall be treated as a distribution of cash in the amount of such withholding and the additional amount required to be withheld shall be treated as a loan (a “ Company Loan ”) from the Company to the Member on the day the Company pays over such amount to a taxing authority. A Company Loan shall be repaid through withholding by the Company with respect to subsequent distributions to the applicable Member or assignee. If a Member (a “ Defaulting Member ”) fails to pay any amount owed to the Company with respect to the Company Loan within fifteen (15) days after demand for payment thereof is made by the Company on the Member, the Manager, in its sole and absolute discretion, may elect to make the payment to the Company on behalf of such Defaulting Member. In such event, on the date of payment, the Manager shall be deemed to have extended a loan (a “ Manager Loan ”) to the Defaulting Member in the amount of the payment made by the Manager and shall succeed to all rights and remedies of the Company against the Defaulting Member as to that amount. Without limitation, the Manager shall have the right to receive any distributions that otherwise would be made by the Company to the Defaulting Member until such time as the Manager Loan has been paid in full, and any such distributions so received by the Manager shall be treated as having been received by the Defaulting Member and immediately paid to the Manager.

Any amounts treated as a Company Loan or a Manager Loan pursuant to this Section 8.4(a) shall bear interest at the lesser of (i) the base rate on corporate loans at large United States money center commercial banks, as published from time to time in The Wall Street Journal, or (ii) the maximum lawful rate of interest on such obligation, such interest to accrue from the date the Company or the Manager, as applicable, is deemed to extend the loan until such loan is repaid in full.

(b) All amounts withheld pursuant to the Code or any provisions of any state or local tax law and Section 8.4(a) with respect to any allocation, payment or distribution to any Member shall be treated as amounts paid or distributed to such Member pursuant to Section 8.1 for all purposes under this Agreement.

(c) Notwithstanding any other provision of this Agreement, the Company, and the Manager on behalf of the Company, shall not make any distribution or other payment to a Member in respect of its Membership Interest to the extent that such distribution would violate the Act or other applicable law.

ARTICLE IX
TRANSFERS OF INTERESTS

Section 9.1 ASHFORD INC.

(p) Other than to an Affiliate of Ashford Inc., Ashford Inc. may not transfer any of its Membership Interest or withdraw as a Member except (i) Ashford Inc. may grant a security interest in or pledge its Membership Interest in the Company to secure debt for borrowed money, or any guaranty thereof, now existing or subsequently incurred, (ii) as provided in Section 9.1(b) or (iii) in connection with a transaction described in Section 9.1(c) .

(q) Except as otherwise provided in Section 6.7 or Section 9.1(c) , Ashford Inc. or its Subsidiaries shall not engage in any merger, consolidation or other combination with or into another Person or in any sale of all or substantially all of its assets, or any reclassification, or recapitalization or change of outstanding Ashford Inc. Common Stock (other than a change in par value, or from par value to no par value, or as a result of a subdivision or combination as described in the definition of “Conversion Factor”) (each of the foregoing being referred to as a “ Transaction ”), unless the Transaction also includes a merger of the Company or sale of substantially all of the assets of the Company or other transaction as a result of which all Members will receive for each Common Unit an amount of cash, securities or other property equal to the product of the Conversion Factor and the greatest amount of cash, securities or other property paid to a holder of one share of Ashford Inc. Common Stock in consideration of one share of Ashford Inc. Common Stock as a result of the Transaction; provided, however, that if, in connection with the Transaction, a purchase, tender or exchange offer shall have been made to and accepted by the holders of more than fifty percent (50%) of the outstanding shares of Ashford Inc. Common Stock, the holders of Common Units shall receive the greatest amount of cash, securities or other property which a Member would have received had it exercised the Redemption Right and the Company, at the direction of Ashford Inc., had exercised its election to satisfy the Redemption Right by the issuance of Ashford Inc. Common Stock immediately prior to the expiration of such purchase, tender or exchange offer.

(r) Notwithstanding Section 9.1(b) , Ashford Inc. or its Subsidiaries may merge into or consolidate with another entity if immediately after such merger or consolidation (i) substantially all of the assets of the successor or surviving entity (the “ Surviving Entity ”), other than Units held by Ashford Inc. or its Subsidiaries, are contributed to the Company as a Capital Contribution in exchange for Units with a fair market value equal to the value of the assets so contributed as determined by

the Surviving Entity in good faith and (ii) the Surviving Entity or one of its Subsidiaries expressly agrees to assume all obligations of Ashford Inc. under this Agreement. Upon such contribution and assumption, the Surviving Entity shall have the right and duty to amend this Agreement as set forth in this Section 9.1(c) . The Surviving Entity shall in good faith arrive at a new method for the calculation of the Cash Amount and Conversion Factor for a Common Unit after any such merger or consolidation so as to approximate the existing method for such calculation as closely as reasonably possible. Such calculation shall take into account, among other things, the kind and amount of securities, cash and other property that was receivable upon such merger or consolidation by a holder of Ashford Inc. Shares or options, warrants or other rights relating thereto, and which a holder of Common Units could have acquired had such Common Units been redeemed immediately prior to such merger or consolidation. Such amendment to this Agreement shall provide for adjustment to such method of calculation, which shall be as nearly equivalent as may be practicable to the adjustments provided for with respect to the Conversion Factor. The above provisions of this Section 9.1(c) shall similarly apply to successive mergers or consolidations permitted under this Agreement.

Section 9.2 RESTRICTIONS ON TRANSFER OF MEMBERSHIP INTERESTS .

(a) Except as otherwise provided in this Article IX , no Member may offer, sell, assign, hypothecate, pledge or otherwise transfer its Membership Interest, in whole or in part, whether voluntarily or by operation of law or at judicial sale or otherwise (collectively, a “ Transfer ”) or withdraw or retire from the Company, without the written consent of the Manager, which consent may be withheld in the sole and absolute discretion of the Manager. The Manager may require, as a condition of any Transfer, that the transferor assume all costs incurred by the Company in connection therewith. The Manager consents to the following Transfers of Common Units: (i) on the Effective Date by Ashford Trust OP to its limited partners and (ii) on the Exchange Date by such limited partners, including Ashford OP Limited Partner LLC, to Ashford Inc. In no event may a Member have any rights to distributions pursuant to Act §18-604 without Manager’s approval.

(b) No Member may effect a Transfer of its Membership Interest if, (i) in the opinion of legal counsel for the Company, such proposed Transfer would require the registration of the Membership Interest under the Securities Act of 1933, as amended, or would otherwise violate any applicable federal or state securities or “Blue Sky” law (including investment suitability standards) or (ii) the assignee is not an Accredited Investor within the meaning of Rule 501 of the Securities Act of 1933, as amended.

(c) No Transfer by a Member of its Units may be made to any Person if (i) the Manager determines that the Transfer would create a risk that the Company would be treated as an association taxable as a corporation or (ii) such transfer is

effectuated through an “established securities market” or a “secondary market” (or the substantial equivalent thereof) within the meaning of Section 7704 of the Code.

(d) Subject to the other provisions of this Section 9.2 , Section 9.2(a) shall not prevent any donative Transfer by an individual Member to his immediate family members or any trust in which the individual or his immediate family members own, collectively, one hundred percent (100%) of the beneficial interests, provided that the transferor assumes all costs of the Company in connection therewith and any such transferee shall not have the rights of a Substitute Member (unless and until admitted as a Substitute Member pursuant to this Section 9.2 and Section 9.3 of this Agreement).

(e) Any Transfer in contravention of any of the provisions of this Article IX shall be void and ineffectual and shall not be binding upon, or recognized by, the Company. Except as required by operation of law Transfers of Membership Interests and Units shall be made on the books of the Company only upon receipt of proper transfer instructions from the registered holder of the Membership Interests and Units and upon compliance with the other provisions of this Article IX .

Section 9.3 ADMISSION OF SUBSTITUTE MEMBER .

(d) Subject to the other provisions of this Article IX (including, without limitation, the provisions of Section 9.2(a) regarding consent of the Manager), an assignee of the Membership Interest of a Member (including, without limitation, any purchaser, transferee, donee, or other recipient of any disposition of such Membership Interest) shall be deemed admitted as a Member of the Company only upon the satisfactory completion of the following:

(i) the assignee has obtained the prior written consent of the Manager as to its admission as a Substitute Member, which consent may be given or denied in the exercise of the Manager's sole and absolute discretion;

(ii) the assignee shall have accepted and agreed to be bound by the terms and provisions of this Agreement by executing a counterpart or an amendment thereof and such other documents or instruments as the Manager may require in order to effect the admission of such Person as a Member;

(iii) the assignee shall have delivered a letter containing the representation and warranty set forth in Section 9.9 and the agreement set forth in Section 9.9 ;

(iv) if the assignee is a corporation, limited liability company, partnership or trust, the assignee shall have provided the Manager with evidence satisfactory to counsel for the Company of the assignee’s authority to become a Member under the terms and provisions of this Agreement;

(v) the assignee shall have executed a power of attorney containing the terms and provisions set forth in Article XII ; and

(vi) the assignee shall have paid all reasonable legal fees of the Company and the Manager and all filing and publication costs incurred in connection with its substitution as a Member.

(e) Notwithstanding the foregoing provisions of Section 9.3(a) , any assignee of Ashford Trust OP on the Effective Date shall be admitted to the Company as a Member and be bound by the terms of this Agreement effective simultaneously with such Transfer without any written execution by such assignee if such assignee does not object to such admission in writing to the Manager within 10 days of being notified by the Manager of such assignment and upon such objection shall continue to be an assignee for purposes of this Agreement and the Act. Ashford Trust OP shall cease to be a member of the Company immediately after its assignees become Members on the Effective Date, it being agreed that at no time on the Effective Date will there be no members of the Company.

(f) For the purpose of allocating profits and losses and distributing cash received by the Company, a Substitute Member shall be treated as having become, and appearing in the records of the Company as of the later of the date specified in the transfer documents, or the date on which the Manager has received all necessary instruments of transfer and substitution.

(g) The Manager shall as promptly as practicable take all action required to effectuate the admission of the Person seeking to become a Substitute Member, including preparing the documentation required by this Section 9.3 and making all official filings and publications.

Section 9.4 RIGHTS OF ASSIGNEES OF MEMBERSHIP INTERESTS .

(l) Subject to the provisions of Sections 9.2 and 9.3 , except as required by operation of law, the Company shall not be obligated for any purposes whatsoever to recognize the assignment by any Member of his Membership Interest until the Company has received notice thereof. If the Manager, in its sole and absolute discretion, does not consent (subject to Section 9.2(a) , Section 9.3(a)(i) and Section 9.3(b) ) to the admission of any transferee of any Membership Interest as a Substitute Member in connection with a Transfer permitted by Section 9.2 , such transferee shall be considered an assignee for the purposes of this Agreement. An assignee shall be entitled to all the rights of an assignee of a limited liability company interest under the Act, including the right to receive distributions attributable to the Units assigned, but such assignee shall not be entitled to effect a consent or vote on any matter presented to the Members for approval or, except as waived by the Manager, effect a Redemption Right with respect to such Units (such right to consent or vote or effect a Redemption Right, to the extent provided in this Agreement or under the Act, fully remaining with the transferor Member).

(m) Any Person who is the assignee of all or any portion of a Member’s Membership Interest, but does not become a Substitute Member and desires to make a further assignment of such Membership Interest, shall be notified that such Membership Interest is subject to Article IX , and, to the fullest extent permitted by applicable law, shall be subject to all of the provisions of this Article IX to the same extent and in the same manner as any Member desiring to make an assignment of its Membership Interest.

Section 9.5 EFFECT OF BANKRUPTCY, DEATH, INCOMPETENCE OR TERMINATION OF A MEMBER . The occurrence of an Event of Bankruptcy as to a Member, the death of a Member or a final adjudication that a Member is incompetent (which term shall include, but not be limited to, insanity) shall not, in and of itself, cause the dissolution of the Company, and the business of the Company shall continue. If an order for relief in a bankruptcy proceeding is entered against an individual Member, the trustee or receiver of his estate or, if he dies, his executor, administrator or trustee, or, if he is finally adjudicated incompetent, his committee, guardian or conservator, shall have the rights of such Member for the purpose of settling or managing his estate property and such power as the bankrupt, deceased or incompetent Member possessed to assign all or any part of his Membership Interest and to join with the assignee in satisfying conditions precedent to the admission of the assignee as a Substitute Member.

Section 9.6 JOINT OWNERSHIP OF INTERESTS . A Membership Interest may be acquired by two (2) individuals as joint tenants with right of survivorship (but not as tenants in common), provided that such individuals either are married or are related and share the same home as tenants in common. The written consent or vote of both owners of any such jointly held Membership Interest shall be required to constitute the action of the owners of such Membership Interest; provided, however, that the written consent of only

one (1) joint owner will be required if the Company has been provided with evidence satisfactory to counsel for the Company that the actions of a single joint owner can bind both owners under the applicable laws of the state of residence of such joint owners. Upon the death of one (1) owner of a Membership Interest held in a joint tenancy with a right of survivorship, the Membership Interest shall become owned solely by the survivor as a Member and not as an assignee. The Company need not recognize the death of one (1) of the owners of a jointly held Membership Interest until it shall have received notice of such death. Upon notice to the Manager from either owner that the tenancy satisfying the first sentence of this Section 9.6 has been destroyed, the Manager shall cause the Membership Interest to be divided into two (2) equal Membership Interests, which shall thereafter be owned separately by each of the former owners.

Section 9.7 TRANSFEREES . Any Membership Interests owned by the Members and transferred pursuant to this Article IX shall be and remain subject to all of the provisions of this Agreement.

Section 9.8 ABSOLUTE RESTRICTION . Notwithstanding any provision of this Agreement to the contrary (except Section 9.2(a) and Section 9.3(b) ), unless waived in writing by the Manager, the sale or exchange of any interest in the Company will not be permitted if the interest sought to be sold or exchanged, when added to the total of all other interests sold or exchanged within the period of twelve (12) consecutive months ending with the proposed date of the sale or exchange, would result in the termination of the Company under Section 708 of the Code, if such termination would materially and adversely affect the Company or any Member.

Section 9.9 INVESTMENT REPRESENTATION . Each Member represents and warrants to the Manager and to the Company that the acquisition of his Membership Interest is made as a principal for his account for investment purposes only and not with a view to the resale or distribution of such Membership Interest. Each Member agrees that he will not sell, assign or otherwise transfer his Membership Interest or any fraction thereof, whether voluntarily or by operation of law or at judicial sale or otherwise, to any Person who does not similarly represent and warrant and similarly agree not to sell, assign or transfer such Membership Interest or fraction thereof to any Person who does not similarly represent, warrant and agree.

ARTICLE X
TERMINATION OF THE COMPANY

Section 10.1 TERMINATION . The Company shall dissolve and commence winding up and liquidating upon the first to occur of the following (“ Liquidating Events ”):

(f) The sale of all or substantially all of the assets of the Company;

(g) The determination of the Manager to dissolve, wind up, and liquidate the Company; and

(h) At any time there are no members of the Company, unless the Company is continued pursuant to the Act.

The Members agree that the Company shall not dissolve prior to the occurrence of a Liquidating Event and that, to the fullest extent permitted by law, no Member shall seek a dissolution of the Company, under Section §18-802 of the Act or otherwise, other than based on the matters set forth in Section 10.1(a) , ( b ) and ( c ) above. If it is determined by a court of competent jurisdiction that the Company has dissolved prior to the occurrence of a Liquidating Event, the Members agree, to the fullest extent permitted by law, to continue the business of the Company without a winding up or liquidation. In the event of a dissolution pursuant to Section 10.1(b) or Section 10.1(c) , the relative economic rights of each class of Units immediately before such dissolution shall be preserved to the greatest extent practicable with respect to distributions made to Members pursuant to Section 10.4 following such dissolution, taking into consideration tax and other legal constraints that may adversely affect one or more Members and subject to compliance with applicable laws and regulations, unless, with respect to any class of Units, holders of a majority of the Units of such class consent in writing to a treatment other than as described above, the Manager (or its trustee, receiver, successor or legal representative) shall proceed with the winding up of the Company, and its assets shall be applied and distributed as provided in the remainder of this Article X .

Section 10.2 PAYMENT OF DEBTS . Upon a winding up of the Company, the assets shall first be applied to the satisfaction of the creditors of the Company (other than Members who are creditors in light of any loans or advances that may have been made by Members to the Company), including the expenses of liquidation, whether by payment or the making of reasonable provision for payment thereof. A reasonable time shall be allowed for the orderly liquidation of the assets of the Company and the satisfaction of liabilities to creditors so as to enable the Manager to minimize any losses resulting from liquidation.

Section 10.3 DEBTS TO MEMBERS . After the application of Section 10.2 , the remaining assets shall next be applied to the repayment of any loans made by any Member to the Company.

Section 10.4 REMAINING DISTRIBUTION .

(c) After the application of Section 10.3 , the remaining assets shall then be distributed first, to the holders of the Preferred Units, if any, as provided in the applicable exhibit, if any, to this Agreement setting forth the terms of such Preferred Units, and second, to the holders of the Common Units in accordance with their positive Capital Account balances, determined after taking into account all Capital Account adjustments for all prior periods and the Company taxable year during which the liquidation occurs.

(d) If the Company is liquidated within the meaning of Section 1.704-1(b)(2)(ii)(g), distributions shall be made pursuant to Section 10.4(a) in compliance with Section 1.704-1(b)(2)(ii)(b)(2) of the Treasury Regulations, except as provided

in Section 10.4(c). In the discretion of the Manager, a pro rata portion of the distributions that would otherwise be made to the Members pursuant to Section 10.4(a) may be:

(i) distributed to a trust established for the benefit of the Members for the purposes of liquidating Company assets, collecting amounts owed to the Company, and paying any contingent or unforeseen liabilities or obligations of the Company or the Members arising out of or in connection with the Company. The assets of any such trust shall be distributed to the Members from time to time, in the reasonable discretion of the Manager, in the same proportions as the amount distributed to such trust by the Company would otherwise have been distributed to the Members pursuant to Section 10.4(a) ; or

(ii) in furtherance of satisfaction of the Company’s creditors pursuant to Section 10.2 , withheld to provide a reasonable reserve for Company liabilities (contingent or otherwise) and to reflect the unrealized portion of any installment obligations owed to the Company, provided that such withheld amounts shall be distributed to the Members pursuant to this Section 10.4 as soon as practicable.

(e) Notwithstanding any other provisions of this Article X , if the Company is liquidated within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Treasury Regulations but no Liquidating Event pursuant to Section 10.1 has occurred, the Property shall not be liquidated, the Company’s liabilities shall not be paid or discharged, and the Company’s affairs shall not be wound up. Instead, solely for federal income tax purposes, the Company shall be deemed to have contributed all its Property and liabilities to a new partnership in exchange for an interest in such new partnership and, immediately thereafter, the Company will be deemed to liquidate by distributing interests in the new partnership to the Members.

Section 10.5 RESERVE . Notwithstanding the provisions of Sections 10.3 and 10.4 , the Manager may retain such amount as it deems necessary as a reserve for any contingent liabilities or obligations of the Company in furtherance of satisfaction of the Company’s creditors pursuant to Section 10.2 , which reserve, after the passage of a reasonable period of time, shall be distributed pursuant to the provisions of this Article X .

Section 10.6 FINAL ACCOUNTING . Each of the Members shall be furnished with a statement examined by the Company’s independent accountants, which shall set forth the assets and liabilities of the Company as of the date of the complete liquidation. Upon the compliance by the Manager with the foregoing distribution plan, the Members shall cease to be such, and the Manager shall execute and cause to be filed a certificate of cancellation of the Certificate of Formation of the Company and any and all other documents necessary with respect to termination and cancellation of the Company.

ARTICLE XI
AMENDMENTS

Section 11.1 AUTHORITY TO AMEND .

(h) This Agreement may be amended by Ashford Inc. without the approval of any other Member if such amendment (i) is solely for the purpose of clarification or is of an inconsequential nature and (ii) does not change the substance of this Agreement and the Company has obtained an opinion of counsel to that effect.

(i) This Agreement may be amended by Ashford Inc. without the approval of any other Member if such amendment is to reflect the admission, substitution or withdrawal of Members; to reflect the issuance of additional Membership Interests or to amend the calculation of the Cash Amount and the Conversion Factor pursuant to a transaction described in Section 9.1(c) . For avoidance of doubt, Manager may amend Exhibit A without the approval of any Member as provided by Section 6.1(v) .

(j) This Agreement may be amended by Ashford Inc. without the approval of any other Member if such amendment is, in the opinion of counsel for the Company, necessary or appropriate to any federal or state securities laws or regulations. Any amendment made pursuant to this Section 11.1(c) may be made effective as of the date of this Agreement.

(k) Notwithstanding any contrary provision of this Agreement, any amendment to this Agreement or other act which would (i) impose on the Members any obligation to make additional Capital Contributions to the Company, (ii) except as provided in Section 11.1(b) , change the method of allocation of profit and loss as provided in Article V or the distribution provisions of Articles VIII and X , (iii) seek to impose personal liability on a Member without that Member’s written consent, or (iv) affect the operation of the Conversion Factor of the Redemption Right shall require the consent and approval of Members holding more than sixty-six and two-thirds percent (66 2/3%) of the Common Percentage Interests of the Members.

(l) Except as otherwise specifically provided in this Section 11.1 , amendments to this Agreement shall require the approval of the Manager and Members holding more than fifty percent (50%) of the Common Percentage Interests of the Members.

Section 11.2 NOTICE OF AMENDMENTS . A copy of any amendment to be approved by the Members pursuant to Sections 11.1(d) or 11.1(e) shall be mailed in advance to such Members. Members shall be notified as to the substance of any amendment pursuant to Sections 11.1(a) , (b) or (c) , and upon request shall be furnished a copy thereof.

Section 11.3 IMPLEMENTATION OF AMENDMENT . Upon obtaining such approvals required by this Agreement and without any further action or execution by any

other Person, including any Member, (i) any amendment, restatement, modification or waiver of this Agreement may be implemented and reflected in a writing executed solely by the Manager, and (ii) each of the Members and any other party to or bound by this Agreement shall be deemed a party to and bound by such amendment, restatement, modification or waiver of this Agreement.

ARTICLE XII
POWER OF ATTORNEY

Section 12.1 POWER . Each of the Members irrevocably constitutes and appoints the Manager as such Member’s true and lawful attorney in such Member’s name, place and stead to make, execute, swear to, acknowledge, deliver and file:

(n) Any certificates or other instruments which may be required to be filed by the Company under the laws of the State of Delaware or of any other state or jurisdiction in which the Manager shall deem it advisable to file;

(o) Any documents, certificates or other instruments, including, but not limited to, (i) any and all amendments and modifications of this Agreement or of the instruments described in Section 12.1(a) which may be required or deemed desirable by the Manager to effectuate the provisions of any part of this Agreement, (ii) all instruments relating to the admission, withdrawal, removal or substitution of any Member, and (iii) by way of extension and not limitation, to do all such other things as shall be necessary to continue and to carry on the business of the Company; and

(p) All documents, certificates or other instruments that may be required to effectuate the dissolution and termination of the Company, to the extent such dissolution and termination is authorized by this Agreement. The power of attorney granted by this Agreement shall not constitute a waiver of, or be used to avoid, the rights of the Members to approve certain amendments to this Agreement pursuant to Sections 11.1(d) and 11.1(e) or be used in any other manner inconsistent with the status of the Company as a limited liability company or inconsistent with the provisions of this Agreement. Each such Member agrees to be bound by any representation made by the Manager, acting in good faith pursuant to such power of attorney; and each such Member waives any and all defenses which may be available to contest, negate or disaffirm the action of the Manager taken in good faith under such power of attorney.

Section 12.2 SURVIVAL OF POWER . It is expressly intended by each of the Members that the foregoing power of attorney is coupled with an interest, is irrevocable and shall survive the death, incompetence, dissolution, liquidation or adjudication of insanity or bankruptcy or insolvency of each such Member. The foregoing power of attorney shall survive the delivery of an assignment by any of the Members of such Member’s entire interest in the Company, except that where an assignee of such entire interest has become a Substitute Member, then the foregoing power of attorney of the assignor Member shall survive the delivery of such assignment for the sole purpose of enabling the Manager to

execute, acknowledge and file any and all instruments necessary to effectuate such substitution.

ARTICLE XIII
CONSENTS, APPROVALS, VOTING AND MEETINGS

Section 13.1 METHOD OF GIVING CONSENT OR APPROVAL . Any consent or approval required by this Agreement may be given as follows:

(f) by a written consent given by the consenting Member and received by the Manager at or prior to the doing of the act or thing for which the consent is solicited, provided that such consent shall not have been nullified by:

(i) Notice to the Manager of such nullification by the consenting Member prior to the doing of any act or thing, the doing of which is not subject to approval at a meeting called pursuant to Section 13.2 , or

(ii) Notice to the Manager of such nullification by the consenting Member prior to the time of any meeting called pursuant to Section 13.2 to consider the doing of such act or thing, or

(iii) The negative vote by such consenting Member at any meeting called pursuant to Section 13.2 to consider the doing of such act or thing;

(g) by the affirmative vote by the consenting Member for the doing of the act or thing for which the consent is solicited at any meeting called pursuant to Section 13.2 to consider the doing of such act or thing; or

(h) by the failure of the Member to respond or object to a request from the Manager for such Member’s consent within thirty (30) days from its receipt of such request (or such shorter period of time as the Manager may indicate in such request in order to ensure that the Manager has sufficient time to respond, if required, to any third party with respect to the subject matter of such request).

Section 13.2 MEETINGS OF MEMBERS . Any matter requiring the consent or vote of all or any of the Members may be considered at a meeting of the Members held not less than five (5) nor more than sixty (60) days after notice thereof shall have been given by the Manager to all Members. Such notice (i) may be given by the Manager, in its discretion, at any time, or (ii) shall be given by the Manager within fifteen (15) days after receipt from Members holding more than fifty percent (50%) of the Common Percentage Interests of the Members of a request for such meeting.

Section 13.3 OPINION . Except for consents obtained pursuant to Sections 13.1 or 13.2 , no Member shall exercise any consent or voting rights unless either (a) at the time of the giving of consent or casting of any vote by the Members under this Agreement, counsel for the Company or counsel employed by the Members shall have delivered to the Company

an opinion satisfactory to the Members to the effect that such conduct (i) is permitted by the Act, (ii) will not impose personal liability on a Member without that Member’s consent, and (iii) will not adversely affect the classification of the Company as a partnership for federal income tax purposes, or (b) irrespective of the delivery or non-delivery of such opinion of counsel, Members holding more than seventy-five percent (75%) of the Common Percentage Interests of the Members determine to exercise their consent or voting rights.

Section 13.4 SUBMISSIONS TO MEMBERS . The Manager shall give the Members notice of any proposal or other matter required by any provision of this Agreement, or by law, to be submitted for consideration and approval of the Members. Such notice shall include any information required by the relevant provision or by law.

ARTICLE XIV
MISCELLANEOUS

Section 14.1 GOVERNING LAW . The Company and this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware.

Section 14.2 AGREEMENT FOR FURTHER EXECUTION . At any time or times upon the request of the Manager, the Members agree to sign, swear to, acknowledge and deliver all further documents and certificates required by the laws of Delaware, or any other jurisdiction in which the Company does, or proposes to do, business, or which may be reasonable, necessary, appropriate or desirable to carry out the provisions of this Agreement or the Act. This Section 14.2 shall not prejudice or affect the rights of the Members to approve certain amendments to this Agreement pursuant to Sections 11.1(d) and 11.1(e) .

Section 14.3 ENTIRE AGREEMENT . This Agreement (including the exhibits following the signature pages to this Agreement and which exhibits are a part of this Agreement) contain the entire understanding among the parties to this Agreement and supersede any prior understandings or agreements among them respecting the within subject matter. There are no representations, agreements, arrangements or understandings, oral or written, between or among the parties to this Agreement relating to the subject matter of this Agreement which are not fully expressed in this Agreement; provided that an LTIP Unit may be subject to a Vesting Agreement and a Member may enter into a deficit restoration obligation agreement.

Section 14.4 SEVERABILITY . This Agreement is intended to be performed in accordance with, and only to the extent permitted by, all applicable laws, ordinances, rules and regulations of the jurisdictions in which the Company does business. If any provision of this Agreement, or the application thereof to any person or circumstance, shall, for any reason and to any extent, be invalid or unenforceable, the remainder of this Agreement and the application of such provision to other persons or circumstances shall not be affected thereby, but rather shall be enforced to the greatest extent permitted by law.

Section 14.5 NOTICES . Notices to Members or to the Company shall be deemed to have been given when personally delivered or mailed, by prepaid registered or certified

mail, addressed as set forth in Exhibit A , unless a notice of change of address has previously been given in writing by the addressee to the addressor, in which case such notice shall be addressed to the address set forth in such notice of change of address.

Section 14.6 TITLES AND CAPTIONS . All titles and captions are for convenience only, do not form a substantive part of this Agreement, and shall not restrict or enlarge any substantive provisions of this Agreement.

Section 14.7 COUNTERPARTS . This Agreement may be executed in multiple counterparts, each one of which shall constitute an original executed copy of this Agreement.

Section 14.8 TERMS . All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the person or persons may require. Any reference to the Code or other statutes or laws include all amendments, modifications or replacements of the specific sections and provisions concerned. Unless otherwise specified, all references to “Section”, “Article” or “Exhibit” contained in this Agreement refer to sections, articles or exhibits of this Agreement. Unless the context of this Agreement clearly requires otherwise, the use of the word “including” is not limiting and the use of the word “or” has the inclusive meaning of both “or” and “and.”

Section 14.9 SURVIVAL OF RIGHTS . Subject to the provisions of this Agreement limiting transfers, this Agreement shall be binding upon and inure to the benefit of the Members and the Company and their respective legal representatives, successors, transferees and assigns.

IN WITNESS WHEREOF, Ashford OP Limited Partner LLC as owner of more than 80 percent of the Common Percentage Interests and Ashford Inc., as Manager, have hereunto set their hands as of the day and year first above written.

MEMBER:

ASHFORD OP LIMITED PARTNER LLC ,
a Delaware limited liability company

By: /s/ David A. Brooks

David A. Brooks, Vice President

MANAGER:

ASHFORD INC. ,
a Delaware corporation

By: /s/ David A. Brooks

David A. Brooks, Chief Operating Officer and

General Counsel

ACCEPTED AND AGREED:

ASHFORD HOSPITALITY LIMITED
PARTNERSHIP

By: Ashford OP General Partner LLC,
a Delaware limited liability company

    By:     /s/ David A. Brooks
        David A. Brooks,
        Vice President

EXHIBIT A

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Exhibit A

EXHIBIT B

FEDERAL INCOME TAX MATTERS

For purposes of interpreting and implementing Article V of the Agreement, the following rules shall apply and shall be treated as part of the terms of the Agreement:

A. SPECIAL ALLOCATION PROVISIONS.

1. To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Section 743(b) is required pursuant to Section 1.704-1(b)(2)(iv)(m)(2) or Section 1.704-1(b)(2)(iv)(m)(4) of the Treasury Regulations to be taken into account in determining Capital Accounts as the result of a distribution to a Member in complete liquidation of its Membership Interest, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to the Members in accordance with their interests in the Company if Section 1.704-1(b)(2)(iv)(m)(2) of the Treasury Regulations applies, or to the Company to whom such distribution was made if Section 1.704-1(b)(2)(iv)(m)(4) of the Treasury Regulations applies.

2. If a Member transfers any part or all of its Membership Interest or if Common Percentage Interests or Preferred Percentage Interests vary during a taxable year of the Company, the Manager, in its sole and absolute discretion, shall determine which method authorized under the Code (including Section 706 of the Code) and the Treasury Regulations shall be used to allocate the distributive shares.

3. To the extent required by law, income, gain, loss and deduction attributable to property contributed to the Company by a Member shall be shared among the Members so as to take into account any variation between the basis of the property and the fair market value of the property at the time of contribution in accordance with the requirements of Section 704(c) of the Code and the applicable Treasury Regulations thereunder as more fully described in Part B. Treasury Regulations under Section 704(c) of the Code allow partnerships to use any reasonable method for accounting for Book-Tax Differences for contributions of property so that a contributing partner receives the tax benefits and burdens of any built-in gain or loss associated with contributed property. The Company shall account for Book-Tax Differences using a method specifically approved in the Treasury Regulations, such as the traditional method. An allocation of remaining built-in gain under Section 704(c) will be made when Section 704(c) property is sold.

4. If the Company is entitled to a deduction for interest imputed under any provision of the Code on any loan or advance from a Member (whether such interest is currently deducted, capitalized or amortized), such deduction shall be allocated solely to such Member.

5. To the extent any payments in the nature of fees made to a Member or reimbursements of expenses to any Member are finally determined by the Internal Revenue Service to be distributions to a Member for federal income tax purposes, there will be a gross income allocation to such Member in the amount of such distribution.

Exhibit B – Page 1

6. (a) Notwithstanding any provision of the Agreement to the contrary and subject to the exceptions set forth in Section 1.704-2(f)(2)-(5) of the Treasury Regulations, if there is a net decrease in Company Minimum Gain during any Company fiscal year, each Member shall be specially allocated items of Company income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Member’s share of the net decrease in Company Minimum Gain determined in accordance with Section 1.704-2(g)(2) of the Treasury Regulations. Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance with Section 1.704-2(f) of the Treasury Regulations. This paragraph 6(a) is intended to comply with the minimum gain chargeback requirement in such Section of the Treasury Regulations and shall be interpreted consistently therewith. To the extent permitted by such Section of the Treasury Regulations and for purposes of this paragraph 6(a) only, each Member’s Adjusted Capital Account Balance shall be determined prior to any other allocations pursuant to Article V of the Agreement with respect to such fiscal year and without regard to any net decrease in Member Minimum Gain during such fiscal year.

(b) Notwithstanding any provision of the Agreement to the contrary, except paragraph 6(a) of this Exhibit B and subject to the exceptions set forth in Section 1.704-2(i)(4) of the Treasury Regulations, if there is a net decrease in Member Nonrecourse Debt Minimum Gain during any Company fiscal year, each Member who has a share of the Member Nonrecourse Debt Minimum Gain, determined in accordance with Section 1.704-2(i)(3) of the Treasury Regulations, shall be specially allocated items of Company income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Member’s share of the net decrease in Member Nonrecourse Debt Minimum Gain, determined in accordance with Section 1.704-2(i)(5) of the Treasury Regulations. Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance with Section 1.704-2(i)(4) of the Treasury Regulations. This paragraph 6(b) is intended to comply with the minimum gain chargeback requirement in such Section of the Treasury Regulations and shall be interpreted consistently therewith. Solely for purposes of this paragraph 6(b) , each Member’s Adjusted Capital Account Balance shall be determined prior to any other allocations pursuant to Article V of the Agreement with respect to such fiscal year, other than allocations pursuant to paragraph 6(a) .

7. If any Members unexpectedly receive any adjustments, allocations or distributions described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6), items of Company income and gain shall be specially allocated to such Members in an amount and manner sufficient to eliminate the deficits in their Adjusted Capital Account Balances created by such adjustments, allocations or distributions as quickly as possible, provided that an allocation pursuant to this paragraph 7 shall be made only if and to the extent that the Member would have a deficit balance in its Adjusted Capital Account Balance after all other allocations provided for Article V of the Agreement and this Exhibit B have been tentatively made as if this paragraph 7 were not in this Exhibit B .

8. No loss shall be allocated to any Member to the extent that such allocation would result in a deficit in its Adjusted Capital Account Balance while any other Member continues to

Exhibit B – Page 2

have a positive Adjusted Capital Account Balance; in such event, losses shall first be allocated to any Members with positive Adjusted Capital Account Balances, and in proportion to such balances, to the extent necessary to reduce their positive Adjusted Capital Account Balances to zero. Any excess shall be allocated to the Manager.

9. If any Member has a deficit balance in its Adjusted Capital Account Balance at the end of any fiscal year or other period, such Member shall be specially allocated items of Company gross income and gain in the amount of such excess as quickly as possible; provided, however , that an allocation pursuant to this paragraph 9 shall be made only if and to the extent that such Member would have a deficit balance in its Adjusted Capital Account Balance after all other allocations provided in this Part A have been tentatively made as if paragraph 7 and this paragraph 9 were not in this Exhibit B .

10. Any special allocations of items pursuant to this Part A shall be taken into account in computing subsequent allocations so that the net amount of any items so allocated and the profits, losses and all other items allocated to each such Member pursuant to Article V of the Agreement shall, to the extent possible, be equal to the net amount that would have been allocated to each such Member pursuant to the provisions of Article V of the Agreement if such special allocations had not occurred.

11. Nonrecourse Deductions for any fiscal year or other period shall be specially allocated to the Members in the manner set forth in Section 5.1(b)(iii) of the Agreement.

12. Any Member Nonrecourse Deductions for any fiscal year or other period shall be specially allocated to the Member who bears the economic risk of loss with respect to the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in accordance with Section 1.704-2(i) of the Treasury Regulations. If more than one Member bears the economic risk of loss (in accordance with Section 1.704-2(i) of the Treasury Regulations) with respect to a Member Nonrecourse Debt, Member Nonrecourse Deductions attributable thereto shall be allocated between or among such Members in accordance with the ratios in which they share such economic risk of loss.

13. If the Company disposes of all or substantially all of its assets in a transaction that will lead to a liquidation of the Company pursuant to Article X , then any profits or losses realized in connection with such transaction and thereafter (and, if necessary, constituent items of income, gain, loss and deduction) shall be specially allocated for such taxable year of the Company (and to the extent permitted by Section 761(c) of the Code, for the immediately preceding taxable year of the Company) among the Members as required so as to cause liquidating distributions pursuant to Section 10.4(a) of the Agreement to be made in the same amounts and proportions as would have resulted had such distributions instead been made pursuant to Article VIII of the Agreement.

B. CAPITAL ACCOUNT ADJUSTMENTS AND TAX ALLOCATIONS.

1. For purposes of computing the amount of any item of income, gain, deduction or loss to be reflected in the Members’ Capital Accounts, the determination, recognition and

Exhibit B – Page 3

classification of any such item shall be the same as its determination, recognition and classification for federal income tax purposes; provided, however, that:

(a) Any income, gain or loss attributable to the taxable disposition of any property shall be determined by the Company as if the adjusted basis of such property as of such date of disposition was equal in amount to the Carrying Value.

(b) The computation of all items of income, gain, loss and deduction shall be made by the Company and, as to those items described in Section 705(a)(1)(B) or Section 705(a)(2)(B) of the Code, without regard to the fact that such items are not includable in gross income or are neither currently deductible nor capitalizable for federal income tax purposes.

(c) In lieu of the depreciation, amortization, and other cost recovery deductions taken into account in computing the Company’s taxable income or loss, there shall be taken into account Depreciation for a fiscal year or other period.

(d) The Company shall be treated as owning directly its proportionate share (as determined by the Manager based upon the provisions of the applicable partnership or limited liability agreement of a Subsidiary of the Company) of all property owned by (i) a Subsidiary of the Company that is classified as a partnership for U.S. federal income tax purposes and (ii) any other partnership, limited liability company, unincorporated business or other entity classified as a partnership for U.S. federal income tax purposes of which the Company or a Subsidiary of the Company is, directly or indirectly, a partner, member or other equity holder.

2. A transferee of a Membership Interest will succeed to the Capital Account relating to the Membership Interest transferred.

3. Upon (i) an issuance of additional Membership Interests in exchange for more than a de minimis capital contribution to the Company, (ii) an issuance of additional Membership Interests (other than a de minimis interest) as consideration for the provision of services to or for the benefit of the Company by an existing Member acting in a member capacity or by a new Member acting in a member capacity or in anticipation of being a Member, or (iii) the distribution by the Company to a Member of more than a de minimis amount of property as consideration for an interest in the Company, the Capital Accounts of all Members (and the Carrying Values of all Company properties) shall, immediately prior to such event, be adjusted (consistent with the provisions of this Exhibit B ) upward or downward to reflect any unrealized gain or unrealized loss attributable to each Company property (as if such unrealized gain or unrealized loss had been recognized upon an actual sale of such property at the fair market value thereof, immediately prior to such issuance, and had been allocated to the Members, at such time, pursuant to Article V of the Agreement). In determining such unrealized gain or unrealized loss attributable to the properties, the fair market value of Company properties shall be determined by the Manager using such reasonable methods of valuation as it may adopt.

4. Immediately prior to the distribution of any Company property, the Capital Accounts of all Members shall be adjusted (consistent with the provisions of this Exhibit B and Section 704 of the Code) upward or downward to reflect any unrealized gain or unrealized loss

Exhibit B – Page 4

attributable to the Company property distributed (as if such unrealized gain or unrealized loss had been recognized upon an actual sale of each such property, immediately prior to such distribution, and had been allocated to the Members, at such time, pursuant to Article V of the Agreement). In determining such unrealized gain or unrealized loss attributable to property, the fair market value of Company property distributed shall be determined by the Manager using such reasonable methods of valuation as it may adopt.

5. In accordance with Section 704(c) of the Code and the Treasury Regulations thereunder, income, gain, loss and deduction with respect to any property shall, solely for tax purposes, and not for Capital Account purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its Carrying Value. The Manager shall make any elections or other decisions relating to such allocations.

6. If the Carrying Value of any Company asset is adjusted as described in paragraph 3 above, subsequent allocations of income, gain, loss and deduction with respect to such asset shall take account of any variation between the adjusted basis for federal income tax purposes of such asset and its Carrying Value immediately after such adjustment in the same manner as under Section 704(c) of the Code and the Treasury Regulations thereunder.

7. Except as provided in paragraphs 5 and 6 of this Exhibit B or as otherwise required by the Code or Treasury Regulations, solely for federal income tax purposes, items of taxable income, gain, loss and deduction of the Company shall be allocated among the Members in the same manner as each correlative item of income, gain, loss and deduction, as determined for Capital Account purposes, is allocated. Any elections or other decisions relating to such allocations shall be made by the Manager in any manner that reasonably reflects the purpose and intention of the Agreement and this Exhibit B .

C. DEFINITIONS. For the purposes of this Exhibit B , the following terms shall have the meanings indicated unless the context clearly indicates otherwise:

“ ADJUSTED CAPITAL ACCOUNT BALANCE ”: means the balance in the Capital Account of a Member as of the end of the relevant fiscal year of the Company, after giving effect to the following: (i) credit to such Capital Account any amounts the Member is obligated to restore, pursuant to the terms of the Agreement or otherwise, or is deemed obligated to restore pursuant to the penultimate sentences of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Treasury Regulations, and (ii) debit to such capital account the items described in Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Treasury Regulations.

“ AGREEMENT ”: means this Amended and Restated Limited Liability Agreement of Ashford Hospitality Advisors LLC, as amended.

“ COMPANY MINIMUM GAIN ”: shall have the meaning set forth in Sections 1.704-2(b)(2) and 1.704-2(d) of the Treasury Regulations.

Exhibit B – Page 5

“ DEPRECIATION ”: means, for each fiscal year or other period, an amount equal to the depreciation, amortization or other cost recovery deduction allowable for federal income tax purposes with respect to property for such fiscal year or other period, except that (a) with respect to any property the Carrying Value of which differs from its adjusted tax basis for federal income tax purposes and which difference is being eliminated by use of the remedial allocation method pursuant to Section 1.704-3(d) of the Treasury Regulations, Depreciation for such fiscal year or other period shall be the amount of book basis recovered for such fiscal year or other period under the rules prescribed by Section 1.704-3(d)(2) of the Treasury Regulations, and (b) with respect to any other property the Carrying Value of which differs from its adjusted tax basis at the beginning of such fiscal year or other period, Depreciation shall be an amount which bears the same ratio to such beginning Carrying Value as the federal income tax depreciation, amortization or other cost recovery deduction for such fiscal year or other period bears to such beginning adjusted tax basis; provided , that if the adjusted tax basis of any property at the beginning of such fiscal year or other period is zero, Depreciation with respect to such property shall be determined with reference to such beginning value using any reasonable method selected by the Manager.

“ MEMBER NONRECOURSE DEBT MINIMUM GAIN ”: means an amount, with respect to each Member Nonrecourse Debt, determined in accordance with Section 1.704-2(i) of the Treasury Regulations.

“ MEMBER NONRECOURSE DEBT ”: shall have the meaning set forth in Section 1.704-2(b)(4) of the Treasury Regulations.

“ MEMBER NONRECOURSE DEDUCTIONS ”: shall have the meaning set forth in Section 1.704-2(i)(2) of the Treasury Regulations. For any Company taxable year, the amount of Member Nonrecourse Deductions with respect to a Member Nonrecourse Debt equal the net increase during the year, if any, in the amount of Member Nonrecourse Debt Minimum Gain reduced (but not below zero) by proceeds of the liability that are both attributable to the liability and allocable to an increase in the Member Nonrecourse Debt Minimum Gain.

“ NONRECOURSE DEDUCTIONS ”: shall have the meaning set forth in Section 1.704-2(b)(1) of the Treasury Regulations. The amount of Nonrecourse Deductions for a Company fiscal year equals the excess, if any, of the net increase, if any, in the amount of Company Minimum Gain during that fiscal year over the aggregate amount of any distributions during that fiscal year of proceeds of a Nonrecourse Liability, that are allocable to an increase in Company Minimum Gain, determined according to the provisions of Section 1.704-2(c) of the Treasury Regulations.

“ NONRECOURSE LIABILITY ”: shall have the meaning set forth in Section 1.704-2(b)(3) of the Treasury Regulations.

For purposes of this Exhibit B , all other capitalized terms will have the same definition as in the Agreement.

Exhibit B – Page 6

Exhibit B – Page 7

EXHIBIT C

NOTICE OF EXERCISE OF REDEMPTION RIGHT

The undersigned irrevocably (i) presents for redemption on_________(such date being at least 3 Business Days after the date set forth below) _________ Units (as defined in the LLC Agreement defined below) in Ashford Hospitality Advisors LLC, in accordance with the terms of the Amended and Restated Limited Liability Company Agreement of Ashford Hospitality Advisors LLC (the “ LLC Agreement ”), and the Redemption Right (as defined in the LLC Agreement) referred to in the LLC Agreement, (ii) surrenders such Units and all right, title and interest in such Units, and (iii) directs that the Cash Amount or Ashford Inc. Shares (both as defined in the LLC Agreement) deliverable upon exercise of the Redemption Right be delivered to the address specified below, and if Ashford Inc. Shares are to be delivered, such Ashford Inc. Shares be registered or placed in the name(s) and at the addresses specified below.

Dated:

Name of Member:

(Signature of Member)

(Street Address)

(City State Zip Code)

If Ashford Inc. Shares are to be issued, issue to:

(Name)

(Social Security or Identifying Number)

Exhibit C – Page 1

EXHIBIT D

NOTICE OF ELECTION BY MEMBER TO CONVERT
LTIP UNITS INTO COMMON UNITS

The undersigned LTIP Unitholder irrevocably (i) elects to convert the number of LTIP Units in Ashford Hospitality Advisors LLC (the “ Company ”) set forth below into Common Units in accordance with the terms of the Amended and Restated Limited Liability Agreement of the Company, as amended; and (ii) directs that any cash in lieu of Common Units that may be deliverable upon such conversion be delivered to the address specified below. The undersigned represents, warrants, and certifies that the undersigned (a) has title to such LTIP Units, free and clear of the rights or interests of any other person or entity other than the Company; (b) has the full right, power, and authority to cause the conversion of such LTIP Units as provided in this notice and as provided in the Amended and Restated Limited Liability Agreement of the Company, as amended; and (c) has obtained the consent or approval of all persons or entities, if any, having the right to consent or approve such conversion.

Name of LTIP Unitholder:

(Please Print: Exact Name as Registered with the Company)

Number of LTIP Units to be Converted:

Date to be Converted___________ (such date being not less than 3 Business Days nor more than 10 Business Days prior to the Date of this Notice set forth below)

Date of this Notice:

(Signature of Member: Sign Exact Name as Registered with the Company)

Exhibit D – Page 1

(Street Address)

(City) (State) (Zip Code)

Exhibit D – Page 2

EXHIBIT E

NOTICE OF ELECTION BY THE COMPANY TO FORCE CONVERSION
OF LTIP UNITS INTO COMMON UNITS

Ashford Hospitality Advisors LLC (the “ Company ”) irrevocably (i) elects to cause the number of LTIP Units held by the LTIP Unitholder set forth below to be converted into Common Units in accordance with the terms of the Amended and Restated Limited Liability Company Agreement of the Company, as amended.

Name of LTIP Unitholder: (Please Print: Exact Name as Registered with the Company)

Number of LTIP Units to be Converted:

Date to be Converted:

Date of this Notice:

Exhibit E - Page 1

EXHIBIT 21

Subsidiaries Listing as of December 31, 2014

The following list details certain of the subsidiaries of Ashford Inc. Subsidiaries not included in the list are omitted because, in the aggregate, they are insignificant as defined by Item 601(b)(21) of Regulation S-K.



Subsidiary		Organized or Incorporated
Ashford Hospitality Advisors LLC		Delaware
AIM General Partner, LLC		Delaware
AIM Management Holdco, LLC		Delaware
AIM Performance Holdco, LP		Delaware
Ashford Investment Management, LLC		Delaware
AIM REHE Funds GP, LP		Delaware
AIM Real Estate Hedged Equity (U.S.) Fund, LP		Delaware
AIM Real Estate Hedged Equity (Cayman) Fund, Ltd.		Cayman Islands
AIM Real Estate Hedged Equity Master Fund, L.P.		Cayman Islands
Ashford Lending Corporation		Delaware

EXHIBIT 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-200183) pertaining to the 2014 Incentive Plan of Ashford Inc. of our report dated March 24, 2015, with respect to the financial statements of Ashford Inc. and subsidiaries, included in this Annual Report (Form 10-K) for the year ended December 31, 2014.



	/s/ Ernst & Young LLP

Dallas, Texas

March 24, 2015

EXHIBIT 31.1

CERTIFICATION

I, Monty J. Bennett, certify that:


1.	I have reviewed this Annual Report on Form 10-K of Ashford Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:


(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 24, 2015



/s/ MONTY J. BENNETT
Monty J. Bennett
Chief Executive Officer

EXHIBIT 31.2

CERTIFICATION

I, Deric S. Eubanks, certify that:


1.	I have reviewed this Annual Report on Form 10-K of Ashford Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:


(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 24, 2015



/s/ DERIC S. EUBANKS
Deric S. Eubanks
Chief Financial Officer

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Ashford Inc. (the “Company”) on Form 10-K for the year ended December 31, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Monty J. Bennett, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:


(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 24, 2015



/s/ MONTY J. BENNETT
Monty J. Bennett
Chief Executive Officer

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Ashford Inc. (the “Company”) on Form 10-K for the year ended December 31, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Deric S. Eubanks, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:


(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 24, 2015



/s/ DERIC S. EUBANKS
Deric S. Eubanks
Chief Financial Officer