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Exhibit 10.2
 
EXECUTION VERSION

INVESTOR RIGHTS AND OPTION AGREEMENT

This Investor Rights and Option Agreement (this “Agreement”) is entered into as
of August 4, 2009, by and among Real Estate Investment Group L.P., a Bermuda
limited partnership, whose general partner and majority limited partner is Tyrus
S.A., a Uruguayan sociedad anónima wholly-owned by IRSA Inversiones y
Representaciones Sociedad Anónima, an Argentine sociedad anónima (the
“Investor”), IRSA Inversiones y Representaciones Sociedad Anónima, an Argentine
sociedad anónima (“IRSA”) (solely for purposes of Section 10(e) hereof) and
Hersha Hospitality Trust, a Maryland real estate investment trust (the
“Company”).

WHEREAS, on or about the date hereof, the Investor is purchasing from the
Company 5,700,000 shares (the “Primary Shares”) of the Company’s Priority Class
A common shares of beneficial interest, par value $0.01 per share, which are
validly issued, fully paid and non assessable and free of any preemptive rights,
rights of first refusal or other or similar rights, subject to the Transaction
Documents (“Common Shares”), pursuant that certain Purchase Agreement (the
“Purchase Agreement”), dated as of August 4, 2009, by and among the Investor,
IRSA, the Company and Hersha Hospitality Limited Partnership, L.P., a Virginia
limited partnership (the “Operating Partnership”);

WHEREAS, in connection with the purchase of the Primary Shares pursuant to the
Purchase Agreement, the Parties desire to enter into this Agreement and the
Trustee Designation Agreement (as defined below) to provide Investor with
certain additional rights and obligations and to promote the interests of the
Company by establishing herein certain terms and conditions upon which the
Primary Shares and the Option Shares (as defined below) will be held and/or
transferred, and to provide for certain other matters as set forth herein; and

WHEREAS, in connection with the Purchase Agreement and this Agreement
the  Company, the Investor and IRSA have entered  into a registration rights
agreement (the “Registration Rights Agreement”).

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements set
forth herein, and other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the Parties hereto, intending to be
legally bound, hereby agree as follows:

1.              Option to Purchase.

(a)            Purchase Option.  At any time and from time to time after the
Closing Date and prior to the five year anniversary of the Closing Date (the
“Expiration Date”), Investor shall have the option to purchase (the “Purchase
Option”), and the Company shall be obligated to issue to Investor, up to
5,700,000 Common Shares (the “Option Shares”) at an exercise price of $3.00 per
share (the “Option Price”), subject to adjustment pursuant to Section 1(e),
Section 1(f), Section 1(g) and Section 1(h) below.

(b)            Purchase Option Mechanics.  At any time after the Closing Date
and on or before the Expiration Date, Investor, in accordance with the terms
hereof, may exercise the Purchase Option, in whole or in part, by delivering to
the Company (i) written notice of the election to purchase the Option Shares in
the form attached hereto as Exhibit A (the “Election to Purchase”), duly
executed, to the Company during normal business hours on any Business Day and
(ii) an investment letter (the “Investment Letter”) in such form as reasonably
required by the Company for purposes of complying with applicable securities
laws and the Code, which letter shall contain representations and warranties
substantially similar to those contained in Section 5 hereof.  If the Expiration
Date is not a Business Day, then the Option may be exercised on the next
succeeding Business Day.

 
 

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(c)            Issuance of Option Shares.  No later than five Business Days
after receipt by the Company of the Election to Purchase as described in Section
1(b) and upon payment in full of the aggregate purchase price as set forth
therein, the Company shall issue and cause to be delivered to the Investor a
certificate or certificates (or the electronic equivalent thereof) representing
the number of fully paid and non-assessable Common Shares for which the option
described in Section 1(a) is being exercised, in whole or in part, by the
Investor.

(d)            Reservation of Authorized Shares.  The Company has, and shall
continue at all times to reserve and keep available out of the aggregate of its
authorized but unissued Common Shares, free and clear of all preemptive rights,
such number of duly authorized Common Shares as shall be sufficient to enable
the Company at any time to fulfill all of its obligations pursuant to the
Purchase Option.

(e)            Adjustment for Splits and Combinations.  If the Company shall, at
any time or from time to time after the date of this Agreement, effect a split,
reverse split, share dividend, subdivision or combination of the outstanding
Common Shares, the Option Price in effect immediately before that split, reverse
split, share dividend, subdivision or combination shall be proportionately
adjusted and the number of Common Shares issuable upon exercise of the Purchase
Option shall be adjusted to equal the aggregate number of Common Shares that a
record holder of the same number of Common Shares issuable upon exercise of the
Purchase Option would own or be entitled to receive after such split, reverse
split, share dividend, subdivision or combination.  Any adjustment under this
Section 1(e) shall become effective at the close of business on the date the
split, reverse split, share dividend, subdivision or combination becomes
effective.

(f)            Adjustment for Reclassification, Exchange and Substitution.  If,
at any time or from time to time after the date of this Agreement, the Common
Shares are changed into the same or a different number of shares of any class or
classes of shares, whether by recapitalization, reclassification or otherwise
(other than a split, reverse split, share dividend, subdivision or combination
provided for in Section 1(e) above), the Investor shall have the right
thereafter to receive upon exercise of the Purchase Option the kind and amount
of shares and other securities and property receivable upon such
recapitalization, reclassification or other change by holders of the maximum
number Common Shares issuable upon exercise of the Purchase Option immediately
prior to such recapitalization, reclassification or change, all subject to
further adjustment as provided herein or with respect to such other securities
or property by the terms thereof.

(g)            Reorganizations, Mergers, Consolidations or Sales of Assets.  If,
at any time or from time to time after the date of this Agreement, there is a
capital reorganization of the Common Shares (other than (i) an acquisition of a
majority of the shares of beneficial interest in the Company by another entity
by means of any transaction or series of related transactions, including,
without limitation, any reorganization, merger or consolidation, statutory share
exchange, self tender offer for all or substantially all Common Shares, sale of
all or substantially all of the Company’s assets or recapitalization of the
Common Shares but excluding any merger effected exclusively for the purpose of
changing the domicile of the Company, in which outstanding Common Shares are
exchanged for securities or other consideration issued, or caused to be issued
by the acquiring entity or its subsidiary (an “Acquisition”), or (ii) a sale,
lease, exchange or other transfer (in one transaction or a series of
transactions) of all or substantially all of the assets of the Company (an
“Asset Transfer”), or (iii) a recapitalization, subdivision, combination,
reclassification, exchange or substitution of shares provided for elsewhere in
this Section 1), then as a part of such capital reorganization, provision shall
be made so that the holders of the Purchase Option shall thereafter be entitled
to receive upon the exercise of the Purchase Option the number of shares or
other securities or property of the Company to which a holder of the number of
Common Shares issuable upon exercise of the Purchase Option would have been
entitled on such capital reorganization, subject to adjustment in respect of
such shares or securities by the terms thereof.   In any such case, appropriate
adjustment shall be made in the application of the provisions of this Section 1
with respect to the rights of the holders of the Purchase Option after the
capital reorganization such that the provisions of this Section 1 (including
adjustment of the Option Price then in effect and the number of shares issuable
upon exercise of the Purchase Option) shall be applicable after that event and
be as nearly equivalent as practicable.

 
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(h)            Other Adjustment Resulting from Actions Affecting Common
Shares.  In case at any time or from time to time after the date of this
Agreement the Company takes any action in respect of the Common Shares other
than those described in Section 1(e), 1(f) or 1(g), then the Option Price and
the number of Common Shares issuable upon exercise of the Purchase Option shall
be adjusted in such manner as may be equitable under the circumstances.

(i)             Certificate of Adjustment.  In case of an adjustment or
readjustment of the Option Price or the number of Common Shares or other
securities issuable upon exercise of the Purchase Option, the Company, at its
expense, shall compute such adjustment or readjustment in accordance with the
provisions hereof and prepare a certificate showing such adjustment or
readjustment, and shall mail such certificate, by first class mail, postage
prepaid, to the Investor.  The certificate shall set forth such adjustment or
readjustment, showing in detail the facts upon which such adjustment or
readjustment is based.

(j)             Minimum Adjustment.  Notwithstanding anything herein to the
contrary, no adjustment of the Option Price shall be made pursuant to this
Section 1 in an amount less than $.01 per share, and any such lesser adjustment
shall be carried forward and shall be made at the time and together with the
next subsequent adjustment which together with any adjustments so carried
forward shall amount to $.01 per share or more.

(k)            Notices of Record Date.  Upon (i) any taking by the Company of a
record of the holders of Common Shares for the purpose of determining the
holders thereof who are entitled to receive any dividend or other distribution
(other than the Company’s normal quarterly cash dividend), or (ii) any
Acquisition or other capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company, any merger or
consolidation of the Company with or into any other entity, or any Asset
Transfer, or any voluntary or involuntary dissolution, liquidation or winding up
of the Company, the Company shall mail to the Investor at least ten (10) days
prior to the record date specified therein a notice specifying (A) the date on
which any such record is to be taken for the purpose of such dividend or
distribution and a description of such dividend or distribution, (B) the date on
which any such Acquisition, reorganization, reclassification, transfer,
consolidation, merger, Asset Transfer, dissolution, liquidation or winding up is
expected to become effective, and (C) the date, if any, that is to be fixed as
to when the holders of record of Common Shares (or other securities) shall be
entitled to exchange their Common Shares (or other securities) for securities or
other property deliverable upon such Acquisition, reorganization,
reclassification, transfer, consolidation, merger, Asset Transfer, dissolution,
liquidation or winding up.

 
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(l)             Fractional Shares.  No fractional Common Shares shall be issued
upon exercise of the Purchase Option.  All Common Shares (including fractions
thereof) issuable upon exercise of the Purchase Option shall be aggregated for
purposes of determining whether the conversion would result in the issuance of
any fractional share.  If, after the aforementioned aggregation, the exercise
would result in the issuance of any fractional share, the Company shall, in lieu
of issuing any fractional shares, pay cash equal to the product of such fraction
multiplied by the fair market value per Common Share on the date of the Option
is exercised (as reported by the NYSE or any other national securities exchange
on which the Common Shares are then listed for trading, or if none, the most
recently reported “over the counter” trade price or if none, as determined in
good faith by the Board of Trustees).

(m)           Legend.  The Investor agrees that all certificates or other
instruments representing the Option Shares will bear a legend substantially to
the following effect:

THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED, OR SECURITIES LAWS OF ANY STATE AND MAY
NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION
STATEMENT RELATING THERETO IS IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR
SUCH LAWS.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO TRANSFER AND OTHER
RESTRICTIONS SET FORTH IN AN INVESTOR RIGHTS AND OPTION AGREEMENT, DATED AS OF
AUGUST 4, 2009, COPIES OF WHICH ARE ON FILE WITH THE SECRETARY OF THE COMPANY.

2.              Company Call Option.

(a)            Call Option.  If at any time after August 4, 2011, the closing
price for the Company’s Common Shares on the New York Stock Exchange (“NYSE”)
exceeds $5.00 for twenty (20) consecutive trading days, the Company shall have
the right, exercisable at any time thereafter in accordance with this Section 2,
to call in and cancel the Purchase Option (the “Call Option”) in exchange for
the issuance of Common Shares (the “Call Shares”) with an aggregate value (the
“Call Value”), as of the date of exercise of the Call Option, equal to (i) the
volume weighted average price (the “VWAP”) per Common Share for the twenty
trading days prior to the exercise of the Call Option, less (ii) the then
current Option Price per share, multiplied by (iii) the number of Common Shares
remaining under the Purchase Option (the “Call Price”).  For example, if (i) the
VWAP per Common Share were $6.00, and (ii) the then current Option Price per
share was $3.00, and (iii) the number of Common Shares remaining under the
Purchase Option was 4,000,000, then (X) the Call Value would be $12,000,000, and
(Y) the total number of Common Shares to be issued in satisfaction of the Call
Option would be 2,000,000 Common Shares.

 
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(b)            Call Option Mechanics.  At any time after the Call Option is
exercisable pursuant to Section 2(a) above, the Company, in accordance with the
terms hereof, may exercise the Call Option, in whole but not in part by
delivering to the Investor written notice of the election to cancel the Purchase
Option (the “Call Notice”), duly executed by the Company, setting forth (1) the
date on which the Call Shares shall be issued (the “Call Date”), which shall be
no later than 30 days after the delivery of such notice, and (2) calculations
showing the satisfaction of the condition to exercise of the Call Option in
Section 2(a), the VWAP contemplated by Section 2(a), the Call Amount and the
Call Shares.

(c)            Issuance of Call Shares.  On the Call Date, the Company shall
issue and cause to be delivered to the Investor a certificate or certificates
(or the electronic equivalent thereof) representing the Call Shares.

(d)            Continuing Right to Exercise.  At any time after the Call Notice
but prior to the Call Date, Investor shall continue to have the right to
exercise the Purchase Option in full in accordance with Section 1 hereof.  Upon
exercise of the Purchase Option, the Option Shares shall be privately issued to
the Investor.

3.              Board of Trustees.  The Investor will be entitled to all of the
rights as set forth under that certain Trustee Designation Agreement dated
August 4, 2009, between the Company and the Investor (the “Trustee Designation
Agreement”), in the form attached hereto as Exhibit B.

4.              Confidentiality.  Each party to this Agreement will hold, and
will cause its respective subsidiaries and their trustees, directors, officers,
employees, agents, consultants and advisors to hold, in strict confidence,
unless disclosure to a regulatory authority is necessary or desirable in
connection with any necessary regulatory approval or unless compelled to
disclose by judicial or administrative process or, in the opinion of its
counsel, by other requirement of law or the applicable requirements of any
regulatory agency or relevant stock exchange, all non-public records, books,
contracts, instruments, computer data and other data and information
(collectively, “Information”) concerning the other Party furnished to it by such
other Party or its representatives pursuant to this Agreement (except to the
extent that such information can be shown to have been (1) previously known by
such Party on a non-confidential basis, (2) in the public domain through no
fault of such Party or (3) later lawfully acquired from other sources by the
Party to which it was furnished), and neither Party shall release or disclose
such Information to any other person, except its auditors, attorneys, financial
advisors, other consultants and advisors and, to the extent permitted above, to
insurance regulatory authorities.

 
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5.              Compliance with U.S. Laws.

(a)            The Investor hereby represents and warrants to the Company that
it: (i) is an “accredited investor” within the meaning of Rule 501 of Regulation
D under the U.S. Securities Act of 1933, as amended (the “Securities Act”); (2)
has sufficient knowledge and experience in business, financial and investment
matters so as to be able to evaluate the risks and merits of its investment in
the Company and it is able financially to bear the risks thereof; (3) has had
access to such information regarding the Company and its affairs as is necessary
to enable it to evaluate the merits and risks of an investment in restricted
securities of the Company and has had a reasonable opportunity to ask questions
and receive answers and documents concerning the Company and its current and
proposed properties, operations, financial condition, business, business plans
and prospects; (4) has not been offered the Purchase Option or any other
securities contemplated herein by any means of general solicitation or
advertising; (5) the Purchase Option and the Option Shares will be acquired by
it for its account for the purpose of investment and not with a view to, or for
resale in connection with, any distribution thereof; (6) the Investor
understands and acknowledges that none of the offer, issuance or sale of the
Purchase Option or the Option Shares has been registered under the Securities
Act in reliance on an exemption from the registration requirements of the
Securities Act; (7) the Investor understands and acknowledges that such
securities may be subject to additional restrictions on transfer under state
and/or federal securities laws.  The Investor acknowledges that such securities
may not be sold or otherwise disposed of except pursuant to an effective
registration statement under the Securities Act and applicable state securities
laws or pursuant to an applicable exemption from the registration requirements
of the Securities Act and such state securities laws, based upon which certain
undertakings have been granted by the Company in accordance with the
Registration Rights Agreement.

(b)            In connection with this Agreement and the Transaction Documents,
the Investor hereby agrees to comply with:  (i) the Securities Act and the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules
and regulations of the Securities and Exchange Commission (the “Commission”)
promulgated under each of the Securities Act and the Exchange Act, including,
without limitation, filing any reports with the Commission pursuant to the
Section 13(d) of the Exchange Act, Regulation 13D under the Exchange Act,
Section 16(a) of the Exchange Act and the rules and regulations of the
Commission promulgated under Section 16(a) of the Exchange Act; (ii) applicable
securities laws of any state, including Blue Sky laws, or any foreign
jurisdiction; (iii) the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, if applicable; (iv) the Internal Revenue Code of 1986, as amended (the
“Code”); and (v) applicable NYSE rules and regulations.

(c)            In connection with this Agreement and the Transaction Documents,
except to he extent otherwise provided herein or therein, the Investor hereby
agrees to comply with Article VII of the Declaration of Trust and to make a
reasonable effort to ensure that any permitted transferee or assignee under this
Agreement agrees in writing for the benefit of the Company to be bound by the
terms of this Section 5(c).

 
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6.              Standstill.

(a)            General Standstill.  The Investor hereby agrees that it shall
not, and shall cause its Affiliates not to, directly or indirectly, unless
specifically authorized in writing in advance by the Board of Trustees, for so
long as Investor owns the 10% Qualifying Ownership Interest or has appointed a
member of the Company’s Board of Trustees:

 
(i)
acquire, agree to acquire, or propose to acquire, in any manner, directly or
indirectly through an Affiliate, “beneficial ownership” (as determined pursuant
to Rule 13d-3 under the Securities Act) or control of:

 
(A)
any securities of the Company or the Operating Partnership (or options, rights
or warrants or other commitments to purchase or securities convertible into (or
exchangeable or redeemable for) Common Shares) as a result of which, after
giving effect to such purchase or acquisitions, Investor and its Affiliates will
Beneficially Own more than 24% of the outstanding Common Shares;

 
(B)
any subsidiary or any assets or properties of the Company or any subsidiary or
division thereof;

 
(ii)
initiate, make or participate in any “solicitation” of “proxies” or become a
“participant” in any “election contest” (as such terms are used in the current
and any future proxy rules of the Commission, but (1) disregarding clause (iv)
of Rule 14a-1(l)(2) under the Exchange Act and (2) including any exempt
solicitation pursuant to Rule 14a-2(b)(1) under the Exchange Act) with respect
to the Company; provided the foregoing shall not be deemed to prohibit (a)
Investor from voting (or casting a written consent solicited by the Company)
regarding its Common Shares in the manner it deems appropriate, or (b)
Investor’s representative on the Board of Trustees from participating in board
deliberations, subject to compliance with the Company’s governing documents;

 
(iii)
call, or in any way encourage or participate in a call for, any special meeting
of shareholders of the Company (or take any action with respect to acting by
written consent of the shareholders of the Company); request, or take any action
to obtain or retain any list of holders of any securities of the Company; or
initiate or propose any shareholder proposal (including, without limitation, any
proposal to amend the Company’s Declaration of Trust or Bylaws) or participate
in or encourage the making of, or solicit shareholders of the Company for the
approval of, one or more shareholder proposals;

 
(iv)
seek to encourage any third person to vote Common Shares or the securities of
the Company in opposition to a recommendation of a majority of the Board of
Trustees, notwithstanding the fact the Investor may vote their shares in such
opposition;

 
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(v)
seek representation on the Board of Trustees or a change in the composition or
size of the Board of Trustees other than as expressly permitted by the Trustee
Designation Agreement;

 
(vi)
form, join or act in concert with any other person with respect to a “group” (as
defined in Section 13(d)(3) of the Exchange Act) relating to the Company other
than a group existing as of the date of this Agreement of Investor, IRSA and the
investors in Investor as of the date hereof;

 
(vii)
assist or encourage any attempt by any other person to do any of the foregoing;

 
(viii)
disclose any intention, plan or arrangement inconsistent with the provisions of
this Section 6; or

 
(ix)
request the Company or any of its trustees, officers, employees or agents to
amend or waive any provisions of this Section 6(a) or Article VII of the Charter
(except as provided pursuant to the Excepted Holder Agreement) or seek to
challenge the legality or effect thereof.

The provisions of this Section 6 are referred to in this Agreement,
collectively, as “Restricted Activities.”  Notwithstanding the foregoing,
nothing in this Section 6 shall prohibit the Investor or their Affiliates from
making a proposal to acquire any Company or Operating Partnership asset or
property for which the Company or the Operating Partnership publicly announces
an intention to sell or for which the Company or the Operating Partnership
actively solicits acquisition proposals from third parties.

(b)            Investment Company Matters.  The Investor shall use its
commercially reasonable best efforts to not be or become an “investment company”
or an entity “controlled” by an “investment company,” as such terms are defined
in the Investment Company Act of 1940, as amended.

7.              Preemptive Rights.

(a)            Sale of New Securities.  As long as the Investor owns the 5%
Qualifying Ownership Interest (before giving effect to any issuances triggering
this Section 7), if at any time after the Closing, the Company at any time or
from time to time makes any public or non-public offering of any equity
securities (including Common Shares or preferred shares, options or debt that is
convertible or exchangeable into equity securities or that include an equity
component, such as an “equity” kicker, including any hybrid security) (any such
security, a “New Security”) for cash (and, for the avoidance of doubt, other
than (1) pursuant to the granting or exercise of employee stock options,
restricted shares or other share incentives pursuant to the Company’s stock
incentive plans or the issuance of stock pursuant to the Company’s employee
stock purchase plan, in each case in the ordinary course of equity compensation
awards, or (2) issuances for the purposes of consideration in acquisition
transactions), the Investor shall be afforded the opportunity to acquire from
the Company for the same price and on the same terms as such securities are
proposed to be offered to others, up to the amount of New Securities in the
aggregate required to enable it to maintain its proportionate Common
Share-equivalent interest in the Company.  The amount of New Securities that the
Investor shall be entitled to purchase in the aggregate shall be determined by
multiplying (x) the total number of such offered shares of New Securities by (y)
a fraction, the numerator of which is the number of Common Shares held by the
Investor, and the denominator of which is the number of Common Shares then
outstanding.

 
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(b)            Notice.  In the event the Company proposes to offer New
Securities, it shall give the Investor written notice of its intention,
describing the price (or range of prices), anticipated amount of securities,
timing and other terms upon which the Company proposes to offer the same, no
later than ten Business Days prior to the commencement of such offer or sale, as
the case may be, or five Business Days prior the commencement of such offer in
the case of an underwritten public offering of Common Shares or Preferred Shares
on an “overnight” or equivalent expedited offering (an “Expedited
Offering”).  The Investor shall have seven (7) Business Days (three (3) Business
Days in the case of an Expedited Offering) from the date of receipt of such a
notice to notify the Company in writing that it intends to exercise such
purchase rights and as to the amount of New Securities the Investor desires to
purchase.  Such notice shall constitute a non-binding indication of interest of
the Investor to purchase the amount of New Securities so specified at the price
and other terms set forth in the Company’s notice to it.  The failure of the
Investor to respond within such seven (7) Business Day period (or three (3)
Business Day period in the case of an Expedited Offering) period shall be deemed
to be a waiver of the Investor’s rights under this Section 7 only with respect
to the offering described in the applicable notice.

(c)            Purchase Mechanism.  If the Investor exercises its gross-up
purchase rights provided in this Section 7, the closing of the purchase of the
New Securities with respect to which such right has been exercised shall take
place (a) in the case of any public offering, simultaneously with the closing of
such offering to other purchasers, or (b) in the case of any private offering,
upon the later to occur of the closing of such offering and thirty (30) calendar
days after the giving of notice of such offering.  Each of the Company and the
Investor agrees to use its commercially reasonable efforts to secure any
regulatory or other consents or shareholder approval, and to comply with any law
or regulation necessary in connection with the offer, sale and purchase of, such
New Securities.

(d)            Failure of Purchase.  In the event the Investor fails to exercise
its gross-up purchase rights provided in this Section 7 within the prescribed
period or, if so exercised, the Investor is unable to consummate such purchase
within the time period specified in Section 7(c) above, the Company shall
thereafter be entitled during the period of ninety (90) days following the
conclusion of the applicable period to sell or enter into an agreement (pursuant
to which the sale of the New Securities covered thereby shall be consummated, if
at all, within thirty (30) days from the date of said agreement) to sell the New
Securities not elected to be purchased pursuant to this Section 7 or that the
Investor is unable to purchase because of such failure to obtain any such
consent or approval, at a price and upon terms no more favorable to the
purchasers of such securities than were specified in the Company’s notice to the
Investor.  Notwithstanding the foregoing, if such sale is subject to the receipt
of any regulatory or other consents, shareholder approval or the expiration of
any waiting period, the time period during which such sale may be consummated
shall be extended until the expiration of five Business Days after all such
approvals or consents have been obtained or waiting periods expired, but in no
event shall such time period exceed 180 days from the date of the applicable
agreement with respect to such sale.  In the event the Company has not sold the
New Securities or entered into an agreement to sell the New Securities within
said 90-day period (or sold and issued New Securities in accordance with the
foregoing within thirty (30) days from the date of said agreement (as such
period may be extended in the manner described above for a period not to exceed
180 days from the date of said agreement), the Company shall not thereafter
offer, issue or sell such New Securities without first offering such securities
to the Investor in the manner provided above.

 
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(e)            Cooperation.  The Company and the Investor shall cooperate in
good faith to facilitate the exercise of the Investor’s rights hereunder,
including securing any required approvals or consents.

8.              Investor Participation.  The Company will afford the Investor
the power to participate in the Company’s financial and operating policy
decisions, to the extent provided in the Transaction Documents or as otherwise
agreed by the Board of Trustees.  Pursuant to and in accordance with the
Transaction Documents, the Company shall furnish the Investor with such
financial and operating data and other information with respect to the business,
finance and properties of the Company as the Company prepares and compiles for
members of its Board of Trustees in the ordinary course.

9.              Termination.  This Agreement, and the respective rights and
obligations of the Parties other than rights and obligations under Section 1,
Section 2, Section 4, Section 5 and Section 10 hereof, shall terminate upon the
earlier of (i) Investor ceasing to own the 5% Qualifying Ownership Interest, and
(ii) the execution of a written agreement of the Parties to terminate this
Agreement.

10.            Miscellaneous.

(a)            Amendment.  No amendment or waiver of any provision of this
Agreement will be effective with respect to any party unless made in writing and
signed by an officer of a duly authorized representative of such party.

(b)            Waivers.  The conditions to each party’s obligations in the
Agreement are for the sole benefit of such party and may be waived by such party
in whole or in part to the extent permitted by applicable law.  No waiver of any
party to this Agreement will be effective unless it is in a writing signed by a
duly authorized officer of the waiving party that makes express reference to the
provision or provisions subject to such waiver.

(c)            Counterparts and Facsimile.  For the convenience of the parties
hereto, this Agreement may be executed in any number of separate counterparts,
each such counterpart being deemed to be an original instrument, and all such
counterparts will together constitute the same agreement.  Executed signature
pages to this Agreement may be delivered by facsimile and such facsimiles will
be deemed as sufficient as if actual signature pages had been delivered.

 
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(d)            Governing Law.  This Agreement will be governed by and construed
in accordance with the laws of the State of New York applicable to contracts
made and to be performed entirely within such State.  The parties hereby
irrevocably and unconditionally consent to submit to the exclusive jurisdiction
of the state and federal courts located in the State of New York for any
actions, suits or proceedings arising out of or relating to this Agreement and
the transactions contemplated hereby.

(e)            IRSA Guarantee.  IRSA is a party to this Agreement solely for
purposes of guaranteeing the obligations of the Investor and shall be liable to
the Company, to the same extent as the Investor, for the obligations of the
Investor hereunder.

(f)             Notices.  All notices or other communications required or
permitted to be given by any party to any other party pursuant to the terms of
this Agreement shall be in writing, unless otherwise specified in this
Agreement, and if sent to the Investor, shall be delivered to Investor at Real
Estate Investment Group L.P., c/o IRSA Inversiones y Representaciones S.A.,
Moreno 877, C1091AAQ, Buenos Aires, Argentina, fax no. +54 (11) 4323-7449,
Attention:  Eduardo S. Elsztain, with copies to and Zang, Bergel & Vines
Abogados, Florida 537, 18th Floor, C1005AAK, Buenos Aires, Argentina, fax no.
+54 (11) 5166-7070, Attention:  Pablo Vergara del Carril; or if sent to the
Company or the Operating Partnership, shall be delivered to Hersha Hospitality
Trust, 510 Walnut Street, 9th Floor, Philadelphia, Pennsylvania 19106 fax no.
(717) 774-7383 Attention:  Ashish R. Parikh, with a copy to Hunton & Williams
LLP, 951 East Byrd Street, Richmond, Virginia 23219, fax no. (804) 788-8218,
Attention:  James S. Seevers, Jr.  Each party to this Agreement may change such
address for notices by sending to the parties to this Agreement written notice
of a new address for such purpose.

(g)            Confidentiality.  For the avoidance of doubt, the confidentiality
agreement, dated as of July 3, 2009, by and between the Company and the Investor
shall continue in full force and effect notwithstanding this Agreement.

(h)            Captions.  The section, paragraph and clause captions herein are
for convenience of reference only, do not constitute part of this Agreement and
will not be deemed to limit or otherwise affect any of the provisions hereof.

(i)             No Third Party Beneficiaries.  Nothing contained in this
Agreement, expressed or implied, is intended to confer upon any person or entity
other than the Parties hereto, any benefit right or remedies.

(j)             Time of Essence.  Time is of the essence in the performance of
each and every term of this Agreement.

(k)            Public Announcements.  Subject to each Party’s disclosure
obligations imposed by law or regulation, each of the parties hereto will
cooperate with each other in the development and distribution of all news
releases and other public information disclosures with respect to this Agreement
and any of the transactions contemplated by this Agreement or the other
Transaction Documents (as defined in the Purchase Agreement), and no Party
hereto will make any such news release or public disclosure without first
consulting with the other Party hereto and receiving its consent (which shall
not be unreasonably withheld or delayed) and each Party shall coordinate with
the other with respect to any such news release or public disclosure.

 
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(l)             Successors, Assigns and Transferees.  This Agreement and the
rights and obligations hereunder shall be binding upon and inure to the benefit
of the Parties and their respective legal representatives, heirs, legatees,
successors, and assigns and any other transferee.

(m)           Assignment.  Except as otherwise provided in this Section 10(m),
this Agreement and the rights and obligations hereunder may not be assigned
without the prior written consent of the Parties hereto and any purported or
attempted assignment or other transfer of rights or obligations under this
Agreement without such consent shall be void and of no force or effect.

 
(i) 
Notwithstanding any provision in this Agreement to the contrary, any time after
the Closing Date and on or before the Expiration Date, the Investor may, in its
sole discretion, assign the Purchase Option in whole or in part to any assignee
that agrees in writing for the benefit of the Company to be bound by the terms
of Sections 1, 2, 4, 5 and 10 of this Agreement, it being expressly understood
that any such assignee will have no rights and benefits under Sections 3, 7 or 8
of this Agreement, and no restrictions pursuant to Section 6 hereof; provided
that such assignment complies with all applicable laws, including but not
limited to, securities laws, rules and regulations, NYSE rules and the Company’s
Declaration of Trust.

 
(ii) 
Notwithstanding any provision in this Agreement to the contrary, in the event
that the Investor is not permitted under applicable law or regulation to
exercise any of its rights to purchase New Securities under Section 7 of this
Agreement, the Investor may, in its sole discretion, assign such rights under
Section 7 to any of its Affiliates that agrees in writing for the benefit of the
Company to be bound by the terms of this Agreement.

(n)            Expenses; Attorney’s Fees.  Each party will be solely responsible
for its fees and expenses in connection with the transactions contemplated
herein, including the fees and expenses of their respective attorneys,
accountants, investment bankers and consultants.  In any action or proceeding
brought to enforce any provision of this Agreement, the successful Party shall
be entitled to recover reasonable attorney’s fees and expenses in addition to
any other available remedy.

(o)            Recapitalization or Exchange Affecting the Company’s Capital
Stock.  The provisions of this Agreement shall apply in accordance with its
terms with respect to all of the shares of beneficial interest of the Company or
any successor thereto (including by merger or consolidation) or that may be
issued in respect of, in exchange for, or in substitution of such shares, as
applicable, and shall be appropriately adjusted for any stock dividends, splits,
reverse splits, combinations, recapitalizations, and the like occurring after
the date hereof.

(p)            Severability.  In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal, or unenforceable in any respect for any reason, the
validity, legality, and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any way
impaired thereby.

 
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(q)            Tax Withholding.  The Company shall be entitled to require
payment in cash or deduction from other compensation payable to the Investor of
any sums required by federal, state, or local tax law to be withheld with
respect to the issuance, vesting, exercise, repurchase, or cancellation of the
Purchase Option or any Option Shares.

(r)             Entire Agreement.  This Agreement (including the Exhibits
hereto) and the Transaction Documents constitute the entire agreement, and
supersede all other prior agreements, understandings, representations and
warranties, both written and oral, between the parties, with respect to the
subject matter hereof.

11.            Definitions.  Capitalized terms used but not defined in this
Agreement or this Section 11 shall have the meanings ascribed to such terms in
the Purchase Agreement.

(a)            “Acquisition” has the meaning ascribed to such term in Section
1(g).

(b)            “Affiliate” means, with respect to any person, any person
directly or indirectly controlling, controlled by or under common control with,
such other person.  For purposes of this definition, “control” (including, with
correlative meanings, the terms “controlled by” and “under common control with”)
when used with respect to any person, means the possession, directly or
indirectly, of the power to cause the direction of management or policies of
such person, whether through the ownership of voting securities by contract or
otherwise.

(c)            “Agreement” has the meaning ascribed such term in the preamble.

(d)            “Asset Transfer” has the meaning ascribed to such term in Section
1(g).

(e)            “Board of Trustees” means the Board of Trustees of the Company.

(f)             “Beneficially Own,” “Beneficially Owned” or “Beneficial
Ownership” means with respect to any securities, having beneficial ownership of
such securities (as determined pursuant to Rule 13d-3 under the Exchange Act.

(g)            “Business Day” means any day except Saturday, Sunday and any day
which shall be a legal holiday or a day on which banking institutions in the
State of New York generally are authorized or required by law or other
governmental actions to close.

(h)            “Call Date” has the meaning ascribed to such term in Section
2(b).

(i)             “Call Notice” has the meaning ascribed to such term in Section
2(b).

(j)             “Call Option” has the meaning ascribed to such term in Section
2(a).

(k)            “Call Price” has the meaning ascribed to such term in Section
2(a).

(l)             “Call Shares” has the meaning ascribed to such term in Section
2(a).

 
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(m)           “Call Value” has the meaning ascribed to such term in Section
2(a).

(n)            “Closing Date” shall be August 4, 2009.

(o)            “Code” has the meaning ascribed to such term in Section 5(b).

(p)            “Commission” has the meaning ascribed to such term in Section
5(a).

(q)            “Common Shares” has the meaning ascribed to such term in the
recitals.

(r)             “Company” has the meaning ascribed to such term in the preamble.

(s)            “Declaration of Trust” means the Amended and Restated Declaration
of Trust of the Company (as amended and supplemented from time to time).

(t)             “Election to Purchase” has the meaning ascribed to such term in
Section 1(b).

(u)            “Elsztain” means Mr. Eduardo S. Elsztain.

(v)            “Exchange Act” has the meaning ascribed to such term in Section
5(b).

(w)           “Expedited Offering” has the meaning ascribed to such term in
Section 7(b).

(x)            “Expiration Date” has the meaning ascribed to such term in
Section 1(a).

(y)            “Information” has the meaning ascribed to such term in Section 4.

(z)            “Investment Letter” has the meaning ascribed to such term in
Section 1(b).

(aa)          “Investor” has the meaning ascribed to such term the preamble.

(bb)         “New Security” has the meaning ascribed to such term in Section
7(a).

(cc)          “NYSE” has the meaning ascribed to such term in Section 2(a).

(dd)          “Operating Partnership” has the meaning ascribed to such term in
the recitals.

(ee)          “Option Price” has the meaning ascribed to such term in Section
1(a).

(ff)            “Option Shares” has the meaning ascribed to such term in Section
1(a).

(gg)          “Party” means any of the parties to this Agreement, as set forth
in the preamble.

(hh)          “Person” has the meaning ascribed to such term in Section 3(a)(9)
of the Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the
Exchange Act.

(ii)            “Primary Shares” has the meaning ascribed to such term in the
recitals.

(jj)            “Purchase Agreement” has the meaning ascribed to such term in
the recitals.

 
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(kk)          “Purchase Option” has the meaning ascribed to such term in Section
1(a).

(ll)            “5% Qualifying Ownership Interest” means Beneficial Ownership by
the Investor or any of its Affiliates of at least 5% of the Common Shares
(excluding solely for purposes of this definition any Common Shares issued after
the date hereof upon redemption of Operating Partnership units held at any time
at or prior to such redemption by trustees or officers of the Company or the
entities they control or of which they Beneficially Own 100% of the outstanding
equity securities).

(mm)        “10% Qualifying Ownership Interest” means Beneficial Ownership by
the Investor or any of its Affiliates of at least 10% of the Common Shares
(excluding solely for purposes of this definition any Common Shares issued after
the date hereof upon redemption of Operating Partnership units held at any time
at or prior to such redemption by trustees or officers of the Company or the
entities they control or of which they Beneficially Own 100% of the outstanding
equity securities).

(nn)          “Securities Act” has the meaning ascribed to such term in Section
5(a).

(oo)          “Subsidiary” means those corporations, banks, savings banks,
associations and other persons of which such person owns or controls 51% or more
of the outstanding equity securities either directly or through an unbroken
chain of entities as to each of which 51% or more of the outstanding equity
securities is owned directly or indirectly by its parent.

(pp)          “Transaction Documents” has the meaning ascribed to such term in
the Purchase Agreement.

(qq)          “Trustee Designation Agreement” means the trustee designation
agreement in the form attached hereto as Exhibit B.

(rr)            “VWAP” has the meaning ascribed to such term in Section 2(a).

[Signature page follows.]

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

 
REAL ESTATE INVESTMENT GROUP L.P.
                   
By:
Tyrus S.A., its sole general partner
             
By:
/s/ Eduardo S. Elsztain    
Name:
   
Title:
                   
IRSA INVERSIONES Y REPRESENTACIONES S.A.
             
By:
/s/ Eduardo S. Elsztain    
Name:
   
Title:
                   
HERSHA HOSPITALITY TRUST
             
By:
/s/ Ashish R. Parikh    
Name: Ashish R. Parikh
   
Title: Chief Financial Officer

 
Investor Rights and Option Agreement Signature Page

 

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