Exhibit 10.37

Execution Version

REGISTRATION RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT, dated as of April 18, 2011 (as amended,
supplemented or restated from time to time, this “Agreement”), is entered into
by and between MHI Hospitality Corporation, a Maryland corporation (the
“Company”), and Richmond Hill Capital Partners, LP, a Delaware limited
partnership (“RHCP”), and Essex Illiquid, LLC, a Delaware limited liability
company (together with RHCP, the “Investors”).

RECITALS

WHEREAS, pursuant to that certain Securities Purchase Agreement, dated as of the
date hereof, between the Company and the Investors (the “Securities Purchase
Agreement”), the Investors have agreed to purchase from the Company, and the
Company has agreed to sell and issue to the Investors, a total of 25,000 shares
of the Company’s Series A Cumulative Redeemable Preferred Stock;

WHEREAS, as contemplated by the terms of, and as an inducement and condition
precedent to the Investors entering into the Securities Purchase Agreement, the
Company has agreed to issue to the Investors one or more warrants (the
“Warrant”), to purchase, upon the terms set forth therein, a total of 1,900,000
shares of the Company’s common stock, par value $0.01 per share (as further
defined below, “Common Stock”); and

WHEREAS, in connection with and as contemplated by the terms of the Warrant, the
Company desires to grant to the Investors certain registration rights with
respect to the Common Stock issuable upon the exercise of the Warrant.

NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, and for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:

Section 1. Definitions. As used in this Agreement, the following terms have the
following meanings:

“Affiliate” of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. For the
purposes of this definition, the term “control” (including the terms
“controlling” and “controlled”) when used with respect to any Person, means the
possession, directly or indirectly, of the power 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.

“Automatic Shelf Registration Statement” has the meaning set forth in
Section 3(a).

“Board” means the board of directors of the Company.

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

 

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“Common Stock” means the common stock, par value $0.01 per share, of the Company
and any other common equity securities issued by the Company, and any other
shares of stock issued or issuable with respect thereto (whether by way of a
stock dividend or stock split, or in exchange for or upon conversion of such
shares or otherwise in connection with a combination of shares, distribution,
reclassification, recapitalization, merger, consolidation or other corporate
reorganization).

“Demand Notice” has the meaning set forth in Section 2(a).

“Demand Registration” has the meaning set forth in Section 2(a).

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.

“Holders” means the Investor Holders and their Permitted Third-Party
Transferees.

“Holding Period” means the period ending on the 180th day following the date of
this Agreement.

“Investor Holders” means the Investors and their Permitted Affiliate
Transferees.

“Permitted Affiliate Transferee” means any transferee of all or any portion of
the Registrable Securities held by an Investor that is an Affiliate of such
Investor and has agreed in writing for the benefit of the Company to be bound by
the provisions of this Agreement.

“Permitted Third-Party Transferee” means (i) any transferee (other than an
Investor Holder or a Permitted Affiliate Transferee) of all or any portion of
the Registrable Securities held by an Investor Holder or (ii) the subsequent
transferee of all or any portion of the Registrable Securities held by any
Permitted Third-Party Transferee, in each case, that has agreed in writing for
the benefit of the Company to be bound by the provisions of this Agreement.

“Person” means an individual or a corporation, partnership, joint venture,
limited liability company, association, trust, or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.

“Piggyback Registration” has the meaning set forth in Section 4(a).

“Prospectus” means the prospectus or prospectuses (whether preliminary or final)
included in any Registration Statement and relating to Registrable Securities,
as amended or supplemented and including all material incorporated by reference
in such prospectus or prospectuses.

“Registrable Securities” means, with respect to any Holder: (a) any shares of
Common Stock held by such Holder at any time or issuable upon conversion,
exercise or exchange of any securities (including, without limitation, the
Warrant) held by such Holder at any time; and (b) any other securities issued or
issuable with respect to any shares described in

 

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clause (a) above by way of a stock dividend or stock split or in connection with
a combination of shares, distribution, reclassification, recapitalization,
merger, consolidation or other corporate reorganization (it being understood
that for purposes of this Agreement, a Person shall be deemed to be a Holder of
Registrable Securities whenever such Person has the right to then acquire or
obtain from the Company any Registrable Securities, whether or not such
acquisition has actually been effected).

As to any particular securities constituting Registrable Securities, such
securities shall cease to be Registrable Securities when: (i) a Registration
Statement with respect to the sale of such securities has become effective under
the Securities Act and such securities have been disposed of pursuant to such
Registration Statement; (ii) such securities have been sold to the public
pursuant to and in compliance with all applicable conditions of Rule 144;
(iii) such securities may be sold to the public in a single transaction pursuant
to and in compliance with all applicable conditions of Rule 144; (iv) such
securities otherwise have been transferred, the Company has delivered to the
transferee a new certificate or other evidence of ownership for such securities
not bearing a Securities Act restricted security legend and such securities may
be resold or otherwise transferred by such transferee without subsequent
registration under the Securities Act; or (v) such securities have ceased to be
outstanding.

“Registration Statement” means any registration statement of the Company filed
or to be filed with the Commission pursuant to the Securities Act which covers
any of the Registrable Securities pursuant to the provisions of this Agreement,
including any Prospectus or free writing Prospectus, amendments and supplements
to such registration statement, including post-effective amendments, all
exhibits and all documents or materials incorporated by reference in such
registration statement.

“Rule 144” means Rule 144 promulgated under the Securities Act, as amended from
time to time, or any similar successor rule thereto that may be promulgated by
the Commission.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

“Selling Expenses” means all underwriting discounts, selling commissions and
stock transfer taxes applicable to the sale of Registrable Securities, and fees
and disbursements of counsel for any Holder of Registrable Securities, except
for the reasonable fees and disbursements of counsel for the Holders of
Registrable Securities required to be paid by the Company pursuant to Section 7.

“Shelf Registration Statement” means a Registration Statement filed with the
Commission on Form S-3 (or any successor form or other appropriate form under
the Securities Act) providing for the registration, and the sale on a continuous
or delayed basis, of the Registrable Securities pursuant to Rule 415 under the
Securities Act.

“Shelf Underwritten Offering” has the meaning set forth in Section 3(b).

“Short-Form Registration” has the meaning set forth in Section 3(a).

 

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“WKSI” has the meaning set forth in Section 3(a).

Section 2. Demand Registration.

(a) At any time and from time to time following the last day of the Holding
Period, the Investor Holders may request in writing that the Company effect the
registration under the Securities Act of all or any portion of the Registrable
Securities held by the Investor Holders (each, a “Demand Notice”). Promptly
after its receipt of any Demand Notice (but in no event later than 10 business
days following receipt thereof), the Company shall deliver written notice
thereof to all other Holders and shall use commercially reasonable efforts to
file, as promptly as practicable but in no event later than 45 days after its
receipt of such Demand Notice, a Registration Statement covering all Registrable
Securities that have been requested to be registered (i) in the Demand Notice
and (ii) by any other Holders by written notice to the Company delivered within
10 days after the date on which the Company has given such Holders notice of the
Demand Notice, in accordance with the methods(s) of distribution specified by
the Investor Holders in the Demand Notice. Any registration requested pursuant
to this Section 2(a) or pursuant to Section 3(a) is referred to herein as a
“Demand Registration.”

(b) Subject to Section 3(a), the Company shall not be required to effect more
than two Demand Registrations (other than non-underwritten Short-Form
Registrations pursuant to Section 3) and Shelf Underwritten Offerings in the
aggregate; provided, that a Registration Statement shall not count as a Demand
Registration requested under Section 2(a) unless and until it has become
effective and the Holders requesting such registration are able to register and
sell at least 50% of the Registrable Securities requested to be included in such
registration. The Company shall not be obligated to effect any Demand
Registration if the Registrable Securities to be included in such Registration
Statement do not have an anticipated aggregate public offering price (before any
underwriting discounts and commissions), determined by the Company in good
faith, of at least $1,000,000. The Company shall not be obligated to effect any
Demand Registration during the period starting with the date 60 days prior to
the Company’s good faith estimate of the date of filing of, and ending on the
180th day immediately following the effective date of, any registration
statement pertaining to securities of the Company (other than (i) a registration
effected solely to implement an employee benefit plan or a transaction to which
Rule 145 under the Securities Act is applicable or (ii) a Registration Statement
on Form S-4, S-8 or any successor form thereto or another form not available for
registering the Registrable Securities for sale to the public). The Company may
postpone for up to 180 days the filing or effectiveness of a Registration
Statement for a Demand Registration if the Board determines in its reasonable
good faith judgment that such Demand Registration would (i) materially interfere
with a significant acquisition, corporate reorganization, capital transaction or
other similar transaction involving the Company; (ii) require premature
disclosure of material information that the Company has a bona fide business
purpose for preserving as confidential; or (iii) render the Company unable to
comply with requirements under the Securities Act or Exchange Act; provided,
that in such event the Investor Holders shall be entitled to withdraw the Demand
Notice relating to such Demand Registration and, if such Demand Notice is
withdrawn, such Demand Registration shall not count as one of the permitted
Demand Registrations hereunder and the Company shall pay all registration
expenses in connection with such registration. The Company may delay a Demand
Registration hereunder only once in any period of 12 consecutive months.

 

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(c) If the Investor Holders make a Demand Notice and elect to distribute the
Registrable Securities covered thereby in an underwritten offering, they shall
so advise the Company as a part of the Demand Notice and the Company shall
include such information in its notice to the other Holders. The Investor
Holders shall select the managing underwriter(s) in connection with such
offering, subject to the prior written approval (not to be unreasonably
withheld) by the Company of such managing underwriter(s).

(d) If a Demand Registration involves an underwritten offering and the managing
underwriter advises the Company and the Investor Holders in writing that in its
opinion the number of shares of Common Stock proposed to be included in the
Demand Registration exceeds the number of shares of Common Stock which can be
sold in such underwritten offering and/or the number of shares of Common Stock
proposed to be included in such registration would adversely affect the price
per share of the Registrable Securities proposed to be sold in such underwritten
offering, the Company shall include in such Demand Registration: (i) first, the
number of shares of Common Stock that the Holders propose to sell, allocated pro
rata among the respective Holders thereof on the basis of the number of
Registrable Securities owned by each such Holder; and (ii) second, the number of
shares of Common Stock proposed to be included therein by any other Persons
(including shares of Common Stock to be sold for the account of the Company
and/or other holders of Common Stock), allocated among such Persons in such
manner as they may agree.

(e) The Company shall not include in any Demand Registration that does not
involve an underwritten offering any securities which are not Registrable
Securities without the prior written consent (not to be unreasonably withheld)
of the Investor Holders.

Section 3. Short-Form Registration.

(a) (i) At all times following the last day of the Holding Period, the Company
shall use commercially reasonable efforts to qualify for registration on Form
S-3 or any comparable or successor form (a “Short-Form Registration”) and, if
available to the Company, such Short-Form Registration shall be a Shelf
Registration Statement that shall provide for the offer and sale of Registrable
Securities by the Holders from time to time. At any time and from time to time
following the last day of the Holding Period, the Investor Holders shall be
entitled to up to two non-underwritten Short-Form Registrations per calendar
year, if available to the Company, with respect to the Registrable Securities
held by the Investor Holders in addition to the registration rights provided in
Section 2. The Company shall pay all expenses (subject to and in accordance with
Section 7) in connection with any Short-Form Registration. If any Demand
Registration is proposed to be a Short-Form Registration and an underwritten
offering, if the managing underwriter(s) shall advise the Company and the
Investor Holders that, in its good faith opinion, it is of material importance
to the success of such proposed offering to file a registration statement on
Form S-11 (or any successor or similar registration statement) or to include in
such registration statement information not required to be included in a
Short-Form Registration, then the Company shall file a registration statement on
Form S-11 or supplement the Short-Form Registration as reasonably requested by
such managing underwriter(s). A Short Form Registration that is an underwritten
offering shall count as a “Demand Registration” pursuant to Section 2 for
purposes of calculating how many “Demand Registrations” the Investor Holders
have requested.

 

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(ii) Upon the filing of any Short-Form Registration, the Company shall use
commercially reasonable efforts to keep such Short-Form Registration effective
with the Commission continuously at all times and to re-file such Short-Form
Registration upon its expiration, and to cooperate in any shelf take-down,
whether or not underwritten, by amending or supplementing the Prospectus related
to such Short-Form Registration as may be reasonably requested by the Investor
Holders, or as otherwise required by applicable law or regulation, until such
time as all Registrable Securities that could be sold in such Short-Form
Registration are no longer Registrable Securities.

(iii) To the extent the Company is a well-known seasoned issuer (as defined in
Rule 405 under the Securities Act) (a “WKSI”) at the time any Demand Notice for
a Short-Form Registration is submitted to the Company and such Demand Notice
requests that the Company file a Shelf Registration Statement, the Company shall
file an automatic shelf registration statement (as defined in Rule 405 under the
Securities Act) on Form S-3 (an “Automatic Shelf Registration Statement”) in
accordance with the requirements of the Securities Act and the rules and
regulations of the Commission thereunder, which covers those Registrable
Securities which are requested to be registered. If at any time following the
filing of an Automatic Shelf Registration Statement when the Company is required
to re-evaluate its WKSI status the Company determines that it is not a WKSI, the
Company shall use commercially reasonable efforts to post-effectively amend the
Automatic Shelf Registration Statement to a Shelf Registration Statement on Form
S-3 or file a new Shelf Registration Statement on Form S-3 or, if such form is
not available, Form S-11, have such Shelf Registration Statement declared
effective by the Commission and keep such Registration Statement effective
during the period during which such Short-Form Registration is required to be
kept effective in accordance with Section 3(a)(ii).

(b) Any offering under a Shelf Registration Statement shall be underwritten (a
“Shelf Underwritten Offering”) at the written request of Holders of Registrable
Securities under such Shelf Registration Statement that hold in the aggregate at
least 50% of such Registrable Securities. The Holders of a majority of the
Registrable Securities proposed to be included in such underwritten offering
shall select the managing underwriter(s) in connection with such offering,
subject to the prior written approval (not to be unreasonably withheld) by the
Company of such managing underwriter(s).

(c) If a Shelf Registration is a Shelf Underwritten Offering and the managing
underwriter advises the Company and the Holders of Registrable Securities in
writing that in its opinion the number of Registrable Securities proposed to be
included in such offering exceeds the number of shares of Common Stock which can
be sold in such offering and/or that the number of shares of Common Stock
proposed to be included in any such registration would adversely affect the
price per share of the Common Stock to be sold in such offering, the Company
shall include in such Shelf Registration the number of shares of Common Stock
requested to be included therein by Holders of Registrable Securities, allocated
pro rata among all such Holders on the basis of the number of Registrable
Securities owned by each such holder or in such manner as they may otherwise
agree.

 

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Section 4. Piggyback Registration.

(a) Whenever the Company proposes to register any shares of its Common Stock
under the Securities Act (other than (i) a registration effected solely to
implement an employee benefit plan or a transaction to which Rule 145 of the
Securities Act is applicable or (ii) a Registration Statement on Form S-4, S-8
or any successor form thereto or another form not available for registering the
Registrable Securities for sale to the public), whether for its own account or
for the account of one or more stockholders of the Company and the form of
Registration Statement to be used may be used for any registration of
Registrable Securities (a “Piggyback Registration”), the Company shall give
prompt written notice (in any event no later than 20 days prior to the filing of
such Registration Statement) to the Holders of Registrable Securities of its
intention to effect such a registration and, subject to Sections 4(b) and 4(c),
shall include in such registration all Registrable Securities with respect to
which the Company has received written requests for inclusion from the Holders
of Registrable Securities within 10 days after the Company’s notice has been
given to each such Holder. A Piggyback Registration shall not be considered a
Demand Registration for purposes of this Agreement.

(b) If a Piggyback Registration is initiated as a primary underwritten offering
on behalf of the Company and the managing underwriter advises the Company and
the Holders of Registrable Securities (if any Holders of Registrable Securities
have elected to include Registrable Securities in such Piggyback Registration)
in writing that in its opinion the number of shares of Common Stock proposed to
be included in such registration, including all Registrable Securities and all
other shares of Common Stock proposed to be included in such underwritten
offering, exceeds the number of shares of Common Stock which can be sold in such
offering and/or that the number of shares of Common Stock proposed to be
included in any such registration would adversely affect the price per share of
the Common Stock to be sold in such offering, the Company shall include in such
registration (i) first, the number of shares of Common Stock that the Company
proposes to sell; (ii) second, the number of shares of Common Stock requested to
be included therein by Holders of Registrable Securities, allocated pro rata
among all such Holders on the basis of the number of Registrable Securities
owned by each such holder or in such manner as they may otherwise agree; and
(iii) third, the number of shares of Common Stock requested to be included
therein by holders of Common Stock (other than holders of Registrable
Securities), allocated among such holders in such manner as they may agree.

(c) If a Piggyback Registration is initiated as an underwritten offering on
behalf of a holder of Common Stock other than Registrable Securities, and the
managing underwriter advises the Company in writing that in its opinion the
number of shares of Common Stock proposed to be included in such registration,
including all Registrable Securities and all other shares of Common Stock
proposed to be included in such underwritten offering, exceeds the number of
shares of Common Stock which can be sold in such offering and/or that the number
of shares of Common Stock proposed to be included in any such registration would
adversely affect the price per share of the Common Stock to be sold in such
offering, the Company shall include in such registration (i) first, the number
of shares of Common Stock requested to be included therein by the holder(s)
requesting such registration and by the Holders of Registrable Securities,
allocated pro rata among such holders on the basis of the number of shares of
Common Stock (on a fully diluted, as converted basis) and the number of
Registrable Securities, as applicable, owned by all such holders or in such
manner as they may otherwise agree; and (ii) second, the number of shares of
Common Stock requested to be included therein by other holders of Common Stock,
allocated among such holders in such manner as they may agree.

 

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(d) If any Piggyback Registration is initiated as a primary underwritten
offering on behalf of the Company, the Company shall select the managing
underwriter(s) in connection with such offering.

Section 5. Lock-up Agreement. Each Holder of Registrable Securities agrees that
in connection with any public offering of the Company’s Common Stock or other
equity securities, and upon the request of the managing underwriter in such
offering, such Holder shall not, without the prior written consent of such
managing underwriter, during the period commencing on the effective date of such
registration and ending on the date specified by such managing underwriter (such
period not to exceed 90 days), (a) offer, pledge, sell, contract to sell, grant
any option or contract to purchase, purchase any option or contract to sell,
hedge the beneficial ownership of or otherwise dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into,
exercisable for or exchangeable for shares of Common Stock held immediately
before the effectiveness of the registration statement for such offering, or
(b) enter into any swap or other arrangement that transfers to another, in whole
or in part, any of the economic consequences of ownership of such securities,
whether any such transaction described in clause (a) or (b) above is to be
settled by delivery of Common Stock or such other securities, in cash or
otherwise. The foregoing provisions of this Section 5 shall not apply to sales
of Registrable Securities to be included in such offering pursuant to
Section 2(a), 3(a) or 4(a), and shall be applicable to the Holders of
Registrable Securities only if all officers and directors of the Company and all
stockholders owning more than 10% of the Company’s outstanding Common Stock are
subject to the same restrictions. Each Holder of Registrable Securities agrees
to execute and deliver such other agreements as may be reasonably requested by
the Company or the managing underwriter which are consistent with the foregoing
or which are necessary to give further effect thereto. Notwithstanding anything
to the contrary contained in this Section 5, each Holder of Registrable
Securities shall be released, pro rata, from any lock-up agreement entered into
pursuant to this Section 5 in the event and to the extent that the managing
underwriter or the Company permit any discretionary waiver or termination of the
restrictions of any lock-up agreement pertaining to any officer, director or
holder of greater than 10% of the outstanding Common Stock.

Section 6. Registration Procedures. If and whenever the Holders of Registrable
Securities request that any Registrable Securities be registered pursuant to the
provisions of this Agreement, the Company shall use commercially reasonable
efforts to effect the registration and the sale of such Registrable Securities
in accordance with the intended method of disposition thereof, and pursuant
thereto the Company shall as soon as reasonably practicable:

(a) subject to Sections 2(a) and 3(a), prepare and file with the Commission a
Registration Statement with respect to such Registrable Securities and, if such
Registration Statement is not automatically effective upon filing, use
commercially reasonable efforts to cause such Registration Statement to be
declared effective as promptly as practicable after the filing thereof;

 

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(b) prepare and file with the Commission such amendments, post-effective
amendments and supplements to such Registration Statement and the Prospectus
used in connection therewith as may be necessary to keep such Registration
Statement effective until all of such Registrable Securities have been disposed
of and to comply with the provisions of the Securities Act with respect to the
disposition of such Registrable Securities in accordance with the intended
methods of disposition set forth in such Registration Statement;

(c) at least 10 business days before filing such Registration Statement,
Prospectus or amendments or supplements thereto, furnish to one counsel selected
by Holders of a majority of such Registrable Securities copies of such documents
proposed to be filed, which documents shall be subject to the review, comment
and approval of such counsel;

(d) notify each selling Holder of Registrable Securities, promptly after the
Company receives notice thereof, of the time when such Registration Statement
has been declared effective or a supplement to any Prospectus forming a part of
such Registration Statement has been filed;

(e) furnish to each selling Holder of Registrable Securities such number of
copies of the Prospectus included in such Registration Statement (including each
preliminary Prospectus) and any supplement thereto (in each case including all
exhibits and documents incorporated by reference therein) and such other
documents as such seller may request in order to facilitate the disposition of
the Registrable Securities owned by such seller;

(f) use commercially reasonable efforts to register or qualify such Registrable
Securities under such other securities or “blue sky” laws of such jurisdictions
as any selling Holder requests and do any and all other acts and things which
may be necessary or advisable to enable such Holders to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
Holders; provided, that the Company shall not be required to qualify generally
to do business, subject itself to general taxation or consent to general service
of process in any jurisdiction where it would not otherwise be required to do so
but for this Section 6(f);

(g) promptly notify each selling Holder of such Registrable Securities, at any
time when a Prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
Prospectus included in such Registration Statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such Holder, the Company shall
prepare a supplement or amendment to such Prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such Prospectus
shall not contain an untrue statement of a material fact or omit to state any
fact necessary to make the statements therein not misleading;

(h) make available for inspection by any selling Holder of Registrable
Securities, any underwriter participating in any disposition pursuant to such
Registration Statement and any attorney, accountant or other agent retained by
any such Holder or underwriter all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company’s
officers, directors and employees to supply all information reasonably requested
by any of the foregoing in connection with such Registration Statement;

 

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(i) provide a transfer agent and registrar (which may be the same entity) for
all such Registrable Securities not later than the effective date of such
registration;

(j) use commercially reasonable efforts to cause such Registrable Securities to
be listed on each securities exchange on which the Common Stock is then listed
or, if the Common Stock is not then listed, on a national securities exchange
selected by the Holders of a majority of such Registrable Securities;

(k) in connection with an underwritten offering, enter into such customary
agreements (including underwriting and lock-up agreements in customary form) and
take all such other customary actions as the Holders of such Registrable
Securities or the managing underwriter of such offering reasonably request in
order to expedite or facilitate the disposition of such Registrable Securities
(including, without limitation, making appropriate officers of the Company
available to participate in “road show” and other customary marketing activities
(including one-on-one meetings with prospective purchasers of the Registrable
Securities);

(l) otherwise comply with all applicable rules and regulations of the Commission
and use commercially reasonable efforts to make available to its stockholders an
earnings statement (in a form that satisfies the provisions of Section 11(a) of
the Securities Act and Rule 158 thereunder) no later than 30 days after the end
of the 12-month period beginning with the first day of the Company’s first full
fiscal quarter after the effective date of such Registration Statement, which
earnings statement shall cover said 12-month period, and which requirement will
be deemed to be satisfied if the Company timely files complete and accurate
information on Forms 10-Q, 10-K and 8-K under the Exchange Act and otherwise
complies with Rule 158 under the Securities Act;

(m) furnish to each selling Holder of Registrable Securities and each
underwriter, if any, with (i) a legal opinion of the Company’s outside counsel,
dated the effective date of such Registration Statement (and, if such
registration includes an underwritten public offering, dated the date of the
closing under the underwriting agreement), in form and substance as is
customarily given in opinions of the Company’s counsel to underwriters in
underwritten public offerings; and (ii) a “comfort” letter signed by the
Company’s independent certified public accountants in form and substance as is
customarily given in accountants’ letters to underwriters in underwritten public
offerings;

(n) without limiting Section 6(f) above, use commercially reasonable efforts to
cause such Registrable Securities to be registered with or approved by such
other governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company to enable the Holders of such Registrable
Securities to consummate the disposition of such Registrable Securities in
accordance with their intended method of distribution thereof;

(o) notify the Holders of Registrable Securities promptly of any request by the
Commission for the amending or supplementing of such Registration Statement or
Prospectus or for additional information;

 

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(p) advise the Holders of Registrable Securities, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance of any stop order by
the Commission suspending the effectiveness of such Registration Statement or
the initiation or threatening of any proceeding for such purpose and promptly
use commercially reasonable efforts to prevent the issuance of any stop order or
to obtain its withdrawal at the earliest possible moment if such stop order
should be issued;

(q) if any Registration Statement refers to any Holder by name or otherwise as
the holder of any securities of the Company and if in its sole and exclusive
judgment such Holder is or might be deemed to be an underwriter or a controlling
person of the Company, such Holder shall have the right to require (i) the
insertion therein of language, in form and substance satisfactory to such Holder
and presented to the Company in writing, which in the reasonable judgment of
such Holder and its counsel should be included (including, without limitation,
language to the effect that the holding by such Holder of such securities is not
to be construed as a recommendation by such Holder of the investment quality of
the Company’s securities covered thereby and that such holding does not imply
that such Holder shall assist in meeting any future financial requirements of
the Company), or (ii) in the event that such reference to such Holder by name or
otherwise is not required by the Securities Act or any similar federal statute
then in force, the deletion of the reference to such Holder;

(r) otherwise use commercially reasonable efforts to take all other steps
necessary to effect the registration of such Registrable Securities contemplated
hereby.

Section 7. Expenses. All expenses (other than Selling Expenses) incurred by the
Company in complying with its obligations pursuant to this Agreement and in
connection with the registration and disposition of Registrable Securities,
including, without limitation, all registration and filing fees, underwriting
expenses (other than fees, commissions or discounts), expenses of any audits
incident to or required by any such registration, fees and expenses of complying
with securities and “blue sky” laws, printing expenses, fees and expenses of the
Company’s counsel and accountants and reasonable fees and expenses of one
counsel for the Holders of Registrable Securities participating in such
registration as a group (selected by, in the case of a Demand Registration, the
Investor Holders, and, in the case of all other registrations hereunder, the
Holders of a majority of the Registrable Securities included in the
registration), shall be paid by the Company. All Selling Expenses relating to
Registrable Securities registered pursuant to this Agreement shall be borne and
paid by the Holders of such Registrable Securities, in proportion to the number
of Registrable Securities registered for each such Holder.

Section 8. Indemnification.

(a) The Company shall indemnify and hold harmless, to the fullest extent
permitted by law, each Holder of Registrable Securities, such Holder’s officers,
directors, managers, members, partners, stockholders and Affiliates, each
underwriter, broker or any other Person acting on behalf of such Holder of
Registrable Securities and each other Person, if any, who controls any of the
foregoing Persons within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, against all losses, claims, actions, damages,
liabilities and expenses, joint or several, to which any of the foregoing
Persons may become subject under the Securities Act or otherwise, insofar as
such losses, claims, actions, damages, liabilities or

 

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expenses arise out of or are based upon any untrue or alleged untrue statement
of a material fact contained in any Registration Statement, Prospectus,
preliminary Prospectus, free writing prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation or alleged violation by the Company of the
Securities Act or any other similar federal or state securities laws or any rule
or regulation promulgated thereunder applicable to the Company and relating to
action or inaction required of the Company in connection with any such
registration, qualification or compliance; and shall reimburse such Persons for
any legal or other expenses reasonably incurred by any of them in connection
with investigating or defending any such loss, claim, action, damage or
liability, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such Holder expressly for use
therein or by such Holder’s failure to deliver a copy of the Registration
Statement, Prospectus, free-writing prospectus or any amendments or supplements
thereto (if the same was required by applicable law to be so delivered) after
the Company has furnished such Holder with a sufficient number of copies of the
same prior to any written confirmation of the sale of Registrable Securities.

(b) In connection with any registration in which a Holder of Registrable
Securities is participating, each such Holder shall furnish to the Company in
writing such information and affidavits as the Company reasonably requests for
use in connection with any such Registration Statement or Prospectus and, to the
extent permitted by law, shall indemnify and hold harmless, the Company, each
director of the Company, each officer of the Company who shall sign such
Registration Statement, each underwriter, broker or other Person acting on
behalf of the Holders of Registrable Securities and each Person who controls any
of the foregoing Persons within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act against any losses, claims, actions, damages,
liabilities or expenses resulting from any untrue or alleged untrue statement of
material fact contained in the Registration Statement, Prospectus, preliminary
Prospectus, free writing prospectus (as defined in Rule 405 promulgated under
the Securities Act) or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only to the extent
that such untrue statement or omission is contained in any information or
affidavit so furnished in writing by such Holder; provided, that the obligation
to indemnify shall be several, not joint and several, for each Holder and shall
be limited to the net proceeds (after underwriting fees, commissions or
discounts) actually received by such Holder from the sale of Registrable
Securities pursuant to such Registration Statement.

(c) Promptly after receipt by an indemnified party of notice of the commencement
of any action involving a claim referred to in this Section 8, such indemnified
party shall, if a claim in respect thereof is made against an indemnifying
party, give written notice to the latter of the commencement of such action. The
failure of any indemnified party to notify an indemnifying party of any such
action shall not (unless such failure shall have a material adverse effect on
the indemnifying party) relieve the indemnifying party from any liability in
respect of such action that it may have to such indemnified party hereunder. In
case any such action is brought against an indemnified party, the indemnifying
party shall be entitled to participate in and to assume the defense of the
claims in any such action that are subject or potentially subject to
indemnification hereunder, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably satisfactory to
such

 

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indemnified party, and after written notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be responsible for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof; provided, that if (i) any indemnified party shall have reasonably
concluded that there may be one or more legal or equitable defenses available to
such indemnified party which are additional to or conflict with those available
to the indemnifying party, or that such claim or litigation involves or could
have an effect upon matters beyond the scope of the indemnity provided
hereunder, or (ii) such action seeks an injunction or equitable relief against
any indemnified party or involves actual or alleged criminal activity, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such indemnified party without such indemnified party’s prior
written consent (but, without such consent, shall have the right to participate
therein with counsel of its choice) and such indemnifying party shall reimburse
such indemnified party and any Person controlling such indemnified party for
that portion of the fees and expenses of any counsel retained by the indemnified
party which is reasonably related to the matters covered by the indemnity
provided hereunder. If the indemnifying party is not entitled to, or elects not
to, assume the defense of a claim, it shall not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.

(d) If the indemnification provided for hereunder is held by a court of
competent jurisdiction to be unavailable to an indemnified party with respect to
any loss, claim, damage, liability or action referred to herein, then the
indemnifying party, in lieu of indemnifying such indemnified party hereunder,
shall contribute to the amounts paid or payable by such indemnified party as a
result of such loss, claim, damage, liability or action in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and of the indemnified party on the other in connection with the statements
or omissions which resulted in such loss, claim, damage, liability or action as
well as any other relevant equitable considerations; provided, that the maximum
amount of liability in respect of such contribution shall be limited, in the
case of each Holder of Registrable Securities, to an amount equal to the net
proceeds (after underwriting fees, commissions or discounts) actually received
by such seller from the sale of Registrable Securities effected pursuant to such
registration. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the parties’
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The parties agree that it would not be just
and equitable if contribution pursuant hereto were determined by pro rata
allocation or by any other method or allocation which does not take account of
the equitable considerations referred to herein. No Person guilty or liable of
fraudulent misrepresentation shall be entitled to contribution from any Person.

Section 9. Rule 144 Compliance. With a view to making available to the Holders
of Registrable Securities the benefits of Rule 144 under the Securities Act and
any other rule or regulation of the Commission that may at any time permit a
holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3 (or any successor form), the Company
shall:

(a) make and keep public information available, as those terms are understood
and defined in Rule 144 under the Securities Act, at all times after the date
hereof;

 

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(b) use commercially reasonable efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act, at any time after the Company has become
subject to such reporting requirements; and

(c) furnish to any holder so long as the Holder owns Registrable Securities,
upon request, a written statement by the Company as to its compliance with the
reporting requirements of Rule 144 under the Securities Act and of the
Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so filed
or furnished by the Company as such Holder may reasonably request in connection
with the sale of Registrable Securities without registration.

Section 10. Participation in Underwritten Offerings. No Person may participate
in any underwritten offerings hereunder unless such Person (a) agrees to sell
such Person’s securities on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and
(b) completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements and these registration rights provided for
hereunder; provided, that no Holder of Registrable Securities included in any
underwritten registration shall be required to make any representations or
warranties to the Company or the underwriters (other than representations and
warranties regarding such Holder, such Holder’s ownership of its shares of
Common Stock to be sold in the offering and such Holder’s intended method of
distribution) or to undertake any indemnification obligations to the Company or
the underwriters with respect thereto, except as otherwise provided in
Section 8.

Section 11. Suspension of Use of Registration Statement.

(a) If the Board determines in its good faith judgment that the filing of a
Shelf Registration Statement under Section 3(a) or the use of any related
Prospectus would be materially detrimental to the Company because such action
would require the disclosure of material information the Company has a bona fide
business purpose for preserving as confidential or the disclosure of which would
materially impede the Company’s ability to consummate a significant transaction,
and that the Company is not otherwise required by applicable securities laws or
regulations to disclose, upon written notice of such determination by the
Company to the Holders which shall be signed by the Chief Executive Officer,
President or any Executive Vice President of the Company certifying thereto, the
rights of the Holders to offer, sell or distribute Registrable Securities
pursuant to a Shelf Registration Statement or to require the Company to take
action with respect to the registration or sale of any Registrable Securities
pursuant to a Shelf Registration Statement shall be suspended until the earlier
of (i) the date upon which the Company notifies the Holders in writing that
suspension of such rights for the grounds set forth in this Section 11(a) is no
longer necessary and they may resume use of the

 

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applicable Prospectus and (ii) the date upon which copies of the applicable
supplemented or amended Prospectus is distributed to the Holders; provided, that
the Company shall not be entitled to exercise any such right more than two times
in any 12-month period or less than 30 days from the termination of the prior
suspension period; and, provided further, that such exercise shall not prevent
the Holders from being entitled to at least 180 days of effective registration
with respect to the Shelf Registration Statement in any 365-day period. The
Company agrees to give the notice under subsection (i) above as promptly as
practicable following the date that such suspension of rights is no longer
necessary.

(b) If all reports required to be filed by the Company pursuant to the Exchange
Act have not been filed by the required date without regard to any extension, or
if the consummation of any business combination by the Company had occurred or
is probable for purposes of Rule 3-05 or Article 11 of Regulation S-X
promulgated under the Securities Act or any similar successor rule, upon written
notice thereof by the Company to the Holders, the rights of the Holders to
offer, sell or distribute Registrable Securities pursuant to a Shelf
Registration Statement or to require the Company to take action with respect to
the registration or sale of any Registrable Securities pursuant to a Shelf
Registration Statement shall be suspended until the date on which the Company
has filed such reports or obtained and filed the financial information required
by Rule 3-05 or Article 11 of Regulation S-X to be included or incorporated by
reference, as applicable, in a Shelf Registration Statement, and the Company
shall use its reasonable best efforts to file the required reports or obtain and
file the financial information required to be included or incorporated by
reference, as applicable, as promptly as practicable, and shall notify the
Holders as promptly as practicable when such is no longer required.

Section 12. Preservation of Rights. The Company shall not (a) grant any
registration rights to third parties which are more favorable than or
inconsistent with the rights granted hereunder or (b) enter into any agreement,
take any action, or permit any change to occur, with respect to its securities
that violates or subordinates the rights expressly granted to the Holders of
Registrable Securities in this Agreement.

Section 13. Termination. This Agreement shall terminate and be of no further
force or effect when no Holder holds any Registrable Securities; provided, that
the provisions of Sections 7, 8 and 14 shall survive any such termination.

Section 14. Miscellaneous.

(a) No Inconsistent Agreements. The Company shall not hereafter enter into any
agreement with respect to its securities which is inconsistent with or violates
the rights granted to the Holders of Registrable Securities in this Agreement or
take any action, or permit any change to occur, with respect to its securities
which would adversely affect the ability of any Holder of Registrable Securities
to include such Registrable Securities in a registration undertaken pursuant to
this Agreement.

(b) Notices. All notices, requests, consents, claims, demands, waivers and other
communications hereunder shall be in writing and shall be deemed to have been
given (i) when delivered by hand (with written confirmation of receipt);
(ii) when received by the addressee if sent by a nationally recognized overnight
courier (receipt requested); (iii) on the date sent by

 

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facsimile or e-mail of a PDF document (with confirmation of transmission) if
sent during normal business hours of the recipient, and on the next business day
if sent after normal business hours of the recipient or (d) on the third day
after the date mailed, by certified or registered mail, return receipt
requested, postage prepaid. Such communications must be sent to the respective
parties at the addresses indicated below (or at such other address for a party
as shall be specified in a notice given in accordance with this Section 14(b)).

 

If to the Company:   

410 West Francis Street

Williamsburg, VA 23185

Facsimile: (757) 564-8801

E-mail: drewsims@mhihospitality.com

Attention: Andrew M. Sims, Chief Executive Officer

with a copy to:   

Baker & McKenzie LLP

Facsimile: (202) 416-6955

E-mail: thomas.egan@bakermckenzie.com

Attention: Thomas J. Egan, Jr.

If to any Holder, to such Holder’s address as set forth on its signature page
hereto or in the register of stockholders maintained by the Company.

(c) Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the parties hereto and their respective
successors and assigns. In addition, the provisions of this Agreement which are
for the benefit of Holders shall be for the benefit of and enforceable by any
Permitted Affiliate Transferee and any Permitted Third Party Transferee.
Notwithstanding anything to the contrary in this Agreement, the Company may
assign this Agreement in connection with a merger, reorganization or sale,
transfer or contribution of all or substantially all of the assets or stock of
the Company to any of its subsidiaries or Affiliates, and, upon the consummation
of any such merger, reorganization, sale, transfer or contribution, such
subsidiary or Affiliate shall automatically and without further action assume
all of the obligations and succeed to all the rights of the Company under this
Agreement.

(d) No Third-Party Beneficiaries. Except as set forth in Section 8, nothing in
this Agreement shall confer any rights upon any Person other than the parties
hereto and each such party’s respective heirs, successors and permitted assigns.

(e) Amendment, Modification and Waiver. Except as otherwise provided herein, the
provisions of this Agreement may only be amended, modified, supplemented or
waived with the prior written consent of the Company and the Holders of a
majority of the Registrable Securities. No waiver by any party or parties shall
operate or be construed as a waiver in respect of any failure, breach or default
not expressly identified by such written waiver, whether of a similar or
different character, and whether occurring before or after that waiver. Except
as otherwise set forth in this Agreement, no failure to exercise, or delay in
exercising, any right, remedy, power or privilege arising from this Agreement
shall operate or be construed as a waiver thereof; nor

 

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shall any single or partial exercise of any right, remedy, power or privilege
hereunder preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege.

(f) Severability. If any term or provision of this Agreement is invalid, illegal
or unenforceable in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other term or provision of this Agreement
or invalidate or render unenforceable such term or provision in any other
jurisdiction. Upon such determination that any term or other provision is
invalid, illegal or unenforceable, the parties hereto shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that the
transactions contemplated hereby be consummated as originally contemplated to
the greatest extent possible.

(g) Remedies. Each Holder of Registrable Securities, in addition to being
entitled to exercise all rights granted by law, including recovery of damages,
shall be entitled to specific performance of its rights under this Agreement.
The Company acknowledges that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Agreement and the Company hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate.

(h) Governing Law; Submission to Jurisdiction. This Agreement shall be governed
by and construed in accordance with the internal laws of the State of New York
without giving effect to any choice or conflict of law provision. Any legal
suit, action or proceeding arising out of or based upon this Agreement or the
transactions contemplated hereby may be instituted in the federal courts of the
United States or the courts of the State of New York in each case located in the
city of New York and County of New York, and each party irrevocably submits to
the exclusive jurisdiction of such courts in any such suit, action or
proceeding. Service of process, summons, notice or other document by mail to
such party’s address set forth herein shall be effective service of process for
any suit, action or other proceeding brought in any such court. The parties
irrevocably and unconditionally waive any objection to the laying of venue of
any suit, action or any proceeding in such courts and irrevocably waive and
agree not to plead or claim in any such court that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.

(i) Waiver of Jury Trial. Each party irrevocably and unconditionally waives any
right it may have to a trial by jury in respect of any legal action arising out
of or relating to this Agreement or the transactions contemplated hereby.

(j) Entire Agreement. This Agreement, together with the Warrant and any related
exhibits and schedules thereto, constitutes the sole and entire agreement of the
parties to this Agreement with respect to the subject matter contained herein,
and supersedes all prior and contemporaneous understandings and agreements, both
written and oral, with respect to such subject matter. Notwithstanding the
foregoing, in the event of any conflict between the terms and provisions of this
Agreement and those of the Warrant, the terms and conditions of this Agreement
shall control.

 

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(k) Counterparts. This Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which together shall be deemed to be one
and the same agreement. A signed copy of this Agreement delivered by facsimile,
e-mail or other means of electronic transmission shall be deemed to have the
same legal effect as delivery of an original signed copy of this Agreement.

[SIGNATURE PAGE FOLLOWS]

 

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

 

MHI HOSPITALITY CORPORATION By:  

/s/ David R. Folsom

  Name:   David Folsom   Title:     President and COO RICHMOND HILL CAPITAL
PARTNERS, LP By:  

Richmond Hill Investment Co., LP,

the Investment Manager

By:  

/s/ Ryan P. Taylor

  Name:   Ryan P. Taylor   Title:     Authorized Signatory ESSEX ILLIQUID, LLC
By:  

Essex Equity Capital Management, LLC,

the Investment Manager

By:  

/s/ Ryan P. Taylor

  Name:   Ryan P. Taylor   Title:     Authorized Signatory

 

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