Exhibit 10.5A

AMENDMENT NUMBER 2 TO HOTEL

MASTER MANAGEMENT AGREEMENT

THIS AMENDMENT NUMBER 2 (the “Amendment”) is made and entered into as of
January 14, 2008 by and between MHI Hospitality TRS, LLC, a Delaware limited
liability company, as lessee, (hereinafter referred to as “Lessee”) and MHI
Hotels Services LLC, a Virginia limited liability company, as manager
(hereinafter referred to as “Manager”) and amends and supplements that certain
Hotel Master Management Agreement dated December 21, 2004 between Manager and
Lessee, as amended through the date hereof (the “Master Agreement”). Lessee and
Manager are sometimes collectively referred to herein as the “Parties”.

WITNESSETH

WHEREAS, the Parties desire to amend the Master Agreement to modify certain
provisions therein.

NOW THEREFORE, in consideration of the agreements contained herein, and
intending to be legally bound hereby, the Parties agree as follows:

Section 1. Section 8.2(e) of Article VIII is hereby deleted in its entirety and
Sections 8.2(f) and 8.2(g) are redesignated as Sections 8.2(e) and 8.2(f),
respectively.

Section 2. Article VIII of the Agreement is hereby amended by adding the
following after Section 8.2:

8.3 Major Repositionings and Product Improvement Plans.

In the event that Manager is engaged by Lessee to manage, coordinate, plan and
execute a major repositioning or a Product Improvement Plan for a Hotel, Manager
shall be paid a project management fee (herein, the “Project Management Fee”)
equal to five percent (5%) of the total project costs associated with the
implementation of the repositioning or Product Improvement Plan that are under
Manager’s control (the “Project Costs”). The Project Management Fee shall be
payable monthly in arrears based upon the prior calendar month’s total
expenditures for Project Costs. In such case that the Project Costs are budgeted
to exceed five percent (5%) of Gross Revenues of a Hotel for the fiscal year
ended immediately prior to the commencement date of such project (the “5%
Revenue Threshold”), the Project Management Fee shall be reduced to three
percent (3%) of the total Project Costs in excess of the 5% Revenue Threshold.
The Project Management Fee shall be accounted for and documented consistent with
the requirements of Section 11.2 herein. Any onsite or dedicated personnel
required for the direct supervision of the implementation of a renovation
project or Product Improvement Plan will be a direct cost to, and shall be
reimbursed by, the Landlord.

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Section 3. Article XV of the Agreement is hereby amended by adding the following
after Section 15.3:

15.4 Internal Controls.

Manager shall maintain a system of internal accounting controls (“Controls”)
that is sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with Manager’s general or specific authorizations;
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted only in
accordance with Manager’s general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. Manager shall implement and maintain such internal control
structures or procedures as reasonably requested from time to time by Lessee to
facilitate Lessee’s preparation of periodic financial reports. In the event that
Lessee requests that Manager implement or change an internal control structure
or procedure, Manager will have ninety (90) days to implement the control
structure or procedure after Manager’s receipt of such request from Lessee.
Manager shall promptly report to Lessee any significant deficiency or material
weakness in the Controls of which Manager becomes aware. In the event Manager
fails to adopt and maintain Controls (including any Controls requested by
Lessee) and, as a consequence, transactions are not recorded, assets are not
accounted for properly or expenditures are incurred without requisite approvals,
Manager shall be liable to Lessee for the full amount of any lost revenues or
unapproved costs incurred regardless of whether the cause of such failure
constituted negligence, gross negligence or willful misconduct.

Section 15.5. Certification.

Manager shall cause its chief executive officer and such other officers or
employees as may be requested from time to time by Lessee to certify to Lessee
any one or more of the following: (i) the accuracy of any financial data or
reports provided by Manager to Lessee; (ii) the compliance by Manager with the
Controls including, without limitation, any internal control procedures
requested by Lessee; (iii) that Manager has implemented internal control
procedures requested by Lessee and that there are no material deficiencies in
such controls or, if such deficiencies exist, identify the deficiencies, and
(iv) such other matters as may be reasonably requested by Lessee.

 

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Section 15.6. Control Rules.

Without limiting the generality of the foregoing, Manager will provide, or cause
its auditor to provide, Lessee and its internal and external auditors with all
descriptions of Controls, tests of Controls, audit reports and any other
information that Lessee or its auditor deem appropriate or necessary to enable
Lessee and its auditor to fulfill their legal obligations under the Securities
Act of 1933; the Securities Exchange Act of 1934; the Sarbanes Oxley Act of
2002; related rules and regulations of the Securities and Exchange Commission,
including Regulation S-X; the rules, regulations and listing standards of the
American Stock Exchange; the rules, regulations and standards of the Public
Company Accounting Oversight Board; and any other financial control or
disclosure requirement imposed by law on public companies, as such legal
requirements may be amended or modified from time to time (the “Control Rules”).

(a) Manager will assist Lessee to comply with the Control Rules by, without
limitation, (i) documenting Controls; (ii) documenting regular internal
assessments to test whether Controls are operating effectively;
(iii) cooperating with Lessee and its auditors in connection with testing the
effectiveness of such Controls; (iv) advising Lessee in advance of any
significant proposed change in such Controls and procedures; (v) issuing such
interim or annual certifications as Lessee may reasonable request pursuant to
Section 15.5; (vi) implementing the additional or alternative Controls that
Lessee from time to time requires; and (vii) correcting any material weakness or
significant deficiency as defined by the Control Rules or any other deficiency
that would prevent Lessee from complying with the Control Rules.

(b) Lessee and its auditor will further be entitled to conduct audits and tests
of Controls at the hotels and Manager’s offices in order to obtain any
additional evidence of effective internal control that Lessee or its auditor
deem appropriate or necessary. Manager will grant reasonable access by Lessee
and its auditor to employees, facilities, data, records, systems, controls,
processes and procedures in connection with any such audit.

Section 4. Remainder of Master Agreement. Except as set forth in this Amendment,
the provisions of the Master Agreement remain in full force and effect without
change, amendment, modification or waiver.

 

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Section 5. References. From and after the date of this Amendment, all references
to the Master Agreement shall be deemed to be references to the Master Agreement
as amended by this Amendment.

Section 6. Counterparts. This Amendment may be executed in several facsimile or
electronic counterparts, each of which shall be an original and all of which
constitute but one and the same instrument.

Section 7. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia without regard to
Virginia conflict of laws principles.

Section 8. Necessary Authorization. Each Party represents and warrants that it
has the necessary corporate and/or legal authority to enter into this Amendment
and that the individuals executing this Amendment have been duly authorized to
do so and that such execution creates a valid, binding, and legally enforceable
obligation of each Party.

[signatures follow on next page]

 

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IN WITNESS WHEREOF, the Parties have caused this Amendment Agreement Number 2 to
be executed and delivered as of the date first above written.

 

MHI HOSPITALITY TRS, LLC, a Delaware limited liability company By:  

/s/ Andrew M. Sims

Name:   Andrew M. Sims Title:   Manager MHI HOTELS SERVICES LLC, a Virginia
limited liability company By:  

/s/ Kim E. Sims

Name:   Kim E. Sims Title:   President

 

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