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.

(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.

(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.

(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.

(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.

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 th