Chief Compliance Officer Employment Agreement

Exhibit 10.29

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (the " Agreement" ), is dated as of the 25th day of May, 2007 between MHI Hospitality Corporation, a Maryland corporation (the " Company" or " Employer" ), and Julia Farr Connolly (the " Executive" ).

RECITALS:

WHEREAS, the Company is in the business of owning and developing hotels (" the Company' s Business" ); and

WHEREAS, the Company seeks to enter into an agreement with Executive to engage her to serve as Vice President and Chief Compliance Officer of the Company on the terms and conditions stated herein; and

WHEREAS, Executive seeks to enter into an agreement to take on such responsibilities under the terms and conditions stated herein; and

WHEREAS, the Company desires to employ the Executive on the terms and conditions set forth herein.

NOW, THEREFORE, on the basis of the foregoing premises and in consideration of the mutual covenants and agreements contained herein, the parties hereto agree as follows:

Section 1. Employment . The Company hereby agrees to employ the Executive and the Executive hereby accepts such employment with the Company, on the terms and subject to the conditions hereinafter set forth. Subject to the terms and conditions contained herein, the Executive shall serve as Vice President and Chief Compliance Officer of the Company and shall have such duties as are typically performed by a chief compliance officer of a corporation of similar size and type as the Company. The Executive shall render her services at the direction of and shall report to the Chief Executive Officer and the Chief Financial Officer of the Company. The Executive agrees to use best efforts to promote and further the business, reputation and good name of the Company. The Executive' s primary place of employment shall be in the Greenbelt, Maryland area, or such other location as determined by the Board of Directors of the Company. If in the best interests of the Company, Executive may work remotely one day each business week; said day being Friday.

Section 2. Commencement Date; Term . Unless terminated pursuant to Section 6 hereof the Executive' s employment hereunder, the employment agreement shall commence on the date first written above (" Commencement Date" ), and shall continue during the period ending on December 31, 2009. Thereafter, the term of the Agreement shall be extended for an additional year, on each anniversary of the Commencement Date, unless either party gives 60 days prior written notice that the term will not be extended (the " Employment Term" ). The Employment Term shall terminate upon any termination of the Executive' s employment pursuant to Section 6.

Section 3. Compensation and Benefits During the Employment Term . The Executive shall be entitled to the following compensation and benefits: (a) Salary . As compensation for the performance of the Executive' s services hereunder, the Company shall pay to the Executive a salary (the " Salary" ) of One Hundred Thirty Seven


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Five Hundred Thousand Dollars ($137,500) per annum. The Salary shall be payable in arrears in approximately equal bi-weekly installments (except that the first and last such bi-weekly installments may be prorated if necessary) on the Company' s regularly scheduled payroll dates, minus such deductions as may be required by law or reasonably requested by the Executive. The Nominating, Corporate Governance and Compensation Committee of the Company' s board of directors (the " Committee" ) shall review Executive' s Salary annually beginning with the 2008 fiscal year in conjunction with its regular review of employee salaries and may increase her Salary as in effect from time to time as recommended by the CEO and approved by the Committee.

(b) Annual Performance Bonus . The Executive shall be eligible to receive, in respect of each calendar year during the Employment Term beginning with 2007, an annual cash performance bonus (the " Annual Performance Bonus" ) in an amount consistent with the bonus program as established by the CEO and approved by the Committee for that calendar year, based upon (other than as noted below) the attainment of quantitative performance goals set forth in a performance plan by January 31 of each year (the " Performance Plan" ). The Annual Performance Bonus shall he paid to the Executive within thirty (30) days following the receipt of the audited results of the Company for the plan year, but in no event later than one hundred eighty (180) days after the close of the plan year. If necessary, the Annual Performance Bonus shall be granted under a performance-based plan that meets the requirements under Section 162(m) of the Internal Revenue Code (the " Code" ).

(c) Stock Options . The Company may grant to Executive stock options, performance shares, performance units, deferred shares or restricted stock from time to time under the terms of a separate agreement, and consistent with the terms of any stock incentive plan that may be created by the Company. (d) Benefits . In addition to the Salary and the Annual Performance Bonus, the Executive shall be eligible to participate in the Company' s health, insurance, retirement, and other benefit plans and programs. The Executive shall also be entitled to three (3) weeks of paid vacation during the Employment term. Additionally, the Executive will be entitled to two (2) weeks paid time for illness and personal leave, and all Company holidays. The Executive shall be entitled to all other benefits in accordance with the Company' s policies in effect from time to time. (e) Directors and Officers Liability Insurance . The Company will, at its expense, provide the Executive with Directors and Officers Liability' Insurance, subject to the provisions governing such insurance and on such terms as the Board may from time to time decide. The Company will indemnify Executive and hold Executive harmless, to the maximum extent permitted by applicable law, against all costs, charges and expenses incurred or sustained by her in connection with any action, suit or proceeding to which she may be made a party by reason of her being an officer, director or employee of the Company or of any subsidiary or affiliate of the Company at any time.

(f) Insurance and Other Related Benefits . Company shall pay for one hundred percent (100%) of all health insurance premiums under a policy covering Executive and her immediate family.

(g) Other Benefits . Executive is entitled to visit the hotels in the Company' s portfolio and utilize same for Executive' s conduct of Company business or for leisure on a space available basis at no cost to Executive.

(h) Retirement . To the extent a retirement or profit sharing plan is created, Executive shall be entitled to participate in said plan pursuant to applicable law.


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(i) No Other Compensation . Except as otherwise expressly provided herein, or in any other written document executed by the Company and the Executive, no other compensation or other consideration shall become due or payable to the Executive on account of the services rendered hereunder. (j) Taxation and Withholding . The compensation and benefits provided for in this Section 3 (as well as the Termination Payments provided for in section 6(g)) shall be reported as income to Executive and subjected to tax withholding as required under applicable Federal, state, and local laws. Section 4. Exclusivity . During the Employment Term, the Executive shall devote her full time to the business of the Company, shall faithfully serve the Company, shall in all respects conform to and comply with the lawful and reasonable directions and instructions given to her by the Senior Management of the Company and the Board. The Executive shall use reasonable efforts to promote and serve the interests of the Company and shall not engage in any other business activity, whether or not such activity shall be engaged in for pecuniary profit, except that the Executive may participate in the activities of professional trade organizations and, engage in personal investing activities, provided that such activities do not interfere in any material respect with the services to be provided by the Executive hereunder and are not in companies that compete with the Company.

Section 5. Reimbursement for Expenses . In addition to, but without duplication of the expenses described in Section 3(f), the Executive is authorized to incur reasonable expenses in the discharge of the services to be performed hereunder, including, without limitation, expenses for travel, entertainment, maintaining professional licenses and certifications, trade association fees, attendance at association meetings and conferences, lodging and similar items in accordance with the Company' s expense reimbursement policy, as the same may be modified by the Company from time to time. The Company shall reimburse the Executive for all such proper expenses upon presentation by the Executive of itemized accounts of such expenditures in accordance with the financial policy of the Company, as in effect from time to time. Section 6. Termination and Default .

(a) Death . The Executive' s employment shall automatically terminate upon her death and upon such event, the Executive' s estate shall be entitled to receive only the Accrued Compensation (as hereinafter defined) pursuant to Section 6(g)(ii) hereof and no other severance compensation.

(b) Disability . If the Executive is unable to perform the duties required of her under this Agreement because of illness, incapacity, or physical or mental disability, the Employment Term shall continue and the Company shall pay all compensation required to be paid to the Executive hereunder, unless the Executive is unable to perform the duties required of her under this Agreement for an aggregate of 60 days (whether or not consecutive) during any 12 month period during the term of this Agreement (a " Disability" ), in which event the Executive' s employment shall terminate. Executive shall be entitled to receive the accrued compensation pursuant to the Company' s group disability policy as it applies to all Company employees and not other severance compensation.

(c) Cause . The Company may terminate the Executive' s employment at any time, with or without Cause. For purposes of this Agreement, " Cause" shall mean the occurrence of any of the following: (i) the Executive' s failure (except where due to a disability contemplated by subsection (b)


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hereof), neglect or refusal to perform her duties hereunder, (ii) any breach of this Agreement by the Executive (or any grossly negligent, willful or intentional act of the Executive) that injures the reputation or business of the Company or its affiliates in any material respect; (iii) material breach by the Executive of her obligations under this Agreement, including, but not limited to, disclosure of confidential Company information; (iv) Executive' s gross negligence in the performance or intentional, material nonperformance (continuing for ten (10) days after receipt of written notice of need to cure) of any of Executive' s material duties and responsibilities hereunder; (v) Executive' s dishonesty, fraud or misconduct with respect to the business or affairs of the Company; (vi) any violation of any of the Company' s policies, including but not limited to, the Business Code of Conduct and the Insider Trading Policy; (vii) the Executive' s indictment of conviction of or pleading of no contest to a felony or any misdemeanor involving fraud; (viii) the commission by the Executive of an act of fraud or embezzlement, or any other act involving the misappropriation of funds or assets; or (ix) chronic alcohol abuse or illegal drug use by Executive. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Senior Management of the Company or the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Company. Cause shall not exist pursuant to clause (i), (ii), (iii) or (iv) of this Section 6(c) unless the Executive has failed to correct the activity alleged to constitute " Cause" within ten (10) days following written notice from the Company of such activity, which notice shall specifically set forth the nature of such activity and the corrective action reasonably sought by the Company. Notwithstanding the foregoing, the termination of the Executive' s employment for Cause shall be pursuant to the action of the CEO taken in conformity with the Bylaws of the Company. In the event of Executive' s termination for Cause as set forth above, Executive shall not be entitled to any severance compensation.

(d) Without Cause . The Company may terminate the Executive' s employment during the Employment Term without Cause at any time by giving written notice to the Executive. A termination of the Executive' s employment without Cause shall mean a termination initiated by the Company for any reason other than Cause or on account of death or Disability. A termination without Cause shall be effective immediately upon notice given by the Company to the Executive, or such later date as may be mutually agreed between the Executive and the Company. Upon a termination of employment with ...