Exhibit 10.3

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT, effective as of January 1, 2015, between SUMMIT HOTEL
PROPERTIES, INC., a Maryland corporation (the “Company”), and PAUL RUIZ (the
“Executive”), recites and provides as follows:

 

W I T N E S S E T H:

 

WHEREAS, the Company desires to employ the Executive to devote substantially all
of the Executive’s business time, attention and efforts to the business of the
Company and to serve as Vice President and Chief Accounting Officer of the
Company; and

 

WHEREAS, the Executive desires to be so employed on the terms and subject to the
conditions hereinafter stated.

 

NOW, THEREFORE, in consideration of the premises and mutual obligations
hereinafter set forth, the parties agree as follows:

 

1.                                      RECITALS.  The above recitals are
incorporated by reference herein and made a part hereof as set forth verbatim.

 

2.                                      EMPLOYMENT.  The Company shall employ
the Executive, and the Executive agrees to be so employed, in the capacity of
the Company’s Vice President and Chief Accounting Officer to serve for the Term
(as hereinafter defined) hereof, subject to earlier termination as hereinafter
provided.

 

3.                                      TERM.  The Initial Term of the
Executive’s employment hereunder (the “Initial Term”) shall commence on
January 1, 2015 (the “Effective Date”), and continuing until May 27, 2016.  If
neither the Company nor the Executive has provided the other with written notice
of an intention to terminate this Agreement at least thirty (30) days before the
end of the Initial Term (or any subsequent renewal period), this Agreement will
automatically renew for a twelve (12) month period.  For purposes of this
Agreement, the word “Term” means the Initial Term and any renewal period
pursuant to the preceding sentence and any extension pursuant to clause (ii) of
the following sentence.  Notwithstanding the preceding sentences (i) this
Agreement may be terminated earlier as provided herein and (ii) if a Control
Change Date (as defined in Section 11 of this Agreement) occurs during the Term,
then the Term shall not end before the first anniversary of the Control Change
Date or the date this Agreement is terminated earlier as provided herein.

 

4.                                      SERVICES.  The Executive shall devote
substantially all of the Executive’s business time, attention and effort to the
Company’s affairs.  The Company further agrees that the Executive may engage in
civic and community activities and endeavors provided that such activities do
not interfere with the performance of the Executive’s duties hereunder.  The
Executive shall have full authority and responsibility for formulating policies
and administering the Company in all respects, subject to the general direction,
approval and control of the Company’s CEO, CFO, and Board of Directors (the
“Board”).

 

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5.                                      COMPENSATION.

 

(a)                                 Base Salary.  During the Term, the Company
shall pay the Executive an annual base salary (as such base is in effect at a
given time “Base Salary”) equal to Two Hundred Sixty Thousand Dollars
($260,000), subject to any increases approved by the Board or its Compensation
Committee (the “Committee”).  Such Base Salary shall be paid in accordance with
the Company’s payroll schedule.  Any increase in Base Salary shall not serve to
limit or reduce any other obligations to the Executive under this Agreement.

 

(b)                                 Annual Bonus.  In addition to the
Executive’s annual Base Salary, for performance in each calendar year during the
Term, the Executive shall have the opportunity to earn an Annual Bonus with
respect to each calendar year.  The Annual Bonus shall be earned and payable to
the extent that predetermined individual and/or corporate goals established by
the Committee are achieved and any other requirements prescribed by the
Committee, at the time the performance goals are established, are satisfied. 
Subject to the satisfaction of any requirements described in the preceding
sentence, the Annual Bonus that will be earned on account of achieving a
“target” level of performance (as established by the Committee), shall not be
less than fifty five percent (55%) of the Executive’s then current Base Salary. 
Any Annual Bonus that is earned pursuant to the preceding sentence shall be paid
in a single lump sum payment no later than March 15 following the calendar year
in which the Annual Bonus is earned, whether or not the Executive is employed by
the Company on such March 15 or any such earlier payment date.

 

6.                                      BENEFITS.  The Company agrees to provide
the Executive with the following benefits:

 

(a)                                 Vacation.  The Executive shall be entitled
each calendar year to a vacation, during which time the Executive’s compensation
shall be paid in full.  The time allotted for vacation shall be an aggregate of
four (4) weeks.  In the year the Executive terminates employment, the Executive
shall be entitled to receive an amount equal to prorated paid vacation based
upon the number of days that the Executive was employed by the Company during
the calendar year of termination.  In the event that the Executive has not taken
all of the vacation time computed on a prorated basis, the Executive shall be
paid, at the Executive’s regular rate of Base Salary, for unused vacation.  In
the event Executive has taken more vacation time than allotted for the year of
termination, there shall be no reduction in compensation otherwise payable
hereunder

 

(b)                                 Employee Benefits.  During the Term, the
Executive and/or the Executive’s family, as the case may be, shall be eligible
to participate in all Company employee benefit plans in which other executive
level employees of the Company and/or the members of their families, as the case
may be, are eligible to participate including, but not limited to, any
retirement, pension, profit-sharing, insurance, or other plans which may now be
in effect or which may hereafter be adopted by the Company.  Regarding life
insurance, the Executive shall have the right to name the beneficiary of such
life insurance policy.

 

(c)                                  Equity Plan Participation.  The Executive
shall be eligible to participate in the Company’s 2011 Equity Incentive Plan and
any subsequent equity incentive

 

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plan established during the Term and shall receive awards, in such amounts and
subject to such terms, as determined by the Committee.

 

7.                                      EXPENSES.  The Company recognizes that
the Executive will have to incur certain out-of-pocket expenses related to the
Executive’s services and the Company’s business, and the Company agrees to
promptly reimburse the Executive for all reasonable expenses necessarily
incurred by the Executive in the performance of the Executive’s duties to the
Company upon presentation of a voucher or documentation indicating the amount
and business purposes of any such expenses.  These expenses include, but are not
limited to, travel, meals and entertainment.  Expenses that are reimbursable to
the Executive under this Section 7 shall be paid to the Executive in accordance
with the Company’s expense reimbursement policy but in no event later than
March 15 following the calendar year in which the expense is incurred, whether
or not the Executive is employed by the Company on such March 15 or any such
earlier reimbursement date.

 

8.                                      TERMINATION.

 

(a)                                 Grounds.  This Agreement shall terminate in
the event of the Executive’s death.  In the case of the Executive’s Disability,
the Company may elect to terminate the Executive’s employment as a result of
such Disability.  The Company also may terminate the Executive’s employment
pursuant to a Termination With Cause or a Termination Without Cause.  Finally,
the Executive may terminate the Executive’s employment with the Company pursuant
to either a Voluntary Termination or a Voluntary Termination for Good Reason. 
For purposes of this Agreement, the terms Disability, Voluntary Termination,
Voluntary Termination for Good Reason, Termination With Cause and Termination
Without Cause are defined in Section 11 of this Agreement.

 

(b)                                 Notice of Termination.  Any termination by
the Company or the Executive (other than upon death) shall be communicated by
Notice of Termination to the Executive or the Company, as applicable.  For
purposes of this Agreement, a “Notice of Termination” means a written notice
which (i) indicates the specific termination provision in this Agreement relied
upon and the specific ground for termination; (ii) sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for such
termination; and (iii) the date of termination in accordance with
Section 8(c) below.

 

(c)                                  Date of Termination.  For the purposes of
this Agreement, “Date of Termination” means (i) if the Company intends to treat
the termination as a termination based upon the Executive’s Disability, the
Executive’s employment with the Company shall terminate effective on the
thirtieth day after the date of the Notice of Termination (which may not be
given before the Executive has been absent from work on account of a physical or
mental illness or physical injury for at least one hundred fifty (150) days)
provided that, before such date, the Executive shall not have returned to the
performance of the Executive’s duties with or without reasonable accommodation;
(ii) if the Executive’s employment is terminated by reason of Death, the Date of
Termination shall be the date of death of the Executive; (iii) if the
Executive’s employment is terminated by reason of Voluntary Termination, the
Date of Termination shall be thirty (30) days from the date of the Notice of
Termination (and the Executive shall be deemed to have terminated employment by
Voluntary Termination if the Executive voluntarily refuses to

 

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provide substantially all the services described in Section 4 hereof for a
period greater than four (4) consecutive weeks, excluding periods in which the
Executive is not performing services on account of vacation in accordance with
Section 6(a) hereof and periods in which the Executive is not performing
services on account of the Executive’s illness or injury or the illness or
injury of a member of the Executive’s immediate family or an approved leave
under the Family and Medical Leave Act, if applicable); in such event, the Date
of Termination shall be the day after the last day of such four-week period;
(iv) if the Company intends to treat the termination as a Termination With
Cause, the Company shall provide the Executive written notice of such grounds
for termination and the Executive shall have, to the extent provided in
Section 11(j), the period specified in Section 11(j) to cure such cause to the
reasonable satisfaction of the Board or to the reasonable satisfaction of the
Board’s Audit Committee, as applicable, failing which, the Date of Termination
shall be the end of the applicable cure period; (v) if the Executive’s
employment is terminated by reason of Voluntary Termination for Good Reason, the
Date of Termination shall be thirty (30) days after the end of the thirty (30)
day cure period or (vi) if the Executive’s employment is terminated by a
Termination Without Cause, the Date of Termination shall be thirty (30) days
from the Notice of Termination.

 

9.                                      COMPENSATION UPON TERMINATION WITH
CAUSE, VOLUNTARY TERMINATION, DEATH OR DISABILITY.  This Section 9 applies in
the event that the Executive’s employment ends upon a Termination With Cause, a
Voluntary Termination, death or Disability or any reason other than a
Termination Without Cause or a Voluntary Termination With Good Reason.  In any
of those events, the Executive (or the Executive’s estate in the event of the
Executive’s death) shall be entitled to receive the Standard Termination
Benefits in addition to the reimbursement of any expenses as provided above. 
The Standard Termination Benefits are the benefits or amounts described in the
following subsections (a) and (b):

 

(a)                                 The Executive shall be entitled to receive
any compensation (including Base Salary and Annual Bonus and accrued but unused
vacation) that is earned prior to the Date of Termination but that remains
unpaid as of the Date of Termination, which shall be paid in a single cash
payment within six (6) days of the Date of Termination.

 

(b)                                 The Executive shall be entitled to receive
any benefits due the Executive under the terms of any employee benefit plan
maintained by the Company and under the terms of any option, restricted stock or
similar equity award or equity-linked award; which benefits shall be paid in
accordance with the terms of the applicable plan and any award agreement between
the Executive and the Company.

 

Except for the Standard Termination Benefits, the Executive shall not be
entitled to receive any compensation after the Date of Termination on account of
a Termination With Cause, a Voluntary Termination, death, Disability or any
reason other than a Termination Without Cause or a Voluntary Termination With
Good Reason.

 

10.                               COMPENSATION UPON TERMINATION WITHOUT CAUSE OR
VOLUNTARY TERMINATION WITH GOOD REASON.  This Section 10 applies in the event
that the Executive’s employment ends upon a Termination Without Cause or a
Voluntary

 

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Termination With Good Reason.  In either of those events but subject to the
provisions of this Agreement, the Executive shall be entitled to receive the
benefits and amounts described in the following subsections (a), (b), (c) and
(d):

 

(a)                                 The Company shall pay or provide the
Standard Termination Benefits as provided in Section 9 except that all
outstanding options, shares of restricted stock and other equity and
equity-linked awards, shall become fully vested and exercisable as of the Date
of Termination and outstanding options, stock appreciation rights and similar
equity and equity-linked awards shall remain exercisable thereafter until their
stated expiration date as if the Executive’s employment had not terminated.

 

(b)                                 The Company shall pay an amount equal to the
Multiple (defined in Section 11 of this Agreement) times the Executive’s Base
Salary at the rate in effect immediately prior to the Date of Termination (or,
in the case of a Voluntary Termination for Good Reason, at the rate in effect
immediately before any reduction in Base Salary that constitutes Good Reason for
resignation), such amount to be paid in accordance with Section 10(g).

 

(c)                                  The Company shall pay an amount equal to
the Multiple (defined in Section 11 of this Agreement) times the Executive’s
“target” Annual Bonus under Section 5(c) for the calendar year that includes the
Date of Termination.  If the “target” Annual Bonus for such year has not been
established by the Committee before the Date of Termination, then the amount
payable under this Section 10(c) shall be the Multiple (defined in Section 11 of
this Agreement) times the amount equal to fifty five percent (55%) of the
Executive’s Base Salary at the rate in effect immediately prior to the Date of
Termination (or, in the case of a Voluntary Termination for Good Reason, at the
rate in effect before a reduction in Base Salary that constitutes Good Reason
for resignation), such amount to be paid in accordance with Section 10(g).

 

(d)                                 The Company shall pay an amount equal to the
product of (x) the Annual Bonus earned by the Executive for the calendar year of
the Company ended immediately before the Date of Termination and (y) a fraction,
the numerator of which is the number of days the Executive was employed by the
Company during the fiscal year that includes the Date of Termination and the
denominator of which is 365, such amount to be paid in accordance with
Section 10(g).

 

(e)                                  The Company shall reimburse the Executive
for premiums paid by the Executive for COBRA coverage for the Executive and the
Executive’s eligible dependents.  The Company shall reimburse the Executive for
such premium payments for coverage during the twelve (12) months following the
Date of Termination or until the termination of the right to coverage under
COBRA, whichever occurs first.  Each reimbursement shall be paid within fifteen
(15) days of the Executive’s premium payment or, if later, within fifteen (15)
days after the Executive’s release and waiver of claims becomes effective in
accordance with Section 10(f).

 

(f)                                   No benefits, other than the Standard
Termination Benefits, will be paid or provided to, or on behalf of, the
Executive under this Section 10 unless the Executive has signed and not revoked
a release and waiver of claims in a form reasonably prescribed by the

 

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Company and furnished to the Executive within five (5) days after the Date of
Termination, releasing the Company and its officers, directors and affiliates
from all claims the Executive has or may have against such parties, and such
release and waiver of claims has become binding and irrevocable on or before the
sixtieth (60th) day after the date the Executive’s employment ends upon a
Termination Without Cause or a Voluntary Termination for Good Reason.

 

(g)                                  Subject to the requirements of
Section 10(f) and the provisions of 15(f), the total of the amounts described in
Section 10(b), (c) and (d) (the “Cash Severance”) shall be payable as described
in the applicable provisions of this Section 10(g).

 

(1)                                 If a Control Change Event and a Control
Change Date have not occurred during the two (2) year period preceding the date
of the Executive’s Separation from Service, then the Cash Severance shall be
payable in accordance with Section 10(g)(1)(i) if the Executive is not a
Specified Employee on the date of Executive’s Separation from Service and in
accordance with Section 10(g)(1)(ii) if the Executive is a Specified Employee on
the date of Executive’s Separation from Service.

 

(i)                                     If this Section 10(g)(1)(i) applies,
then the Cash Severance shall be payable in eighteen (18) equal or nearly equal
monthly installments.  The first installment shall be payable on the sixtieth
(60th) day after the Date of Termination or, if later, on the sixtieth (60th)
day after the Executive’s Separation from Service.  The remaining installments
shall be payable on the first day of the month beginning after the date on which
the first installment is payable and on the first day of each month thereafter
until all of the Cash Severance has been paid.

 

(ii)                                  If this Section 10(g)(1)(ii) applies, then
the Cash Severance shall be payable as follows:

 

(x)                                  The lesser of (1) one-sixth of the total
Cash Severance and (2) the maximum amount of the Cash Severance that can be
exempt from Section 409A of the Code pursuant to Treasury Regulation
§1.409A-1(b)(9)(iii) (the lesser of (1) and (2) being the “Exempt Amount”) shall
be payable in six (6) equal or nearly equal monthly installments.  The first
installment shall be payable on the sixtieth (60th) day after the Date of
Termination or, if later, on the sixtieth (60th) day after the Executive’s
Separation from Service.

 

(y)                                  Any balance of the Cash Severance, i.e.,
the amount of the Cash Severance that exceeds the Exempt Amount, shall be
payable in thirty (30) equal or nearly equal monthly installments.  The
installments shall be payable on the first day of the seventh (7th) month
beginning after the date of the Executive’s Separation from Service and on the
first day of each month thereafter until all of the Cash Severance has been
paid.

 

(2)                                 If a Control Change Date and a Control
Change Event have occurred during the two (2) year period ending on the date of
the Executive’s Separation from Service, then the Cash Severance shall be
payable in accordance with Section 10(g)(2)(i) if the Executive is not a
Specified Employee on the date of Executive’s Separation from Service and in
accordance with Section 10(g)(2)(ii) if the Executive is a Specified Employee on
the date of the Executive’s Separation from Service.

 

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(i)                                     If this Section 10(g)(2)(i) applies,
then the Cash Severance shall be payable in a single cash payment on the
sixtieth (60th) day after the Date of Termination or, if later, on the sixtieth
(60th) day after the Executive’s Separation from Service.

 

(ii)                                  If this Section 10(g)(2)(ii) applies, then
the Cash Severance shall be payable as follows:

 

(x)                                  The Exempt Amount shall be payable in a
single cash payment on the sixtieth (60th) day after the Date of Termination or,
if later, on the sixtieth (60th) day after the Executive’s Separation from
Service.

 

(y)                                  Any balance of the Cash Severance, i.e.,
the amount of the Cash Severance that exceeds the Exempt Amount, shall be paid
in a single cash payment on the first day of the seventh (7th) month beginning
after the date of the Executive’s Separation from Service.

 

11.                               DEFINITIONS.  For the purposes of this
Agreement, the following terms shall have the following definitions:

 

(a)                                 “COBRA” means continued group health plan
coverage under Section 4980B of the Code or under similar state law.

 

(b)                                 “Code” means the Internal Revenue Code of
1986, as amended.

 

(c)                                  “Control Change Date” for purposes of this
Agreement, has the same meaning as such term is defined in the Company’s 2011
Equity Incentive Plan.

 

(d)                                 “Control Change Event” means a “change in
control event” as defined under Treasury Regulation §1.409A-3(i)(5).

 

(e)                                  “Disability” means that the Executive is
“disabled” within the meaning of Section 409A(a)(2)(C) of the Code.

 

(f)                                   “Multiple” is “one and one-half (1.5)” if
the Executive’s employment ends upon a Termination Without Cause pursuant to a
Notice of Termination given by the Company before the date of a Control Change
Date and a Control Change Date does not occur within ninety (90) days after the
Date of Termination or if the Executive’s employment ends upon a Voluntary
Termination With Good Reason pursuant to a Notice of Termination given by the
Executive before the date of a Control Change Date.  The Multiple is “two (2.0)”
if the Executive’s employment ends upon a Termination Without Cause on or after
the date of a Control Change Date or within the ninety (90) day period preceding
the date of a Control Change Date or if the Executive’s employment ends upon a
Voluntary Termination With Good Reason on or after the date of a Control Change
Date.

 

(g)                                  “Separation from Service” has the same
meaning as such term is defined under Treasury Regulation §1.409A-1(h).

 

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(h)                                 “Specified Employee” has the same meaning as
such term is defined under Treasury Regulation §1.409A-1(i).

 

(i)                                     “Termination With Cause” means the
termination of the Executive’s employment by act of the Board on account of
(i) the Executive’s failure to perform a material duty or the Executive’s
material breach of an obligation set forth in this Agreement or a breach of a
material and written Company policy other than by reason of mental or physical
illness or injury, (ii) the Executive’s breach of Executive’s fiduciary duties
to the Company, (iii) the Executive’s conduct that is demonstrably and
materially injurious to the Company, monetarily or otherwise; provided that, in
the cases of the foregoing clauses (i)-(iii), that following written notice from
the Board describing any such event, such event is not cured, to the reasonable
satisfaction of the Board, within thirty (30) days after such notice is received
by the Executive, or (iv) the Executive’s conviction of, or plea of guilty or
nolo contendre to, a felony or crime involving moral turpitude or fraud or
dishonesty involving assets of the Company.

 

(j)                                    “Termination Without Cause” means the
termination of the Executive’s employment by act of the Board that does not
constitute a Termination With Cause at a time when the Executive is otherwise
willing and able to continue providing services hereunder.  For the avoidance of
doubt, termination of the Executive’s employment on account of death or
Disability or Voluntary Termination is not a Termination Without Cause.

 

(k)                                 “Voluntary Termination” means the
Executive’s voluntary termination of employment hereunder for any reason other
than a Voluntary Termination for Good Reason.  For purposes of this Section 11,
the term Voluntary Termination does not include a voluntary refusal to perform
services on account of a vacation taken in accordance with Section 6(a) hereof,
the Executive’s failure to perform services on account of the Executive’s
illness or injury or the illness or injury of a member of the Executive’s
immediate family, provided such illness is adequately substantiated at the
reasonable request of the Company, or any other absence from service with the
written consent of the Board.

 

(l)                                     Voluntary Termination for “Good Reason”
means the Executive’s termination of employment hereunder on account of (i) the
Company’s material breach of the terms of this Agreement or a direction from the
Board that the Executive act or refrain from acting which in either case would
be unlawful or contrary to a material and written Company policy, (ii) a
material diminution in the Executive’s duties, functions and responsibilities to
the Company and its affiliates without the Executive’s prior written consent or
the Company preventing the Executive from fulfilling or exercising the
Executive’s material duties, functions and responsibilities to the Company and
its affiliates without the Executive’s prior written consent, (iii) a material
reduction in the Executive’s Base Salary or Annual Bonus opportunity or (iv) a
requirement that the Executive relocate the Executive’s employment more than
fifty (50) miles from the location of the Company’s principal office in Austin,
Texas as of the date of this Agreement, without the prior written consent of the
Executive.  The Executive’s resignation shall not be deemed a “Voluntary
Termination for Good Reason” unless the Executive gives the Board written notice
(delivered within thirty (30) days after the Executive receives notice of the
event, action, etc. that the Executive asserts constitutes Good Reason), the
event, action, etc. that the Executive asserts constitutes Good Reason is not
cured, to the reasonable satisfaction of the

 

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Executive, within thirty (30) days after such notice and the Executive resigns
effective not later than thirty (30) days after the expiration of such cure
period.

 

12.                               CODE SECTION 280G.  The benefits that the
Executive may be entitled to receive under this Agreement and other benefits
that the Executive is entitled to receive under other plans, agreements and
arrangements (which, together with the benefits provided under this Agreement,
are referred to as “Payments”), may constitute Parachute Payments that are
subject to Sections 280G and 4999 of the Code.  As provided in this Section 12,
the Parachute Payments will be reduced if, and only to the extent that, a
reduction will allow the Executive to receive a greater Net After Tax Amount
than the Executive would receive absent a reduction.

 

The Accounting Firm will first determine the amount of any Parachute Payments
that are payable to the Executive.  The Accounting Firm also will determine the
Net After Tax Amount attributable to the Executive’s total Parachute Payments.

 

The Accounting Firm will next determine the largest amount of Payments that may
be made to the Executive without subjecting the Executive to tax under
Section 4999 of the Code (the “Capped Payments”).  Thereafter, the Accounting
Firm will determine the Net After Tax Amount attributable to the Capped
Payments.

 

The Executive will receive the total Parachute Payments or the Capped Payments,
whichever provides the Executive with the higher Net After Tax Amount.  If the
Executive will receive the Capped Payments, the total Parachute Payments will be
adjusted by first reducing the amount of any benefits under this Agreement or
any other plan, agreement or arrangement that are not subject to Section 409A of
the Code (with the source of the reduction to be directed by the Participant)
and then by reducing proportionally the amount of benefits under this Agreement
or any other plan, agreement or arrangement that are subject to Section 409A of
the Code.  The Accounting Firm will notify the Executive and the Company if it
determines that the Parachute Payments must be reduced to the Capped Payments
and will send the Executive and the Company a copy of its detailed calculations
supporting that determination.

 

As a result of the uncertainty in the application of Sections 280G and 4999 of
the Code at the time that the Accounting Firm makes its determinations under
this Section 12, it is possible that amounts will have been paid or distributed
to the Executive that should not have been paid or distributed under this
Section 12 (“Overpayments”), or that additional amounts should be paid or
distributed to the Executive under this Section 12 (“Underpayments”).  If the
Accounting Firm determines, based on either the assertion of a deficiency by the
Internal Revenue Service against either the Company or the Executive, which
assertion the Accounting Firm reasonably believes has a high probability of
success or controlling precedent or substantial authority, that an Overpayment
has been made, the Executive must repay to the Company, without interest;
provided, however, that no loan will be deemed to have been made and no amount
will be payable by the Executive to the Company unless, and then only to the
extent that, the deemed loan and payment would either reduce the amount on which
the Executive is subject to tax under Section 4999 of the Code or generate a
refund of tax imposed under Section 4999 of the Code.  If the Accounting Firm
determines, based upon controlling precedent or substantial authority, that an
Underpayment has occurred, the Accounting Firm will notify the Executive and the
Company

 

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of that determination and the amount of that Underpayment will be paid to the
Executive promptly by the Company.

 

For purposes of this Section 12, the term “Accounting Firm” means the
independent accounting firm engaged by the Company immediately before the
Control Change Date.  For purposes of this Section 12, the term “Net After Tax
Amount” means the amount of any Parachute Payments or Capped Payments, as
applicable, net of taxes imposed under Sections 1, 3101(b) and 4999 of the Code
and any State or local income taxes applicable to the Executive on the date of
payment.  The determination of the Net After Tax Amount shall be made using the
highest combined effective rate imposed by the foregoing taxes on income of the
same character as the Parachute Payments or Capped Payments, as applicable, in
effect on the date of payment.  For purposes of this Section 12, the term
“Parachute Payment” means a payment that is described in Section 280G(b)(2) of
the Code, determined in accordance with Section 280G of the Code and the
Treasury Regulations promulgated or proposed thereunder.

 

13.                               CODE SECTION 409A.  This Agreement and the
amounts payable and other benefits provided under this Agreement are intended to
comply with, or otherwise be exempt from, Section 409A of the Code
(“Section 409A”), after giving effect to the exemptions in Treasury Regulation
section 1.409A-1(b)(3) through (b)(12).  This Agreement shall be administered,
interpreted and construed in a manner consistent with Section 409A.  If any
provision of this Agreement is found not to comply with, or otherwise not be
exempt from, the provisions of Section 409A, it shall be modified and given
effect, in the sole discretion of the Board and without requiring the
Executive’s consent, in such manner as the Board determines to be necessary or
appropriate to comply with, or to effectuate an exemption from, Section 409A;
provided, however, that in exercising its discretion under this Section 13, the
Board shall modify this Agreement in the least restrictive manner necessary and
without reducing any payment or benefit due under this Agreement.  Each payment
under this Agreement shall be treated as a separate identified payment for
purposes of Section 409A.

 

With respect to any reimbursement of expenses of, or any provision of in-kind
benefits to, the Executive, as specified under this Agreement, such
reimbursement of expenses or provision of in-kind benefits shall be subject to
the following limitations:  (i) the expenses eligible for reimbursement or the
amount of in-kind benefits provided in one taxable year shall not affect the
expenses eligible for reimbursement or the amount of in-kind benefits provided
in any other taxable year, except for any medical reimbursement arrangement
providing for the reimbursement of expenses referred to in Section 105(b) of the
Code; (ii) the reimbursement of an eligible expense shall be made as specified
in this Agreement and in no event later than the end of the year after the year
in which such expense was incurred and (iii) the right to reimbursement or
in-kind benefit shall not be subject to liquidation or exchange for another
benefit.

 

If a payment obligation under this Agreement arises on account of a Control
Change Date or the occurrence of a Control Change Date or the Executive’s
termination of employment and such payment obligation constitutes “deferred
compensation” (as defined under Treasury Regulation section 1.409A-1(b)(1),
after giving effect to the exemptions in Treasury Regulation section
1.409A-1(b)(3) through (b)(12)), it shall be payable only if the Control Change
Date constitutes a Control Change Event or after the Executive’s Separation from
Service; provided,

 

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however, that if the Executive is a Specified Employee, any such payment that
are scheduled to be paid within six months after such Separation from Service
shall accrue without interest and shall be paid in a single lump sum on the
first day of the seventh month beginning after the date of the Executive’s
Separation from Service or, if earlier, within fifteen days after the
appointment of the personal representative or executor of the Executive’s estate
following the Executive’s death.

 

14.                               TAX WITHHOLDING.  All payments to be made
under this Agreement shall be reduced by applicable income and employment tax
withholdings.

 

15.                               COVENANTS OF THE EXECUTIVE.

 

(a)                                 General Covenants of the Executive.  The
Executive acknowledges that (i) the principal business of the Company is
acquiring, owning, renovating and developing premium-branded select-service
hotels in the upscale and upper midscale segments of the US lodging industry
(such business, and any and all other businesses that after the date hereof, and
from time to time during the Term, become material with respect to the Company’s
then-overall business, herein being collectively referred to as the “Business”),
(ii) the Company knows of a limited number of persons who have developed the
Business; (iii) the Business is, in part, national in scope; (iv) the
Executive’s work for the Company and its subsidiaries has given and will
continue to give the Executive access to the confidential affairs, proprietary
information and trade secrets of the Company; (v) the covenants and agreements
of the Executive contained in this Section 15 are essential to the business and
goodwill of the Company; and (vi) the Company would not have entered into this
Agreement but for the covenants and agreements set forth in this Section 15.

 

(b)                                 Covenants Against Competition.  The covenant
against competition herein described shall apply during the Executive’s
employment with the Company and its subsidiaries and, if a Control Change Date
has not occurred, following a termination of the Executive’s employment with the
Company and its subsidiaries for any reason until the earlier of the first
anniversary of such termination or a Control Change Date (the “Restriction
Period”).  During the Restriction Period the Executive shall not, directly or
indirectly, own, manage, control or participate in the ownership, management, or
control of, or be employed or engaged by or otherwise affiliated or associated
with, in an executive, senior management, strategic or professional capacity,
whether as an employee, employer, consultant, agent, principal, partner,
stockholder, corporate officer, director or in any other individual or
representative capacity, that is similar to an engagement in an executive,
senior management, strategic or professional capacity although otherwise named
in any business or venture engaged in the Business and that owns at least
twenty-five (25) hotels, at least one of which is located within twenty-five
(25) miles of any hotel acquired, owned, managed, developed or re-developed by
the Company and its subsidiary, or within twenty-five (25) miles of any hotel
the Company is pursuing to acquire, own, manage, develop or re-develop so long
as the pursuit of such began prior to, and remained ongoing at the time of the
termination of the Executive’s employment; provided, however, that,
notwithstanding the foregoing, (i) the Executive may own or participate in the
ownership of any entity which the Executive owned or managed or participated in
the ownership or management of prior to the Effective Date, which ownership,
management or participation has been disclosed to the Company; and (ii) the
Executive may invest in securities of any entity, solely for

 

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investment purposes and without participating in the business thereof, if
(A) such securities are traded on any national securities exchange or the
National Association of Securities Dealers, Inc. Automated Quotation System or
equivalent non-U.S. securities exchange, (B) the Executive is not a controlling
person of, or a member of a group which controls, such entity and (C) the
Executive does not, directly or indirectly, own one percent (1%) or more of any
class of securities of such entity.  Notwithstanding the foregoing, this
Section 15(b) shall not apply after the Executive’s Termination Without Cause or
Voluntary Termination for Good Reason.

 

(c)                                  Confidentiality.  During and after the
Executive’s employment with the Company and its affiliates, except in connection
with the business and affairs of the Company and its affiliates: the Executive
shall keep secret and retain in strictest confidence, and shall not use for the
Executive’s benefit or the benefit of others, all confidential matters relating
to the Business and the business of any of its affiliates and to the Company and
any of its affiliates, learned by the Executive heretofore or hereafter directly
or indirectly from the Company of any of its subsidiaries (or any predecessor of
either) (the “Confidential Company Information”), including, without limitation,
information with respect to the Business and any aspect thereof, profit or loss
figures, and the Company’s or its affiliates’ (or any of their predecessors)
properties, and shall not disclose such Confidential Company Information to
anyone outside of the Company except with the Company’s express written consent
and except for Confidential Company Information which (i) at the time of receipt
or thereafter becomes publicly known through no wrongful act of the Executive;
(ii) is clearly obtainable in the public domain; (iii) was not acquired by the
Executive in connection with the Executive’s employment or affiliation with the
Company; (iv) was not acquired by the Executive from the Company or its
representatives or from a third-party who has an agreement with the Company not
to disclose such information; (v) was legally in the possession of or developed
by the Executive prior to February 14, 2011; or (vi) is required to be disclosed
by rule of law or by order of a court or governmental body or agency.

 

(d)                                 Nonsolicitation.  During the Restriction
Period, the Executive shall not, without the Company’s prior-written consent,
directly or indirectly, (i) knowingly solicit or knowingly encourage to leave
the employment or other service of the Company or any of its affiliates, any
employee employed by the Company on the Date of Termination or knowingly hire
(on behalf of the Executive or any other person or entity) any employee employed
by the Company on the Date of Termination who has left the employment or other
service of the Company or any of its affiliates (or any predecessor of either)
within one (1) year of the termination of such employee’s or independent
contractor’s employment or other service with the Company and its affiliates; or
(ii) whether for the Executive’s own account or for the account of any other
person, firm, corporation or other business organization, intentionally
interfere with the Company’s or any of its affiliates, relationship with, or
endeavor to entice away from the Company or any of its affiliates, any person
who during the Executive’s employment with the Company is or was a customer or
client of the Company or any of its affiliates (or any predecessor of either). 
Notwithstanding the above, nothing shall prevent the Executive from soliciting
loans, investment capital, or the provision of management services from third
parties engaged in the Business if the activities of the Executive facilitated
thereby do not otherwise adversely interfere with the operations of the
Business.

 

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(e)                                  Company Property.  During and after the
Executive’s employment with the Company and its affiliates, all memoranda,
notes, lists, records, property and any other tangible product and documents
(and all copies thereof) made, produced or compiled by the Executive or made
available to the Executive during the Term concerning the Business of the
Company and its affiliates shall be the Company’s property and shall be
delivered to the Company at any time on request.  Notwithstanding the above, the
Executive’s contacts and contact data base shall not be the Company’s property. 
Notwithstanding the above, software, methods and material developed by the
Executive prior to the Term of the Agreement shall not be the Company’s
property.

 

(f)                                   Nondisparagement.  The Executive agrees
that during and after the Executive’s employment with the Company and its
affiliates the Executive will not make any negative comments or otherwise
disparage the Company or its officers, the Board or individual directors,
employees, shareholders or agents.  Similarly, the Company agrees that during
and after the Term, Company officers, executives, members of the Board and
members of management shall not make any negative comments or otherwise
disparage the Executive.  The preceding sentences shall not be violated by
(i) truthful statements in response to legal process, required governmental
testimony or filings, or administrative or arbitral proceedings (including,
without limitation, depositions in connection with such proceedings) or
(ii) communications by the Executive to the Board or an officer of the Company
or by the Board, members of the Board, Company officers, executives or members
of management that are made in the good faith performance of their duties.

 

(g)                                  Rights and Remedies upon Breach.  The
Executive acknowledges and agrees that any breach by the Executive of any of the
provisions of this section 15 (the “Covenants”) would result in irreparable
injury and damage for which money damages, would not provide an adequate
remedy.  Therefore, if the Executive breaches, or threatens to commit a breach
of, any of the Covenants, the Company and its affiliates shall have the right
and remedy to seek to have the Covenants specifically enforced (without posting
bond and without the need to prove damages) by any court having equity
jurisdiction, including, without limitation, the right to an entry against the
Executive of restraining orders and injunctions (preliminary, mandatory,
temporary and permanent) against violations, threatened or actual, and whether
or not then continuing, of such covenants.  This right and remedy shall be in
addition to, and not in lieu of, any other rights and remedies available to the
Company and its affiliates under law or in equity (including, without
limitation, the recovery of damages).  The existence of any claim or cause of
action by the Executive, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement of the Covenants.  The Company
has the right to cease making the payments of any Cash Severance installments
that remains payable under Section 10(g)(1) or other benefits to the Executive
in the event of a material breach of any of the Covenants that, if capable of
cure and not willful, is not cured within thirty (30) days after receipt of
notice thereof from the Company.

 

(h)                                 Severability.  The Executive acknowledges
and agrees that the Executive has had an opportunity to seek advice of counsel
in connection with this Agreement; and that the Covenants are reasonable in
geographical and temporal scope and in all other respects.  If it is determined
that any of the provisions of this Agreement, including, without limitation, any
of the Covenants, or any part thereof, is invalid or unenforceable, the
remainder

 

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of the provisions of this Agreement shall not thereby be affected and shall be
given full affect, without regard to the invalid portions.

 

(i)                                     Duration and Scope of Covenants.  If any
court or other decision maker of competent jurisdiction determines that any of
the Covenants, including, without or any part thereof are unenforceable because
of the duration or geographical scope of such provision, then, after such
determination has become final and unappealable, the duration or scope of such
provision, as the case may be, shall be reduced so that such provision becomes
enforceable and, in its reduced form, such provision shall then be enforceable
and shall be enforced.

 

(j)                                    Enforceability of Restrictive Covenants;
Jurisdictions.  The Company and the Executive intend to and hereby consent to
jurisdiction to enforce the Covenants upon the courts of any jurisdiction within
the geographical scope of the Covenants.  If the courts of any one or more of
such jurisdictions hold the Covenants wholly unenforceable by reason of breadth
of scope or otherwise it is the intention of the Company and the Executive that
such determination not bar or in any way affect the Company’s right, or the
right of any of its affiliates, to the relief provided above in the courts of
any other jurisdiction within the geographical scope of such Covenants, as to
breaches of such Covenants in such other respective jurisdictions, such
Covenants as they relate to each jurisdiction’s being, for this purpose,
severable, diverse and independent covenants, subject, where appropriate, to the
doctrine of res judicata.

 

16.                               INDEMNIFICATION.  In addition to the
indemnification and exculpation provisions contained in the Company’s
organizational documents, the Company will indemnify the Executive in accordance
with the terms of the Executive’s Indemnification Agreement with the Company,
which is attached hereto as Exhibit A.  In addition, the Executive shall be
entitled to coverage under the Company’s directors and officers insurance
policies, which shall be maintained in effect at all times, with minimum limits
established by the Board of Directors in its good faith discretion

 

17.                               EXECUTIVE REPRESENTATIONS AND WARRANTIES.  The
Executive hereby represents and warrants to the Company there are no covenants
or restrictions prohibiting the Executive from entering into this Employment
Agreement or accepting employment with the Company in the capacities stated
herein.  If the Executive is found to be wilfully and knowingly in breach of
this Section 17, the Company shall have the right to pursue a Termination With
Cause for such breach.

 

18.                               NOTICES.  All notices or deliveries authorized
or required pursuant to this Agreement shall be deemed to have been given when
in writing and personally delivered or three (3) days following the date when
deposited in the U.S. mail, certified, return receipt requested, postage
prepaid, addressed to the parties at the following addresses or to such other
addresses as either may designate in writing to the other party:

 

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To the Company:

Summit Hotel Properties, Inc.

 

Attn: Corporate Secretary

 

12600 Hill Country Boulevard

 

Suite R-100

 

Austin, Texas 78738

 

 

To the Executive:

Paul Ruiz

 

 

19.                               ENTIRE AGREEMENT.  This Agreement and the
Indemnification Agreement between the Company and the Executive with the same
date hereof contains the entire understanding between the parties hereto with
respect to the subject matter hereof and shall not be modified in any manner
except by instrument in writing signed, by or on behalf of, the parties hereto. 
This Agreement shall be binding upon and inure to the benefit of the heirs,
successors and assigns of the parties hereto.

 

20.                               ARBITRATION.  Any claim or controversy arising
out of, or relating to, this Agreement or its breach or the Executive’s
employment with the Company, other than a claim or controversy arising under
Section 15, shall be settled by arbitration in Austin, Texas in accordance with
the governing Employment Arbitration Rules and Mediation Procedures of the
American Arbitration Association.  Judgment upon the award rendered may be
entered in any court of competent jurisdiction.  In the event one of the parties
hereto requests an arbitration proceeding under this Agreement, such proceeding
shall commence within 30 days from the date of such request.  The prevailing
party shall be entitled to reasonable attorney’s fees and costs.

 

21.                               APPLICABLE LAW.  This Agreement shall be
governed and construed in accordance with the laws of the State of Texas. 
Except as expressly provided above with respect to the Covenants, WITH RESPECT
TO ANY SUIT, ACTION OR OTHER PROCEEDING ARISING FROM (OR RELATING TO) THIS
EMPLOYMENT AGREEMENT, THE COMPANY AND THE EXECUTIVE HEREBY IRREVOCABLY AGREE TO
THE EXCLUSIVE PERSONAL JURISDICTION AND VENUE OF THE UNITED STATES DISTRICT
COURT FOR THE WESTERN DISTRICT OF TEXAS, AUSTIN DIVISION (AND ANY TEXAS STATE
COURT WITHIN TRAVIS COUNTY, TEXAS).

 

22.                               NO SETOFF.  The Company’s obligation to make
the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by a setoff, counterclaim,
recoupment, defense or other claim, right or action which the Company may have
against the Executive or others.  In no event shall the Executive be obligated
to seek other employment or take other action by way of mitigation of the
amounts payable to the Executive under the provisions of this Agreement.  The
provisions of this Section 20 do not affect or detract from the Company’s rights
under Section 10(h), Section 15 or Section 22.

 

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23.                               ASSIGNMENT.  The Executive acknowledges that
the Executive’s services are unique and personal.  Accordingly, the Executive
may not assign the Executive’s rights or delegate the Executive’s duties or
obligations under this Agreement.  The Executive’s rights and obligations under
this Agreement shall insure to the benefit of and shall be binding upon the
Executive’s successors and assigns.

 

24.                               RECOUPMENT.     The Executive acknowledges and
agrees that any incentive compensation, whether payable in cash or equity (but
excluding amounts that vest or become payable solely on account of continued
employment or service) that is payable under this Agreement or under any other
agreement or any plan or arrangement, is subject to recoupment or repayment if
such action is required under applicable law or the terms of any Company
recoupment or “clawback” policy as in effect on the date that such compensation
or benefit was paid.

 

25.                               HEADINGS.  Headings in this Agreement are for
convenience only and shall not be used to interpret or construe its provisions.

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.

 

 

SUMMIT HOTEL PROPERTIES, INC.

 

 

 

/s/ Christopher Eng

 

By: Christopher Eng 

 

Title: Secretary

 

 

 

 

 

EXECUTIVE

 

 

 

/s/ Paul Ruiz

 

Paul Ruiz

 

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EXHIBIT A

INDEMNIFICATION AGREEMENT

 

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