exv10w2






Exhibit 10.2




TAX PROTECTION AGREEMENT



THIS TAX PROTECTION AGREEMENT (this “Agreement”) is made and entered into as of February 10, 2011
by and among SUMMIT HOTEL OP, LP, a Delaware limited partnership (the “Partnership”), and THE
SUMMIT GROUP, INC., a South Dakota corporation and Class B member (the “Member”) in Summit Hotel
Properties, LLC, a South Dakota limited liability company (the “Merging Entity”).



WHEREAS, pursuant to that certain Merger Agreement, dated as of August 5, 2010, (the “Merger
Agreement”), the Merging Entity will merge into the Partnership, with the Partnership surviving,
with the Member, along with the other members of the Merging Entity, exchanging its interest in the
Merging Entity for partnership units of limited partnership interest in the Partnership (“Units”);



WHEREAS, it is intended for federal income tax purposes that the Partnership will be treated as a
continuation of the Merging Entity for federal income tax purposes;



WHEREAS, in consideration for the agreement of the Merging Entity to consummate the merger of the
Merging Entity into the Partnership, the parties desire to enter into this Agreement regarding
certain tax matters as set forth herein; and



WHEREAS, the Partnership desires to evidence its agreement regarding amounts that may be payable in
the event of certain actions being taken by the Partnership regarding certain debt obligations of
the Partnership and its subsidiaries.



NOW, THEREFORE, in consideration of the promises and the mutual representations, warranties,
covenants and agreements contained herein and in the Merger Agreement, the parties hereto hereby
agree as follows:




ARTICLE 1

DEFINITIONS



To the extent not otherwise defined herein, capitalized terms used in this Agreement have the
meanings ascribed to them in the Partnership Agreement (as defined below).




          “Bottom Guarantee” has the meaning set forth in Section 2.1.




          “Closing Date” means the date on which the Merger will be effective.




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




          “Consent” means the prior written consent to do the act or thing for which the consent
is required or solicited, which consent may be executed by a duly authorized officer or agent of
the party granting such consent.




          “Deficit Restoration Obligation” means a written obligation by a Protected Partner to
restore part or all of its deficit capital account in the Partnership upon the occurrence






 









 







of certain events (which written obligation may provide for an indemnity in favor of the
general partner of the Partnership).




          “Guaranteed Amount” means the aggregate amount of each Guaranteed Debt that is
guaranteed at any time by Partner Guarantors.




          “Guaranteed Debt” means any loans incurred (or assumed) by the Partnership or any of
its subsidiaries that are guaranteed by Partner Guarantors at any time after the Closing Date
pursuant to Article 2 hereof.




          “Indirect Owner” means, in the case of a Protected Partner that is an entity that is
classified as a partnership, disregarded entity or subchapter S corporation for federal income tax
purposes, any person owning an equity interest in such Protected Partner, and in the case of any
Indirect Owner that itself is an entity that is classified as a partnership, disregarded entity or
subchapter S corporation for federal income tax purposes, any person owning an equity interest in
such entity.




          “Liability Amount” means, for each Protected Partner, the amount set forth next to
such Protected Partner’s name on Schedule 2.1(b) hereto.




          “Nonrecourse Liability” has the meaning set forth in Treasury Regulations Section
1.752-1(a)(2).




          “Partner Guarantors” means those Protected Partners who have guaranteed any portion of
the Guaranteed Debt.




          “Partnership” has the meaning set forth in the Preamble.




          “Partnership Agreement” means the First Amended and Restated Agreement of Limited
Partnership of the Partnership, dated as of
February 14, 2011, as amended, and as the same may be
further amended in accordance with the terms thereof.




          “Protected Partner” means those persons set forth as Protected Partners on Schedule
2.1(a), and any person who (i) acquires Units from a Protected Partner in a transaction in which
gain or loss is not recognized in whole or in part and in which such transferee’s adjusted basis
for federal income tax purposes is determined in whole or in part by reference to the adjusted
basis of the Protected Partner in such Units, (ii) has notified the Partnership of its status as a
Protected Partner and (iii) provides all documentation reasonably requested by the Partnership to
verify such status, but excludes any person that ceases to be a Protected Partner pursuant to this
Agreement.




          “REIT” means Summit Hotel Properties, Inc., a Maryland corporation.




          “Tax Protection Period” means the period commencing on the Closing Date and ending,
with respect to a Protected Partner, at the earlier of such time as (i) such Protected Partner (or
one or more successor Protected Partners) has disposed of 100% of the Units received, directly or
indirectly, in the Merger by such Protected Partner in one or more taxable






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transactions or (ii) the tenth anniversary of the closing of an underwritten initial public
offering of the common stock of the REIT.




          “Units” has the meaning set forth in the Recitals.




ARTICLE 2

ALLOCATION OF LIABILITIES; GUARANTEE AND DEFICIT RESTORATION

OBLIGATION OPPORTUNITY




     2.1 Minimum Liability Allocation. During the Tax Protection Period, the Partnership
will offer to each Protected Partner the opportunity, in the Partnership’s discretion, either (i)
to enter into a “bottom dollar guarantee” of certain liabilities of the Partnership (substantially
in the form set forth in Schedule 2.1(c)) pursuant to which the lender for the guaranteed liability
is required to pursue all other collateral and security for the guaranteed liability (other than
any “bottom dollar guarantees”) prior to seeking to collect on such a guarantee, and the lender
shall have recourse against the guarantee only if, and solely to the extent that, the total amount
recovered by the lender with respect to the guaranteed liability after the lender has exhausted its
remedies is less than the aggregate of the guaranteed amounts with respect to such liability, and
the maximum aggregate liability of each partner for all guaranteed liabilities shall be limited to
the amount actually guaranteed by such partner (a “Bottom Guarantee”) or (ii) to enter into a
Deficit Restoration Obligation, in either case in such amount or amounts so as to cause a special
allocation of partnership liabilities to such Protected Partner for purposes of Section 752 of the
Code in an amount equal to such Protected Partner’s Liability Amount (determined as of the Closing
Date) and to cause a special allocation of partnership liabilities for purposes of Section 465 of
the Code that increases the Protected Partner’s “at risk” amount by an amount equal to such
Protected Partner’s Liability Amount (determined as of the Closing Date).



     2.2. Repayment or Refinancing of Guaranteed Debt. If the Partnership, at any time
during the Tax Protection Period applicable to a Partner Guarantor, repays or refinances all or any
portion of any Guaranteed Debt, the Partnership will use commercially reasonable efforts to ensure
that (i) after taking into account such repayment, each Partner Guarantor would be entitled to
include in its basis for its Units an amount of Guaranteed Debt equal to its Liability Amount, or
(ii) alternatively, the Partnership, not less than thirty (30) days prior to such repayment or
refinancing, offers to the applicable Partner Guarantor the opportunity, in the Partnership’s
discretion, either (A) to enter into a Bottom Guarantee with respect to other indebtedness of the
Partnership, or (B) to enter into a Deficit Restoration Obligation, in either case in an amount
sufficient so that, taking into account such Bottom Guarantee of such other Partnership
indebtedness or such Deficit Restoration Obligation, as applicable, each Partner Guarantor who
makes such Bottom Guarantee or enters into a Deficit Restoration Obligation in the amount specified
by the Partnership would be entitled to include in its adjusted tax basis for its Units debt equal
to the Liability Amount (determined as of the Closing Date) for such Partner Guarantor.



     2.3 Deficit Restoration Obligation. The Partnership will use commercially reasonable
efforts to maintain an amount of indebtedness of the Partnership that would be



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considered “recourse” indebtedness (taking into account all of the facts and circumstances
related to the indebtedness, the Partnership and the general partner) equal to or greater than the
sum of the amounts subject to a Deficit Restoration Obligation of all Protected Partners and other
partners in the Partnership. The Deficit Restoration Obligation shall be conclusively presumed to
cause the Protected Partner to be allocated an amount of liabilities equal to the Deficit
Restoration Obligation amount of such Protected Partner for purposes of Sections 465 and 752 of the
Code, provided that (1) the Partnership maintains an amount of debt that is considered “recourse”
indebtedness (determined for purposes of Section 752 of the Code and taking into account all of the
facts and circumstances related to the indebtedness, the Partnership and the general partner) equal
to the aggregate Deficit Restoration Obligation amounts of all partners of the Partnership and (2)
all other terms and conditions of the Partnership Agreement with respect to such Deficit
Restoration Obligation are met.




ARTICLE 3

REMEDIES FOR BREACH




     3.1 Monetary Damages. In the event that the Partnership breaches its obligations set
forth in Article 2 with respect to a Protected Partner the Protected Partner’s sole right shall be
to receive from the Partnership, and the Partnership shall pay to such Protected Partner as
damages, an amount equal to the aggregate federal, state and local income taxes incurred by the
Protected Partner or an Indirect Owner as a result of the income or gain allocated to, or otherwise
recognized by, such Protected Partner with respect to its Units by reason of such breach. For the
avoidance of doubt, so long as the Partnership provides the opportunity to a Protected Partner to
enter into a Bottom Guarantee or Deficit Restoration Obligation pursuant to the forms attached
hereto or otherwise agreed to by the parties and the Partnership uses commercially reasonable
efforts to maintain outstanding the relevant partnership liabilities in accordance with Article 2,
the Partnership shall have no liability pursuant to this Section 3.1 in the event it is determined
that a Protected Partner has not been specially allocated for purposes of Section 752 of the Code
an amount of partnership liabilities equal to such Protected Partner’s Liability Amount or is not
treated as receiving a special allocation of partnership liabilities for purposes of Section 465 of
the Code that increases such Protected Partner’s “at risk” amount by an amount equal to such
Protected Partner’s Liability Amount. Furthermore, the Partnership shall have no liability
pursuant to this Section 3.1 if the Partnership merges into another entity treated as a partnership
for federal income tax purposes or the Protected Partner accepts an offer to exchange its OP Units
for equity interests in another entity treated as a partnership for federal income tax purposes so
long as, in either case, such successor entity assumes or agrees to assume the Partnership’s
obligations pursuant to this Agreement.



          For purposes of computing the amount of federal, state, and local income taxes required to be
paid by a Protected Partner (or Indirect Owner), (i) any deduction for state income taxes payable
as a result thereof actually allowed in computing federal income taxes shall be taken into account,
and (ii) a Protected Partner’s (or Indirect Owner’s) tax liability shall be computed using the
highest federal, state and local marginal income tax rates that would be applicable to such
Protected Partner’s (or Indirect Owner’s) taxable income (taking into account the character and
type of such income or gain) for the year with respect to which the taxes must be paid, without
regard to any deductions, losses or credits that may be available to such Protected Partner (or
Indirect Owner) that would reduce or offset its actual taxable income or






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actual tax liability if such deductions, losses or credits could be utilized by the Protected
Partner (or Indirect Owner) to offset other income, gain or taxes of the Protected Partner (or
Indirect Owner), either in the current year, in earlier years, or in later years).




     3.2 Process for Determining Damages. If the Partnership has breached or violated any
of the covenants set forth in Article 2 (or a Protected Partner asserts that the Partnership has
breached or violated any of the covenants set forth in Article 2), the Partnership and the
Protected Partner (or Indirect Owner) agree to negotiate in good faith to resolve any disagreements
regarding any such breach or violation and the amount of damages, if any, payable to such Protected
Partner (or Indirect Owner) under Section 3.1. If any such disagreement cannot be resolved
by the Partnership and such Protected Partner (or Indirect Owner) within sixty (60) days after the
receipt of notice from the Partnership of such breach and the amount of income to be recognized by
reason thereof (or, if applicable, receipt by the Partnership of an assertion by a Protected
Partner that the Partnership has breached or violated any of the covenants set forth in Article 2),
the Partnership and the Protected Partner shall jointly retain a nationally recognized independent
public accounting firm (“an Accounting Firm”) to act as an arbitrator to resolve as expeditiously
as possible all points of any such disagreement (including, without limitation, whether a breach of
any of the covenants set forth Article 2 has occurred and, if so, the amount of damages to which
the Protected Partner is entitled as a result thereof, determined as set forth in Section
3.1). All determinations made by the Accounting Firm with respect to the resolution of any
breach or violation of any of the covenants set forth in Article 2 and the amount of damages
payable to the Protected Partner under Section 3.1 shall be final, conclusive and binding
on the Partnership and the Protected Partner. The fees and expenses of any Accounting Firm
incurred in connection with any such determination shall be shared equally by the Partnership and
the Protected Partner, provided that if the amount determined by the Accounting Firm to be owed by
the Partnership to the Protected Partner is more than five percent (5%) higher than the amount
proposed by the Partnership to be owed to such Protected Partner prior to the submission of the
matter to the Accounting Firm, then all of the fees and expenses of any Accounting Firm incurred in
connection with any such determination shall be paid by the Partnership and if the amount
determined by the Accounting Firm to be owed by the Partnership to the Protected Partner is more
than five percent (5%) less than the amount proposed by the Partnership to be owed to such
Protected Partner prior to the submission of the matter to the Accounting Firm, then all of the
fees and expenses of any Accounting Firm incurred in connection with any such determination shall
be paid by the Protected Partner.



     3.3 Required Notices; Time for Payment. In the event that there has been a breach of
Article 2, the Partnership shall provide to each affected Protected Partner notice of the
transaction or event giving rise to such breach not later than at such time as the Partnership
provides to the Protected Partners the IRS Schedule K-1’s to the Partnership’s federal income tax
return. All payments required under this Article 3 to any Protected Partner shall be made to such
Protected Partner on or before April 15 of the year following the year in which the gain
recognition event giving rise to such payment took place; provided that, if the Protected Partner
is required to make estimated tax payments that would include such gain (taking into account all
available safe harbors), the Partnership shall make a payment to the Protected Partner on or before
the due date for such estimated tax payment and such payment from the Partnership shall be in an
amount that corresponds to the amount of the estimated tax being paid by such Protected



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Partner at such time. In the event of a payment required after the date required pursuant to
this Section 3.3, interest shall accrue on the aggregate amount required to be paid from
such date to the date of actual payment at a rate equal to the “prime rate” of interest, as
published in the Wall Street Journal (or if no longer published there, as announced by Citibank,
N.A.) effective as of the date the payment is required to be made.




ARTICLE 4

AMENDMENT OF THIS AGREEMENT; WAIVER OF CERTAIN PROVISIONS;

APPROVAL OF CERTAIN TRANSACTIONS




     4.1 Amendment. This Agreement may not be amended, directly or indirectly (including
by reason of a merger between either the Partnership or the REIT and another entity) except by a
written instrument signed by the Partnership and each of the Protected Partners to be subject to
such amendment, except that the Partnership may amend Schedules 2.1(a) and 2.1(b)
upon a person becoming a Protected Partner as a result of a transfer of Units.



     4.2 Waiver. Notwithstanding the foregoing, upon written request by the Partnership,
each Protected Partner, in its sole discretion, may waive the payment of any damages that are
otherwise payable to such Protected Partner pursuant to Article 3 hereof. Such a waiver shall be
effective only if obtained in writing from the affected Protected Partner.



ARTICLE 5

MISCELLANEOUS




     5.1 Additional Actions and Documents. Each of the parties hereto hereby agrees to
take or cause to be taken such further actions, to execute, deliver, and file or cause to be
executed, delivered and filed such further documents, and will obtain such consents, as may be
necessary or as may be reasonably requested in order to fully effectuate the purposes, terms and
conditions of this Agreement.



     5.2 Assignment. No party hereto shall assign its or his rights or obligations under
this Agreement, in whole or in part, except by operation of law, without the prior written consent
of the other parties hereto, and any such assignment contrary to the terms hereof shall be null and
void and of no force and effect.



     5.3 Successors and Assigns. This Agreement shall be binding upon and shall inure to
the benefit of the Protected Partners and their respective successors and permitted assigns,
whether so expressed or not. This Agreement shall be binding upon the Partnership and any entity
that is a direct or indirect successor, whether by merger, transfer, spin-off or otherwise, to all
or substantially all of the assets of the Partnership (or any prior successor thereto as set forth
in the preceding portion of this sentence), provided that none of the foregoing shall result in the
release of liability of the Partnership hereunder. The Partnership covenants with and for the
benefit of the Protected Partners not to undertake any transfer of all or substantially all of the
assets of either entity (whether by merger, transfer, spin-off or otherwise) unless the transferee
has acknowledged in writing and agreed in writing to be bound by this Agreement, provided that



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the foregoing shall not be deemed to permit any transaction otherwise prohibited by this
Agreement.




     5.4 Modification; Waiver. No failure or delay on the part of any party hereto in
exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise thereof or the exercise of
any other right or power. The rights and remedies of the parties hereunder are cumulative and not
exclusive of any rights or remedies which they would otherwise have. No modification or waiver of
any provision of this Agreement, nor consent to any departure by any party therefrom, shall in any
event be effective unless the same shall be in writing, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No notice to or
demand on any party in any case shall entitle such party to any other or further notice or demand
in similar or other circumstances.



     5.5 Representations and Warranties Regarding Authority; Noncontravention. The
Partnership has the requisite power and authority to enter into this Agreement and to perform its
obligations hereunder. The execution and delivery of this Agreement by the Partnership and the
performance of each of its obligations hereunder have been duly authorized by all necessary
partnership action on the part of the Partnership. This Agreement has been duly executed and
delivered by the Partnership and constitutes a valid and binding obligation of the Partnership,
enforceable against the Partnership in accordance with its terms, except as such enforcement may be
limited by (i) applicable bankruptcy or insolvency laws (or other laws affecting creditors’ rights
generally) or (ii) general principles of equity. The execution and delivery of this Agreement by
the Partnership does not, and the performance of each of its respective obligations hereunder will
not, conflict with, or result in any violation of (i) the Partnership Agreement or (ii) any other
agreement applicable to the Partnership, other than, in the case of clause (ii), any such conflicts
or violations that would not materially adversely affect the performance by the Partnership of its
obligations hereunder.



     5.6 Captions. The Article and Section headings contained in this Agreement are
inserted for convenience of reference only, shall not be deemed to be a part of this Agreement for
any purpose, and shall not in any way define or affect the meaning, construction or scope of any of
the provisions hereof.



     5.7 Notices. All notices and other communications given or made pursuant hereto shall
be in writing, shall be deemed to have been duly given or made as of the date delivered, mailed or
transmitted, and shall be effective upon receipt, if delivered personally, mailed by registered or
certified mail (postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like changes of address)
or sent by electronic transmission to the telecopier number specified below:




	 	(i)	 	if to the Partnership, to:





Summit Hotel OP, LP

2701 South Minnesota Avenue, Suite 6

Sioux Falls, South Dakota 57105





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Attention: Chris Eng, Esq.

Telecopier No. (605) 362-9388






	 	(ii)	 	if to a Protected Partner, to the address on file with the
Partnership.




Each party may designate by notice in writing a new address to which any notice, demand, request or
communication may thereafter be so given, served or sent. Each notice, demand, request, or
communication which shall be hand delivered, sent, mailed, telecopied or telexed in the manner
described above, or which shall be delivered to a telegraph company, shall be deemed sufficiently
given, served, sent, received or delivered for all purposes at such time as it is delivered to the
addressee (with the return receipt, the delivery receipt, or (with respect to a telecopy or telex)
the answerback being deemed conclusive, but not exclusive, evidence of such delivery) or at such
time as delivery is refused by the addressee upon presentation.




     5.8 Counterparts. This Agreement may be executed in two or more counterparts, all of
which shall be considered one and the same agreement and each of which shall be deemed an original.



     5.9 Governing Law. The interpretation and construction of this Agreement, and all
matters relating thereto, shall be governed by the laws of the State of Delaware, without regard to
the choice of law provisions thereof.



     5.10 Consent to Jurisdiction; Enforceability.



          5.10.1 This Agreement and the duties and obligations of the parties hereunder shall be
enforceable against any of the parties in the courts of the State of South Dakota. For such
purpose, each party hereto and the Protected Partners hereby irrevocably submits to the
nonexclusive jurisdiction of such courts and agrees that all claims in respect of this Agreement
may be heard and determined in any of such courts.




          5.10.2 Each party hereto hereby irrevocably agrees that a final judgment of any of the courts
specified above in any action or proceeding relating to this Agreement shall be conclusive and may
be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.




     5.11 Severability. If any part of any provision of this Agreement shall be invalid or
unenforceable in any respect, such part shall be ineffective to the extent of such invalidity or
unenforceability only, without in any way affecting the remaining parts of such provision or the
remaining provisions of this Agreement.



     5.12 Costs of Disputes. Except as otherwise expressly set forth in this Agreement,
the nonprevailing party in any dispute arising hereunder shall bear and pay the costs and expenses
(including, without limitation, reasonable attorneys’ fees and expenses) incurred by the prevailing
party or parties in connection with resolving such dispute.



     5.13 Enforcement by Protected Partners. The Protected Partners are the beneficiaries
of this Agreement and shall be able to enforce this Agreement as if they were parties to this
Agreement.



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     IN WITNESS WHEREOF, the Partnership and the Member have caused this Agreement to be signed by
their respective officers, general partners, or delegates thereunto duly authorized all as of the
date first written above.



	 	 	 	 	 
	 	SUMMIT HOTEL OP, LP,

a Delaware limited partnership

 	 
	 	By:  	Summit Hotel GP, LLC,
 	 
	 	 	a Delaware limited liability company, 	 
	 	 	its General Partner 	 
	 	 	 
	 	By:  	                    Summit Hotel Properties, Inc.,
 	 
	 	 	a Maryland corporation, 	 
	 	 	its sole member 	 
	 	 	 
	 	By:  	                                             /s/ Kerry W. Boekelheide
 	 
	 	 	Name:  	Kerry W. Boekelheide 	 
	 	 	Title:  	President 	 
	 
	 	THE SUMMIT GROUP, INC.

a South Dakota corporation

 	 
	 	By:  	/s/ Kerry W. Boekelheide
 	 
	 	 	Name:  	Kerry W. Boekelheide 	 
	 	 	Title:  	Chairman and CEO 	 



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SCHEDULES AND EXHIBITS TO THE TAX PROTECTION AGREEMENT




	 	 	 

	Schedule 2.1(a)

	 	List of Protected Partners
	Schedule 2.1(b)

	 	Liability Amount
	Schedule 2.1(c)

	 	Form of Guarantee Agreement






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Schedule 2.1(a)




List of Protected Partners



The Summit Group, Inc.









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Schedule 2.1(b)




Liability Amount



	 	 	 	 	 
	Protected Partner	 	Liability Amount **/
	The Summit Group, Inc.
	 	$	13,763,798	 








 




			
	**/	 	The estimated “negative tax capital account” of a Partner in the Partnership on the
closing date of the IPO that would be recognized as a result of the repayment of liabilities with
IPO proceeds, as determined by the Partnership in its sole discretion.




 









 










Schedule 2.1(c)

Form of Guaranty 1/




GUARANTEE



     This Guarantee is made and entered into as of the __ day of _______ 20__, by the persons
listed on Exhibit A annexed hereto (the “Guarantors”) for the benefit of the Lender
set forth on Exhibit B annexed hereto and made a part hereof (the “Lender,” which
term shall include any person or entity who hereafter holds the Note (as defined below) in
accordance with the terms thereof).



RECITALS






 




			
	1/ 	 	This Form of the Guarantee Agreement is
for Guaranteed Debt where the following conditions all are applicable:






	 	(i)	 	there are no other guarantees in effect with
respect to such Guaranteed Debt;
	 
	 	(ii)	 	the collateral securing such Guaranteed Debt
is not collateral for any other indebtedness
that is senior to or pari passu with such
Guaranteed Debt;
	 
	 	(iii)	 	no additional guarantees with respect to
such Guaranteed Debt will be entered into during
the applicable Tax Protection Period;
	 
	 	(iv)	 	the lender with respect to such Guaranteed
Debt is not the Partnership or other entity in
which the Partnership owns a direct or indirect
interest, the REIT, any other partner in the
Partnership, or any person related to any
partner in the Partnership as determined for
purposes of Treasury Regulations
Section 1.752-2; and
	 
	 	(v)	 	none of the REIT, nor any other partner in
the Partnership, nor any person related to any
partner in the Partnership as determined for
purposes of Treasury Regulations Section 1.752-2
shall have provided, or shall thereafter
provide, collateral for, or otherwise shall have
entered, or thereafter shall enter, into a
relationship that would cause such person or
entity to be considered to bear risk of loss
with respect to such Guaranteed Debt, as
determined for purposes of Treasury Regulations
Section 1.752-2.





          If, and to the extent that, one or more of these conditions is not
applicable, appropriate changes to the attached Form of Guaranty will be
required in order to cause the various conditions set forth in Article 2 of the
Tax Protection Agreement to be satisfied.






 









 








     WHEREAS, the Lender has loaned to the borrower set forth on Exhibit B (the
“Borrower”) the amount set forth opposite such Lender’s name on Exhibit B, which
loan (i) is evidenced by the promissory note described on Exhibit C hereto (the
“Note”), (ii) has a current outstanding balance in the amount set forth on Exhibit
B annexed hereto, and (iii) is secured by a mortgage or deed of trust on the collateral
described on Exhibit D annexed hereto (the “Deed of Trust,” with the property and
other assets securing such Deed of Trust referred to as the “Collateral”);



     WHEREAS, the Borrower is either Summit Hotel OP, LP, a Delaware limited partnership (the
“Partnership”), or a subsidiary of the Partnership in which the Partnership owns a 98% or
greater interest in the subsidiary;



     WHEREAS, the Guarantors are limited partners in the Partnership; and



     WHEREAS, the Guarantors are executing and delivering this Guarantee to guarantee a portion of
the Borrower’s payments with respect to the Note, subject to and otherwise in accordance with the
terms and conditions hereinafter set forth.



     NOW THEREFORE, in consideration of the foregoing recitals and facts and other good and
valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, each of
the Guarantors hereby agree as follows:



     1. Guarantee and Performance of Payment.



     (a) The Guarantors hereby irrevocably and unconditionally guarantee the collection by the
Lender of, and hereby agree to pay to the Lender upon demand (following (1) foreclosure of the Deed
of Trust, exercise of the powers of sale thereunder and/or acceptance by the Lender of a deed to
the Collateral in lieu of foreclosure, and (2) the exhaustion of the exercise of any and all
remedies available to the Lender against the Borrower, including, without limitation, realizing
upon the assets of the Borrower other than the Collateral against which the Lender may have
recourse), an amount equal to the excess, if any, of the Guaranteed Amount set forth on Exhibit
B over the Lender Proceeds (as hereinafter defined) (which excess is referred to as the
“Aggregate Guarantee Liability”). The amounts payable by each Guarantor in respect of the
guarantee obligations hereunder shall be in the same proportion as the dollar amounts listed next
to such Guarantor’s name on Exhibit A attached hereto bears to the total Guaranteed Amount
set forth on Exhibit A, provided that, notwithstanding anything to the contrary contained
in this Guarantee, each Guarantor’s aggregate obligation under this Guarantee shall be limited to
the dollar amount set forth on Exhibit A attached hereto next to such Guarantor’s name.
The Guarantors’ obligations as set forth in this paragraph 1(a) are hereinafter referred to as the
“Guaranteed Obligations.”



     (b) For the purposes of this Guarantee, the term “Lender Proceeds” shall mean the
aggregate of (i) the Foreclosure Proceeds (as hereinafter defined) plus (ii) all amounts collected
by the Lender from the Borrower (other than payments of principal, interest or other amounts
required to be paid by the Borrower to Lender under the terms of the Note that are paid by the
Borrower to the Lender at a time when no default has occurred under the Note and is continuing) or
realized by the Lender from the sale of assets of the Borrower other than the Collateral.



 









 





     (c) For the purposes of this Guarantee, the term “Foreclosure Proceeds” shall have the
applicable meaning set forth below with respect to the Collateral:




	 	1.	 	If at least one bona fide third party unrelated to the Lender
(and including, without limitation, any of the Guarantors) bids for such
Collateral at a sale thereof, conducted upon foreclosure of the related Deed of
Trust or exercise of the power of sale thereunder, Foreclosure Proceeds shall
mean the highest amount bid for such Collateral by the party that acquires
title thereto (directly or through a nominee) at or pursuant to such sale. For
the purposes of determining such highest bid, amounts bid for the Collateral by
the Lender shall be taken into account notwithstanding the fact that such bids
may constitute credit bids which offset against the amount due to the Lender
under the Note.
	 
	 	2.	 	If there is no such unrelated third-party at such sale of the
Collateral so that the only bidder at such sale is the Lender or its designee,
the Foreclosure Proceeds shall be deemed to be fair market value (the “Fair
Market Value”) of the Collateral as of the date of the foreclosure sale, as
such Fair Market Value shall be mutually agreed upon by the Lender and the
Guarantor or determined pursuant to subparagraph 1(d).
	 
	 	3.	 	If the Lender receives and accepts a deed to the Collateral in
lieu of foreclosure in partial satisfaction of the Borrower’s obligations under
the Note, the Foreclosure Proceeds shall be deemed to be the Fair Market Value
of such Collateral as of the date of delivery of the deed-in-lieu of
foreclosure, as such Fair Market Value shall be mutually agreed upon by the
Lender and the Guarantor or determined pursuant to subparagraph 1(d).





     (d) Fair Market Value of the Collateral (or any item thereof) shall be the price at which a
willing seller not compelled to sell would sell such Collateral, and a willing buyer not compelled
to buy would purchase such Collateral, free and clear of all mortgages but subject to all leases
and reciprocal easements and operating agreements. If the Lender and the Guarantor are unable to
agree upon the Fair Market Value of any Collateral in accordance with subparagraphs (c)1., 2. or 3.
above, as applicable, within twenty (20) days after the date of the foreclosure sale or the
delivery of the deed-in-lieu of foreclosure, as applicable, relating to such Collateral, either
party may have the Fair Market Value of such Collateral determined by appraisal by appointing an
appraiser having the qualifications set forth below to determine the same and by notifying the
other party of such appointment within twenty (20) days after the expiration of such twenty (20)
day period. If the other party shall fail to notify the first party, within twenty (20) days after
its receipt of notice of the appointment by the first party, of the appointment by the other party
of an appraiser having the qualifications set forth below, the appraiser appointed by the first
party shall alone make the determination of such Fair Market Value. Appraisers appointed by the
parties shall be members of the Appraisal Institute (MAI) and shall have at least ten years’
experience in the valuation of properties similar to the Collateral being valued in the greater
metropolitan area in which such Collateral is located. If each party shall appoint an appraiser
having the aforesaid qualifications and if such appraisers



 









 




cannot, within thirty (30) days after the appointment of the second appraiser, agree upon the
determination hereinabove required, then they shall select a third appraiser which third appraiser
shall have the aforesaid qualifications, and if they fail so to do within forty (40) days after the
appointment of the second appraiser they shall notify the parties hereto, and either party shall
thereafter have the right, on notice to the other, to apply for the appointment of a third
appraiser to the chapter of the American Arbitration Association or its successor organization
located in the metropolitan area in which the Collateral is located or to which the Collateral is
proximate or if no such chapter is located in such metropolitan area, in the metropolitan area
closest to the Collateral in which such a chapter is located. Each appraiser shall render its
decision as to the Fair Market Value of the Collateral in question within thirty (30) days after
the appointment of the third appraiser and shall furnish a copy thereof to the Lender and the
Guarantor. The Fair Market Value of the Collateral shall then be calculated as the average of (i)
the Fair Market Value determined by the third appraiser and (ii) whichever of the Fair Market
Values determined by the first two appraisers is closer to the Fair Market Value determined by the
third appraiser; provided, however, that if the Fair Market Value determined by the third appraiser
is higher or lower than both Fair Market Values determined by the first two appraisers, such Fair
Market Value determined by the third appraiser shall be disregarded and the Fair Market Value of
the Collateral shall then be calculated as the average of the Fair Market Value determined by the
first two appraisers. The Fair Market Value of a Property, as so determined, shall be binding and
conclusive upon the Lender and the Guarantors. A Guarantor shall bear the cost of its own appraiser
and, subject to subparagraph 1(e), shall bear all reasonable costs of appointing, and the expenses
of, any other appraiser appointed pursuant to this subparagraph (1)(d).




     (e) Notwithstanding anything in the preceding subparagraphs of this paragraph 1, (i) in no
event shall the aggregate amount required to be paid pursuant to this Guarantee by the Guarantors
as a group with respect to all defaults under the Note and the Deed of Trust securing the
obligations thereunder exceed the Guaranteed Amount set forth on Exhibit B hereto, and (ii)
the aggregate obligation of each Guarantor hereunder with respect to the Guaranteed Obligation
shall be limited to the lesser of (I) the product of (w) the Individual Guarantee Percentage for
such Guarantor set forth on Exhibit A hereto multiplied by (x) the Guaranteed Amount, or
(II) the product of (y) such Guarantor’s Individual Guarantee Percentage multiplied by (z) the
Aggregate Guarantee Liability.



     (f) In confirmation of the foregoing, and without limitation, the Lender must first exhaust
all of its rights and remedies against all property of the Borrower as to which the Lender has (or
may have) a right of recourse, including, without limitation, the institution and prosecution to
completion of appropriate foreclosure proceedings under the Deed of Trust, before exercising any
right or remedy or making any claim, under this Guarantee.



     (g) The obligations under this Guarantee shall be personal to each Guarantor and shall not be
affected by any transfer of all or any part of a Guarantor’s interests in the Partnership;
provided, however, that if a Guarantor has disposed of all of its equity interests in the
Partnership, the obligations of such Guarantor under this Guarantee shall terminate 12 months after
the date of such disposition (the “Termination Date”) provided (i) the Guarantor notifies the
Lender that it is terminating its obligations under this Guarantee as of the Termination Date and
(ii) the fair market value of the Collateral exceeds the outstanding balance of the Note, including
accrued and unpaid interest, as of the Termination Date. Further, no



 









 




Guarantor shall have the right to recover from the Borrower any amounts such Guarantor pays
pursuant to this Guarantee (except and only to the extent that the amount paid to the Lender by
such Guarantor exceeds the amount required to be paid by such Guarantor under the terms of this
Guarantee).




     (h) The obligations of any Guarantor who is an individual as a Guarantor hereunder shall
terminate with respect to such Guarantor one week after the death of such Guarantor if, as a result
of the death of such Guarantor, all property held by the Guarantor on the date of death would have
a basis for federal income tax purposes equal to the fair market value of such property on such
date (unless a later date were to be elected by the executor of the Guarantor’s estate in
accordance with the applicable provisions of the Internal Revenue Code).



     2. Intent to Benefit Lender. This Guarantee is expressly for the benefit of the
Lender. The Guarantors intend that the Lender shall have the right to enforce the obligations of
the Guarantors hereunder separately and independently of the Borrower, subject to the provisions of
paragraph 1 hereof, without any requirement whatsoever of resort by the Lender to any other party.
The Lender’s rights to enforce the obligations of the Guarantors hereunder are material elements of
this Guarantee. This Guarantee shall not be modified, amended or terminated (other than as
specifically provided herein) without the written consent of the Lender. The Borrower shall
furnish a copy of this Guarantee to the Lender contemporaneously with its execution.



     3. Waivers. Each Guarantor intends to bear the ultimate economic responsibility for
the payment hereof of the Guaranteed Obligations to the extent set forth in Paragraph 1 above.
Pursuant to such intent:



          (a) Except as expressly set forth in Paragraph 1 above, each Guarantor expressly waives any
right (pursuant to any law, rule, arrangement or relationship) to compel the Lender, or any
subsequent holder of the Note or any beneficiary of the Deed of Trust to sue or enforce payment
thereof or pursue any other remedy in the power of the Borrower, the Lender or any subsequent
holder of the Note or any beneficiary of the Deed of Trust whatsoever, and failure of the Borrower
or the Lender or any subsequent holder of the Note or any beneficiary of the Deed of Trust to do so
shall not exonerate, release or discharge a Guarantor from its absolute unconditional obligations
under this Guarantee. Each Guarantor hereby binds and obligates itself, and its permitted
successors and assignees, for performance of the Guaranteed Obligations according to the terms
hereof, whether or not the Guaranteed Obligations or any portion thereof are valid now or hereafter
enforceable against the Borrower or shall have been incurred in compliance with any of the
conditions applicable thereto, subject, however, in all respects to the Guarantee Limit and the
other limitations set forth in paragraph 1.




          (b) Each Guarantor expressly waives any right (pursuant to any law, rule, arrangement, or
relationship) to compel any other person (including, but not limited to, the Borrower, the
Partnership, any subsidiary of the Partnership or the Borrower, or any other partner or affiliate
of the Partnership or the Borrower) to reimburse or indemnify such Guarantor for all or any portion
of amounts paid by such Guarantor pursuant to this Guarantee to the extent such amounts do not
exceed the amounts required to be paid by such Guarantor pursuant to paragraph 1 hereof (taking
into account the limitations set forth therein).







 









 








          (c) Except as expressly set forth in Paragraph 1 above, if and only to the extent that the
Borrower has made similar waivers under the Note or the Deed of Trust, each Guarantor expressly
waives: (i) the defense of the statute of limitations in any action hereunder or for the
collection or performance of the Note or the Deed of Trust; (ii) any defense that may arise by
reason of: the incapacity, or lack of authority of the Borrower, the revocation or repudiation
hereof by such Guarantor, the revocation or repudiation of the Note or the Deed of Trust by the
Borrower, the failure of the Lender to file or enforce a claim against the estate (either in
administration, bankruptcy or any other proceeding) of the Borrower; the unenforceability in whole
or in part of the Note, the Deed of Trust or any other document or instrument related thereto; the
Lender’s election, in any proceeding by or against the Borrower under the federal Bankruptcy Code,
of the application of Section 1111(b)(2) of the federal Bankruptcy Code; or any borrowing or grant
of a security interest under Section 364 of the federal Bankruptcy Code; (iii) presentment, demand
for payment, protest, notice of discharge, notice of acceptance of this Guarantee or occurrence of,
or any default in connection with, the Note or the Deed of Trust, and indulgences and notices of
any other kind whatsoever, including, without limitation, notice of the disposition of any
collateral for the Note; (iv) any defense based upon an election of remedies (including, if
available, an election to proceed by non-judicial foreclosure) or other action or omission by the
Lender or any other person or entity which destroys or otherwise impairs any indemnification,
contribution or subrogation rights of such Guarantor or the right of such Guarantor, if any, to
proceed against the Borrower for reimbursement, or any combination thereof; (v) subject to
Paragraph 4 below, any defense based upon any taking, modification or release of any collateral or
guarantees for the Note, or any failure to create or perfect any security interest in, or the
taking of or failure to take any other action with respect to any collateral securing payment or
performance of the Note; (vi) any rights or defenses based upon any right to offset or claimed
offset by such Guarantor against any indebtedness or obligation now or hereafter owed to such
Guarantor by the Borrower; or (vii) any rights or defenses based upon any rights or defenses of the
Borrower to the Note or the Deed of Trust (including, without limitation, the failure or value of
consideration, any statute of limitations, accord and satisfaction, and the insolvency of the
Borrower); it being intended, except as expressly set forth in Paragraph 1 above, that such
Guarantor shall remain liable hereunder, to the extent set forth herein, notwithstanding any act,
omission or thing which might otherwise operate as a legal or equitable discharge of any of such
Guarantor or of the Borrower.




     4. Amendment of Note and Deed of Trust. Without in any manner limiting the generality
of the foregoing, the Lender or any subsequent holder of the Note or beneficiary of the Deed of
Trust may, from time to time, without notice to or consent of the Guarantors, agree to any
amendment, waiver, modification or alteration of the Note or the Deed of Trust relating to the
Borrower and its rights and obligations thereunder (including, without limitation, renewal, waiver
or variation of the maturity of the indebtedness evidenced by the Note, increase or reduction of
the rate of interest payable under the Note, release, substitution or addition of any Guarantor or
endorser and acceptance or release of any security for the Note), it being understood and agreed by
the Lender, however, that the Guarantor’s obligations hereunder are subject, in all events, to the
limitations set forth in Paragraph 1; provided that (i) in the event that the Lender consents to
the release of any Collateral securing the Note pursuant to the Deed of Trust, the Guaranteed
Amount shall be reduced by the Fair Market Value of such Collateral on the date of such release
(determined as set forth in Section 1(d)); and (ii) upon any material change to the Note or the
Deed of Trust, including, without limitation, the maturity date or the



 









 




interest rate of the Note, or upon any release or substitution of any Collateral securing the
Note, within thirty (30) days of any Guarantor’s receipt of actual notice of such event, subject to
the following sentence, such Guarantor may elect to terminate such Guarantor’s obligations under
this Guarantee by written notice to the Lender. Such termination shall take effect on the 31st day
following such actual notice, provided that no default under the Guaranteed Obligation has occurred
and is then continuing.




     5. Termination of Guarantee. Subject to Paragraph 4, this Guarantee is irrevocable as
to any and all of the Guaranteed Obligations.



     6. Independent Obligations. Except as expressly set forth in Paragraph 1, the
obligations of each Guarantor hereunder are independent of the obligations of the Borrower, and a
separate action or actions may be brought by a Lender against the Guarantors, whether or not
actions are brought against the Borrower. Each Guarantor expressly waives any and all rights of
subrogation, reimbursement, indemnity, exoneration, contribution or any other claim which such
Guarantor may now or hereafter have against the Borrower, or any other person directly or
contingently liable for the payment or performance of the Note and the Deed of Trust arising from
the existence or performance of this Guarantee (including, but not limited to, the Partnership,
Summit Hotel Properties, Inc., or any other partner of the Partnership) (except and only to the
extent that a Guarantor makes a payment to the Lender in excess of the amount required to be paid
under Paragraph 1 and the limitations set forth therein).



     7. Understanding With Respect to Waivers. Each Guarantor warrants and represents that
each of the waivers set forth above are made with full knowledge of their significance and
consequences, and that under the circumstances, the waivers are reasonable and not contrary to
public policy or law. If any of said waivers are determined to be contrary to any applicable law
or public policy, such waiver shall be effective only to the maximum extent permitted by law.



     8. No Assignment. No Guarantor shall be entitled to assign his or her rights or
obligations under this Guarantee to any other person without the written consent of the Lender.



     9. Entire Agreement. The parties agree that this Guarantee contains the entire
understanding and agreement between them with respect to the subject matter hereof and cannot be
amended, modified or superseded, except by an agreement in writing signed by the parties.



     10. Notices. Any notice given pursuant to this Guarantee shall be in writing and
shall be deemed given when delivered personally, or sent by registered or certified mail, postage
prepaid, as follows:



     If to the Partnership:


Summit Hotel OP, LP

2701 South Minnesota Avenue, Suite 6

Sioux Falls, South Dakota 57105

Attention: Chris Eng, Esq.

Telecopier No. (605) 362-9388







 









 







or to such other address with respect to which notice is subsequently provided in the manner set
forth above; and




     If to a Guarantor, to the address set forth on Exhibit A hereto, or to such other
address with respect to which notice is subsequently provided in the manner set forth above.



     11. Applicable Law. This Guarantee shall be governed by, interpreted under and
construed in accordance with the laws of the State of Delaware without reference to its choice of
law provisions.



     12. Consent to Jurisdiction; Enforceability



          (a) This Guarantee and the duties and obligations of the parties hereto shall be enforceable
against each Guarantor in the courts of the State of South Dakota. For such purpose, each
Guarantor hereby irrevocably submits to the nonexclusive jurisdiction of such courts and agrees
that all claims in respect of this Guarantee may be heard and determined in any of such courts.




          (b) Each Guarantor hereby irrevocably agrees that a final judgment of any of the courts
specified above in any action or proceeding relating to this Guarantee shall be conclusive and may
be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.




     13. Condition of Borrower. Each Guarantor is fully aware of the financial condition
of the Borrower and is executing and delivering this Guarantee based solely upon its own
independent investigation of all matters pertinent hereto and is not relying in any manner upon any
representation or statement of the Lender or the Borrower. Each Guarantor represents and warrants
that it is in a position to obtain, and hereby assumes full responsibility for obtaining, any
additional information concerning the Borrower’s financial conditions and any other matter
pertinent hereto as it may desire, and it is not relying upon or expecting the Lender to furnish to
it any information now or hereafter in the Lender’s possession concerning the same. By executing
this Guarantee, each Guarantor knowingly accepts the full range of risks encompassed within a
contract of this type, which risks it acknowledges.



     14. Expenses. Each Guarantor agrees that, promptly after receiving Lender’s notice
therefor, such Guarantor shall reimburse Lender, subject to the limitation set forth in
subparagraph 1(e) and to the extent that such reimbursement is not made by Borrower, for all
reasonable expenses (including, without limitation, reasonable attorneys’ fees and disbursements)
incurred by Lender in connection with the collection of the Guaranteed Obligations or any portion
thereof or with the enforcement of this Guarantee.



 









 





     IN WITNESS WHEREOF, the undersigned Guarantors set forth on Exhibit A hereto have
executed this Guarantee as of the date first set forth above.



	 	 	 	 	 
	 	GUARANTORS SET FORTH ON

EXHIBIT A
HERETO:

 	 
	 	By:  	 	 
	 	 	 
	 	By:  	 	 
	 	 	 
	 	By:  	 	 
	 	 	 
	 	By:  	 	 
	 	 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 



 









 






	 	 	 	 	 



Exhibit A to Guarantee




	 	 	 	 	 
	Name and Address of Partner Guarantors	 	Guaranteed Amount
	 
	 	 	 	 
	Guarantors, as a group
	 	$	 	 






	 	 	 

	Individual Guarantors:

	 	Individual

Guarantee

Percentage






 









 






Exhibit B to Guarantee




	 	 	 	 	 	 	 	 	 
	 	 	 	 	Date of and	 	 	 	 
	 	 	 	 	Principal Amount	 	Debt Balance as of	 	Guaranteed
	Name of Lender	 	Name of Borrower	 	of Loan	 	__/__/__	 	Amount
	 
	 	 	 	 	 	 	 	 





 









 






Exhibit C to Guarantee




Copy of Note



 









 





Exhibit D to Guarantee




Identification of Deed of Trust and



Brief Summary Description of Collateral




14