Document:

artw20170228_10q.htm

Exhibit 10.1

 

THIRD LOAN MODIFICATION AGREEMENT

 

THIS THIRD LOAN MODIFICATION AGREEMENT (this “Agreement”) is by and among ART’S WAY MANUFACTURING CO., INC., a Delaware corporation (the “Borrower”), Art’s-Way Scientific, Inc., an Iowa corporation (“Scientific”), Ohio Metal Working Products/Art’s-Way, Inc., an Ohio corporation (“Ohio Metal”; together with Scientific, the “Guarantors”), and U.S. BANK NATIONAL ASSOCIATION, a national banking association (the “Bank”), and is made as of the date shown opposite the Bank’s signature on the signature page (the “Agreement Date”), but shall be deemed effective (a) with respect to the modifications set forth in Section 3 (other than the modifications set forth in Section 3(b)), as of April 1, 2017 and (b) with respect to the modifications set forth in Section 3(b), as of May 1, 2017 (the “Effective Date”), subject to the terms and conditions below.

 

RECITALS:

 

WHEREAS, the Borrower has executed and delivered to the Bank an Installment or Single Payment Note dated May 10, 2012 in the original principal amount of $880,000 (as amended, restated, supplemented or otherwise modified from time to time, the “2012 Term Note”); 

 

WHEREAS, the Borrower has executed and delivered to the Bank a Revolving Credit Note dated May 1, 2013 in the original principal amount of $8,000,000 (as amended, restated, supplemented or otherwise modified from time to time, the “Revolving Note”);

 

WHEREAS, the Borrower has executed and delivered to the Bank Term Notes each dated May 1, 2013 in the original principal amounts of (i) $1,006,500, (ii) 1,143,600 and (iii) 1,833,510.26 (each as amended, restated, supplemented or otherwise modified from time to time, collectively, the “2013 Term Notes”); 

 

WHEREAS, the Borrower has executed and delivered to the Bank a Term Note dated May 29, 2014 in the original principal amount of $1,000,000 (as amended, restated, supplemented or otherwise modified from time to time, the “2014 Term Note”; together with the 2012 Term Note, the Revolving Note, the 2013 Term Notes, and the 2014 Term Note, collectively, the “Notes”);

 

WHEREAS, the Revolving Note is subject to the terms and conditions set forth in the Revolving Credit Agreement dated as of May 1, 2013 between the Borrower and the Bank (as amended, restated, supplemented or otherwise modified from time to time, “Revolving Credit Agreement”);

 

WHEREAS, the 2013 Term Notes are subject to the terms and conditions set forth in the Term Loan Agreement dated as of May 1, 2013 between the Borrower and the Bank (as amended, restated, supplemented or otherwise modified from time to time, “2013 Term Loan Agreement”);

 

WHEREAS, the 2014 Term Note is subject to the terms and conditions set forth in the Term Loan Agreement dated as of May 29, 2014 between the Borrower and the Bank (as amended, restated, supplemented or otherwise modified from time to time, “2014 Term Loan Agreement”; together with the Revolving Credit Agreement and the 2013 Term Loan Agreements, collectively, the “Loan Agreements”);

 

 

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WHEREAS, all indebtedness evidenced by the Notes and the Loan Agreements, and any extensions, renewals, restatements and modifications thereof and all principal, interest, fees and expenses relating thereto, however arising, whether liquidated or unliquidated, whether absolute or contingent, and of whatever nature, including without limitation, costs and expenses of collection and enforcement of the Loan Documents (as defined below), including without limitation attorneys’ fees of both inside and outside counsel, and all other indebtedness, obligations and liabilities of any kind owing by the Borrower or any Guarantor to the Bank or any of its affiliates are referred to in this Agreement as the “Obligations”;

 

WHEREAS, the Obligations are secured by the real and personal property (together with all substitutions and replacements for and products and proceeds of any of the foregoing, the “Collateral”) in which the Bank has been granted a lien pursuant to any of the following documents (together with any additional agreement or document entered into by the Borrower, any Guarantor or other Person for the benefit of the Bank to secure payment of the Obligations or otherwise relating to any Collateral, each as amended, restated or otherwise modified from time to time, collectively, the “Collateral Documents”): 

 

	 	
(i)
	
a Business Security Agreement dated May 1, 2013 by the Borrower in favor of the Bank;

 

	 	
(ii)
	
a Business Security Agreement dated May 1, 2013 by Scientific in favor of the Bank;

 

	 	
(iii)
	
a Business Security Agreement dated May 1, 2013 by the Borrower (as successor by merger to Art’s Way Vessels, Inc. (“Vessels”)) in favor of the Bank;

 

	 	
(iv)
	
a Business Security Agreement dated October 25, 2013 by Ohio Metal in favor of the Bank;

 

	 	
(v)
	
a Pledge Agreement dated May 1, 2013 by Scientific in favor of the Bank;

 

	 	
(vi)
	
a Pledge Agreement dated May 1, 2013 by the Borrower (as successor by merger to Vessels) in favor of the Bank;

 

	 	
(vii)
	
a Pledge Agreement dated June 4, 2014 by Ohio Metal in favor of the Bank;

 

	 	
(viii)
	
a Mortgage, Security Agreement and Assignment of Rents of Iowa Real Estate dated May 1, 2013 by the Borrower in favor of the Bank and recorded in the Office of the Clayton County Recorder on May 16, 2013 as Document No. 2013R02019;

 

	 	
(ix)
	
a Mortgage, Security Agreement and Assignment of Rents of Iowa Real Estate dated May 1, 2013 by the Borrower (as successor by merger to Vessels) in favor of the Bank and recorded in the Office of the Dubuque County Recorder on May 16, 2013 as Document No. 007687140008; and

 

	 	
(x)
	
a Mortgage, Security Agreement and Assignment of Rents of Iowa Real Estate dated August 30, 2013 by the Borrower in favor of the Bank and recorded in the Office of the Emmet County Recorder on September 23, 2013 as Document No. 2013-01380;

 

	 	
(xi)
	
an Open-End Mortgage, Security Agreement and Assignment of Rents and Leases (Including Fixture Filing Under Uniform Commercial Code) (Ohio) dated May 29, 2014 by Ohio Metal in favor of the Bank and recorded in the Office of the Stark County Recorder on June 13, 2014 as Document No. 201406130021758.

 

 

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WHEREAS, the Obligations of the Borrower are guaranteed pursuant to the following guaranties (each as amended, restated or otherwise modified from time to time, collectively, the “Guaranties”) in favor of the Bank:

 

	 	
(i)
	
a Continuing Guaranty (Unlimited) dated May 1, 2013 by Scientific in favor of the Bank; and

 

	 	
(ii)
	
a Continuing Guaranty (Unlimited) dated October 25, 2013 by Ohio Metal in favor of the Bank.

 

WHEREAS, the Notes, the Loan Agreements, the Collateral Documents and the Guaranties, as well as any other loan documents executed by the Borrower or any Guarantor pursuant thereto or in connection therewith, as the same may be amended from time to time, are referred to collectively in this Agreement as the “Loan Documents”;

 

WHEREAS, a default exists under the Loan Documents; and

 

WHEREAS, the Borrower has requested that the Bank modify the terms of the Loan Documents, and the Bank is willing to grant the Borrower’s request upon the terms and conditions set forth in this Agreement. 

 

AGREEMENT:

 

NOW, THEREFORE, in consideration of the above recitals, the agreements set forth in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties agree:

 

1.     Recitals; Capitalized Terms. The Borrower and each Guarantor acknowledges that the recitals set forth above are true and correct, and are made a part of this Agreement. Capitalized terms used and not defined in this Agreement have the meanings assigned to such terms in the Loan Documents.

 

2.     Confirmation of Indebtedness. The outstanding amounts under the Notes as of March 24, 2017 (as calculated under the Loan Documents prior to the Effective Date of this Agreement) are:

 

	 	
Note
	 	
Principal
	 	 	
Interest
	 	 	
Prepayment Fee
	 	 	
Total
	 
	 	
2012 Term Note
	 	$	293,694.88 	 	 	$	359.77 	 	 	$	149.66	 	 	$	294,204.31 	 
	 	
2013 Term Note
	 	$	594,266.78 	 	 	$	1,131.42 	 	 	$	0.00 	 	 	$	595,398.20 	 
	 	
2013 Term Note
	 	$	672,699.58 	 	 	$	1,280.74 	 	 	$	0.00 	 	 	$	673,980.32 	 
	 	
2013 Term Note
	 	$	704,545.40 	 	 	$	1,341.38 	 	 	$	0.00 	 	 	$	705,886.78 	 
	 	
Revolving Note
	 	$	3,284,114.05 	 	 	$	10,942.71 	 	 	$	0.00 	 	 	$	3,295,056.76 	 
	 	
2014 Term Note
	 	$	894,946.90 	 	 	$	2,000.21 	 	 	$	0.00 	 	 	$	896,947.11 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	
TOTALS
	 	$	6,444,267.59	 	 	$	17,056.23	 	 	$	149.66	 	 	$	6,461,473.48 	 

 

3.     Loan Modifications. As of the Effective Date, the Loan Documents are amended and supplemented as follows, so long as the conditions to effectiveness set forth in Section 4 are satisfied or waived as provided in Section 4: 

 

(a)     Changes to the Loan Documents. The defined term “Obligations” in each applicable Loan Document is hereby amended and restated in its entirety to read as follows:

 

 

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“Obligations” mean all indebtedness evidenced by the Loan Documents, and any extensions, renewals, restatements and modifications thereof and all principal, interest, fees and expenses relating thereto; however arising, whether liquidated or unliquidated, whether absolute or contingent, and of whatever nature, including without limitation, costs and expenses of collection and enforcement of the Loan Documents, including without limitation attorneys’ fees of both inside and outside counsel, and all other indebtedness, obligations and liabilities of any kind owing by any Borrower or Guarantor to the Bank or any of its affiliates, including without limitation in connection with any Banking Services or any Swap Obligations (each as defined herein). As used herein, (a) “Banking Services” means each and any of the following bank services provided to any Borrower or Guarantor by the Bank or any of its affiliates: (i) credit cards for commercial customers (including, without limitation, “commercial credit cards,” purchasing cards and procurement cards), (ii) stored value cards, (iii) credit card processing services, and (iv) treasury management services (including, without limitation, controlled disbursement, automated clearinghouse transactions, return items, overdrafts and interstate depository network services) and (b) “Swap Obligations” of a Person means any and all obligations of such Person owing to the Bank or its affiliates, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (i) any and all swap agreements, and (ii) any and all cancellations, buy backs, reversals, terminations or assignments of any swap agreement transaction.

 

(b)     Changes to the 2012 Term Note. The 2012 Term Note is hereby amended as follows:

 

(i)     Change in Maturity Date. All references to “maturity date” and “maturity” in the 2012 Term Note are hereby deemed to be “September 25, 2017”.

 

(ii)     Change in Interest Rate. . Section 2 of the 2012 Term Note is hereby amended and restated in its entirety to read as follows:

 

“The unpaid principal balance will bear interest at an annual rate equal to 1.5% plus the prime rate announced by the Bank from time to time; provided that the interest rate will not be less than 5.00% per annum at any time. The interest rate hereunder will be adjusted each time that the prime rate changes.”

 

(iii)     Change in Payment Schedule. Section 3 of the 2012 Term Note is hereby amended and restated in its entirety to read as follows:

 

(a)     Interest is payable beginning May 10, 2017, and on the same date of each consecutive month thereafter, plus a final interest payment with the final payment of principal. Interest will be computed for the actual number of days principal is unpaid, using a daily factor obtained by dividing the stated interest rate by 360 which pursuant to Iowa Stats. Section 537.2601 is the equivalent computation as using the same stated interest rate calculated on a 365-day basis times 1.0139.

 

(b)     Principal is payable in installments of $10,960.00 each, beginning May 10, 2017, 2017, and on the same date of each consecutive month thereafter (except that if a given month does not have such a date, the last day of such month), plus a final payment equal to all unpaid principal on September 25, 2017, the maturity date.

 

 

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(c)     Changes to the Revolving Note and the Revolving Loan Agreement. The Revolving Note and the Revolving Loan Agreement are hereby amended as follows:

 

(i)     Change in Maturity Date. All references to “Maturity Date” in the Revolving Note and the Revolving Credit Agreement are hereby deemed to be “September 25, 2017”.

 

(ii)     Change in Loan Amount. 

 

(A)     The amount “$5,000,000” in the Revolving Note is hereby deleted in each instance and the amount “$4,500,000” is inserted in substitution therefor.

 

(B)     All references to “Loan Amount” in the Revolving Credit Agreement are hereby deemed to be “$4,500,000”.

 

(iii)     Advances and Paying Procedure. The Revolving Credit Agreement is hereby amended by adding a new sentence to the end of the existing Section 1.4 to read as follows:

 

“The Bank is hereby authorized by the Borrower to make fundings under the revolving line of credit upon receipt of an oral or a written request therefor from an authorized person. The Bank shall be entitled to rely upon, and shall not incur any liability for relying upon, any such oral or written request believed by it to be genuine and to have been signed, sent or made by an authorized person. Upon request by the Bank, the Borrower agrees to deliver promptly to the Bank a written confirmation of each oral request. If the written confirmation of any oral request differs in any material respect from the action taken by the Bank, the records of the Bank will control, absent manifest error.”

 

(iv)     Engagement of Consultant. The Revolving Credit Agreement is hereby amended by adding a new Sections 2.16 immediately following the existing Section 2.15 to read as follows:

 

“2.16     Engagement of Consultant. Upon request of the Bank, the Borrower shall engage a reputable, professional turnaround consulting firm of national or regional standing acceptable to the Bank in its sole discretion (the “Consultant”), such engagement shall be evidenced by a fully executed engagement letter, in form and content acceptable to the Bank (the “Engagement Agreement”). The Borrower shall not terminate, extend, amend or otherwise change the terms of the Engagement Agreement without the prior written consent of the Bank. The Borrower irrevocably authorizes the Consultant to communicate directly with the Bank at any and all times to discuss or to review any aspect of the Borrower’s business and any other matter regarding the engagement between the Borrower and the Consultant, or to transmit any information relating to the Borrower’s business to the Bank, all without any further authorization from or notice to the Borrower. All fees, costs and expenses of the Consultant shall be paid by the Borrower.

 

 

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(v)     Changes to Addenda to Revolving Credit Agreement and Note. The Addenda to the Revolving Credit Agreement and Note are hereby amended as set forth below. Except as set forth herein, all other requirements of each Addendum to Revolving Credit Agreement and Note shall remain in full force and effect.

 

(A)     Change in Financial Covenants. The Addendum to Revolving Credit Agreement and Note describing the financial covenants and financial reporting is hereby amended by (x) deleting the financial covenant entitled “Fixed Charge Coverage Ratio” and the related defined term and (y) adding or amending, as the case may be, the financial covenants or defined terms shown below for the period beginning on the Effective Date and thereafter:

 

“Year-To-Date EBITDA as of the end of each month set forth below for the fiscal year to date then ended of not less than the amount set forth opposite such date:

 

	
Year-To-Date Ending
	
Amount

	 	 
	
May 30, 2017
	
$1

	 	 
	
August 31, 2017
	
$648,000

 

“Minimum Liquidity as of the end of each month of not less than $500,000.”

 

(B)     Change in Borrowing Base. The Addendum to Revolving Credit Agreement and Note describing the Borrowing Base is hereby amended by amending and restating the Section entitled “Borrowing Base Provision and Definitions” in its entirety to read as follows:

 

“Borrowing Base Provision and Definitions. This provision replaces in its entirety the section of the Agreement titled “Borrowing Base” and is hereby made a part of the Agreement. The Borrowing Base will be an amount equal to (A) the sum of (i) seventy-five percent (75%) of the face amount of Eligible Accounts, and (ii) fifty percent (50%) of the Borrower’s cost (determined on a lower of cost or market basis or on such other basis as may be designated by the Bank from time to time) of Eligible Inventory, as such cost may be diminished as a result of any event causing loss or depreciation in value of Eligible Inventory, but in no event shall this component exceed $3,375,000.00, less (B) the sum of (i) the then-current outstanding loan balance on the Revolving Credit Note dated May 1, 2013 by the Borrower in favor of the Bank in the original principal amount of $6,000,000.00, as amended, (ii) undrawn amounts of outstanding letters of credit issued by the Bank or any affiliate thereof and (iii) Reserves. The Borrower will provide the Bank with information regarding the Borrowing Base in such form and at such times as the Bank may request. Capitalized terms used in this provision will have the meanings set forth below. Financial terms used herein which are not specifically defined herein shall have the meanings ascribed to them under generally accepted accounting principles.”

 

 

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The Borrower acknowledges that the Bank, from time to time, may do any one or more of the following: (a) establish, modify, or eliminate Reserves, (b) decrease the dollar limits on outstanding advances against the Borrowing Base or (c) decrease the advance rate applicable to Eligible Inventory or Eligible Accounts set forth within the definition of “Borrowing Base” at the sole discretion of the Bank. As used herein, “Reserves” means any and all reserves which the Bank deems necessary, in its sole discretion, to maintain (including, without limitation, reserves for rent at locations leased by the Borrower and for consignee’s, warehousemen’s and bailee’s charges, reserves for Swap Obligations, Banking Services, reserves for dilution of accounts, reserves for accrued and unpaid interest on the Obligations, reserves for inventory shrinkage, reserves for declines in inventory values and reserves for contingent liabilities of the Borrower) based on such considerations as the Bank deems appropriate in its sole discretion from time to time.

 

If, at any time, the Bank establishes, modifies or eliminates Reserves, decreases any of the dollar limits on outstanding advances against the Borrowing Base or decreases the advance rate applicable to Eligible Inventory or Eligible Accounts set forth within the definition of “Borrowing Base”, the Bank will give the Borrower contemporaneous oral or written notice of such change. 

 

(d)     Changes to the 2013 Term Notes and 2013 Term Loan Agreements. Each 2013 Term Note and each 2013 Term Loan Agreement is hereby amended as follows:

 

(i)     Change in Maturity Date. All references to “maturity date” and “maturity” in each 2013 Term Note and each 2013 Term Loan Agreement are hereby deemed to be “September 25, 2017”.

 

(ii)     Change in Interest Rate. . Section 2 of each 2013 Term Note is hereby amended and restated in its entirety to read as follows:

 

“The unpaid principal balance will bear interest at an annual rate equal to 1.5% plus the prime rate announced by the Bank from time to time; provided that the interest rate will not be less than 5.00% per annum at any time. The interest rate hereunder will be adjusted each time that the prime rate changes.”

 

(iii)     Change in Payment Schedule. Section 3 of each 2013 Term Note is hereby amended and restated in its entirety to read as follows:

 

(a)     Interest is payable beginning May 1, 2017, and on the same date of each consecutive month thereafter, plus a final interest payment with the final payment of principal. Interest will be computed for the actual number of days principal is unpaid, using a daily factor obtained by dividing the stated interest rate by 360 which pursuant to Iowa Stats. Section 537.2601 is the equivalent computation as using the same stated interest rate calculated on a 365-day basis times 1.0139.

 

(b)     Principal is payable in installments of (i) $9,600.00 each with respect to the 2013 Term Note in the original principal amount of $1,006,500, (ii) $10,965.00 each with respect to the 2013 Term Note in the original principal amount of $1,143,600 and (iii) $26,107.00 each with respect to the 2013 Term Note in the original principal amount of $1,833,510.26, beginning May 1, 2017, and on the same date of each consecutive month thereafter (except that if a given month does not have such a date, the last day of such month), plus a final payment equal to all unpaid principal on September 25, 2017, the maturity date.

 

 

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(iv)     Changes to Addenda to Term Loan Agreements and Notes. The Addenda to Term Loan Agreement and Note attached to each 2013 Term Loan Agreement is hereby amended as set forth below. Except as set forth herein, all other requirements of each Addendum to Term Loan Agreement and Note shall remain in full force and effect.

 

(A)     Change in Financial Covenants. Each Addendum to Term Loan Agreement and Note is hereby amended by (x) deleting the financial covenant entitled “Fixed Charge Coverage Ratio” and the related defined term and (y) adding or amending, as the case may be, the financial covenants or defined terms shown below for the period beginning on the Effective Date and thereafter:

 

“Year-To-Date EBITDA as of the end of each month set forth below for the fiscal year to date then ended of not less than the amount set forth opposite such date:

 

	
Year-To-Date Ending
	
Amount

	 	 
	
May 30, 2017
	
$1

	 	 
	
August 31, 2017
	
$648,000

 

“Minimum Liquidity as of the end of each month of not less than $500,000.”

 

(e)     Changes to the 2014 Term Note and 2014 Term Loan Agreement. The 2014 Term Note and 2014 Term Loan Agreement is hereby amended as follows:

 

(i)     Change in Maturity Date. All references to “maturity date” and “maturity” in the 2014 Term Note and 2014 Term Loan Agreement are hereby deemed to be “September 25, 2017”.

 

(ii)     Change in Interest Rate. The section describing the interest rate in the 2014 Term Note is hereby amended and restated in its entirety to read as follows:

 

“Interest. The unpaid principal balance will bear interest at an annual rate equal to 1.5% plus the prime rate announced by the Bank from time to time; provided that the interest rate will not be less than 5.00% per annum at any time. The interest rate hereunder will be adjusted each time that the prime rate changes.”

 

(iii)     Change in Payment Schedule. The section describing the payment schedule in the 2014 Term Note is hereby amended and restated in its entirety to read as follows:

 

 

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“Payment Schedule.

 

(a)     Interest is payable beginning May 25, 2017, and on the same date of each consecutive month thereafter, plus a final interest payment with the final payment of principal. Interest will be computed for the actual number of days principal is unpaid, using a daily factor obtained by dividing the stated interest rate by 360 which pursuant to Iowa Stats. Section 537.2601 is the equivalent computation as using the same stated interest rate calculated on a 365-day basis times 1.0139.

 

(b)     Principal is payable in installments of $4,300.55 each, beginning May 25, 2017, and on the same date of each consecutive month thereafter (except that if a given month does not have such a date, the last day of such month), plus a final payment equal to all unpaid principal on September 25, 2017, the maturity date.”

 

(iv)     Changes to Financial Covenants. Section 2.14 of the 2014 Term Loan Agreement is hereby amended by (x) deleting the financial covenant entitled “Fixed Charge Coverage Ratio” and (y) adding or amending, as the case may be, the financial covenants or defined terms shown below for the period beginning on the Effective Date and thereafter:

 

“Year-To-Date EBITDA as of the end of each month set forth below for the fiscal year to date then ended of not less than the amount set forth opposite such date:

 

	
Year-To-Date Ending
	
Amount

	 	 
	
May 30, 2017
	
$1

	 	 
	
August 31, 2017
	
$648,000

 

“Minimum Liquidity as of the end of each month of not less than $500,000.”

 

(v)     Changes to Financial Definitions. Section 2.15 of the 2014 Term Loan Agreement is hereby amended by deleting the defined term “Fixed Charge Coverage Ratio”.

 

(f)     Addenda to the Loan Agreements. Each Loan Agreement is hereby amended by adding an addendum entitled “OFAC, Anti-Corruption Laws and the Patriot Act” thereto in the form attached to this Agreement.

 

(g)     Miscellaneous. All references in the Loan Documents to a Loan Document means such Loan Document as modified and supplemented by this Agreement.

 

4.     Conditions to Effectiveness of Agreement. The Borrower shall deliver (or cause to be delivered) to the Bank each of the following, each in form and substance satisfactory to the Bank:

 

(a)     this Agreement, duly executed by the Borrower and the Guarantors;

 

 

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(b)     a certificate of the secretary or other appropriate officer of the Borrower, certifying (i) that the execution and delivery of this Agreement and the performance by the Borrower of this Agreement and the Loan Documents as amended hereby have been duly approved by all necessary action of the board of directors of the Borrower, and attaching true, correct and complete copies of the applicable resolutions granting such approval; (ii) that attached to such certificate are true and correct copies of the articles of incorporation and bylaws of the Borrower, together with such copies; and (iii) the names of the officers of the Borrower that are authorized to sign the Loan Documents and other documents contemplated hereunder, together with the true signatures of such officers; the Bank may conclusively rely on such certificate until the Bank receives a further certificate of the secretary or other appropriate officer of the Borrower canceling or amending the prior certificate and submitting the signatures of the officers named in such further certificate;

 

(c)     a certificate of the secretary or other appropriate officer of each Guarantor certifying (i) that the execution and delivery of this Agreement, and the performance by such Guarantor of this Agreement and the Guaranty to which such Guarantor is a party have been duly approved by all necessary action of the board of directors of such Guarantor, and attaching true, correct and complete copies of the applicable resolutions granting such approval; (ii) that attached to such certificate are true and correct copies of the articles of incorporation and bylaws of such Guarantor, together with such copies; and (iii) the names of the officers of such Guarantor that are authorized to sign the Loan Documents and other documents contemplated hereunder, together with the true signatures of such officers; the Bank may conclusively rely on such certificate until the Bank receives a further certificate of the secretary or other appropriate office of such Guarantor canceling or amending the prior certificate and submitting the signatures of the officers named in such further certificate; 

 

(d)     evidence of all insurance required by the terms of the Loan Documents, together with certificates and loss payable endorsements showing the Bank as additional insured and lender loss payee thereunder;

 

(e)     payment of all fees and costs of the Bank in immediately available funds, including all attorney’s fees, incurred in connection with the drafting and preparation of this Agreement and any related documents; and

 

(f)     such additional information or documentation as the Bank may require.

 

The later of (x) the date on which the last of the conditions and requirements in this Section 4 has been satisfied, or waived in writing by the Bank; and (y) the Agreement Date is called the “Closing Date.” The provisions of this Section 4 are solely for the Bank’s benefit and protection.

 

5.     Further Assurances. Following the receipt of any real estate appraisal with respect to any Collateral constituting real property, promptly upon request by the Bank, the Borrower and the Guarantors shall take such additional actions and execute such documents as the Bank may reasonably require from time to time in order (i) to perfect and maintain the validity, effectiveness and priority of any of the Collateral Documents, including without limitation any mortgage, and (ii) to better assure, convey, grant, assign, transfer, preserve, protect and confirm to the Bank the rights granted or now or hereafter intended to be granted to Bank under any Collateral Document or any other Loan Document, including without limitation any mortgage and the amount secured thereunder. 

 

6.     Acknowledgments. The Borrower and each Guarantor acknowledges and agrees that as of the Closing Date: (a) the Obligations exist and are owing without offset, defense or counterclaim assertable by the Borrower or any Guarantor against the Bank; and (b) the Collateral Documents continue to secure the Obligations, as applicable.

 

 

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7.     Ratification of Loan Documents. The Borrower and each Guarantor represents that on and as of the Closing Date and after giving effect to this Agreement all of the representations and warranties contained in the Loan Documents to which it is a party are true, correct and complete in all respects as of the Closing Date as though made on and as of such date, except for changes expressly permitted by the terms of the Loan Documents. The parties further acknowledge that the Loan Documents, as amended and supplemented by this Agreement, remain in full force and effect. Without limiting the generality of the foregoing, the Borrower represents and warrants that the Collateral Documents continue to secure the obligations of the Borrower under the Notes, as applicable. 

 

8.     Confirmation of Guarantors. Each Guarantor consents to the terms of this Agreement and acknowledges that all indebtedness of the Borrower arising under the Loan Agreements and the Notes, each as amended hereby, constitutes Obligations (as defined in each Guaranty) under the Guaranty of such Guarantor. The confirmation set forth in this Section 8 shall not be deemed to limit the terms of any Guaranty in any manner. Each Guarantor acknowledges that this Section 8 merely confirms the terms of the Guaranty to which it is a party; that no such confirmation is required in connection with this Agreement or any future amendment to or restatement of any Loan Agreement, any Note or any document executed in connection with the Loan Agreements or this Agreement.

 

9.     General Release and Waivers. 

 

(a)     The Borrower and each Guarantor, for and on behalf of itself and its legal representatives, successors and assigns, does waive, release, relinquish and forever discharge the Bank, its parents, subsidiaries, and affiliates, its and their respective past, present and future directors, officers, managers, agents, employees, insurers, attorneys, representatives and all of their respective heirs, successors and assigns (collectively, the “Released Parties”), of and from any and all manner of action or causes of action, suits, claims, demands, judgments, damages, levies and executions of whatsoever kind, nature or description arising on or before the Closing Date, including, without limitation, any claims, losses, costs or damages, including compensatory and punitive damages, in each case whether known or unknown, asserted or unasserted, liquidated or unliquidated, fixed or contingent, direct or indirect, which the Borrower or such Guarantor, or its legal representatives, successors or assigns, ever had or now has or may claim to have against any of the Released Parties, with respect to any matter whatsoever, including, without limitation, the Loan Documents, the administration of the Loan Documents, the negotiations relating to this Agreement and the other Loan Documents executed in connection with this Agreement and any other instruments and agreements executed by the Borrower or such Guarantor in connection with the Loan Documents or this Agreement, arising on or before the Closing Date (collectively, “Claims”). The Borrower and each Guarantor acknowledges that it is aware that it may discover facts different from or in addition to those it now knows or believes to be true with respect to the Claims, and agrees that the release contained in this Agreement is and will remain in effect in all respects as a complete and general release as to all matters released in this Agreement, notwithstanding any such different or additional facts. The Borrower and each Guarantor agrees not to sue any Released Party or in any way assist any other person or entity in suing a Released Party with respect to any claim released in this Section.

 

(b)     The Borrower and each Guarantor irrevocably waives, to the extent permissible under law, any and all rights of redemption, the right to notice of any proposed sale of any of the Collateral constituting personal property (the “Personal Property Collateral”), or of any other disposition of any of the Personal Property Collateral, and any other rights with respect to the Personal Property Collateral under the Uniform Commercial Code or other laws of any state.

 

 

11

 

 

(c)     Pursuant to each of the (i) Addenda to the Revolving Credit Agreement and Note, (ii) Addenda to 2013 Term Loan Agreements and Notes and (iii) Section 2.14 of the 2014 Term Loan Agreement, the Borrower was required to maintain a Year-To-Date Fixed Charge Coverage Ratio as of February 28, 2017 for the fiscal year to date then ended of at least 1.0 to 1.0. The Borrower has notified the Bank that it has failed to maintain such Year-To-Date Fixed Charge Coverage Ratio as of February 28, 2017, which would result in a default under each Loan Agreement upon the reporting thereof (such default, the “Identified Default”). The Borrower has requested that the Bank waive the Identified Default. Effective upon the Closing Date, the Bank waives the Identified Default, provided, however, that the waiver granted in this Agreement is limited to the Identified Default and is not intended, and will not be construed, to be a general waiver of any term or provision of any Loan Agreement or a waiver of any other existing or future default.

 

10.     No Duress or Reliance. The Borrower and each Guarantor acknowledges and agrees that the Borrower or such Guarantor has received the advice of independent counsel, appraisers and accountants selected by the Borrower or such Guarantor, or the opportunity to obtain such advice, before entering into this Agreement and the other Loan Documents to which it is party referred to in this Agreement, and has not relied upon the Bank or any of its officers, directors, employees, agents or attorneys concerning any aspect of the transactions contemplated by this Agreement and the other Loan Documents to which it is a party referred to in this Agreement. The Borrower or such Guarantor executed and delivered this Agreement of the Borrower’s or such Guarantor’s own free will and will execute and deliver the other instruments required by this Agreement of the Borrower’s or such Guarantor’s own free will. The Borrower and such Guarantor further acknowledges that the Bank has not taken advantage of the Borrower or such Guarantor by threats, overreaching, unconscionable conduct or other activities and that the Borrower or such Guarantor is proceeding in all transactions contemplated in this Agreement as a volunteer and in what such Borrower or Guarantor perceives to be the Borrower’s or such Guarantor’s own best interest. 

 

11.     Notices. Any notice or other communication to any party in connection with this Agreement or any Loan Document shall be in writing and shall be sent by manual delivery, facsimile transmission, overnight courier or United States mail (postage prepaid) addressed to such party at the address specified below, or at such other or additional address as such party shall have specified to the other party in writing. All periods of notice (if any) shall be measured from the date of delivery of the notice if manually delivered, from the date of sending if sent by facsimile transmission, from the first business day after the date of sending if sent by overnight courier, or from four days after the date of mailing if mailed. Each notice or other communication should be addressed as follows: 

 

	
If to the Bank:
	
U.S. Bank National Association

9900 W. 87th Street

Overland Park, KS 66212

Attn: Michael Gloviak

Fax: (913) 652-5122

	
 
	
 

	
 
	
 

	
If to the Borrower:
	
Art’s-Way Manufacturing Company, Inc.

5556 Highway 9 West

Armstrong, Iowa 50514

Attn: Amber Murra, Chief Financial Officer

Fax: (712) 864-3154

 

 

12

 

 

	If to the Guarantors: 	
Art’s-Way Scientific, Inc.

5556 Highway 9 West

Armstrong, Iowa 50514

Attn: Amber Murra, Chief Financial Officer

Fax: (712) 864-3154

 

and

 

Ohio Metal Working Products/Art’s-Way, Inc.

5556 Highway 9 West

Armstrong, Iowa 50514

Attn: Amber Murra, Chief Financial Officer

 

The parties agree that the notice addresses set forth in this Agreement supersede and replace all prior notice addresses. 

 

12.     Representations and Warranties. The Borrower and each Guarantor warrants and represents that (a) on and as of the Closing Date and after giving effect to this Agreement, there will exist no default under the Loan Documents, as amended by this Agreement, or any other instruments executed by the Borrower or such Guarantor in connection with this Agreement or the Loan Documents, or circumstances that with the giving of notice, the passage of time or both will constitute an Event of Default under any Loan Document on such date; (b) the Borrower or such Guarantor has the power and legal right and authority to enter into, deliver and perform this Agreement, and any other documents or agreements executed by the Borrower or such Guarantor in connection with this Agreement, and that neither this Agreement, nor the agreements contained in this Agreement or any documents or agreements executed by the Borrower or such Guarantor in connection with this Agreement contravene any provision of or constitute a default under any agreement, instrument or indenture to which the Borrower or such Guarantor is a party or signatory or any provision of the Borrower’s or such Guarantor ’s constituent documents, if applicable, or any other agreement or requirement of law; (c) this Agreement and all other documents or agreements executed by the Borrower or such Guarantor in connection with this Agreement have been duly executed and delivered by the Borrower or such Guarantor and constitute the legal, valid and binding obligation of the Borrower or such Guarantor, enforceable against it in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and by general principles of equity; and (d) no consent, approval or authorization of or registration or declaration with any party, including but not limited to any governmental authority, is required (except for those which the Borrower or such Guarantor has obtained or provided) in connection with the execution and delivery by the Borrower or such Guarantor of this Agreement, or any other documents or agreements executed by the Borrower or such Guarantor in connection with this Agreement, or the performance of the obligations of the Borrower or such Guarantor described in this Agreement. 

 

13.     Further Assurances. The Borrower shall promptly correct any defect or error that may be discovered in any Loan Document or in the execution, acknowledgment or recordation of any Loan Document. Promptly upon request by the Bank, the Borrower also shall do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register, any and all deeds, conveyances, mortgages, deeds of trust, trust deeds, assignments, estoppel certificates, financing statements and continuations thereof, notices of assignment, transfers, certificates, assurances and other instruments as the Bank may reasonably require from time to time in order: (a) to carry out more effectively the purposes of the Loan Documents; (b) to perfect and maintain the validity, effectiveness and priority of any security interests intended to be created by the Loan Documents; and (c) to better assure, convey, grant, assign, transfer, preserve, protect and confirm unto the Bank the rights granted now or hereafter intended to be granted to the Bank under any Loan Document or under any other instrument executed in connection with any Loan Document or that the Borrower may be or become bound to convey, mortgage or assign to the Bank in order to carry out the intention or facilitate the performance of the provisions of any Loan Document. The Borrower shall furnish to the Bank evidence satisfactory to the Bank of every such recording, filing or registration.

 

 

13

 

 

14.     Copies; Entire Agreement; Modification. The Borrower acknowledges the receipt of a copy of the Notes and all other Loan Documents. The Notes and all of the Loan Documents are each a “transferable record” as defined in applicable law relating to electronic transactions. Therefore, the Bank may, on behalf of the Borrower, create a microfilm or optical disk or other electronic image of the Notes and any or all of the Loan Documents that is an authoritative copy as defined in such law. The Bank may store the authoritative copy of such Notes and any or all of the Loan Documents in its electronic form and then destroy the paper original as part of the Bank’s normal business practices. The Bank, on its own behalf, may control and transfer such authoritative copy as permitted by such law. 

 

15.     Additional Provisions. TIME IS OF THE ESSENCE WITH RESPECT TO ALL PROVISIONS OF THIS AGREEMENT. No amendment, modification or waiver of the provisions of this Agreement or any Loan Document is effective unless the same is in writing and signed by the party against whom it is to be enforced, and then such amendment, modification or waiver shall be effective only in the specific instance and for the specific purpose for which given. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER AND IN ACCORDANCE WITH THE LAWS OF THE STATE OF IOWA, BUT GIVING EFFECT TO FEDERAL LAWS OF THE UNITED STATES APPLICABLE TO NATIONAL BANKS. The Loan Documents as modified by this Agreement, and this Agreement, shall represent the entire agreement among the Borrower, the Guarantors and the Bank with respect to the modification of the Loan Documents, shall supersede any prior oral negotiations or agreements, and shall be binding upon the parties to this Agreement and their respective legal representatives, successors and assigns. In the event of any conflict between the provisions of this Agreement and the provisions of any Loan Document, the provisions of this Agreement shall govern. If any part of this Agreement is held to be illegal, invalid or unenforceable, (a) the remainder of this Agreement shall continue in full force and effect, notwithstanding such illegality, invalidity or unenforceability and (b) the judge or arbiter holding that part illegal, invalid or unenforceable shall attempt to reform that part so as to give effect to the original intent of the parties. Section headings in this Agreement are for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. This Agreement may be executed in different counterparts with the same effect as if the signatures were on the same instrument, and will be effective upon delivery of all such counterparts to the Bank. Facsimiles or other photocopies or images of executed signature pages to this Agreement shall be considered originals.

 

16.     Waiver of Jury Trial. THE BORROWER, EACH GUARANTOR AND THE BANK IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY LOAN DOCUMENT.

 

17.     No Commitment to Extend, Modify or Forbear. EXCEPT AS SPECIFICALLY PROVIDED IN THIS AGREEMENT, THE BANK IS NOT COMMITTED, AND IS NOT COMMITTING AT THIS TIME, TO EXTEND, MODIFY OR OTHERWISE RESTRUCTURE ANY LOAN, OR FORBEAR FROM EXERCISING ANY OF ITS RIGHTS OR REMEDIES UNDER THE LOAN DOCUMENTS, AS AMENDED BY THIS AGREEMENT. NO PRIOR COURSE OF DEALING, NO USAGE OF TRADE, AND NO ORAL STATEMENTS OR COMMENTS BY THE BANK OR ITS OFFICERS, EMPLOYEES, ATTORNEYS OR OTHER AGENTS WILL BE DEEMED TO BE A COMMITMENT BY THE BANK TO EXTEND, MODIFY, OR OTHERWISE RESTRUCTURE ANY LOAN OR FORBEAR FROM EXERCISING ANY OF ITS RIGHTS OR REMEDIES, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, OR UNLESS THE SAME SHALL BE REDUCED IN WRITING AND SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE BANK.

 

 

14

 

 

18.     Borrower’s Understanding. THE BORROWER ACKNOWLEDGES THAT: (A) THIS AGREEMENT CONTAINS A COMPLETE RELEASE OF CLAIMS AND WAIVERS OF CERTAIN RIGHTS; (B) THE BORROWER HAS READ AND UNDERSTOOD THIS AGREEMENT IN ITS ENTIRETY PRIOR TO SIGNING AND FULLY AGREES TO EACH, ALL AND EVERY PROVISION OF THIS AGREEMENT; AND (C) THE BORROWER HAS RECEIVED A COPY OF THIS AGREEMENT.

 

19.     IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS AGREEMENT SHOULD BE READ CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING AND SIGNED BY THE PARTIES ARE ENFORCEABLE. NO OTHER TERMS OR ORAL PROMISES NOT CONTAINED IN THIS WRITTEN CONTRACT MAY BE LEGALLY ENFORCED. THE TERMS OF THIS AGREEMENT MAY ONLY BE CHANGED BY ANOTHER WRITTEN AGREEMENT. THIS NOTICE SHALL ALSO BE EFFECTIVE WITH RESPECT TO ALL OTHER CREDIT AGREEMENTS NOW IN EFFECT BETWEEN THE BORROWER AND THE BANK. A MODIFICATION OF ANY OTHER CREDIT AGREEMENTS NOW IN EFFECT BETWEEN THE BORROWER AND THE BANK, WHICH OCCURS AFTER RECEIPT BY THE BORROWER OF THIS NOTICE, MAY BE MADE ONLY BY ANOTHER WRITTEN INSTRUMENT. ORAL OR IMPLIED MODIFICATIONS TO SUCH CREDIT AGREEMENTS ARE NOT ENFORCEABLE AND SHOULD NOT BE RELIED UPON.

 

[The next page is the signature page.]

 

 

15

 

 

IN WITNESS WHEREOF, the parties to this Loan Modification Agreement have caused it to be duly executed as of the date set forth below.

 

	
Date: March 30, 2017
	
ART’S-WAY MANUFACTURING COMPANY, INC.,

a Delaware corporation
	
 

	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 

	
 
	
By: 
	
/s/ Amber Murra
	
 

	
 
	
Name: Amber Murra
	
 

	
 
	
Title: CFO
	
 

  

 

	
Date: March 30, 2017
	
ART’S-WAY SCIENTIFIC, INC.,

an Iowa corporation
	
 

	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 

	
 
	
By: 
	
/s/ Amber Murra
	
 

	
 
	
Name: Amber Murra
	
 

	
 
	
Title: CFO
	
 

 

 

	
Date: March 30, 2017
	
Ohio Metal Working Products/Art’s-Way, Inc., 

an Ohio corporation 
	
 

	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 

	
 
	
By: 
	
/s/ Amber Murra
	
 

	
 
	
Name: Amber Murra
	
 

	
 
	
Title: CFO
	
 

  

 

	
Date: March 30, 2017
	
U.S. BANK NATIONAL ASSOCIATION,

a national banking association
	
 

	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 

	
 
	
By: 
	
/s/ Michael Gloviak
	
 

	
 
	
Name: Michael Gloviak
	
 

	
 
	
Title: Vice President
	
 

 

 

16

 

 

ADDENDUM TO LOAN AGREEMENT

 

OFAC, Anti-Corruption Laws and the Patriot Act

 

Reference is made to the (a) Revolving Credit Agreement dated as of May 1, 2013 between the ART’S WAY MANUFACTURING CO., INC., a Delaware corporation (the “Borrower”) and the U.S. BANK NATIONAL ASSOCIATION, a national banking association (the “Bank”) (as amended, restated, supplemented or otherwise modified from time to time, “Revolving Credit Agreement”); (b) Term Loan Agreement dated as of May 1, 2013 between the Borrower and the Bank (as amended, restated, supplemented or otherwise modified from time to time, “2013 Term Loan Agreement”), (c) Term Loan Agreement dated as of May 29, 2014 between the Borrower and the Bank (as amended, restated, supplemented or otherwise modified from time to time, “2014 Term Loan Agreement”; together with the Revolving Credit Agreement and the 2013 Term Loan Agreements, collectively, the “Loan Agreements”), as applicable. Unless otherwise defined herein, terms defined in the Loan Agreement and used herein shall have the meanings given to them in the applicable Loan Agreement.

 

1.     Definitions. As used herein, the following terms shall have the meanings assigned to them below:

 

“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to the Borrower or its subsidiaries from time to time concerning or relating to bribery or corruption.

 

“OFAC” means the U.S. Department of the Treasury’s Office of Foreign Assets Control, and any successor thereto.

 

“PATRIOT Act” means the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), as amended from time to time, and any successor statute.

 

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, governmental authority or other entity.

 

“Sanctioned Country” means, at any time, any country or territory which is itself the subject or target of any comprehensive Sanctions.

 

“Sanctioned Person” means, at any time, (a) any Person or group listed in any Sanctions related list of designated Persons maintained by OFAC or the U.S. Department of State, the United Nations Security Council, the European Union or any EU member state, (b) any Person or group operating, organized or resident in a Sanctioned Country, (c) any agency, political subdivision or instrumentality of the government of a Sanctioned Country, or (d) any Person 50% or more owned, directly or indirectly, by any of the above.

 

“Sanctions” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by OFAC or the U.S. Department of State or (b) the United Nations Security Council, the European Union or Her Majesty’s Treasury of the United Kingdom. 

 

2.     Representations and Warranties. In addition to any representations or warranties contained in the Note, the Agreement or other Loan Documents, the Borrower hereby represents and warrants to the Bank that the following are true, correct and complete: 

 

	 	
(a)
	
Anti-Corruption Laws; Sanctions; Anti-Terrorism Laws. 

 

 

17

 

 

(i)     The Borrower and each Guarantor, their respective subsidiaries and their respective officers and employees and to the knowledge of the Borrower or such Guarantor, its directors and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects. None of the Borrower, any Guarantor or any subsidiary thereor or to the knowledge of the Borrower or such Guarantor, any of their respective directors, officers or employees is a Sanctioned Person. No loan, use of the proceeds of any loan or other transactions contemplated by the Agreement, the Note or any other Loan Document will violate Anti-Corruption Laws or applicable Sanctions.

 

(ii)     Neither the making of the loans under the Note or the Agreement nor the use of the proceeds thereof will violate the PATRIOT Act, the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 C.F.R., Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto or successor statute thereto. The Borrower, each Guarantor and their subsidiaries are in compliance in all material respects with the PATRIOT Act.

 

3.     Covenants. In addition to any representations or warranties contained in the Note, the Agreement or other Loan Documents, the Borrower and each Guarantor covenants and agrees that, so long as any loan or other Obligation (as defined in the Agreement) (other than contingent indemnification Obligations to the extent no claim giving rise thereto has been asserted) shall remain unpaid or unsatisfied or any commitment shall remain outstanding:

 

(a)     Use of Proceeds. The Borrower will not request any loan, and the Borrower shall not use, and the Borrower shall ensure that its subsidiaries and its or their respective directors, officers, employees and agents shall not use, the proceeds of any loan (i) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of any Anti-Corruption Laws or (ii) in any manner that would result in the violation of any applicable Sanctions. 

 

(b)     Compliance with Laws. The Borrower will, and will cause each subsidiary to, comply in all material respects with all laws, rules, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject including, without limitation, all Environmental Laws, Anti-Corruption Laws and applicable Sanctions.

 

(c)     PATRIOT Act Compliance. The Borrower shall, and shall cause each subsidiary to, provide such information and take such actions as are reasonably requested by the Bank in order to assist the Bank in maintaining compliance with the PATRIOT Act.

 

THIS ADDENDUM SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF IOWA.

 

Signature page follows.

 

 

18

 

 

 

IN WITNESS WHEREOF, the undersigned caused this Addendum to be duly executed and delivered as of the date set forth below.

  

	
Date: March 30, 2017
	
ART’S-WAY MANUFACTURING COMPANY, INC.,

a Delaware corporation
	
 

	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 

	
 
	
By: 
	/s/ Amber Murra	
 

	
 
	
Name:
	
Amber Murra
	
 

	
 
	
Title:
	
CFO
	
 

 

 

19Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT,
effective as of April 17, 2017, between SUMMIT HOTEL PROPERTIES, INC., a Maryland corporation (the “Company”),
and Jonathan P. Stanner (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 Executive Vice President and Chief Investment 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 Executive
Vice President and Chief Investment 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 April 17, 2017
(the “Effective Date”), and continue until May 27, 2018. 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 report to
the Company’s Chief Executive Officer and shall have such duties and responsibilities as may be assigned to him by the Chief
Executive Officer or by the Company’s Board of Directors (the “Board”).

 

     

     

    

 

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 Four Hundred Thousand Dollars ($400,000), 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)2017
Bonus.In addition to the Executive’s annual Base Salary the Executive may have the opportunity to earn additional
cash compensation (“2017 Bonus”) as determined by the Committee. The 2017 Bonus shall be determined by the Committee
at its discretion and shall be a prorated amount based on corporate objectives established by the Committee. Any 2017 Bonus that
is earned pursuant to this paragraph shall be paid in a single lump sum payment no later than March 15, 2018.

 

(c)       Annual
Bonus. In addition to the Executive’s annual Base Salary, for performance in each calendar year, except for 2017, 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 one hundred
percent (100%) 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 Base Salary 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 a prorated paid vacation amount 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 days. 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. If the Company offers life insurance
coverage, the Executive shall have the right to name the beneficiary of such life insurance policy.

 

    	 	2	 

     

    

 

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

    	 	3	 

     

    

 

 

9.       COMPENSATION
UPON TERMINATION WITH CAUSE, VOLUNTARY TERMINATION, DEATH OR DISABILITY OR NON-RENEWAL OF EMPLOYMENT AGREEMENT. This Section
9 applies in the event that the Executive’s employment ends upon a Termination With Cause, a Voluntary Termination, death
or Disability, a termination in connection with non-renewal of this Employment Agreement 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)       In
the case of a Termination With Cause, Voluntary Termination or Non-Renewal of Employment Agreement, the Executive shall be entitled
to receive any compensation (including Base Salary and Annual Bonus as determined by the Committee and accrued but unused vacation)
that is earned prior to the Date of Termination, provided that any payment of an Annual Bonus made under this Section 9(a) shall
only be made if the Executive remains employed by the Company until the date that Annual Bonuses are paid to other Company executives.
In the case of a termination upon Death or Disability, the Executive, his estate or beneficiaries, shall be entitled to receive
any compensation (including Base Salary and a prorated Annual Bonus to the Date of Termination as determined by the Committee and
accrued but unused vacation) that is earned prior to the Date of Termination. Any payment of an Annual Bonus as a result of Death
or Disability shall be paid on the date that Annual Bonuses are paid to other Company executives.

 

    	 	4	 

     

    

 

(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 agreement between
the Company and the Executive; 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 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 one hundred percent (100%)
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).

 

    	 	5	 

     

    

 

(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 following 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
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 Section 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 (each as defined in Section 11) 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 (as defined in Section 11) 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.

 

    	 	6	 

     

    

 

(y)       Any
balance of the Cash Severance, i.e., the amount of the Cash Severance that exceeds the Exempt Amount, shall be payable in
twelve (12) 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.

 

(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).

 

    	 	7	 

     

    

 

(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).

 

(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
or by virtue of non-renewal of this Employment Agreement 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.

 

    	 	8	 

     

    

 

(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 or action that the Executive asserts constitutes Good
Reason), the event or action that the Executive asserts constitutes Good Reason is not cured, to the reasonable satisfaction of
the 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.

 

    	 	9	 

     

    

 

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 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.

 

    	 	10	 

     

    

 

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, 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, and its subsidiaries’ and affiliates’, 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)       Confidentiality.
As further consideration for Executive’s agreements herein, the Company agrees to provide Executive with confidential Company
information. 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
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 April 1, 2017; or (vi) is required to be disclosed by rule of law or by order of a court or governmental body
or agency.

 

    	 	11	 

     

    

 

(c)       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 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.

 

    	 	12	 

     

    

 

(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.

 

(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, the Company will instruct the Company’s
executive officers, and members of the Board to 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 remain 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.

 

    	 	13	 

     

    

 

(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 of the provisions of this Agreement shall not thereby be affected and shall be given full effect,
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,
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.

 

    	 	14	 

     

    

 

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 in writing. Such notices shall be effective
upon receipt or refusal of receipt following deposit into the United States mail, registered or certified, return receipt requested,
postage prepaid, or if hand delivered or if sent by nationally recognized overnight courier providing evidence of delivery or when
sent by electronic mail (with a copy delivered on the next business day) at the following addresses or to such other addresses
as either may designate in writing to the other party:

 

	 	To the Company:	Summit Hotel Properties, Inc.
	 	 	Attn:  Corporate Secretary
	 	 	12600 Hill Country Boulevard
	 	 	Suite R-100
	 	 	Austin, Texas  78738
	 	Email:	 
	 	 	 
	 	To the Executive:	Jonathan Stanner
	 	 	(Address)
	 	 	 
	 	Email:	 

  

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(g), 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).

 

    	 	15	 

     

    

 

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
22 do not affect or detract from the Company’s rights under Section 15 or Section 24.

 

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.

 

26.       EXPENSE
REIMBURSEMENT. Upon the execution of this Employment Agreement, the Company shall reimburse the Executive for his documented
legal fees and expenses in reviewing and negotiating this Employment Agreement, up to a maximum of $5,000.00.

 

    	 	16	 

     

    

 

IN WITNESS WHEREOF, the
parties have executed this Agreement effective as of April 17, 2017.

  

	 	SUMMIT HOTEL PROPERTIES, INC.
	 	 
	 	 
	 	 	/s/ Christopher Eng
	 	By:	Christopher Eng
	 	Title:	Secretary
	 	 	 
	 	 	 
	 	EXECUTIVE
	 	 	 
	 	 	/s/ Jonathan P. Stanner
	 	 	Jonathan P. Stanner
	 	 	 

 

 

 

 

    	 	17	 

     

    

 

 

 

EXHIBIT A

INDEMNIFICATION AGREEMENT

 

 

 

 

    	 	18

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