FIRST AMENDED AND RESTATED LOAN AGREEMENT

FIRST AMENDED AND RESTATED LOAN AGREEMENT

THIS FIRST AMENDED AND RESTATED LOAN AGREEMENT (“Agreement”) is entered into as of August 31, 2009 by and between FIRST NATIONAL BANK OF OMAHA, N.A., a national banking association (“First National”) as a Lender, Administrative Agent and Collateral Agent for the Lenders, as a Lender, Bank Midwest, N.A., a national banking association (“Bank Midwest”) as a Lender, Crawford County Trust & Savings, a State banking association (“Crawford County”) as a Lender, Quad City Bank & Trust Co., a State banking association (“Quad City”) as a Lender, and the other Lenders a party hereto from time to time, and SUMMIT HOTEL PROPERTIES, LLC (“Summit Hotel”), a South Dakota limited liability company and SUMMIT HOSPITALITY V, LLC (“Summit Hospitality”), a South Dakota limited liability company. First National, Bank Midwest, Crawford County, Quad City and the other lenders a party hereto from time to time may be hereinafter collectively referred to as the “Lenders” and individually as a “Lender”. Summit Hotel and Summit Hospitality may be collectively referred to hereinafter as the “Borrowers” and individually as a “Borrower”. The Administrative Agent and the Collateral Agent for the Lenders may be hereinafter collectively referred to as the “Agent”.

WHEREAS, the Borrowers, the Agent, and certain of the Lenders are parties to a Loan Agreement, dated as of June 24, 2005, as amended (as so amended and as in effect prior to the date hereof, the “Current Credit Agreement”), pursuant to which the Lenders party thereto have made loans available to the Borrowers;

WHEREAS, the Borrowers have requested that the Current Credit Agreement be amended and restated on the terms and conditions set forth herein;

WHEREAS, it is intended that the indebtedness of the Borrowers under this Agreement be a continuation of the indebtedness of the Borrowers under the Current Credit Agreement; and

WHEREAS, under the terms and conditions of and subject to the limitations contained in this Agreement, Lenders have approved financial accommodations in the maximum principal amount of the lesser of (i) the aggregate Commitments from Lenders or (ii) $35,000,000.00. The Loans will consist of Pool One Loans and Pool Two Loans as provided for in this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

ARTICLE I
Loans

1.1. Definitions . Certain capitalized terms not otherwise defined in the body of this Agreement shall have the meanings given to such terms in Exhibit A attached hereto and incorporated herein by reference.

1.2. Loans . Subject to the terms of this Agreement and the maximum amount available under the Pool One Loan Formula for Pool One Advances and Pool Two Loan Formula for Pool Two Loans, Lenders severally agree to lend Borrowers, from time to time until the termination hereof, such sums as a Borrower may request, but which shall not exceed in the aggregate principal amount at any time outstanding the lesser of (i) the aggregate Commitments from Lenders, and (ii) Thirty-Five Million and No/100 Dollars ($35,000,000.00). In no event shall the outstanding principal amount of the Loans exceed the aggregate Commitments from Lenders. The Loans will consist of Pool One Loans and Pool Two Loans. In addition, the aggregate Commitments will be reduced by the outstanding principal amount of Loans extended under the Current Loan Agreement.

1.3. Pool One Loans . Subject to the terms of this Agreement, the maximum amount available under the Pool One Loan Formula and the aggregate Commitments, Lenders severally agree to lend Borrowers, from time to time until the termination hereof, such sums as a Borrower may request under a Notice of Borrowing for a Pool One Loan. In no event shall a Pool One Advance exceed the Pool One Loan Formula or the aggregate Commitments from Lenders then available for borrowing. Subject to the conditions and limitations set forth in this Agreement, Pool One Advances will be made to the Borrowers, from time to time during the period commencing on the date hereof to, but not including, the Termination Date, unless renewed by written agreement between Lenders and Borrowers. In addition to the foregoing, availability for Pool One Advances shall be deemed to automatically terminate if the occurrence of an Event of Default (as defined under Article VI hereof) causes the Loans to become immediately due and payable. Each Pool One Advance made by Lenders shall be evidenced by a Pool One Note, which along with this Agreement, the Pool Two Notes, Security Agreements, the Amended and Restated Security Agreements, Mortgages and/or any other loan document executed in connection with the Loans, and all modifications, amendments, restatements and replacements thereof, shall be hereinafter collectively referred to as the “Loan Documents”.

1.4. Pool Two Loans . Subject to the terms of this Agreement, the maximum amount available under the Pool Two Loan Formula, the aggregate Commitments and the satisfaction of the Conversion Requirements, a Borrower may request from Lenders Pool Two Loans as initial loans under this Agreement or as the conversion of a Pool One Loan to a Pool Two Loan on or before the maturity date of a Pool One Loan. Subject to the conditions and limitations set forth in this Agreement, Pool Two Loans will be made to the Borrowers severally by Lenders, from time to time during the period commencing on the date hereof to, but not including, the Termination Date, unless renewed by written agreement between Lenders and Borrowers. In addition to the foregoing, the obligation of Lenders to make Pool Two Loans shall be deemed to automatically terminate if the occurrence of an Event of Default causes the Loans to become immediately due and payable. Each Pool Two Loan made by Lenders shall be evidenced by a Pool Two Note. A Borrower may only convert a Pool One Loan to a Pool Two Loan and Lenders will only make Pool Two Loans to the requesting Borrower as original loans if all of the following requirements and conditions are met (the “Conversion Requirements”):

(a) The principal amount of a Pool Two Loan increased to the nearest multiple of $100,000.00 shall not exceed sixty-five percent (65%) of the lesser of (i) the Appraised Value of the Hotel acquired with the proceeds of the Pool One Loan being converted to the Pool Two Loan or the Hotel securing the Pool Two Loan if the Pool Two Loan is an initial loan under this Agreement and (ii) the Project Costs of the Hotel acquired with the proceeds of the Pool One Loan being converted to the Pool Two Loan or the Project Costs of the Hotel securing the Pool Two Loan if the Pool Two Loan is an initial loan under this Agreement, provided, however, that notwithstanding the foregoing, without the prior written consent of the Required Lenders, the amount of a Pool Two Loan shall not exceed one hundred twenty percent (120%) of the purchase price of the Hotel acquired with such Pool One Advance being converted to a Pool Two Loan or the Hotel securing the Pool Two Loan if the Pool Two Loan is an initial loan under this Agreement. Notwithstanding the foregoing, only with respect to a Hotel to which the applicable Borrower will make major capital expenditures due to major renovations (a major renovation being an expenditure of $3,500 or more on each room of such Hotel for renovations within the 36 month period prior to the date of determination or the 6 month period thereafter) of such Hotel (a “Renovated Hotel”) and which has either secured a Pool Two Loan which has been outstanding for one year or the acquisition of which was financed by a Pool One Loan which has been outstanding for at least one year, (i) a Borrower may refinance the original Pool Two Loan secured with such Renovated Hotel only in the maximum principal amount increased to the nearest multiple of $100,000.00 equal to or less than sixty-five percent (65%) of the Appraised Value of such Renovated Hotel, and (ii) if a Borrower desires to refinance the Pool One Loan which financed the acquisition of a Renovated Hotel with a Pool Two Loan, then the principal amount of such Pool Two Loan increased to the nearest multiple of $100,000.00 must be equal to or less than sixty-five percent (65%) of the Appraised Value of such Renovated Hotel. However, the foregoing one (1) year waiting requirement with respect to a Renovated Hotel being converted to a Pool Two Loan will not apply if the Renovated Hotel has been owned by the applicable Borrower in excess of three (3) years; provided, that the maximum principal amount of the Pool Two Loan secured by such Renovated Hotel may not exceed sixty-five percent (65%) of the Appraised Value of such Renovated Hotel. The foregoing is referred to in the Agreement as the “Pool Two Loan Formula”.

(b) The Hotel acquired with the proceeds of the Pool One Loan being converted to the Pool Two Loan or the Hotel securing the Pool Two Loan individually must have a Debt Service Coverage Ratio, based on a trailing twelve (12) month cash flow of such Hotel, of not less than 1.25;

(c) No Event of Default has occurred and is continuing;

(d) Sufficient Commitments are available to fund the Pool Two Loan if the Pool Two Loan is an initial loan and not a refinance of a Pool One Loan; and

(e) Borrowers are in compliance with the financial covenants set forth below, both before and after conversion of the Pool One Loan to a Pool Two Loan or the making of the Pool Two Loan as an initial loan under this Agreement, all as evidenced and detailed by a Pool Two Certificate substantially in the form contained in Schedule 1.8 attached hereto and incorporated herein by reference, which Borrowers shall deliver to the Agent as part of a request for a Pool Two Loan.

1.5. Notes . To evidence Pool One Loans, the applicable Borrower shall execute and deliver to Agent Pool One Notes payable to Lenders substantially in the form of the Pool One Note attached hereto as Exhibit B and incorporated herein by reference. Each Pool One Note shall mature and be due and payable in full in two (2) years after the date of such Pool One Note. To evidence Pool Two Loans, the applicable Borrower shall execute and deliver to Agent Pool Two Notes payable to Lenders substantially in the form of the Pool Two Note attached hereto as Exhibit C and incorporated herein by reference. Each Pool Two Note shall mature and be due and payable in full in five (5) years after the date of such Pool Two Note. The Agent is authorized to record in a manner satisfactory to the Agent, appropriate notations evidencing the date and amount of each Pool One Loan and each Pool Two Loan, the interest rate applicable thereto, the date and amount of each payment, and the interest of each Lender therein, which recording shall constitute prime facie evidence of the accuracy of the information recorded; provided, however, that the failure to make such recordings shall not affect the obligations of Borrowers under the Loans or this Agreement or affect the validity of any Loan.

1.6. Repayment . The Loans shall be repaid as follows:

(a) Pool One Loans . Each Pool One Note shall be payable interest only, with accrued interest paid monthly in arrears. The outstanding principal balance together with accrued and unpaid interest shall be due and payable in full on the second anniversary date of such Pool One Note.

(b) Pool Two Loans . The principal and interest balance of each Pool Two Note shall be payable in fifty-nine (59) equal monthly installments, with the amount of such monthly installments calculated on a twenty (20) year amortization schedule and the interest rate in effect on the date of funding of such Pool Two Note, with the outstanding principal balance together with accrued and unpaid interest due and payable in full on the fifth anniversary date of such Pool Two Note.

All payments due under this Agreement and the other Loan Documents shall be made in immediately available funds to the Agent at its office described in the notice provision of this Agreement unless the Agent gives notice to the contrary. Payments so received at or before 1:00 p.m. Omaha, Nebraska time on any Business Day shall be deemed to have been received by the Agent on that Business Day. Payments received after 1:00 p.m. Omaha, Nebraska time on any Business Day shall be deemed to have been received on the next Business Day, and interest, if payable in respect of such payment, shall accrue thereon until such next Business Day. The Agent shall remit to each Lender its Percentage of all payments of principal and interest received by the Agent no later than the next Business Day after the Agent is deemed to have received such payment.

1.7. Interest .

(a) The principal balance of each Pool One Note shall bear interest at a variable per annum rate equal to the greater of (i) the LIBOR Rate plus four percent (4%), fixed for interest periods of ninety (90) days, or (ii) five and one half percent (5 1/2 %). In no event will Pool One Notes bear interest at a per annum rate less than five and one half percent (5 1/2 %).

(b) The principal balance of each Pool Two Note shall bear interest at a per annum rate equal to the greater of (i) the LIBOR Rate plus four percent (4%), fixed for interest periods of ninety (90) days, or (ii) five and one quarter percent (5 1/4 %). In no event will Pool Two Notes bear interest at a per annum rate less than five and one quarter percent (5 1/4 %).

Interest on the Loans shall be calculated on the number of days outstanding based upon a year consisting of three hundred and sixty (360) days. The LIBOR Rate shall initially be set on the first Business Day on the calendar month of the applicable note, and shall adjust 90 days thereafter to the LIBOR Rate in effect on the first Business Day of the month in which the such 90 ^th day falls. If the Loan is made on any day other than the first Business Day of a month, the initial LIBOR Rate to be in effect until adjustment as provided for above month shall be that 90 day LIBOR rate in effect on the first Business Day of the month of in which the Loan is made. The interest rate charged on any Pool One Notes and Pool Two Notes outstanding under the Current Loan Agreement is hereby amended to the applicable rate provided for in this Section.

All Loans shall bear interest after their maturity date, whether by acceleration or otherwise, at the variable per annum rate of four percent (4%) in excess of the interest rate determined above, but not to exceed the maximum rate allowed by law.

1.8. Notice of Borrowing/Disbursements . A Borrower may request a Pool One Advance or a Pool Two Loan by delivering a notice (a “Notice of Borrowing”) to the Agent not less than thirty (30) Business Days prior to the date of funding of such Pool One Advance or Pool Two Loan. Each Notice of Borrowing shall specify the requested date of such Pool One Advance or Pool Two Loan (which shall be a Business Day), and the amount of such requested Pool One Advance or Pool Two Loan. In addition, with each Notice of Borrowing, with respect to a Pool One Advance, the applicable Borrower will complete and deliver to the Agent a Pool One Certificate for the Hotel securing such Pool One Advance, and the Franchise and address of the Hotel securing such Pool One Advance, and, with respect to a Notice of Borrowing for a Pool Two Loan, a completed Pool Two Certificate for the Hotel securing such Pool Two Loan, and the Franchise and address of the Hotel securing such Pool Two Loan. Each Borrower agrees that the Agent may rely and act upon any Notice of Borrowing Agent receives from an individual who the Agent, absent gross negligence or willful misconduct, believes to be a representative of a Borrower. The Agent will provide the Lenders each Notice of Borrowing received by the Agent.

The Lenders shall, before 1:00 p.m. central time on the date of funding of such Pool One Advance or Pool Two Loan, make available to the Agent at the Agent’s address referred to in this Agreement for notices in same day funds, such Lenders’ Percentage of such Pool One Advance or Pool Two Loan. After the Agent’s receipt of such funds, the Agent will make such funds available to the applicable Borrower as provided for in this Agreement. Notwithstanding the foregoing, unless the Agent shall have received notice from a Lender prior to the date of funding of any Pool One Advance or Pool Two Loan that such Lender will not make available to the Agent such Lender’s Percentage of such Pool One Advance or Pool Two Loan, the Agent may assume that each Lender has made such Percentage available to the Agent on the date of funding of such Pool One Advance or Pool Two Loan in accordance with the first sentence of this paragraph, and the Agent may, in reliance upon such assumption, make available to the applicable Borrower on such date a corresponding amount. If and to the extent a Lender shall not have so made such funds available to the Agent (a “Funding Default”), such Lender agrees to repay to the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the applicable Borrower until the date such amount is repaid to the Agent, at the customary rate reasonably set by the Agent for the correction of errors among banks. If such Lender shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Lender’s Percentage in such Pool One Advance or Pool Two Loan, as the case may be, for purposes of this Agreement. Once a Funding Default has occurred, then the Agent shall no longer have the discretion under this Section to make funds available to the applicable Borrower on the assumption that the Lenders will make the corresponding funds available to the Agent. In no event shall the Agent be obligated to advance funds to the Borrowers (and in no event shall any other Lender have any liability to the Borrowers) if a Defaulting Lender fails to advance its share of such funds to the Agent in accordance with the requirements of this Section.

The Agent will deposit the proceeds of any Pool One Advance or Pool Two Loan to the requesting Borrower’s designated deposit account maintained at First National.

1.9. Conditions to Advances . In addition to the conditions precedent set forth in Article VII below, each request for a Loan shall be deemed to constitute a representation by the Borrowers at the time of the request that no Event of Default (as defined in Article VI hereof) exists or is imminent and that the representations and warranties of the Borrowers contained in this Agreement and the other Loan Documents are true in all material respects on or as of the date of such request for a Loan.

1.10. Purpose . Borrowers will use the Pool One Advances to finance the requesting Borrower’s Hotels. Borrowers will use the Pool Two Loans to refinance Pool One Advances at or prior to the maturity of such Pool One Advances and to refinance debt on existing Hotels.

1.11. Minimum Amounts . Each Pool One Advance and Pool Two Loan shall be in a minimum aggregate principal amount of $100,000.00 and integral multiples of $100,000.00 in excess thereof, subject to the maximum amount available for borrowing on Loans as provided for in this Agreement, increased to the nearest $100,000.00 multiple.

1.12. Fees . In consideration for Lenders making the Loans available to Borrowers, Borrowers will jointly and severally pay to the Agent for the pro rata account of Lenders (i) a commitment fee equal to ten (10) basis points of the aggregate Commitments of the Lenders payable in full at the closing of this Agreement. In addition, Borrowers will jointly and severally pay the Agent for the pro rata account of Lenders an unused fee on the unused Commitments available during the period of determination in the amount of .15% per annum, payable quarterly, in arrears. The foregoing fees shall be shared by Lenders pro rata based upon the amount of each Lender’s Commitment and the date such Commitment becomes available to Borrowers bears to the remaining term to the Termination Date. In addition, Borrowers will jointly and severally pay the Agent for the account only of the Agent an annual agency fee equal to twelve and one half (12 1/2 ) basis points of the aggregate Commitments of the Lenders payable at the closing of this Agreement and on the first anniversary date of this Agreement.

Additional commitment fees and agency fees which arise due to an increase in a Lender’s Commitment or the adding of a Lender and such added Lender’s Commitment shall also be due at the time such increased Commitment or additional Commitment becomes available to Borrowers for borrowing and shall be prorated based on the amount of the Commitment added by such Lender and the number of days remaining until the Termination Date.

ARTICLE II
Collateral; Reserves

Payment of Borrowers’ obligations hereunder, under the Loans and under the Loan Documents shall be secured and/or supported by the following (hereinafter collectively referred to as the “Collateral”) until all such obligations are fully and finally paid and performed in full:

2.1. Personal Property . The Loans made pursuant to this Agreement and all other indebtedness arising hereunder or in connection herewith shall be collateralized and supported by a security interest, and each Borrower hereby grants to the Agent, a security interest in all of each Borrower’s respective assets associated with or located at a Hotel encumbered with a mortgage or deed of trust to secure the Loans, including, but not limited to, each Borrower’s goods, equipment and inventory, now owned as well as any and all thereof that may hereafter be acquired by such Borrower, and in and to all cash and non-cash proceeds (including, without limitation, insurance proceeds), accessions, accessories and products thereof, and all of such Borrower’s accounts receivable, general intangibles, payment intangibles, software, chattel paper (whether tangible or electronic), deposit accounts, documents, investment property and instruments now owned or hereafter arising or acquired and all cash and non-cash proceeds thereof. Such security interest shall be further evidenced by a security agreement specific to the applicable Borrower’s assets located at the applicable Hotel in form and substance acceptable in all respects to the Agent (the “Security Agreement”). Each Borrower further agrees to authenticate to the Agent and hereby authorizes the Agent to file in all filing offices the Agent deems necessary, appropriate or desirable such financing statements, continuations, assignments or other instruments as may be requested by the Agent at any time and from time to time in order for the Agent to perfect the security interest in the aforementioned Collateral. Borrowers will each execute in favor of and deliver to the Agent a First Amended and Restated Security Agreement which will amend and restate any Security Agreement executed in connection with the Current Loan Agreement.

2.2. Real Property . Contemporaneously with the issuance of a Pool One Note evidencing a Pool One Advance or a Pool Two Note, the applicable Borrower will grant and execute in favor of the Agent a first priority deed of trust or mortgage and assignment of rents and leases on the Hotel acquired with the Pool One Advance or financed or refinanced with the Pool Two Note, with such deed of trust or mortgage in form and substance acceptable to the Agent. Thereafter, such deed of trust or mortgage and assignment of rents and leases shall secure all the Loans.

2.3. Other Documents . Borrowers agree to furnish such information and to execute such other documents or undertake any other acts as may be reasonably necessary to attach, perfect and maintain the security interests and assignments contemplated by this Agreement, or as otherwise reasonably requested by the Agent from time to time.

2.4. Maintenance and Capital Expenditure Reserve . For each Reserve Hotel, each month the applicable Borrower which owns such Hotel will deposit, in a deposit account maintained with the Agent, an amount not less than three percent (3%) of the gross revenues for such Hotel for the prior month to be maintained as a cash reserve for maintenance and capital expenditures (the “Maintenance and Capital Expenditure Reserve”). Borrowers hereby grant the Agent a security interest in the Maintenance and Capital Expenditure Reserve and will execute such documents required by the Agent to create, grant, attach and perfect the Agent’s Lien on such Maintenance and Capital Expenditures Reserve. Borrowers will submit requests for reimbursement or invoices for payment of capital expenditures for Reserve Hotels, and the Agent will not unreasonably deny such requests. Borrowers will be reimbursed from Maintenance and Capital Expenditure Reserve funds within ten (10) days of request.

ARTICLE III
Representations and Warranties

Each Borrower represents and warrants to Lenders (which representations and warranties will survive the delivery of the Notes and shall continue so long as any sums remain outstanding under the Loans, this Agreement or any other Loan Document or Lenders have any Commitments remaining) as follows:

3.1. Standing . Each Borrower is a limited liability company duly organized, validly existing and in good standing under the laws of the State of South Dakota. Each Borrower is duly qualified and is in good standing in every other jurisdiction where such qualification and good standing is required in order to conduct business in such jurisdiction. Each Borrower has the power and authority to own its property and to carry on its business.

3.2. Authority . Each Borrower has the full power and authority to execute and deliver this Agreement and the other Loan Documents, and the same constitute the binding and enforceable obligations of Borrowers in accordance with their terms. No consent or approval of the members or manager of either Borrower or any other Person, creditor, governmental department, agency or body are required as a condition to the effectiveness and validity of the Loan Documents. The execution of and performance by each Borrower of its obligations under the Loan Documents to which it is a party has been duly authorized by all appropriate and required limited liability company proceedings and action and will not violate, conflict with or contravene any provisions (i) of law or any regulation, order, writ, judgment, injunction, decree, permit, or license applicable to such Borrower or any of such Borrower’s property, or (ii) of such Borrower’s Articles of Organization, Operating Agreement or any members’ agreement or other governing or organizational agreement of such Borrower or such Borrower’s members.

3.3. Litigation . There are no actions, suits, arbitration proceedings or other proceedings of any nature pending or, to the knowledge of either Borrower, threatened, or any basis therefor, against or affecting either Borrower or any Collateral at law or in equity, in any court or before any governmental department or agency or arbitrator or arbitration panel, which may result in a Material Adverse Effect.

3.4. Conflicting Agreements . There are no provisions of any existing mortgage, indenture, deed of trust, trust deed, lease, contract or agreement of any nature binding on either Borrower or affecting the Collateral or either Borrower’s other property, which would conflict with or in any way prevent the execution, delivery, or performance of the terms of this Agreement and/or the Loan Documents. Neither Borrower is in default in any respect in the performance, observance or fulfillment of any obligation, covenant or condition contained in any agreement or instrument to which it is a party.

3.5. Title and Liens . Each Borrower has good, valid and marketable title of record to its real, mixed and personal property (including, without limitation, the property constituting Collateral), all of which is owned free and clear of all mortgages, Liens, pledges, charges, attachments and other security interests and encumbrances of any nature, except for the Permitted Liens or as otherwise provided for in this Agreement or disclosed to and approved by Lenders in writing. In respect of leased property, the applicable Borrower has valid and enforceable leasehold interests therein.

3.6. Taxes . Each Borrower has filed all federal, state, local, and other tax and similar returns and has paid or provided for the payment of all taxes assessments and other governmental charges due thereunder through the date of this Agreement, including without limitation, all withholding, FICA and franchise taxes. No claims or Liens for unpaid taxes which are due have been asserted, claimed or threatened against either Borrower.

3.7. Financial Statements . Borrowers’ audited financial statements dated as of December 31, 2008 and internally-prepared interim financial statement dated June 30, 2009, copies of which have been furnished to Lenders, are complete and correct and fairly and accurately present the financial condition of each Borrower as of such date and the results of operations for the period covered by such statements. Since June 30, 2009, there has been no Material Adverse Effect or change with respect to either Borrower. Neither Borrower has any material liabilities, direct or contingent, except those disclosed in the foregoing financial statements or as otherwise disclosed to Lenders in writing. No information, exhibit or report furnished by either Borrower to Lenders or the Agent in connection with the Loans, this Agreement or any other Loan Document contains any material misstatement of fact or omits to state a material fact or any fact necessary to make the statement contained therein incomplete or not materially misleading.

3.8. Other . All statements by either Borrower contained in any certificate, statement, document or other instrument or writing delivered by or on behalf of either Borrower at any time pursuant to this Agreement or the other Loan Documents shall constitute representations and warranties made by Borrowers hereunder. No representation or warranty of either Borrower contained in this Agreement or any other Loan Document, and no statement contained in any certificate, schedule, list, financial statement or other instrument furnished to Lenders or the Agent by or on behalf of Borrowers contains, or will contain, any untrue statement of a material fact, or omits, or will omit, to state a material fact necessary to make the statements contained herein or therein not misleading. To the best of each Borrower’s knowledge, all information material to the transactions contemplated in this Agreement has been expressly disclosed to Lenders in writing.

3.9. Regulation U . No part of the proceeds of the Loans will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock or to reduce or retire any indebtedness incurred for any such purpose. If requested by the Agent, Borrowers will furnish to the Agent a statement in conformity with the requirements of Federal Reserve Form U-1 referred to in Regulation U to the foregoing effect.

3.10 ERISA .

(a)  Definitions . The following terms shall have the following definitions:

(1) “Consolidated Entity” shall mean any corporation or other entity which owns at least 50% of the voting or control rights or interest or other ownership interest in either Borrower directly or indirectly in any manner, or in which at least 50% of the voting stock or other ownership interest in such corporation or other entity is owned by either Borrower directly or indirectly in any manner. If Borrowers have no Consolidated Entities, the provisions of this Agreement relating to Consolidated Entities shall be inapplicable without affecting the applicability of such provisions to Borrowers alone.

(2) “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time.

(3) “Internal Revenue Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

(4) “Pension Event” shall mean, with respect to any Pension Plan, the occurrence of: (i) any prohibited transaction described in Section 406 of ERISA or in Section 4975 of the Internal Revenue Code; (ii) any Reportable Event; (iii) any complete or partial withdrawal, or proposed complete or partial withdrawal, of Borrowers or any Consolidated Entity from such Pension Plan; (iv) any complete or partial termination, or proposed complete or partial termination, of such Pension Plan; or (v) any accumulated funding deficiency (whether or not waived), as defined in Section 302 of ERISA or in Section 412 of the Internal Revenue Code.

(5) “Pension Plan” shall mean any pension plan, as defined in Section 3(2) of ERISA, which is a multi-employer plan or a single employer plan, as defined in Section 4001 of ERISA, and subject to Title IV of ERISA and which is (i) a plan maintained by either Borrower or any Consolidated Entity for employees or former employees of either Borrower or of any Consolidated Entity, (ii) a plan to which either Borrower or any Consolidated Entity contributes or is required to contribute, (iii) a plan to which either Borrower or any Consolidated Entity was required to make contributions at any time during the five (5) calendar years preceding the date of this Agreement or (iv) any other plan with respect to which either Borrower or any Consolidated Entity has incurred or may incur liability, including, without limitation, contingent liability, under Title IV of ERISA either to such plan or to the Pension Benefit Guaranty Corporation. For purposes of the definitions of the terms “Pension Event” and “Pension Plan”, each Borrower shall include any trade or business (whether or not incorporated) which, together with such Borrower or any Consolidated Entity, is deemed to be a single employer within the meaning of Section 4001(b)(1) of ERISA.

(6) “Reportable Event” shall mean any event described in Section 4043(b) of ERISA or in regulations issued thereunder with regard to a Pension Plan.

(b)  ERISA Representations and Warranties . Each Borrower represents and warrants to Lenders that:

(1) No Pension Plan has been terminated, or partially terminated, or is insolvent, or in reorganization, nor have any proceedings been instituted to terminate or reorganize any Pension Plan;

(2) Neither Borrower nor any Consolidated Entity has withdrawn from any Pension Plan in a complete or partial withdrawal, nor has a condition occurred which, if continued, would result in a complete or partial withdrawal;

(3) Neither Borrower nor any Consolidated Entity has incurred any withdrawal liability, including, without limitation, contingent withdrawal liability, to any Pension Plan, pursuant to Title IV of ERISA;

(4) Neither Borrower nor any Consolidated Entity has incurred any liability to the Pension Benefit Guaranty Corporation other than for required insurance premiums which have been paid when due;

(5) No Reportable Event has occurred with regard to a Pension Plan;

(6) No Pension Plan or other “employee pension benefit plan”, as defined in Section 3(2) of ERISA, to which either Borrower or any Consolidated Entity is a party has an accumulated funding deficiency (whether or not waived), as defined in Section 302 of ERISA or Section 412 of the Internal Revenue Code;

(7) The present value of all benefits vested under any such Pension Plan does not exceed the value of the assets of such Pension Plan allocable to such vested benefits;

(8) Each Pension Plan and each other employee benefit plan as defined in Section 3(2) of ERISA, to which either Borrower or any Consolidated Entity is a party has received a favorable determination by the Internal Revenue Service with respect to qualification under Section 401(a) of the Internal Revenue Code;

(9) Each Pension Plan and each other employee benefit plan as defined in Section 3(2) of ERISA, to which either Borrower or any Consolidated Entity is a party is in substantial compliance with ERISA, and no such plan or any administrator, trustee or fiduciary thereof has engaged in a prohibited transaction defined or described in Section 406 of ERISA or in Section 4975 of the Internal Revenue Code; and

(10) Neither Borrower nor any Consolidated Entity has incurred any liability or a trustee or trust established pursuant to Section 4049 of ERISA or to a trustee appointed pursuant to Section 4042(b) or (c) of ERISA.

(c)  ERISA Indemnity . In addition to any other transfer prohibitions set forth herein and in the other Loan Documents, and not in limitation thereof, neither Borrower shall assign, sell, pledge, encumber, transfer, hypothecate or otherwise dispose of its interest or rights in this Agreement or in the Collateral, or attempt to do any of the foregoing or suffer any of the foregoing, nor shall any shareholder or member of either Borrower assign, sell, pledge, encumber, transfer, hypothecate or otherwise dispose of any of its rights or interest in such Borrower, attempt to do any of the foregoing or suffer any of the foregoing, if such action would cause the Loans or the exercise of any of Lenders’ rights in connection therewith, to constitute a prohibited transaction under ERISA or the Internal Revenue Code or otherwise result in Lenders being deemed in violation of any applicable provision of ERISA. Borrowers jointly and severally agree to indemnify and hold Lenders free and harmless from and against all loss, costs (including attorneys’ fees and expenses), taxes, damages (including consequential damages), and expenses Lenders may suffer by reason of the investigation, defense and settlement of claims and in obtaining any prohibited transaction exemption under ERISA necessary or desirable in the Agent’s sole judgment or by reason of a breach of the foregoing prohibitions. The foregoing indemnification shall survive repayment of the Loans.

3.11. Solvency . Each Borrower is and, after consummation of the transactions contemplated by this Agreement will be, Solvent. “Solvent” shall mean that, as of a particular date, (i) such Borrower is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the ordinary course of business; (ii) such Borrower is not engaged in a business or a transaction, and is not about to engage in a business or a transaction, for which such Borrower’s property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such Borrower is engaged, (iii) the fair value of the property of such Borrower is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Borrower and (iv) the present fair salable value of the assets of such Borrower is not less than the amount that will be required to pay the probable liability of such Borrower on its debts as they become absolute and matured. In computing the amount of contingent liabilities at any time, it is intended that such liabilities will be computed at the amount which, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

3.12. Compliance With Law. The business and operations of the Borrowers comply in all respects with all applicable federal, state, regional, county and local laws, including without limitation statutes, rules, regulations and ordinances relating to public health, safety or the environment or disposals to air, water, land or groundwater, to the withdrawal or use of groundwater, to the use, handling or disposal of polychlorinated biphenyls (PCBs), asbestos or urea formaldehyde, to the treatment, storage, disposal or management of hazardous substances (including, without limitation, petroleum, its derivatives, by-products or other hydrocarbons), to exposure to toxic, hazardous, or other controlled, prohibited or regulated substances, to the transportation, storage, disposal, management or release of gaseous or liquid substances, and any regulation, order, injunction, judgment, declaration, notice or demand issued thereunder, except where the failure to so comply (individually or in the aggregate) would not reasonably be expected to have a Material Adverse Effect.

ARTICLE IV
Financial and Affirmative Covenants

So long as this Agreement remains in effect, or as long as there is any principal or interest due under the Loans and Lenders have any Commitments remaining, unless the Required Lenders shall otherwise consent in writing, Borrowers will:

4.1. Financial Covenants . Borrowers shall maintain and comply with the following financial covenants:

(a). Debt Service Coverage Ratio . Each Borrower shall maintain at all times, on a rolling four-quarter average (for each Borrower’s four most recent fiscal quarters then ended), a Debt Service Coverage Ratio of not less than 1.50:1.00. The first quarterly calculation and measurement of the Debt Service Coverage Ratio shall be September, 2009.

(b). Liquidity Covenant . Borrowers shall establish and maintain at all times while any Loan remains outstanding unencumbered cash balances in an amount not less than $4,000,000.00 on a consolidated basis, reserving for, but not limited to, the following: costs and expenses incurred in connection with capital improvements, repairs, replacements and capital expenditures to Hotels.

(c). Total Debt . The aggregate Total Debt outstanding at any one time of Borrowers, The Summit Group, Inc. and any other affiliates or subsidiaries of The Summit Group, Inc. and either Borrower shall not exceed $450,000,000.00.

4.2. Books and Records; Inspections . Maintain proper books and records and account for financial transactions in a manner consistent with the preparation of the financial statements referenced is Section 3.7, and permit the Agent’s officers and/or authorized representatives or accountants to visit and inspect Borrowers’ respective properties, examine their books and records, conduct audits of the Collateral and discuss their accounts and business with their respective officers, accountants and auditors, all at reasonable times upon reasonable notice. Borrowers will cooperate in arranging for such inspections and audits. Without the prior written consent of the Required Lenders, neither Borrower will change in any material way the accounting principles upon which the financial statements referenced in Section 3.7 were prepared and based except for changes made as a result of changes in or to generally accepted accounting principles.

4.3. Financial Reporting . Deliver to the Agent financial information in such form and detail and at such times as are satisfactory to the Agent, including, without limitation:

(a) Each Borrower’s year end financial statements (to include, but not be limited to, balance sheet, income statement, and net worth reconciliation, each setting forth in comparative form figures for the preceding fiscal year of Borrowers), audited by a certified public accounting firm selected and approved by the Audit Committee of Summit Hotel as soon as available and in any event within one hundred twenty (120) days after the end of each of Borrower’s respective fiscal years;

(b) Each Borrower’s interim quarterly financial statements (to include its unaudited balance sheet as of the end of each such period and the related unaudited statements of income, and statement of changes in financial position for such period and the portion of the fiscal year through such date, setting forth in each case in comparative form the figures for the previous year) as soon as available, but in any event within twenty (20) days after the end of each quarter, signed and certified correct by the Chief Financial Officer or equivalent of Borrowers (subject to normal year-end adjustments);

(c) a quarterly certificate of the chief financial officer of each Borrower substantially in the form of Schedule 4.3(c) attached hereto and incorporated herein by reference, (i) demonstrating compliance with the financial covenants contained in Section 4.1 by calculation thereof as of the end of each such fiscal period, (ii) stating that no Event of Default exists, or if any Event of Default does exist, specifying the nature and extent thereof and what action such Borrower proposes to take with respect thereto and (iii) certifying that all of the representations and warranties made by such Borrower in this Agreement and/or in any other Loan Document are true and correct in all material respects on and as of such date as if made on and as of such date, within twenty-five (25) days after the end of each quarter; and

(d) Such other financial information concerning Borrowers as the Agent may require from time to time.

All financial statements required hereunder shall be complete and correct in all respects and shall be prepared in reasonable detail (consistent with the financial statements referred to in Subsection 3.7.) and applied consistently throughout the periods reflected therein.

4.4. Payment of Debts, Taxes and Claims . Promptly pay and discharge prior to delinquency all debts, accounts, liabilities, taxes, assessments and other governmental charges or levies imposed upon, or due from, either Borrower, as well as all claims of any kind (including claims for labor, materials and supplies) which, if unpaid, might by law become a lien or charge upon any of a Borrower’s property, except that nothing herein contained shall be interpreted to require the payment of any such debt, account, liability, tax, assessment or charge so long as its validity is being contested in good faith by appropriate legal proceedings and against which, if requested by the Agent or required by generally accepted accounting principles, reserves satisfactory to and deposited with the Agent have been made therefor. Any such reserves will constitute additional Collateral and Borrowers hereby grant the Agent a first priority security interest in such reserves.

4.5. Insurance . Each Borrower will purchase, pay for in advance, and at all times maintain insurance including but not limited to: (i) fire, windstorm and other hazards, casualties and contingencies covered by the “all-risk” form of insurance; (ii) public liability; (iii) workers’ compensation and (iv) property damage as is customarily maintained by similar businesses and/or as the Agent from time to time requires. In addition, if a Hotel is located in flood hazard area, the applicable Borrower will obtain and maintain appropriate flood insurance as is acceptable to the Agent. The amounts, limits, forms, deductibles, contents and issuer of said policies shall be subject to the Agent’s reasonable approval. The Agent, as Collateral Agent for Lenders, shall be named as an additional insured as its interest shall appear and each of said policies covering the Collateral shall contain a loss payable clause, and any proceeds of such insurance in excess of $100,000.00 shall be either (in the discretion of the Required Lenders) (i) payable to the Collateral Agent for application to the Loans and any other sums owing under this Agreement or any other Loan Document in a manner and priority to be determined by the Required Lenders in their sole discretion or (ii) if consented to by the Required Lenders, used for restoration or repair with such proceeds disbursed by the Agent in accordance with procedures established by the Agent. All such insurance shall provide for noncancellation without at least thirty (30) days prior written notice to the Agent and shall contain provisions protecting the Collateral Agent’s interests whether or not any acts by either Borrower or others should result in loss of coverage under such policies. The originals, certified copies or certificates of such policies, and renewals evidencing the insurance required hereunder shall be delivered to the Agent, and such insurance shall be maintained in full force and effect at all times during the period of this Agreement and while any indebtedness under the Loans remains outstanding.

In the event either Borrower at any time or times hereafter shall fail to obtain or maintain any of the policies of insurance required above or to pay any premium in whole or in part relating thereto, then the Lenders, without waiving or releasing any obligation or default by Borrowers hereunder, may at any time or times thereafter (but shall be under no obligation to do so) obtain and maintain such policies of insurance and pay such premium and take any other action with respect thereto which the Required Lenders deem advisable. All sums so disbursed by Lenders, including, without limitation, reasonable attorneys’ fees, court costs, expenses and other charges relating thereto, shall be part of Borrowers’ obligations and indebtedness hereunder, secured by the Collateral and payable jointly and severally by Borrowers to the Agent on demand. UNLESS BORROWERS PROVIDE EVIDENCE OF THE INSURANCE COVERAGE REQUIRED UNDER THIS AGREEMENT AND/OR ANY OTHER LOAN DOCUMENT, LENDERS MAY PURCHASE INSURANCE AT THE BORROWERS’ JOINT AND SEVERAL EXPENSE TO PROTECT LENDERS’ INTEREST IN THE COLLATERAL. THIS INSURANCE MAY, BUT NEED NOT, PROTECT BORROWERS’ RESPECTIVE INTERESTS. THE COVERAGE THAT LENDERS PURCHASE MAY NOT PAY ANY CLAIM THAT A BORROWER MAY MAKE OR ANY CLAIM THAT IS MADE AGAINST A BORROWER IN CONNECTION WITH THE COLLATERAL. BORROWERS MAY LATER CANCEL ANY INSURANCE PURCHASED BY LENDERS, BUT ONLY AFTER PROVIDING EVIDENCE THAT BORROWERS HAVE EACH OBTAINED INSURANCE AS REQUIRED BY THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT. IF LENDERS PURCHASE INSURANCE FOR THE COLLATERAL, BORROWERS WILL BE JOINTLY AND SEVERALLY RESPONSIBLE FOR THE COSTS OF THAT INSURANCE, INCLUDING THE INSURANCE PREMIUM, INTEREST AND ANY OTHER CHARGES LENDERS MAY IMPOSE IN CONNECTION WITH THE PLACEMENT OF INSURANCE, UNTIL THE EFFECTIVE DATE OF THE CANCELLATION OR EXPIRATION OF THE INSURANCE. THE COSTS OF THE INSURANCE MAY BE ADDED TO THE BORROWERS’ OBLIGATIONS HEREUNDER AND SHALL BE SECURED BY THE COLLATERAL. THE COSTS OF THE INSURANCE MAY BE MORE THAN THE COST OF INSURANCE BORROWERS MAY BE ABLE TO OBTAIN ON THEIR OWN.

4.6. Property Maintenance . Keep their respective properties in good repair, working order, and condition and from time to time make any needful and proper repairs, renewals, replacements, extensions, additions, and improvements thereto so that the business of Borrowers will be conducted at all times in accordance with prudent business management.

4.7. Existence; Compliance With Laws . Take or cause to be taken such action as from time to time may be necessary to preserve and maintain their respective existence in their jurisdiction of organization and qualify and remain qualified as a foreign entity in each jurisdiction in which such qualification is required and use due diligence to comply with all statutes, laws, codes, rules, regulations and orders applicable or pertaining to the business or property of Borrowers, or any part thereof, and with all other lawful government requirements relating to their respective business and property. Each Borrower will continue to engage in the same lines of business in which it is presently engaged.

4.8. Litigation; Adverse Events . Promptly inform the Agent of the commencement of any action, suit, proceeding, arbitration, mediation or investigation against either Borrower, or the making of any counterclaim against either Borrower, which could be reasonably expected to have a Material Adverse Effect, and promptly inform the Agent of all Liens against any of either Borrower’s property, other than Permitted Liens, which could be reasonably expected to have a Material Adverse Effect, and promptly advise the Agent in writing of any other condition, event or act which comes to either of their attention that could be reasonably expected to have a Material Adverse Effect or might materially prejudice Lenders’ rights under this Agreement or the Loan Documents.

4.9. Notification . Notify the Agent immediately if either of them becomes aware of the occurrence of any Event of Default (as defined under Article VI hereof) or of any fact, condition, or event that, only with the giving of notice or passage of time or both, would become an Event of Default, or if either of them becomes aware of a material adverse change in the business prospects, financial condition (including, without limitation, proceedings in bankruptcy, insolvency, reorganization, or the appointment of a receiver or trustee), or results of operations, or the failure of either Borrower to observe any of its undertakings under the Loan Documents. Borrowers shall also notify the Agent in writing of any default under any other indenture, agreement, contract, lease or other instrument to which either Borrower is a party or under which either Borrower is obligated, and of any acceleration of the maturity of any material indebtedness of either Borrower which default or acceleration could be reasonably expected to have a Material Adverse Effect, and Borrowers shall take all steps necessary to remedy promptly any such default, to protect against any such adverse claim, to defend any such proceeding and to resolve all such controversies.

4.10. Inspections . Each Borrower shall allow the Agent, its employees, officers, agents and representatives, at reasonable intervals and during normal business hours, to inspect such Borrower’s operations, books and records, financial books and records (including the right to make copies thereof) and to discuss such Borrower’s affairs, finances and accounts with such Borrower’s managers, principal officers and independent public accountants. Each Borrower shall permit the Agent, and will cooperate with the Agent in arranging for, inspections at reasonable intervals of such Borrower’s facilities and audits of the Collateral. Each Borrower acknowledges that any reports and inspections conducted or generated by the Agent or its agents or representatives, shall be made for the sole benefit of Lenders and not for the benefit of Borrowers or any third party, and Lenders do not assume any liability, responsibility or obligation to Borrowers or any third party by reason of such inspections or reports. The reasonable cost of any audits or inspections made by Lenders shall be paid or reimbursed jointly and severally by Borrowers.

4.11. Conduct of Business . Continue to engage in an efficient and economical manner in the business currently conducted by Borrowers on the date of this Agreement.

ARTICLE V
Negative Covenants

So long as this Agreement remains in effect, or as long as there is any principal or interest due under the Loans, this Agreement or any of the other Loan Documents or any Commitments remain outstanding, neither Borrower shall, without the prior written consent of the Required Lenders:

5.1. Liens . Create, incur, assume or suffer to exist any Lien or other encumbrance upon any of its respective personal properties or assets, whether now owned or hereafter acquired, except such security interests, mortgages, pledges, liens or other encumbrances (each, a “Permitted Lien):

(a) created or granted by such Borrower under or pursuant to this Agreement or the other Loan Documents;

(b) created or granted by such Borrower to Lenders under the Current Loan Agreement and securing indebtedness arising thereunder;

(c) securing debt allowed in Section 5.4 below incurred in the ordinary course of such Borrower’s business, consistent with current practices;

(d) Liens for taxes, assessments or governmental charges or levies to the extent not delinquent or that are being diligently contested in good faith by appropriate proceedings and for which such Borrower has set aside adequate reserves in accordance with generally accepted accounting principles;

(e) cash pledges or deposits to secure (A) obligations under workmen’s compensation laws or similar legislation, (B) public or statutory obligations of such Borrower, (C) bids, trade contracts, surety and appeal bonds, performance bonds, letters of credit and other obligations of a similar nature incurred in or necessary to the ordinary course of such Borrower’s business;

(f) Liens imposed by law, such as materialmen’s, mechanics’, carriers’, workmen’s and repairmen’s liens and other similar liens arising in the ordinary course of business securing obligations which are not overdue by more than 60 days or which have been fully bonded or are being diligently contested in good faith by appropriate proceedings and for which adequate reserves have been set aside in accordance with generally accepted accounting principles;

(g) purchase money Liens or purchase money security interests upon or in property acquired or held by such Borrower in the ordinary course of business to secure the purchase price of such property or to secure indebtedness incurred solely for the purpose of financing the acquisition of any such property to be subject to such Liens or security interests, or Liens or security interests existing on any such property at the time of acquisition, or extensions, renewals or replacements of any of the foregoing for the same or a lesser amount, provided that no such Lien or security interest shall extend to or cover any property other than the property being acquired and no such extension, renewal or replacement shall extend to or cover property not theretofore subject to the Lien or security interest being extended, renewed or replaced, and provided, further , that the aggregate principal amount of indebtedness at any one time outstanding secured by Liens permitted by this clause (g) shall not exceed $75,000.00 per Hotel;

(h) easements, rights-of-way, zoning and other similar restrictions and encumbrances, which do not (individually or in the aggregate) materially detract from the use of the property to which they attach by Borrowers;

(i) liens disclosed in Schedule 3.5 attached to this Agreement and incorporated herein by reference; and

(j) mortgages or deeds of trust providing permanent financing on Borrowers’ Hotels which are not Collateral for the Loans.

5.2. Fundamental Changes . Wind up, liquidate, or dissolve; reorganize, merge or consolidate with or into another entity, or sell, transfer, convey or lease all, substantially all or any material part of its property, to another Person other than sale of such Borrower’s inventory in the ordinary course of business; sell or assign any accounts receivable; purchase or otherwise acquire all or substantially all of the assets of any corporation, partnership, limited liability company or other entity, or any shares or similar equity interest in any other entity if such entity is in a business unrelated to the business of such Borrower.

5.3. Conduct of Business . Materially alter the character in which it conducts its business or the nature of such business conducted at the date hereof.

5.4. Debt . Create, incur, assume or suffer to exist any direct or indirect indebtedness, except the following (“Permitted Debt”):

(a) Indebtedness under or pursuant to this Agreement or the other Loan Documents;

(b) Accounts payable to trade creditors for goods or services which are not aged more than the later of (i) ninety (90) days from the bi