EXHIBIT 10.8
MANAGEMENT AGREEMENT
THIS AGREEMENT made and entered into as of this 29th day of July, 2003 by
and between Summit Group of Scottsdale, Arizona, LLC, a South Dakota limited
liability company, d/b/a Springhill Suites by Marriott, hereinafter referred to
as "Owner", and The Summit Group, Inc., a South Dakota Corporation, acting on
its own behalf, hereinafter referred to as "Manager".
WHEREAS, it is the desire of the Owner that the Springhill Suites by
Marriott in Scottsdale, Arizona ("Hotel") be managed and operated efficiently
and effectively; and
WHEREAS, Manager is a corporation engaging in hotel management;
WHEREAS, the Owner desires to engage the Manager to manage the Hotel and
the Manager desires to accept said engagement, all in accordance with the terms
and conditions of this agreement as hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. ENGAGEMENT
The Owner hereby engages the Manager, and the Manager hereby accepts such
engagement, as the manager for the Springhill Suites by Marriott hotel upon
the terms and conditions hereinafter set forth, for a period ending on the
first to occur of: (1) of ten years, (2) the dissolution of the Owner, or
(3) termination of this Agreement. This Agreement shall automatically renew
for four successive five year periods unless either party provides written
notice to the other party within ninety (90) days of the termination of the
initial lease term or a renewal term thereof. The Manager shall manage the
Hotel, devoting such time thereto as in its sole discretion it shall
determine to be necessary to manage the Hotel in an efficient and effective
manner.
2. INDEPENDENT CONTRACTOR
In the performance of its duties under this agreement, the Manager shall
occupy the position of an independent contractor with respect to the Owner.
Except as expressly otherwise provided for herein, nothing contained herein
shall be construed as making the Manager an employee of the Owner.
3. DUTIES AND AUTHORITY OF THE MANAGER
(A) GENERAL DUTIES AND AUTHORITY
Subject only to the restrictions and limitations provided for herein
and the right of the Owner to terminate this agreement as provided
herein, the Manager shall have the sole and exclusive authority to
fully and completely supervise the Hotel and supervise and direct the
business and affairs associated or related to the operation thereof,
and to that end to cause or direct the Owner to execute such documents
or instruments and hire or discharge such employees as, in the sole
judgment of the Manager, may deem necessary or advisable.
(B) OPERATION OF THE HOTEL
The Manager shall direct and establish policies and procedures for the
Owner's employees who will have direct responsibility for the Hotel's
operations. The Manager shall have the sole discretion, which
discretion shall be exercised in good faith, to establish the terms
and conditions of patron occupancy, including, although not
necessarily limited to, room rental schedules, occupancy policies, and
departure times. The Manager is hereby authorized to direct and
control the promotional activity of the Owner's employees and cause
the Owner to advertise in such media and to the extent that it deems
necessary and appropriate.
(C) ACCOUNTING
The Manager shall devise, establish and supervise the operation of an
accounting system for the Hotel staff who will be primarily
responsible for, among other things, performing all bookkeeping and
administrative duties in connection with the Hotel, including all
collections and all disbursements to be paid out of funds generated by
such operations or otherwise supplied by the Owner. At Manager's sole
discretion all accounting, bookkeeping and administrative duties shall
be performed by employees of Manager. Expenses of Manager's
bookkeeping department shall be paid by all hotels and businesses,
including Hotel, for which Manager performs bookkeeping services, on a
pro rata per number of rooms per hotel managed basis.
(D) DEPOSITS AND DISBURSEMENTS
The Manager shall cause the establishment of bank accounts in the name
of the Owner and shall establish and be responsible for administrating
a policy for specifying the identity of signatories to such bank
accounts. The Manager shall deposit or cause to be deposited in the
Owner's bank accounts all receipts and monies arising from the
operations of the Hotel or otherwise received for and on behalf of the
Owner. The Manager shall be responsible for the disbursement of the
Owner's funds in payment of all expenses incurred in connection with
the operations of the Hotel.
(E) AGREEMENTS
Manager shall negotiate and enter into leases, licenses, permits,
service contracts, employee agreements, and agreements for guest room
rental on behalf of Owner, in Owner's name.
(F) RESTRICTIONS
Notwithstanding anything to the contrary set forth in this section,
the Manager shall not be required to do, or cause to be done, anything
for the account of the Owner (1) which would make the Manager liable
to third parties; (2) which may not be commenced, undertaken, or
completed because of insufficient funds available in the accounts
established pursuant to this section; (3) which may, under applicable
law, constitute an impermissible delegation of the duties and
responsibilities of the Owner, including but not limited to, the
purchase or
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construction of capital improvements, the sale or disposition of all
or substantially all of the Owner's assets, and any action which may
result in a change in the Owner's primary business; or (4) which may
not be commenced, undertaken, or completed because of acts of God,
strikes, governmental regulations or laws, acts of war, or other types
of events beyond the Manager's control whether similar or dissimilar
to the foregoing.
4. DUTIES OF THE OWNER
(A) COOPERATION
The Owner hereby agrees to cooperate with the Manager in the
performance of its duties under this agreement and to execute all
documents or instruments necessary or advisable to enable the Manager
to fulfill its duties under this agreement.
(B) EXPENSES BORNE BY OWNER
All operating expenses, ownership costs, and expenses incurred by
Manager on behalf of Owner or Hotel shall be the responsibility of
Owner. Operating expenses include but are not limited to: salaries,
wages and benefits for all Hotel employees; repairs and maintenance to
the Hotel, including capital expenditures; marketing and advertising
expenses; debt service on any mortgage or other loans to the Hotel;
property taxes; all administrative and general expenses; all legal,
accounting and bookkeeping expenses; and franchise fees.
(C) ADVANCE FUNDS
Manager shall not be obligated to advance any of its own funds for the
maintenance and operation of the Hotel or for the account of Owner,
nor to incur any liability with respect to the Hotel. However, if
Manager shall have advanced funds for any necessary and appropriate
expenses, Owner shall reimburse Manager therefor on demand. In the
event Manager advances funds for the maintenance and operation of the
Hotel or for the account of Owner, Owner shall pay Manager interest on
the advanced funds at the rate of ten percent (10%) annually.
5. COMPENSATION TO THE MANAGER
The Manager, as a Management Fee, shall be reimbursed for its overhead
costs and expenses related to managing the Hotel. If Manager manages more
than one hotel, then Manager shall charge each hotel managed, including
Hotel, its pro rata share of all overhead expenses, which include but are
not limited to: wages of employees and officers, rent, legal, accounting,
insurance, and travel. In no event will the annualized Management Fee
exceed four percent (4%) of annual Gross Revenues. Such Management Fee
shall be paid to Manager on a monthly basis. Any expenses for services that
would customarily be handled by the hotel property, such as bookkeeping,
and expenses that are paid for third party services, such as accounting and
legal services, shall be paid directly by the Hotel or Owner or shall be
reimbursed to the Manager and shall not be included in the four percent of
Gross Revenues cap.
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6. MANAGER'S BREACH
Except in extraordinary circumstances, such as theft or fraud on the part
of the Manager or default by Owner as Franchisee under a License Agreement
with Marriott International caused by the Manager for which the Franchisee
needs to promptly remove the Manager from the Hotel, the management
agreement shall not be terminated without at least thirty (30) days' prior
written notice to Franchisor. In the event the Manager breaches this
agreement, the Owner shall have the right to terminate this agreement, and
the Owner shall have such other rights and remedies as may be permitted by
the Operating Agreement dated July 29, 2003.
7. ASSIGNMENT
This agreement and any rights hereunder may be assignable by the Manager,
provided, however, any such assignee must assume all obligations of the
Manager hereunder.
8. INDEMNIFICATION
The Owner hereby agrees to indemnify and hold harmless the Manager, all
companies affiliated with the Manager, all officers, directors, and
employees of the Manager, and any affiliated companies harmless from any
and all costs, expenses, attorney fees, suits, liabilities, judgments,
damages, and claims in connection with the management of the Hotel
(including the loss of use thereof following any damage, injury, or
destruction) arising from any cause except for fraud or gross misconduct on
the part of the Manager or such other persons and entities. The Manager,
all persons affiliated with the Manager, all officers, directors, and
employees of the Manager, and any affiliated persons also shall not be
liable for any error of judgment or for any mistake of fact or law, or for
anything which it or they may do or refrain from doing hereinafter, except
in cases of fraud or gross misconduct. The Manager hereby agrees to
indemnify and hold the Owner harmless from any and all costs, expenses,
attorney fees, suits, liabilities, judgments, damages and claims in
connection with the management of the Hotel arising from the fraud or gross
misconduct of the Manager or any of its affiliates. The Owner shall have
one year from the action or inaction giving rise to such claim to bring
suit against the Manager pursuant to this agreement.
9. FRANCHISE COMPLIANCE
(A) DAILY MANAGEMENT
The Manager shall have the authority and responsibility for the
day-to-day management of the Hotel.
(B) COMPLIANCE WITH FRANCHISE AGREEMENT
The Hotel will be operated during the term of this Management
Agreement in strict compliance with the requirements of the Franchise
Agreement with Marriott International. Specifically, the Manager will
be bound by and shall adhere strictly to all terms and conditions in
the Franchise Agreement regarding confidentiality and operation of the
Hotel, which terms and conditions may be enforced by Franchisor
directly with the Manager.
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(C) CONTROLLING AGREEMENT
If there are conflicts between any provision(s) of this Management
Agreement and the Franchise Agreement, the provision(s) of the
Franchise Agreement shall control.
(D) DEFAULT
Any default under the terms and conditions of the Franchise Agreement
caused wholly or partially by the Manager shall constitute a default
under the terms and conditions of this Management Agreement, for which
Franchisee shall have the right to terminate the Management Agreement.
(E) COMMUNICATION WITH MANAGEMENT
Franchisor shall have the right to communicate directly with the
Manager regarding day-to-day operation of the Hotel.
10. CAPTIONS
The captions contained herein are for convenience of reference only and are
not intended to define, limit, or describe the scope or intent of any
provisions of this agreement.
11. GOVERNING LAW
The validity of this agreement, the construction of its terms, and the
interpretation of the rights and duties of the parties shall be governed by
the laws of the State of South Dakota.
12. NOTICES
Any notice required or permitted herein to be given shall be in writing and
shall be personally delivered or mailed, first-class mail, postage prepaid,
to the respective addresses of the parties set forth below their signatures
on the signature page hereof, or to such address as any party may give to
the other in writing.
13. SEVERABILITY
Should any term or provision hereof be deemed invalid, void, or
unenforceable either in its entirety or in a particular application, the
remainder of this agreement shall nonetheless remain in full force and
effect, and if the subsequent term or provision is deemed to be invalid,
void, or unenforceable only with respect to a particular application, such
term or provision shall remain in full force and effect with respect to all
other applications. The parties recognize that broad discretionary
authority has been granted by Owner to the Manager in the supervision and
direction of the Owner's business and financial affairs, and it is their
intent that such authority be fully exercisable by the Manager within the
limitations imposed by applicable law.
14. SUCCESSORS
This agreement shall be binding upon and inure to the benefit of the
respective parties hereto and their permitted assigns and successors in
interest.
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15. ATTORNEY FEES
If it shall become necessary for either party hereto to engage attorneys to
institute legal action for the purpose of enforcing its rights hereunder or
for the purpose of defending legal action brought by the other party
hereto, the party or parties prevailing in such litigation shall be
entitled to receive all costs, expenses, and fees (including reasonable
attorney's fees) incurred by it in such litigation (including appeals).
16. OTHER DOCUMENTS
The parties shall and do hereby agree to execute any other and further
documents which may be necessary to effectuate this agreement.
17. MODIFICATION
This agreement may be amended or modified at any time by the parties hereto
provided that the same is reduced to writing and signed by each party
hereto. This agreement may not be modified by oral agreement.
18. COMPLETE AGREEMENT
This agreement constitutes the complete agreement by and between the
parties hereto and supplants and supersedes all prior or contemporaneous
oral or written discussions, agreements or effects.
IN WITNESS WHEREOF, the parties hereto have executed this agreement in duplicate
on the date first above written.
OWNER: MANAGER:
SUMMIT GROUP OF SCOTTSDALE, THE SUMMIT GROUP, INC.
ARIZONA, LLC
By: /s/ Xxxxx X. Xxxxxxxxxxx By: /s/ Xxxxx X. Xxxxxxxxxxx
--------------------------------- ------------------------------------
Name: Xxxxx X. Xxxxxxxxxxx Name: Xxxxx X. Xxxxxxxxxxx
Its: President Its: President
0000 X. Xxxxxxxxx Xxx, Xxxxx 0 0000 X. Xxxxxxxxx Xxx, Xxxxx 0
Xxxxx Xxxxx, XX 00000 Xxxxx Xxxxx, XX 00000
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