EXHIBIT 10.1
MANAGEMENT AGREEMENT
THIS HOTEL MANAGEMENT AGREEMENT (the "Agreement" or "Hotel Management
Agreement") made and entered into as of this 11th day of February, 2004 by and
between Summit Hotel Properties, LLC, a South Dakota limited liability company
(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 all hotels currently owned or
hereinafter owned by Owner ("Hotels") 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 Hotels 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 Hotels upon the terms and conditions
hereinafter set forth, for a period ending on the first to occur of: (1)
the dissolution of the Owner, or (2) termination of this Agreement. The
Manager shall manage the Hotels, devoting such time thereto as in its sole
discretion, it shall determine to be necessary to manage the Hotels 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 Hotels 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 HOTELS
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 Hotels, 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 any or all accounting, bookkeeping and administrative
duties may be performed by employees of Manager. Expenses of Manager's
bookkeeping department shall be paid by all hotels and businesses,
including Hotels, 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 Hotels 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 Hotels.
(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 except in the course of managing and operating the
Hotels; (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 construction of capital
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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 Hotels 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 Hotels, including capital expenditures; marketing and advertising
expenses; debt service on any mortgage or other loans to the Hotels;
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 Hotels or for the account of Owner,
nor to incur any liability with respect to the Hotels. 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
Hotels or for the account of Owner, Owner shall pay Manager interest
on the advanced funds at a rate to be determined by the parties.
5. COMPENSATION TO THE MANAGER
The Manager, as a Management Fee, shall be reimbursed for its overhead
costs and expenses related to managing the Hotels. If Manager manages more
hotels than the Hotels contemplated by this Agreement, then Manager shall
charge each hotel managed, including Hotels, its pro rata share of all
overhead expenses, which include but are not limited to: wages of employees
and officers, including the salary of ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇; rent; legal;
accounting; insurance; and travel expenses. In no event will the annualized
Management Fee exceed five percent (5%) 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 a 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 Hotels or
Owner or shall be reimbursed to the Manager and shall not be included in
the five percent of gross revenue cap.
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6. TERMINATION
(A) FOR CAUSE.
This Agreement may be terminated by the Owner and the Manager may be
removed, in part or in whole, as further described in Section 6b
below, only for "cause". "Cause" shall mean a material violation or
breach of the authority, duty or obligations given to the Manager
under this Agreement, or knowingly and intentionally failing to
discharge such duties, willfully and wantonly disregarding the
interest of the Owner or the Hotels, intentionally and deliberately
disregarding standards of behavior or conduct for a hotel management
position which the Owner and others have a right to expect of Manager,
or any other acts or omissions of carelessness or negligence of such
degree or recurrence as to manifest equal culpability or wrongful
intent. Mere failure to perform as the result of a good faith error in
judgment or discretion shall not constitute "cause."
(B) PARTIAL TERMINATION.
In the event that the grounds for removal of Manager are deemed
specific to one or more individual Hotels, either under a respective
franchise agreement or otherwise, this Agreement shall only be
terminated with respect to such Hotel or Hotels. The remaining rights,
authority and obligations of Manager with respect to the remaining
Hotels shall remain.
(C) NOTICE TO FRANCHISOR
Except as otherwise provided herein, Owner shall provide no less than
thirty (30) days prior written notice of removal of Manager from
management of a Hotel or Hotels to the Franchisor or Franchisors of
such Hotels. In the event the breach warrants immediate removal of the
Manager, such as theft, fraud, or actions or omissions that cause
default under a franchise agreement, notice shall be promptly provided
to the respective Franchisors, but the Manager may be removed
immediately. .
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 Hotels
(including the loss of use thereof following any damage, injury, or
destruction) arising from any cause except for fraud or misconduct on the
part of the Manager or
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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 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 Hotels arising from the
fraud or 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.
9. FRANCHISE COMPLIANCE
Manager understands that several of the Hotels are franchised by various
national hotel franchise companies ("Franchisors"). Each of the Franchisors
sets forth rules, standards and procedures that must be followed by the
Hotels that are bound by the respective franchises.
Management of any Hotels pursuant to any Marriott International franchises
is subject to the additional provisions below:
(A) DAILY MANAGEMENT
The Manager shall have the authority and responsibility for the
day-to-day management of the Hotels.
(B) COMPLIANCE WITH FRANCHISE AGREEMENT
The Hotels will be operated during the term of this Hotel
Management Agreement in strict compliance with the requirements
of the franchise agreements with the Marriott International.
Specifically, the Manager will be bound by and shall adhere
strictly to all terms and conditions in the franchise agreements
regarding confidentiality and operation of the Hotels, which
terms and conditions may be enforced by Marriott International
directly with the Manager.
(C) CONTROLLING AGREEMENT
If there are conflicts between any provision(s) of this Hotel
Management Agreement and the Marriott International franchise
agreements, the provisions(s) of the franchise agreements shall
control.
(D) DEFAULT
Any default under the terms and conditions of the respective
Marriott International franchise agreements caused wholly or
partially by the Manager shall constitute a default under the
terms and conditions of this Hotel Management Agreement, for
which Franchisee shall have the right to terminate the Hotel
Management Agreement with respect to the Hotel that is in
violation of its franchise agreement.
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(E) COMMUNICATION WITH MANAGEMENT
Marriott International shall have the right to communicate
directly with the Manager regarding day-to-day operation of the
Hotels.
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.
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.
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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 HOTEL PROPERTIES, LLC THE SUMMIT GROUP, INC.
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Its: President of the Company Manager Its: President
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