HomeMy WebLinkAboutC35730 - Kemper Sports Mgmt Inc - DWGR CONTRACT NO. C35730
RESOLUTION NO. 2017-36
CITY OF PALM DESERT
FINANCE DEPARTMENT
STAFF REPORT
Request: APPROVE THE MANAGEMENT AGREEMENT BETWEEN THE CITY
OF PALM DESERT, KEMPER SPORTS MANAGEMENT, INC., AND
THE PALM DESERT RECREATIONAL FACILITIES CORPORATION TO
OPERATE AND MANAGE THE DESERT WILLOW GOLF RESORT AND
APPROVE RESOLUTION 2017- 36 AUTHORIZING AN INCREASE IN
THE LOAN AMOUNT FROM THE CITY TO DESERT WILLOW
Submitted By: Rudy Acosta, Assistant City Manager
Date: April 13, 2017
Contents: Management Agreement with Kemper Sports and Palm Desert
Recreational Facilities Corporation
Resolution 2017- 36
Recommendation
By Minute Motion, that the City Council,
1) Approve the management agreement between the City of Palm Desert,
Kemper Sports Management, Inc., and the Palm Desert Recreational
Facilities Corporation to operate and manage Desert Willow Golf Resort,
substantially as to the form presented; and
2) Adopt Resolution No. 2017- 36 authorizing an increase to the loan to
Desert Willow from the City up to an additional $2,000,000 from the
unobligated General Fund reserves; and
3) Authorize the City Manager and legal counsel to finalize the agreement; and
4) Authorize the Mayor to execute the agreement and the City Manager and the
Director of Finance to take actions necessary to effectuate the actions taken
herewith.
Discussion
On December 8, 2016 the City Council directed staff to negotiate a new management
agreement between the City of Palm Desert (the City), the Palm Desert Recreational Facilities
Corporation (PDRFC), and Kemper Sports, Inc. (Kemper) to operate and manage the Desert
Willow Golf Resort. City staff and Kemper have negotiated and agreed upon the management
agreement attached. The new agreement is for three years commencing on July 1, 2017 and
expiring on June 30, 2020. In addition, two one-year options to extend per Section 2.1(B) of the
management agreement are available to exercise at the City's discretion.
The following changes to the new management agreement were addressed and added to the
new management agreement:
1) Article 1, Definitions, regarding Key Employees was revised to reflect current Kemper
organizational positions at Desert Willow Golf Resort.
Staff Report
Approval of Management Agreement— Kemper Sports Management, Inc.
April 13, 2017
Page 2 of 3
2) Section 3.4.5 Key Employees restriction language was modified.
3) Article V Insurance sections were revised to reflect updated insurance coverage
requirements.
4) The new monthly fixed management fee referenced in Section 6.1 will be $20,833.33 for
a total annual amount of $250,000. This is a reduction of $50,000 over the previous
operations agreement.
5) The City will agree to deposit up to $2,000,000 into the Desert Willow Operating
Accounts ($1,500,000 immediately and up to an additional $500,000 provided for in the
agreement) to provide projected operating cash flow to fund the day-to-day operations of
Desert Willow Golf Resort including the daily operations of the restaurant.
6) The percentage management fee referenced in Section 6.2 is capped at $200,000 with a
2% cap on the annual adjustment. The threshold amount is $6.5 million. To summarize,
Kemper will be paid an incentive fee of 5% of all revenues (adjusted per Section 6.3) in
excess of $6.5 million in an amount not to exceed $200,000 during the first year. Each
subsequent year the cap on the incentive fee will increase by a ceiling amount of 2%.
In addition to the changes noted above, the key components of the new agreement remain as
exclusive features benefitting Desert Willow. Those key components are:
1) Kemper and its affiliates agree not to manage, own, or operate any other golf course
within a 20 mile radius without the City's approval. Kemper exclusively operates and
manages Desert Willow.
2) Kemper is no longer required to maintain a reserve. If the City is required to
deposit more than $2,000,000 in the operating accounts, depending on the
circumstances, it will be grounds for termination of the agreement.
3) The City retains the option to decide whether to continue the Learning Center (the
Academy at Desert Willow). This right allows the City to make a real-time budget
decision at Desert Willow without harming Kemper or any other amenity of the golf
resort.
4) Corporate administrative costs borne by Kemper remain with Kemper. Kemper does not
allocate or pass through the costs of their corporate or regional staff that have oversight
responsibility of Desert Willow.
5) Kemper will now be required to provide such IT support as is necessary for their
operations, rather than using City resources for this function.
Kemper has proven their ability to manage Desert Willow with their expert knowledge and
professionalism. Kemper was the operator firm unanimously recommended by the Desert
Willow Golf Resort Operator RFQ/RFP selection committee. Kemper manages seven municipal
golf courses in southern California. Nationally, their management portfolio includes over 100 golf
courses with 35 of those courses municipally owned.
Kemper's experience and expert knowledge of the operating cycle at Desert Willow along with
Kemper's national knowledge of the golf industry allows them to implement policies and
procedures at Desert Willow to maximize the day-to-day operations, resulting in efficient
operations without any assistance from the City's general fund.
Staff recommends approval of the management agreement between Kemper, PDRFC, and the
City of Palm Desert for the operations at Desert Willow Golf Resort for a firm period of three
years with two one-year options.
G:\ECON DEVELOPMENTRUDY ACOSTA\STAFF REPORTS-2017\SR-APPROVE MGMT AGMT-KEMPERSPORTS 041317WLS.DOCX
Staff Report
Approval of Management Agreement— Kemper Sports Management, Inc.
April 13, 2017
Page 3 of 3
Fiscal Analysis:
The fixed management fee of $20,883.33 ($250,000 a year) will be paid directly from the golf
resort operating accounts. As with the prior agreement, there is also a percentage management
fee of up to $200,000 in the first year (increased by not more than 2(3/0 each year) based on
percentage of the Gross Revenues in excess of $6,500,000.
By eliminating the $500,000 cash reserve, Kemper is reducing the fixed management fee by
$50,000. As a result of the elimination of the cash reserve, staff recommends increasing the
loan to Desert Willow from the unobligated General Fund reserves up to an additional
$2,000,000 ($1,500,000 immediately and up to an additional $500,000 as provided for in the
agreement). In 2010 the City made a loan to Desert Willow in the amount of $500,000 to cover
the reduction in revenues during the construction of the kitchen and terrace expansions. This
action will authorize the loan to be increased to $2,500,000 in the aggregate.
Submitted by: Approval:
S
Rudy P. costa, Assistant City Manager auri Aylaian, City Manager
.' I/•' i ! i
elMoore, Finance Director
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KEMPERSPORTS 041317WLS.DOCX
RESOLUTION NO. 2017- 36
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALM DESERT,
CALIFORNIA, AUTHORIZING AND APPROVING A LOAN FROM THE CITY'S
UNOBLIGATED GENERAL RESERVES FUND TO THE DESERT WILLOW GOLF
RESORT OPERATING 520 FUND IN AN AMOUNT NOT TO EXCEED$2,000,000
WHEREAS,the City Council has approved the new management agreement to operate
and manage the Desert Willow Golf Resort; and
WHEREAS, the City has agreed to deposit up to $2,000,000 into the Desert Willow
Operating Accounts ($1,500,000 immediately and up to an additional $500,000 provided for in
the agreement) to provide projected operating cash flow to fund the day-to-day operations of
Desert Willow Golf Resort including the daily operations of the restaurant; and
WHEREAS, the City Council has determined it is desirable to proceed with the new
management agreement to operate and manage Desert Willow Golf Resort and to loan the
necessary funds from the unobligated general fund reserves, subject to repayment, as
described below.
NOW, THEREFORE, the City Council of the City of Palm Desert, California, DOES
HEREBY DETERMINE, ORDER AND RESOLVE, as follows:
Section 1. The above recitals are true and correct.
Section 2. The City Council hereby authorizes and approves a loan from the
unobligated general fund reserves to the Desert Willow Golf Resort Operating Fund 520 in the
amount of up to $2,000,000 (with an initial deposit of$1,500,000) subject to simple interest on
the unpaid principal balance thereof, computed at a per annum rate to be determined annually
by the City Manager of up to four percent (4%), from the date of deposit by the City, to the date
of repayment.
Section 3. The principal on loan will be repaid on June 30, 2022. Interest on the
outstanding principal will be paid annually on June 30.
Section 4. The Director of Finance is hereby directed to take any such actions to
facilitate the loan described herein.
Section 5. The City Manager or his/her designee is hereby authorized and directed to
take any such actions to implement this resolution.
PASSED,APPROVED and ADOPTED this day of 2017, by the following
vote to wit:
AYES:
NOES:
ABSENT:
ABSTAIN:
ATTEST: JAN C. HARNIK, MAYOR
RACHELLE D. KLASSEN, CITY CLERK
CITY OF PALM DESERT
CONTRAT NO. C35730
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement") is made and entered into
this 1st day of July, 2017 by and among the CITY OF PALM DESERT, a charter city,
organized and validly existing under the Constitution and laws of the State of California
(the "City"), the PALM DESERT RECREATIONAL FACILITIES CORPORATION, a
California nonprofit public benefit corporation ("PDRFC") and KEMPER SPORTS
MANAGEMENT, INC., an Illinois corporation ("Kemper").
PRELIMINARY STATEMENT
A. The City is the owner of certain real property located in the City of Palm
Desert, California, which is improved with two 18-hole golf courses and related facilities
(the "Golf Resort"), as defined herein.
B. The City desires to utilize the services of Kemper to operate and manage
the Golf Resort, upon the terms and conditions set forth in this Agreement.
C. The City and the PDRFC have entered into that certain Lease Agreement
dated as of March 14, 1997, as amended (the "Lease Agreement") pursuant to which
the City leases the restaurant premises at the clubhouse to PDRFC.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the City, PDRFC and Kemper hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms shall have the
respective meanings indicated below:
Affiliate - Any and all corporations, partnerships, trusts, and other entities
directly or indirectly controlled by, controlling, or subject to direct or indirect common
control of an entity or person.
Agency — The Successor Agency to the Palm Desert Redevelopment
Agency.
Capital Improvements - Any alteration, addition, improvement, repair,
replacement, rebuilding, or renovation to the Golf Resort, the cost of which exceeds
$5,000.00.
Cause - The failure of any party to keep, observe or perform any material
covenant, agreement, term or provision of this Agreement to be kept, observed or
performed by such party.
City - The City of Palm Desert, a charter city, duly organized and validly
existing under the Constitution and laws of the State.
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City Manager - The person holding the position of City Manager of the
City.
Compensation - The direct salaries and wages paid to or accruing for the
benefit of the management staff and all other persons employed by Kemper at the Golf
Resort, together with all fringe benefits payable to or accruing for the benefit of such
employees, including employer's contribution under the Federal Insurance Contributions
Act ("FICA"), unemployment compensation, or other employment taxes, pension fund
contributions, worker's compensation, group life and accident and health insurance
premiums, retirement, disability and other similar benefits; provided, however,
compensation shall be in general conformity with that paid at other golf courses
operated by Kemper, taking into account geographic and project specific differences,
and industry standards.
CPI - The CPI shall mean the Consumer Price Index for All Urban
Consumers for the Los Angeles - Anaheim - Riverside area (1982-84 = 100), as
published by the United States Department of Labor, Bureau of Labor Statistics. Should
the United States Department of Labor, Bureau of Labor Statistics discontinue the
publication of the CPI or publish the CPI less frequently or vary the method of
calculating the CPI, then the parties shall agree upon a substitute index or substitute
procedure which reasonably reflects and monitors consumer prices and most closely
matches the CPI initially provided herein.
Furnishings and Equipment - All furniture, furnishings, trade fixtures,
apparatus and equipment, including without limitation course maintenance vehicles and
equipment, golf carts, driving range pickers and pullers, mats, range ball baskets, cash
registers, rental golf clubs and bags, ball washers, benches, uniforms, kitchen
equipment, appliances, china, glassware, silverware, office equipment, computers, copy
machines, facsimile machines, telephone systems (not including pay telephones), and
other personal property used in or held in storage for use in the operation of the Golf
Resort, other than Operating Inventory.
Golf Resort - The Golf Resort is the Desert Willow Golf Course at Palm
Desert, owned by the City and which includes two 18-hole golf courses, a clubhouse,
pro shop, driving range, maintenance facility and related facilities.
Golf Course Committee - The Golf Course Committee is the group of
individuals appointed by the City Manager. The composition of the Golf Course
Committee may, from time to time, be altered in size or membership by the City
Manager.
Golf Resort Expenses - All costs and expenses incurred in the operation,
management, and maintenance of the Golf Resort, including (a) all expenditures
incurred by Kemper in the performance of its obligations under this Agreement on
behalf of the City, including without limitation Compensation, or expenditures incurred
by the City for the benefit of the Golf Resort; (b) all expenses specifically identified as
"Golf Resort Expenses" in this Agreement; and (c) all other expenses incurred by
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Kemper in connection with the Golf Resort or this Agreement, which expenses were not
reasonably anticipated by the parties or otherwise provided in this Agreement and which
expenses, if assumed by Kemper, would be consistent with the role of a golf resort
manager; provided, however, any such unplanned expense which exceeds $5,000.00
must have prior written approval from the City Manager, which approval shall be acted
upon within 15 days and shall not be unreasonably withheld. Golf Resort Expenses
shall not include any expenses of Kemper's corporate office
Gross Revenues - Gross Revenues has the meaning set forth in Section
6.3 hereof.
Impositions - All taxes and assessments (including without limitation real
property taxes and assessments, possessory interest taxes, and personal property
taxes), water, sewer or other similar rents, rates and charges, levies, license fees,
permit fees, inspection fees and other authorization fees and charges, which at any time
may be assessed, levied, confirmed or imposed on the Golf Resort or the operation of
the Golf Resort.
Insurance Requirements - All requirements of each insurance policy, and
all orders, rules, regulations and other requirements of the National Board of Fire
Underwriters (or any other body exercising similar functions) applicable to the Golf
Resort or the operation of the Golf Resort.
Kemper - Kemper Sports Management, Inc. or any successor to Kemper's
interest under this Agreement as provided in Section 9.3 of this Agreement.
Key Employees — For the purposes hereof, a "Key Employee" of KSM
shall mean any individual holding any of the following positions at any time during the
Term: the general manager, superintendent, accountant/bookkeeper, director of golf or
head professional, or any employee of KSM's corporate office.
Learning Center - The Learning Center is a free-standing facility, located
adjacent to the driving range, providing golf services to the Golf Resort independent of
Clubhouse facilities.
Legal Requirements - All laws, statutes, ordinances, orders, rules,
regulations, permits, licenses, authorizations, directives and requirements of all
governments and governmental authorities, which now or hereafter may be applicable
to the Golf Resort or the operation of the Golf Resort.
Operating Inventory - Consumable items used in or held in storage for use
in the operation of the Golf Resort, including score cards and cart tickets, driving range
balls, golf pro shop merchandise, food and beverage inventory, kitchen supplies, paper
and plastic ware, locker room and bathroom supplies, towels, fuel, cleaning materials,
fertilizers, pesticides, seed, maintenance parts and supplies, office supplies, and other
similar items.
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Operating Year - An Operating Year shall be a 12 month period during the
term of this Agreement commencing on July 1 and continuing through and including the
following June 30; provided, however, the first Operating Year shall commence on the
Commencement Date and shall end on June 30 of the next following year.
Resident - A Resident is a person whose primary residence is the City.
Restaurant - The restaurant shall mean each location at the clubhouse
premises and Golf Resort where the food & beverage operations occur, including selling
of alcoholic beverages at the restaurant, bars, banquets, outside catering and on-course
food and beverage operations.
State - The State of California.
Threshold Amount - The term "Threshold Amount" is the amount set forth
in Section 6.2 hereof.
ARTICLE II
TERM OF AGREEMENT
2.1 Term.
A. The term of this Agreement shall commence on July 1, 2017 (the
"Commencement Date") and continue through July 1, 2020 (the "Termination Date").
Notwithstanding the foregoing, however, either party may terminate this Agreement for
Cause at any time by delivery to the other party of written notice (the "Initial Notice") 60
days prior to the date of termination, which Initial Notice shall specify the Cause and
provide for the action required to remedy the Cause within 30 days of the notice (the
"Cure Period"). If the non-terminating party performs the required action to remove the
Cause within the Cure Period to the sole satisfaction of the terminating party, then this
Agreement shall remain in full force and effect. If the non-terminating party fails to
remove the Cause to the terminating party's satisfaction within the Cure Period, then
this Agreement shall terminate on the specified date of termination set forth in the Initial
Notice. In addition, either party may terminate this Agreement, in its sole and absolute
discretion, on or after June 30, 2020, by delivery to the other party of written notice 60
days prior to the date of termination.
B. The City, at its option, may extend the term of this Agreement for
two one (1) year successive extensions each at the discretion of the City Council of the
City of Palm Desert, by giving written notice of the exercise of such option to Kemper
prior to January 1, 2020 for the first extension and prior to January 1, 2021 for the
second extension. In the event of the exercise of such option by the City, all other terms
of this Agreement shall remain the same, except "July 1, 2020", shall be the new
Termination Date in Section 2.1 A hereof.
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ARTICLE III
OPERATING RESPONSIBILITIES
3.1 Management of the Golf Resort by Kemper. The City hereby contracts
with Kemper to manage and operate the Golf Resort pursuant to the terms of this
Agreement, and Kemper agrees it shall manage and operate the Golf Resort pursuant
to the terms of this Agreement. Subject to the terms of this Agreement, Kemper shall
have the authority and responsibility to: (a) determine, establish, and implement the
policies, standards, and schedules for the operation and maintenance of the Golf Resort
and all matters affecting customer relations; (b) hire, train, and supervise the general
manager, course superintendent, and all Golf Resort employees; (c) supervise and
direct all phases of advertising, sales, and business promotion for the Golf Resort; and
(d) establish accounting and payroll procedures and functions for the Golf Resort. The
City agrees it shall cooperate with Kemper to permit and assist Kemper to carry out its
duties under this Agreement; provided, however, that the City Council's annual (or from
time to time) resolution setting rates and the season schedule shall govern to the extent
of its terms. All policies and procedures of Kemper relating to the Golf Resort including
but not limited to those set forth in clauses (a) through (d), above, shall be subject to the
approval of the designee of the City and the designee of the City may, from time to time,
recommend other policies or procedures, which Kemper shall follow and implement.
3.2 Annual Plans.
3.2.1 Preparation and Approval. Kemper shall submit to the City Manager
on or before execution of this Agreement by the City and on or before March 1, of the
fiscal year the annual plan (the "Annual Plan") for the Golf Resort for the next Operating
Year. The Annual Plan shall include an operating budget containing estimates of all Golf
Resort Expenses for the next Operating Year, including expenditures for (a) property
operation and maintenance, (b) repairs, replacements, and alterations which do not
constitute Capital Improvements, (c) Furnishings and Equipment and Operating
Inventory, and (d) advertising, sales, and business promotion. The Annual Plan shall
also include the course maintenance plan and the marketing and business plan for the
Golf Resort for the next Operating Year. The parties agree that they shall use their best
efforts to limit any increase in Golf Resort Expenses during the term of this Agreement
to three percent (3%) per year. The parties understand that, as provided in Article IV of
this Agreement, recommendations and budgets for Capital Improvements will be treated
separately and will not form part of the Annual Plan. The Annual Plan shall be subject to
the prior written approval of the City Manager, which approval shall not be unreasonably
withheld. The City agrees to examine each Annual Plan submitted by Kemper and it is
contemplated by the parties that the Annual Plan will be agreed upon by the parties not
later than July 1 of each year. Each Annual Plan may contain a contingency item equal
to five percent of the total projected Golf Resort Expenses.
In the event of a dispute with regard to the Annual Plan, pending the
resolution of such dispute, Kemper shall continue to manage and operate the Golf
Resort in accordance with the standards set forth in this Agreement at a level of
expenditures comparable to those of the preceding Operating Year, plus up to an
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additional three percent (3%). This amount shall apply to actual costs, not to the Fixed
Management Fee described in Section 6.1.
3.2.2 Compliance. Kemper shall comply, to the extent reasonably and
commercially practicable, with the applicable Annual Plan. Kemper shall not spend for
Golf Resort Expenses in excess of the amount budgeted in the Annual Plan without the
prior written consent of the City Manager. Notwithstanding the foregoing sentence,
Kemper shall be entitled to make additional expenditures not authorized under the then
applicable Annual Plan in the event of an emergency or in order to comply with any
applicable Insurance Requirements or Legal Requirements.
3.2.3 Quarterly Review of Annual Plan. The general manager of the Golf
Resort shall meet not less frequently than quarterly with the City Manager and discuss
the operating results of the Golf Resort, and the parties shall agree upon any
amendments or revisions to the Annual Plan to take into consideration variables or
events that did not exist, or could not be anticipated by Kemper or the City, at the time
the Annual Plan was prepared. Any material amendments or revisions to the Annual
Plan shall be subject to the prior approval of the City. In addition to Quarterly Reviews
of the Annual Plan with the General Manager, the senior leadership of Kemper Sports
and City Staff will conduct a review at or around each mid fiscal year of the Term to
discuss whether or not there may need to be a change in operating strategies for the
remainder of the fiscal year due to unforeseen market changes that might require an
adjustment to the Annual Plan. Further, if at any time during the fiscal year a material
event occurs which detrimentally harms the operations of the Golf Resort by resulting in
a loss of revenues or increase in expenditures in excess of 5% of the Budget, then
Kemper shall meet with the City Manager to present a plan to mitigate the financial and
economic impact to the Golf Resort. Both Kemper and the City agree to promptly
implement appropriate contingencies, policies and procedures to reasonably reduce the
material loss of revenues or material increase in expenses.
3.3 Responsibilities of Kemper. Without in any way limiting Kemper's right to
manage and operate the Golf Resort in accordance with the terms of this Agreement,
Kemper shall perform the following services, or cause the same to be performed for the
Golf Resort, and all expenditures of Kemper and costs and expenses incurred by
Kemper in performing these services shall be Golf Resort Expenses:
3.3.1 Consummate arrangements with concessionaires, licensees,
tenants of the City or subtenants of the City, or other intended users of the Golf Resort;
3.3.2 Enter into such contracts for the furnishing of utilities and
maintenance and other services to the Golf Resort, subject to the terms of Section 3.6
below;
3.3.3 Make all repairs, decorations, replacements, additions, revisions,
alterations and improvements to the Golf Resort as shall be reasonably necessary for
maintenance of the Golf Resort in good order, condition and repair, subject to the terms
of Article IV of this Agreement;
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3.3.4 Incur such expenses as shall be necessary for the proper operation
and maintenance of the Golf Resort, including without limitation rental expenses for
leased Furnishings and Equipment;
3.3.5 Maintain a level of Operating Inventory deemed appropriate by
Kemper and the City Manager for supplying the needs of the Golf Resort and its
customers;
3.3.6 Apply for, obtain and maintain, all licenses and permits required of
Kemper and the City in connection with the operation and management of the Golf
Resort; and the City agrees to execute any and all applications and such other
documents as shall be reasonably required and to otherwise cooperate, in all
reasonable respects, with Kemper in the application for, and obtaining and maintenance
of, such licenses and permits; if licenses or permits for the Golf Resort are held (or to be
held) in the City's, or the Palm Desert Recreational Facilities Corporation's name, then
Kemper will assist City with obtaining and maintaining such licenses and permits;
3.3.7 Use commercially reasonable efforts to do, or cause to be done, all
such acts and things in and about the Golf Resort as shall be reasonably necessary to
comply with all Insurance Requirements and Legal Requirements;
3.3.8 Pay all Golf Resort Expenses, Impositions and insurance
premiums, whether incurred by the City or Kemper, when due;
3.3.9 Implement a marketing, advertising, and promotional plan for the
Golf Resort;
3.3.10 Purchase Furnishings and Equipment on behalf of the City
necessary to operate and maintain the Golf Resort in the manner provided in this
Agreement.
3.3.11 Purchase and maintain all computer software, hardware, and
information technology necessary to operate and maintain the Golf Resort.
3.4 Personnel.
3.4.1 General. Kemper shall recruit, hire, train, discharge, promote and
supervise the management staff of the Golf Resort (i.e., the general manager, the
course superintendent, and other Key Employees), and Kemper shall supervise through
the management staff the recruiting, hiring, training, discharge, promotion and work of
all other employees of Kemper at the Golf Resort. The general manager of the Golf
Resort shall confidentially inform the City Manager of all terminations and the reason
therefor. All employees of Kemper at the Golf Resort shall be employees of Kemper, not
the City, and shall be properly experienced and qualified for their positions. Kemper
may at its expense assign its management trainees to the Golf Resort. From time to
time, Kemper shall provide safety training to its employees, including but not limited to
training with respect to the California Occupational Safety and Health Act.
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3.4.2 Pension and Benefit Plans. Subject to written approval by the City
Manager, Kemper shall have the right to provide the non-management employees of
the Golf Resort with pensions and other employee retirement benefits and disability,
health and welfare benefits, and other benefit plans at customary levels now or
hereafter available to similarly situated employees of other golf courses and country
clubs operated by Kemper, and the allocable share of such employee benefits accrued
while working at the Golf Resort shall be a Golf Resort Expense.
3.4.3 Temporary Assignment of Other Kemper Personnel. If the positions
of Key Employees are not filled for whatever reason, Kemper may temporarily assign to
these positions the staff of other golf courses and country clubs operated by Kemper.
During such time as these employees are temporarily assigned to the Golf Resort, all
such employees will be paid their regular Compensation.
3.4.4 Management Staff. The general manager of the Golf Resort shall
be responsible for the day to day management and operation of the Golf Resort. The
name and telephone number (both home and business) of the general manager shall be
provided, in writing, to the City Manager and shall be current at all times. The general
manager shall be reasonably available during normal working hours to meet with the
City Manager. After normal working hours, the general manager shall be reasonably
available to appear at the Golf Resort if deemed necessary by the City Manager. The
course superintendent for the Golf Resort shall be a member in good standing of the
Golf Course Superintendents Association. The director of golf for the Golf Resort shall
be a current Class "A" member in good standing of the Professional Golf Association of
America. The City Manager shall have the right to approve the individuals whom
Kemper intends to hire to fill the position of General Manager.
3.4.5 Key Employees. During the Term and for a period of two (2) years
after the end of the Term, it is agreed that City shall not, directly or indirectly, seek to
contact, entice or discuss employment opportunities with any Key Employee of KSM nor
shall City otherwise engage or seek to employ or otherwise engage, directly or
indirectly, any such Key Employee, without first obtaining the written consent of KSM.
3.5 Specific Operating Procedures. In addition to the more general
responsibilities of Kemper as manager of the Golf Resort as provided in this Article,
Kemper shall operate and manage the Golf Resort in accordance with the following
operating procedures:
3.5.1 Golf Resort Hours of Operation. Except upon the occurrence of the
events described in Article X of this Agreement, the Golf Resort shall be kept fully open
to adequately serve the public utilizing the Golf Resort, except for instances in which
normal maintenance requires temporary closure, as determined by Kemper and the City
in such parties' reasonable discretion. After seven days prior written notice to the City,
the golf courses and the driving range may be closed at the same time for winter over
seeding. The inside food and beverage services of the Golf Resort clubhouse shall be
open all year, except as otherwise approved in writing by the City Manager. The hours
of food and beverage services in the clubhouse restaurant shall be adequate to serve
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the general public, subject to the approval of the City Manager. The City of Palm Desert
will have the right to temporarily close parts of or the whole Golf Resort, driving range,
clubhouse, academy, and all other facilities for special use event(s) with written notice
to Kemper not less than 60 days prior to the date of such special event(s).
3.5.2 Fees and Charges. Kemper shall recommend, and the City shall
establish annually (or more frequently and in all cases consistent with resolutions and
orders of the City Council) all fees and charges for use of the golf course, golf carts, bag
storage, club rental and driving range. All other fees, charges, and prices for services at
the Golf Resort shall be set by Kemper and shall be comparative and competitive with
other first class golf resorts in the Coachella Valley.
3.5.3 Dress Code. Bathing attire, cut-offs and short shorts, halter tops,
tube tops, running outfits, and similar types of recreational wear are not considered
proper dress on the golf courses and shall not be permitted. Shirts and shoes shall be
worn at all times at the Golf Resort. This dress code shall apply to all visitors, golfers,
and employees.
3.5.4 Handicap Service. During the term of this Agreement, Kemper shall
implement a United States Golf Association golf handicap service for golfers who
patronize the Golf Resort. Kemper shall make the necessary arrangements to
implement such a handicap system. The fee charged to golfers by Kemper for such
handicap service shall be an annual fee and shall not exceed two times the fee charged
to the Golf Resort by Southern California Golf Association or United States Golf
Association, as the case may be, for providing the handicap service. The handicap
service shall not include as part of its benefits any privileges to use the golf courses,
other than the privileges otherwise available to the public.
3.5.5 Starter Service and Marshals. Starter services shall be provided in
the golf pro shop, and shall include the assignment of tee times and carts and the
collection of fees. While the golf courses are open for play, marshals shall closely
monitor and control the speed of play and assist the slower golfers in order to maintain
golf play at acceptable levels, in a manner to be determined by Kemper in its
reasonable judgment.
3.5.6 Club Cleaning. Golf club cleaning services shall be provided to
golfers immediately upon their completion of golf play. There shall be no charge to the
golfers for golf club cleaning services. Appropriate Golf Resort employees may accept
gratuities from golfers for such services.
3.5.7 Tee Times. The tee time schedule for the golf courses shall be
recommended by Kemper and approved by the City Manager. "Starter" tee times shall
not be reserved, and the starter shall not work in groups if it will result in not remaining
"on schedule" throughout the day.
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3.5.8 Fivesome Play. It shall be the policy of the Golf Resort not to permit
fivesomes. However, Kemper may permit fivesomes, when appropriate (such as group
or family events), at its reasonable discretion and notify the City Manager in writing.
3.5.9 Tournaments. Consecutive tee times, shotgun starting formats, and
modified shotgun starting formats shall be acceptable forms of reservations for
tournaments. During the appropriate seasons and provided the weather conditions
permit such an arrangement, when a full shotgun (use of all 18 holes) starting
procedure is used, it shall be timed in such a manner so as to potentially accommodate
two full shotguns per day - one in the morning and one in the afternoon. In preparation
for a tournament, Kemper shall, if necessary, prepare tee settings, spectator areas, and
tents for judges and players and shall mark hazards and damaged turf areas. Kemper
shall provide player identification cards for golf carts, and if necessary provide "closest
to the pin" and "longest drive" markers and scoring forms. If requested, Kemper shall
arrange for food and beverage services including box lunches and beverage carts.
Kemper may charge a separate fee if the tournament group wants any additional
services, including but not limited to: prior reservations, bag handling, merchandise,
food and beverage services, scoring, shuttle service between hotels and the Golf
Resort, videotaping, portraits, shoe cleaning services, or club cleaning services.
3.5.10 Golf Pro Shops. The golf pro shop(s) shall be open for business in
accordance with the provisions of Section 3.5.1. Kemper shall employ a qualified person
for the golf pro shops, who will be responsible for promoting and increasing sales at the
golf pro shops. Kemper shall employ qualified personnel to work in the golf pro shops
each day that the golf courses are open for play. Merchandise that can reasonably be
classified as "stale" or "unsalable" may be marked down. If Kemper determines that any
aged merchandise in the golf pro shops should not be sold, whether on a discounted
basis or otherwise, because of the reputation or image of the golf pro shops, then with
the approval of the City Manager, Kemper may purchase with its own funds (and not
from the Golf Resort Accounts) such merchandise at cost for purposes of selling such
merchandise at other golf courses operated by Kemper. Space shall be provided in the
golf pro shops for merchandise that the City may develop as part of its marketing
programs.
3.5.11 Learning Center. Kemper may operate a Learning Center on the
designated Learning Center Area on the Golf Resort. The City shall have the right, at
the City's sole discretion, to re-purpose or close the Learning Center at any time upon
45 days' written notice to Kemper.
3.5.12 Golf Instruction. Kemper shall either employ or shall retain, as a
Golf Resort Expense, as independent contractors golf instructors to provide golf lessons
and golf instruction at the Golf Resort. All golf instructors must be certified Professional
Golf Association or Ladies Professional Golf Association golf professionals or
apprentices, and shall be certified by the director of golf at the Golf Resort. All golf
instruction fees shall be handled as a cash register transaction and reported in the
same manner as green fees. Kemper shall develop a golf instructional program that will
offer individual and group lessons, video instruction, golf clinics, junior golf clinics, and
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golf schools. This golf instructional program shall be used to complement golf package
promotions offered by the owner of the timeshare projects and hotels adjacent to the
Resort Course. A golf professional shall only be allowed to conduct golf lessons at the
Golf Resort if he or she has first obtained the approval to do so by Kemper; such
approval may be conditioned on payment of an appropriate fee.
3.5.13 Golf Driving Range. The driving range property shall be open in
accordance with the provisions of Section 3.5.1. The driving range building shall be
staffed appropriately by Kemper. Driving range balls shall be of reasonable and
appropriate quality, and all cracked and worn range balls shall be removed daily. A
driving range fee shall be recommended by Kemper and set by the City Manager.
3.5.14 Golf Club Rentals and Bag Storage. Rental golf clubs and bags
shall be available for customers of the Golf Resort. Storage space for golf bags shall be
made available, and bag tags shall be placed on all golf bags stored at the Golf Resort
with the name of the player printed on the bag tag. The fee for golf bag storage shall be
recommended by Kemper and set by the City Manager.
3.5.15 Golf Carts. Golf cart rentals shall be required for all golfers on the
golf courses. Kemper shall not permit the use of private golf carts on the golf courses. A
minimum of 160 electrically powered golf carts per golf course shall be maintained at
the Golf Resort. Golf carts shall be new when acquired and shall be manufactured by a
reputable firm. The entire golf cart fleet shall be replaced with new units upon Kemper's
recommendation and when approved by the City Manager. All golf carts shall be four-
wheel vehicles, and shall be equipped with canopies, windshields, coolers, and sand
and seed containers and holders. Kemper shall employ a mechanic who is qualified to
repair and maintain the golf carts or provide for third-party maintenance through the golf
cart lease agreement or an authorized manufacturer's representative.
3.5.16 Food and Beverage Operations. The Golf Resort shall include a
restaurant located in the clubhouse and a snack bar. Temporary food stands shall not
be installed on the golf courses except for special events. If permitted by applicable law,
with the prior written consent of the City Manager, Kemper may establish an on-course
cart food and beverage service. Kemper shall comply with all requirements of state and
local law governing the sale and distribution of alcoholic beverages. Kemper shall obtain
and maintain all permits from the County of Riverside Department of Health for all food
and beverage operations at the Golf Resort. Kemper shall obtain all necessary licenses
required for operation of the restaurant and snack bar. Kemper shall comply with all
regulations of the County of Riverside Department of Health and all other present and
future health laws and regulations as may be established by all federal, state, and local
governmental agencies and their instrumentalities. All food service employees shall
possess valid food handler cards, and a copy of these cards shall be maintained in the
administrative office at the Golf Resort. Kemper shall comply with the City's municipal
code and state and federal law as it relates to health and disease testing as now or
hereafter required by applicable law, for all food and beverage employees. Prices of
food and beverages sold at the Golf Resort shall be comparable to prices charged at
other first class golf resorts in the Coachella Valley.
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3.5.17 Office Operations. Kemper shall employ an administrative staff at
the Golf Resort to accomplish the administrative functions as required by this
Agreement. The Golf Resort shall be equipped with all necessary equipment to allow for
the efficient administration of the Golf Resort business. Upon the written request of the
City Manager, Kemper shall provide the City with a written job description for each
management position at the Golf Resort. The City shall keep these job descriptions in
strict confidence, subject to applicable public records disclosure laws.
3.5.18 Safety and Security. Kemper shall take all commercially reasonable
action to cause the Golf Resort to comply with all safety regulations of federal, state,
and local governmental agencies and their instrumentalities, including without limitation
any requirements imposed by California Labor Code Sections 1720 et seq. and 6300 et
seq. and regulations promulgated with respect thereto, and applicable federal
occupational, health, and safety laws and regulations. Kemper shall take all reasonable
actions to protect the safety of all Golf Resort employees, customers and visitors. The
Golf Resort shall contain appropriate security systems as determined by Kemper and
the City Manager.
3.5.19 Customer Forms. Forms shall be visible and readily available to
customers of the Golf Resort to present their comments or complaints regarding the
Golf Resort. Completed forms shall be made available to the designee of the City upon
request.
3.6 Contracts and Agreements. Except as provided below, all leases and
financing agreements for Furnishings and Equipment, and all contracts and agreements
relating to the operation and maintenance of the Golf Resort (including without limitation
contracts for maintenance and repair services, pest control, supplies, and landscaping
services, and agreements for tournaments, banquets, and other group functions),
entered into during the term of this Agreement shall be entered into by Kemper as the
contracting party, on behalf of the City unless mutually agreed upon to the contrary. If
the term of the lease, financing agreement, or other contract or agreement extends
beyond the expiration date of this Agreement or if the date for performance under such
contract is after the expiration date of this Agreement, then the City (and not Kemper)
shall be the contracting party to such contract and Kemper shall obtain approval from
the City Manager prior to entering into such lease, financing agreement, or other
contract or agreement. The preceding sentence shall not apply to agreements for
tournaments, banquets, and other group functions to take place after the expiration date
of this Agreement, and such agreements shall be entered into by Kemper on behalf of
the City. Upon the expiration or earlier termination (for whatever reason) of this
Agreement, the City agrees to assume all contracts and agreements entered into in
Kemper's name on behalf of the City in accordance with this Section 3.6.
3.7 Alterations to Buildings. Kemper shall not make any alterations, additions,
or changes to the exterior appearance or the structural nature of the clubhouse, golf pro
shop, maintenance building, or other buildings located at the Golf Resort without the
prior consent of the City.
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3.8 Operation and Maintenance Standards. The parties acknowledge and
agree that the Golf Resort shall be operated and maintained as a first class golf resort.
In addition to all other responsibilities of Kemper under this Agreement, Kemper agrees
that at all times during the term of this Agreement, the Golf Resort shall be operated
and maintained in accordance with the Standards for Operation and Maintenance set
forth as Exhibit "A" of this Management Agreement. The City Manager, may, from time
to time, inspect the Golf Resort for purposes of compliance with the terms of this
Section 3.8. The City Manager, shall act reasonably and in good faith in making the
determination whether the Standards for Operation and Maintenance have been
satisfied, and if not, the City Manager shall provide Kemper with a list of written
deficiencies. Kemper shall correct such deficiencies within 30 days of receipt of such
written list of deficiencies.
In particular, Kemper is aware that there is a concern with respect to the
maintenance of the "desert-scape" portion of the Golf Course, and maintenance
standards for the desert-scape, which are now on file in the office of the City Clerk, shall
be included with such Standards.
Except as provided below, if a particular Corrective Action Item has not been
corrected, improved, or repaired within 30 days after receipt of the report containing the
Corrective Action Item, then the City shall have the right to declare a default hereunder
and terminate this Agreement. The following items shall be excluded from the
Evaluation Form for purposes of determining whether a Corrective Action Item has been
corrected, improved, or repaired within such 30 day period: (a) any outstanding
Corrective Action Item that Kemper is diligently and timely correcting in accordance with
the time schedule jointly prepared by the City Manager and the general manager of the
Golf Resort, as provided above, (b) any item in disagreement between the parties as
provided in the immediately following paragraph, (c) any Corrective Action Item in which
the correction, improvement, or repair is considered a Capital Improvement, and (d) any
Corrective Action Item that Kemper is unable to correct, improve, or repair because of
the occurrence of a "Force Majeure Event" (as defined in Section 10.3 of this
Agreement).
In the event Kemper disagrees with the results of any Evaluation Form or in the
event the parties disagree as to whether any Corrective Action Item has been properly
or timely corrected, improved, or repaired, then the parties shall submit the matter in
disagreement to the City or Golf Course Committee. The parties agree that Kemper
shall comply with the recommendations made by the City or Golf Course Committee as
to the correction, improvement, or repair of any Corrective Action Item in accordance
with Kemper's responsibilities under this Agreement. With regard to any matter in
disagreement, during the period of time that such matter has been submitted to the City
Manager as provided above, the penalty applicable to such matter shall be suspended
until such matter has been finally resolved and no additional damages for such matter
shall accrue during the period of time that such matter has been submitted to the City. If
Kemper does not agree with the recommendation of the City or Golf Course Committee,
then Kemper and the City shall, within 15 days after the date of the recommendation,
select an independent third party to make such decision. If Kemper and the City cannot
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agree on such third party, then the matter shall be submitted to the local Judicial
Arbitration and Mediation Services office for resolution.
3.9 Contract Administration. The City has designated the City Manager as the
individual who is responsible for administering this Agreement on behalf of the City.
The City Manager may designate any member or members of his or her staff or other
person to carry out the City Manager's responsibilities in administering this Agreement.
Kemper has designated James R. Stegall, Executive Vice-President, as the individual
who is responsible for administering this Agreement on behalf of Kemper. Kemper shall
notify the City in writing if another individual has replaced James R. Stegall as the
person responsible for administering this Agreement on behalf of Kemper. The parties
acknowledge that except as otherwise expressly provided herein (a) the City Manager
has the authority to approve or consent to those matters identified in this Agreement as
requiring the City's approval or consent and to make all other decisions on behalf of the
City regarding the administration of this Agreement (except where approval by the City
Council is expressly required herein), and (b) James R. Stegall or such other individual
designated by Kemper has the authority to approve or consent to those matters
identified in this Agreement as requiring Kemper's approval or consent and to make all
other decisions on behalf of Kemper regarding the administration of this Agreement.
The City's management direction to Kemper shall be given by the City Manager.
3.10 Meetings with Golf Course Committee. The General Manager of the Golf
Resort shall attend all meetings of the Golf Course Committee and discuss all
standards, changes, policies and other matters required to be discussed.
3.11 Compliance with Environmental Laws. In performing its responsibilities
under this Agreement, Kemper shall comply with all federal, state, and local laws and
regulations pertaining to the storage, use, and disposal of "hazardous or toxic wastes,
substances, or materials" as defined by applicable law, to the extent such "hazardous or
toxic wastes, substances, or materials" are within Kemper's control or under Kemper's
management. The City shall not exercise any remedies to terminate this Agreement in
the event of non-material breach hereof Kemper agrees to indemnify the City for any
costs, fees, fines or losses that may result from environmental contamination or natural
resource damage on the subject property if caused by Kemper's performance in storing,
using or disposing of hazardous or toxic substances or materials or wastes such as, but
not limited to, herbicides, pesticides, algicides or other water treatment chemicals. The
City acknowledges and agrees that the City shall be responsible for any legal or other
liability or damage arising out of the presence of environmental contamination or natural
resource damage on the subject property by any cause other than Kemper's
performance in storing, using or disposing of hazardous or toxic substances or materials
or wastes such as, but not limited to, herbicides, pesticides, algicides or other water
treatment chemicals.
3.12 Cooperation with other City Agreements. Kemper agrees to honor and
cooperate with the City in all agreements between the City and third parties and all City
policies concerning the use of the Golf Resort. To the extent that such agreements and
policies impact on the operation of the Golf Courses, Kemper shall have the right to
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review and comment on such agreements and policies prior to their approval by the
City. The City may approve or disapprove of any such agreements and policies in its
sole and absolute discretion.
3.13 Radius Restriction. During the Term of this Agreement, neither Kemper
nor any affiliate or subsidiary of Kemper shall manage, own or operate another golf
course within a 20 mile radius of the Golf Resort, without first obtaining the City's prior
written consent.
3.14 Good Standing. Kemper shall be a management company recognized in
the golf course management community as a first-class manager of high-quality golf
courses and shall be authorized to conduct business in the City.
ARTICLE IV
CAPITAL IMPROVEMENTS
4.1 Capital Improvement Plans. Kemper shall submit to the City on or before
April 1 of each year during the term of this Agreement, commencing a "Capital
Improvement Plan" for the Golf Resort for the next Operating Year, which shall include
Kemper's recommendation of Capital Improvement projects for the next Operating Year
and the estimated costs of such Capital Improvement projects.
4.2 Implementation of Capital Improvement Projects. The parties
acknowledge and agree that all Capital Improvement projects are in the sole control and
discretion of the City, and all costs and expenses of Capital Improvement projects shall
be paid from City funds. The costs and expenses of Capital Improvement projects shall
not be considered Golf Resort Expenses. The parties acknowledge and agree that this
Agreement imposes no responsibilities or obligations on the part of Kemper with respect
to any aspect of a Capital Improvement project, including design, construction, or
supervision. In the event the City desires Kemper to be involved in any capacity in a
Capital Improvement project, the parties will enter into a separate agreement setting
forth the terms and conditions of such involvement, including without limitation fees to
be received by Kemper for such involvement.
ARTICLE V
INSURANCE
Without limiting Kemper's indemnification of City, and prior to execution of the
Agreement by the City, Kemper shall obtain, provide and maintain during the term of
this Agreement, policies of insurance of the type and amounts described below and in a
form that is satisfactory to the City.
5.1 General Liability Insurance. Kemper shall maintain commercial general
liability insurance with coverage at least as broad as Insurance Services Office form CG
00 01, in an amount not less than $10,000,000 per occurrence, $10,000,000 general
aggregate, on a per project basis, for bodily injury, personal injury, and property
damage for all activities of Kemper under this Agreement. The policy must include
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contractual liability that has not been amended. Any endorsement restricting standard
ISO "insured contract" language will not be accepted.
5.2 Automobile Liability Insurance. Kemper shall maintain automobile
insurance at least as broad as Insurance Services Office form CA 00 01 covering bodily
injury and property damage for all activities of Kemper under this Agreement, including
coverage for any owned, hired, non-owned or rented vehicles, in an amount not less
than $10,000,000 combined single limit for each accident.
5.3 Umbrella or Excess Liability Insurance.
Kemper may opt to utilize umbrella or excess liability insurance in meeting insurance
requirements. In such circumstances, Kemper may obtain and maintain an umbrella or
excess liability insurance policy with limits that will provide bodily injury, personal injury
and property damage liability coverage at least as broad as the primary coverages set
forth above, including commercial general liability and employer's liability. Such policy or
policies shall include the following terms and conditions:
• A drop down feature requiring the policy to respond if any primary insurance that
would otherwise have applied proves to be uncollectible in whole or in part for
any reason;
• Pay on behalf of wording as opposed to reimbursement;
• Concurrency of effective dates with primary policies;
• Policies shall "follow form" to the underlying primary policies; and.
• Insureds under primary policies shall also be insureds under the umbrella or
excess policies.
5.4 Workers' Compensation Insurance. Kemper shall maintain Workers'
Compensation Insurance (Statutory Limits) and Employer's Liability Insurance (with
limits of at least $1,000,000). Kemper shall submit to City, along with the certificate of
insurance, a Waiver of Subrogation endorsement in favor of the City of Palm Desert, the
Palm Desert Recreational Facilities Corporation, the Successor Agency to the Palm
Desert Redevelopment Agency, and their elected or appointed officers, agents, officials,
employees and volunteers. Kemper shall require all subcontractors performing work for
Kemper under this Agreement to maintain workers compensation insurance covering
such subcontractors' employees. The City of Palm Desert, the Palm Desert
Recreational Facilities Corporation, the Palm Desert City Council, and City personnel
shall not be responsible for any claims in law or equity occasioned by the failure of
Kemper to comply with this section, or with the provisions of California law relating to
workers compensation insurance.
5.5 Personal Property Coverage. Kemper shall maintain insurance on the
contents of the buildings located at the Golf Resort and other personal property located
at the Golf Resort, which contents and personal property are owned or leased by the
City or Kemper, against loss or damage by fire, lightning and/or any other perils
insurable under the form of "all risk" coverage then available (including specifically
irrigation and/or sprinkler system leakage damage, vandalism and malicious mischief, if
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available), for full replacement value. The City of Palm Desert and the Palm Desert
Recreational Facilities Corporation shall be named as loss payees. The parties agree
that Kemper shall not be responsible for procuring or maintaining "all risk" insurance
coverage on the buildings, structures, or other improvements located at the Golf Resort,
and the City shall either procure or maintain such insurance coverage or shall self-
insure for such risks.
OTHER PROVISIONS OR REQUIREMENTS
5.6 Right to Increase Insurance Coverage. Kemper shall have the right to
increase, but not to decrease without the prior written consent of the City, the minimum
amount of any insurance to be maintained by Kemper with respect to the Golf Resort
under this section, in order to make such coverage comparable to the amount of
insurance carried with respect to other golf courses and country clubs operated by
Kemper, taking into account the size, character, and location of the Golf Resort. The
types of insurance and the coverage amounts specified in this section are the
requirements of the City in connection with the operation of the Golf Resort.
5.7 Insurance Maintained by Kemper. Any insurance maintained by Kemper
under this section may contain deductible provisions and self-insurance or self-
assumption provisions, but must be declared to and approved by the City. City reserves
the right to require that self-insured retentions be eliminated, lowered, or replaced by a
deductible. Self-insurance or self-assumption provisions will not be considered to
comply with these specifications unless approved by the City. The City understands and
agrees that with respect to all policies of insurance required under this section, the
portion of any claim, loss, or damage subject to a deductible amount or a self-insurance
or self-assumption amount shall be a Golf Resort Expense. Kemper shall obtain the
City's consent in writing of the City Manager at least 30 days prior to any increase in the
deductible amount or self-insured or self-assumed amounts for the insurance coverage
maintained by Kemper under this section. Any failure to comply with reporting or other
provisions of the policies, including breach of warranties shall not affect coverage
provided to the City of Palm Desert, the Palm Desert Recreational Facilities
Corporation, and their officers, officials, employees, agents, and volunteers.
5.8 Proof of Insurance. Kemper shall provide certificates of insurance to City
as evidence of the insurance coverage required herein, along with a waiver of
subrogation endorsement for workers' compensation. Insurance certificates and
endorsements must be approved by City's Risk Manager prior to commencement of
performance. Current certification of insurance shall be kept on file with City at all times
during the term of this contract. City reserves the right to require complete, certified
copies of all required insurance policies, at any time.
5.9 Duration of Coverage. Kemper shall procure and maintain for the duration
of the contract insurance against claims for injuries to persons or damages to property,
which may arise from or in connection with the performance under this Agreement
hereunder by Kemper, their agents, representatives, employees, subcontractors, or
consultants.
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5.10 Primary/Non-Contributing. Coverage provided by Kemper shall be primary
and any insurance or self-insurance procured or maintained by City shall not be
required to contribute with it. The limits of insurance required herein may be satisfied by
a combination of primary and umbrella or excess insurance. Any umbrella or excess
insurance shall contain or be endorsed to contain a provision that such coverage shall
also apply on a primary and non-contributory basis for the benefit of City before the
City's own insurance or self-insurance shall be called upon to protect it as a named
insured.
5.12 Acceptable Insurers. All insurance policies shall be issued by an insurance
company currently authorized by the Insurance Commissioner to transact business of
insurance or is on the List of Approved Surplus Line Insurers in the State of California,
with an assigned policyholders' Rating of A- (or higher) and Financial Size Category
Class VII (or larger) in accordance with the latest edition of Best's Key Rating Guide,
unless otherwise approved by the City's Risk Manager.
5.13 Waiver of Subrogation. All insurance coverage maintained or procured
pursuant to this agreement shall be endorsed to waive subrogation against the City of
Palm Desert, the Palm Desert Recreational Facilities Corporation, and their elected or
appointed officers, agents, officials, employees and volunteers, or shall specifically
allow Kemper or others providing insurance evidence in compliance with these
specifications to waive their right of recovery prior to a loss. Kemper hereby waives its
own right of recovery against the City of Palm Desert and the Palm Desert Recreational
Facilities Corporation, the Successor Agency to the Palm Desert Redevelopment
Agency, and their elected or appointed officers, agents, officials, employees and
volunteers, and shall require similar written express waivers and insurance clauses from
each of its subcontractors or consultants.
5.14 Enforcement of Contract Provisions (non estoppel). Kemper
acknowledges and agrees that any actual or alleged failure on the part of the City to
inform Kemper of non-compliance with any requirement imposes no additional
obligations on the City nor does it waive any rights hereunder.
5.15 Requirements Not Limiting. Requirements of specific coverage features or
limits contained in this Section are not intended as a limitation on coverage, limits or
other requirements, or a waiver of any coverage normally provided by any insurance.
Specific reference to a given coverage feature is for purposes of clarification only as it
pertains to a given issue and is not intended by any party or insured to be all inclusive,
or to the exclusion of other coverage, or a waiver of any type. If Kemper maintains
higher limits than the minimums shown above, the City requires and shall be entitled to
coverage for the higher limits maintained by Kemper. Any available insurance proceeds
in excess of the specified minimum limits of insurance and coverage shall be available
to the City.
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5.16 Notice of Cancellation. Kemper agrees to oblige its insurance agent or
broker and insurers to provide the City a 30 day notice of cancellation (except for
nonpayment for which a 10 day notice is required) or nonrenewal of coverage for each
required coverage.
5.17 Insurance Premium Expenses. The expense of insurance premiums for
any insurance required by this Agreement shall be a Golf Resort Expense.
5.18 Additional Insured Status. General liability policies shall provide or be
endorsed to provide that the City of Palm Desert, the Palm Desert Recreational
Facilities Corporation, the Successor Agency to the Palm Desert Redevelopment
Agency, and their elected or appointed officers, agents, officials, employees and
volunteers shall be additional insureds under such policies. This provision shall also
apply to any excess/umbrella liability policies.
5.19 Prohibition of Undisclosed Coverage Limitations. None of the coverages
required herein will be in compliance with these requirements if they include any limiting
endorsement of any kind that has not been first submitted to City and approved of in
writing.
5.20 Separation of Insureds. A severability of interests provision must apply for
all additional insureds ensuring that Kemper's insurance shall apply separately to each
insured against whom claim is made or suit is brought, except with respect to the
insurer's limits of liability. The policy(ies) shall not contain any cross-liability exclusions.
5.21 Pass Through Clause. Kemper agrees to ensure that its consultants,
subcontractors, and any other party involved with the project who is brought onto or
involved in the project by Kemper, provide the same minimum insurance coverage and
endorsements required of Kemper. Kemper agrees to monitor and review all such
coverage and assumes all responsibility for ensuring that such coverage is provided in
conformity with the requirements of this section. Kemper agrees that upon request, all
agreements with consultants, subcontractors, and others engaged in the project will be
submitted to City for review.
5.22 City's Right to Revise Specifications. The City reserves the right at any
time during the term of the contract to change the amounts and types of insurance
required by giving Kemper ninety (90) days advance written notice of such change. If
such change results in substantial additional cost the City and Kemper may renegotiate
the terms of this Agreement.
5.23 Timely Notice of Claims. Kemper shall give City prompt and timely notice
of claims made or suits instituted that arise out of or result from Kemper's performance
under this Agreement, or are related in any way to the Golf Resort, and that involve or
may involve coverage under any of the required liability policies.
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5.24 Additional Insurance. Kemper shall also procure and maintain, at its own
cost and expense, any additional kinds of insurance, which in its own judgment may be
necessary for its proper protection in performance under this Agreement. Kemper must
obtain the City's prior written approval to have any additional expenses under this
section included as a Golf Resort Expense.
5.25 Safety. Kemper shall execute and maintain its work so as to avoid injury
or damage to any person or property. Kemper shall at all times be in compliance with
all applicable local, state and federal laws, rules and regulations, and shall exercise all
necessary precautions for the safety of employees appropriate to the nature of the work
and the conditions under which the work is to be performed. Safety precautions, where
applicable, shall include, but shall not be limited to: (A) adequate life protection and
lifesaving equipment and procedures; (B) instructions in accident prevention for all
employees, consultants, and subcontractors, such as safe walkways, scaffolds, fall
protection ladders, bridges, gang planks, confined space procedures, trenching and
shoring, equipment and other safety devices, equipment and wearing apparel as are
necessary or lawfully required to prevent accidents or injuries; and (C) adequate
facilities for the proper inspection and maintenance of all safety measures.
ARTICLE VI
MANAGEMENT FEES TO KEMPER
6.1 Fixed Management Fee. For the period from the date of this Agreement to
the expiration of the Term, but subject to the following paragraph, Kemper shall receive
a "Fixed Management Fee" of $20,833.33 per month.
The Fixed Management Fee shall be paid monthly, in advance, on the first day of
each calendar month Any fixed management fee owing at the expiration or early
termination of this agreement or resulting from correction of errors or adjustments shall
be paid concurrently with the delivery to the City of the final statements per section 7.7.2
hereof.
6.2 Percentage Management Fee. In addition to the Fixed Management Fee,
for the period from the date of this Agreement to the expiration of the Term, Kemper
shall receive a "Percentage Management Fee" equal to five percent (5%) of the amount
by which the Gross Revenues of the portions of the Golf Resort operated by Kemper
exceeds the Threshold Amount; provided that in no event shall the Percentage
Management Fee in any one Operating Year exceed Two Hundred ($200,000)
("Percentage Management Fee Cap"). Notwithstanding the above or the Threshold
Amount below, the Percentage Management Fee Cap shall increase by the lesser of (i)
an amount equal to the percentage change in the CPI for the preceding 12 month
reporting period, or (ii) two percent (2%) per Operating Year of the Term. The
Threshold Amount is the sum of $6,500,000.00. The Percentage Management Fee
shall be paid to Kemper annually, in arrears, within 45 days following Kemper's delivery
to the City of the annual statement required by Section 7.7.2, below, and shall be based
on the Gross Revenues for the Operating Year covered by such statement.
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In the event of any corrections to any monthly or annual statements, the parties
shall promptly make the necessary adjustments between themselves.
Any Percentage Management Fee owing as of the expiration or earlier
termination of this Agreement shall be payable concurrently with the delivery to the City
of the final statement per Section 7.7.2 hereof.
6.3 Gross Revenues Defined. For the purpose of determining the Percentage
Management Fee, the term "Gross Revenues" means all money received as a result of
the operation of the Golf Resort and the sale of goods and services at the Golf Resort,
determined on a cash basis in accordance with generally accepted accounting
principles consistently applied. Gross Revenues shall include all green fees; rental fees
for golf carts, golf clubs and bags, and other rental items; bag storage fees; range balls;
reservation fees; fees for golf handicap service; rental and concession payments; food
and beverage sales; liquor sales; revenue generated from space rentals and from
meetings, banquets, parties, receptions, tournaments, and other group gatherings;
merchandise sales; golf instruction fees; and revenues received by the City from golf
schools operated by the City or Kemper. The following shall be excluded from Gross
Revenues:
6.3.1 Cost of goods returned to suppliers.
6.3.2 Monies and or credits received in settlement of claims for loss or
damage to goods, wares, food, or merchandise.
6.3.3 Compensation paid to golf pros providing lessons and related
services.
6.3.4 Revenues from the Learning Center, unless operated by Kemper.
6.3.5 The amount of cash refunded or credit allowed on merchandise or
gift certificates returned by customers, or the amount of cash refunded or credit allowed
in lieu of Kemper's acceptance therefor.
6.3.6 Receipts in the form of refunds from, or the value of merchandise,
supplies or equipment returned to, shippers, suppliers or manufacturers.
6.3.7 Credit card carrying charges.
6.3.8 All sales taxes, admissions taxes, use taxes, so-called luxury taxes,
entertainment taxes, value added taxes, excise taxes, gross receipt taxes, and similar
taxes, whether imposed under any existing or future rules, regulations, laws or
ordinances, upon the sales of food, beverages, merchandise or services, and whether
or not added to or included in the selling price;
6.3.9 Delivery charges.
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6.3.10 Interest, service or sales carrying charges paid by customers for
extension of credit on sales.
6.3.11 Any receipts from the transfer of goods, wares or merchandise from
the Golf Resort to any other store owned by the City.
6.3.12 Bad debts and bad checks.
6.3.13 Proceeds of insurance, except business interruption insurance
proceeds.
6.3.14 Receipts from vending machines, telephones, lottery ticket sales,
stamp machines, and the like.
6.3.15 Receipts from sales to employees at a discount.
6.3.16 Proceeds from the sale of fixtures or equipment or of all or of a
substantial part the stock-in-trade and merchandise at a sale other than at retail, or the
sale of the business as a whole.
6.3.17 Proceeds from the bulk sale of any merchandise (i.e., a sale not
made in the ordinary course of business).
6.3.18 Gross receipts received by licensees or concessionaires, except to
the extent any portion of such receipts is received by the Golf Resort.
6.3.19 The amount of any gratuities paid or given by customers to Golf
Resort employees, or service charges added to customer billings which represent
gratuities to Golf Resort employees.
6.3.20 Proceeds of any borrowings by Kemper or the City.
6.3.21 Any amount received by Kemper in connection with any claim,
demand, or lawsuit.
6.3.22 Initial operating funds in the Golf Resort Accounts and funds
subsequently provided by the City, if any.
ARTICLE VII
ACCOUNTS; WORKING FUNDS; DISBURSEMENT OF FUNDS;
RECORDS AND REPORTS
7.1 Golf Resort Accounts.
7.1.1 The City shall cause to be established bank accounts for the Golf
Resort (including a "Capital Reserve Account" to be used for approved capital
expenditures) at a banking institution or institutions (which banking institution or
institutions shall have branches located in the City and in close proximity to the Golf
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Resort), such accounts to be in the City's name or the City's name (collectively the "Golf
Resort Accounts"). Kemper will collect and deposit daily in the Golf Resort Accounts
designated by the City all monies received from the operation of the Golf Resort. The
Golf Resort Accounts shall be maintained, as described in more detail in Section 7.4.
Kemper shall have check writing privileges with respect to the Golf Resort Accounts,
subject to a limit of $5,000.00 per check, for the purpose of disbursement of the
payment of Golf Resort Expenses as set forth in Sections 7.3 and 7.4 below. The City
shall have the right to require additional controls on check writing privileges.
Notwithstanding the provisions of the foregoing sentence, subject to the City's approval,
Kemper shall be entitled to maintain funds in reasonable amounts in "cash register
banks" or in petty cash funds at the Golf Resort.
7.1.2 All revenues generated by the Golf Resort shall be the property of
the City. Revenue collection procedures shall be in accordance with the method
approved by the City. The deposit shall be made with the bank no later than the next
business day following the date on which the revenues are collected. A duplicate copy
of the deposit receipt identifying the amount collected by Kemper and its deposit with
the bank shall be delivered by Kemper (or designated representative) to the City
Manager at the address set forth below, on a weekly basis, or, at the option of the City,
Kemper shall provide the City with a weekly bank deposit report via a computerized "on-
line" reporting system.
7.1.3 Until such monies or other things of value have been deposited in
the City's account and verified by the bank in accordance with this Agreement, Kemper
bears all risk of loss therefore, including, but not limited to, damage, destruction,
disappearance, theft, fraudulent or any dishonest or unlawful act, or other hazard,
irrespective of location and whether by Kemper's employees or any other person or
entity. Should such an event or act occur, Kemper shall notify as soon as possible the
City Manager and the Riverside County Sheriff and Kemper shall prepare a report of
such incident. Kemper shall notify the City of any operational changes deemed
necessary by Kemper to safeguard the City's monies or things of value.
7.1.4 Kemper shall require of the bank holding the City's funds that all
funds be secured to such an extent and in such a manner as is required by applicable
law in connection with the deposit of funds of a public entity.
7.2 Accounting System. Kemper shall design, establish, implement and
maintain procedures for the accounting and control of the revenues from the time of
their collection by Kemper to the time of deposit at the bank. This shall include a system
of internal controls to account for all gross revenues. Such procedures shall include
each of the accounting and cash control processes identified recommended by Kemper
and approved by the City Manager, which approval shall not unreasonably be withheld.
7.3 Disbursements from Operating Account. From the Golf Resort Accounts
(or, if applicable, from "cash register banks" or petty cash funds available at the Golf
Course), Kemper is authorized to pay all Golf Resort Expenses when incurred, except
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for fees due to Kemper under Sections 6.1 and 6.2, which shall be paid by the City from
other Golf Resort Accounts.
7.4 Operating Accounts. Kemper shall use its commercially reasonable efforts
to maintain at all times, sufficient funds in the Golf Resort Accounts to satisfy the daily
working capital needs of the Golf Resort, including the timely payment of Golf Resort
Expenses. To this end, upon the commencement of the Term hereof, the City shall
deposit into the Golf Resort Accounts the amount of $1,500,000. If at any time, or from
time to time, the Golf Resort Expenses could become greater than the operating income
of the Golf Resort, then Kemper shall immediately notify by telephone and email the
City Manager and the Finance Director of the City. To the extent that the Golf Resort
has annual capital expenditures under Section 4.2 to be paid from the Golf Resort
Accounts, the maximum amount to be disbursed from the Golf Resort Accounts shall
not exceed $100,000 annually. The City shall have the right to withdraw and retain any
net operating income in excess of the amounts required for maintaining the Golf Resort
Accounts.
7.5 Books and Records. Kemper shall maintain in accordance with GAAP
(Generally Accepted Accounting Principles) adequate books of account with respect to
its management and operations of the facilities and shall maintain such books at its
local offices in Palm Desert, California. Kemper shall keep full and accurate books of
account and such other records as are necessary to reflect the results of the operation
of the Golf Resort. For this purpose, Kemper agrees it will make available to the City at
all times all books and records in Kemper's possession relating to the Golf Resort,
including contract documents, invoices and construction records. All accounting records
shall be maintained in accordance with generally accepted accounting principles and
shall be maintained in a cash format for each Operating Year. All such books, records,
and reports shall be maintained separately from other facilities operated by Kemper.
Kemper shall keep digital back-up for all records including precautions for local system
failures. All records at the Golf Resort shall be kept by Kemper in fireproof files. Kemper
agrees to maintain reasonable and necessary accounting, operating, and administrative
controls relating to the financial aspects of the Golf Resort, and such controls shall
provide checks and balances designed to protect the Golf Resort, Kemper, and the City.
Kemper shall maintain all financial and accounting books and records for a period of at
least three years after the expiration or earlier termination of this Agreement, and the
City shall have the right to inspect and audit such books and records during such period
as provided in Section 7.6, below.
Kemper shall provide the City with a verification and accounting system as
directed by the City for all monies, gross receipts, revenues, fees, and charges collected
at the Golf Resort. Such system shall include:
(a) Recordation of all sales by means of a cash register, which will
display the amount of each sale and automatically issue a customer's receipt. The cash
registers used by Kemper shall be approved by the City. Said cash registers shall in all
cases have locked in sales total transaction counters that are constantly accumulating
and which cannot, in any case, be reset, and in addition, a tape loaded within the cash
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registers on which transaction numbers and sales details are imprinted. Beginning and
ending cash register readings shall be made a matter of daily record. In the event of a
mechanical or electrical failure of cash register, Kemper shall record by hand all
collections and issue a customer receipt in like manner.
(b) A written record of the physical count of each and every player on
the golf tee sheet with each player's name who reserved the tee time. Kemper will
make reasonable efforts to capture all players' names at the point of sale, if possible.
Kemper shall provide a complete count of resident play on a daily basis.
(c) Totaling of golfers' starter sheets at the end of each day's play and
reconciliation of fee category totals on cash register detail tapes.
(d) Maintenance of a daily log book detailing the number of rounds
played by fee category and total amount of cash collected by fee category.
7.6 Inspection. The City or its authorized agents, auditors, or representatives
shall have the right during normal business hours to review, inspect, audit, and copy the
books, records, invoices, deposit receipts, canceled checks, and other accounting and
financial information maintained by Kemper in connection with the operation of the Golf
Resort. All such books and records shall be made available to the City at the Golf
Resort, unless the City and Kemper agree upon another location. The City, at its own
expense, shall have the right to retain an independent accounting firm to audit the
books and records of the Golf Resort on an annual basis. The City's rights under this
Section shall continue after termination of this Agreement.
7.7 Reports to City. Kemper shall deliver to the City the following financial
statements, in a form reasonably acceptable to the City:
7.7.1 Within 20 days after the end of each calendar month, a statement
of profits, losses, and Gross Revenues, showing the results of operation of the Golf
Resort for such month and for the Operating Year to date, which statement shall include
sufficient detail to reflect all Gross Revenues, Golf Resort Expenses and the Fixed
Management Fee. Such statements shall include a budget comparison, a variance
report, and such other customary reports as may reasonably be requested by the City.
Such statement shall be certified as correct by an authorized financial officer of Kemper.
Such statement shall be in a form reasonably acceptable to the City; and
7.7.2 Within 30 days after the end of each Operating Year, a statement of
profits, losses, and Gross Revenues, showing the results of operation of the Golf Resort
for such Operating Year which statement shall include sufficient detail to reflect all
Gross Revenues, Golf Resort Expenses, the Fixed Management Fee, and the
Percentage Management Fee (if applicable) for such period. Such statement shall be
certified as correct by an authorized officer of Kemper. Such statements shall include a
budget comparison, a variance report, and such other customary reports as may
reasonably be requested by the City Manager. If requested by the City Manager, and at
the sole expense of the City, these financial statements shall be certified by an
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independent certified public accountant acceptable to the City Manager and provided to
the City within 90 days after the end of the Operating Year. Kemper shall provide to the
City Manager, within 30 days of end of each calendar month, that calendar month's
payroll register by department and individual.
7.8 If Kemper fails to provide to the City any monthly or annual statement at
the time and in the manner specified in this Agreement, this failure shall constitute a
material default under this Agreement and the City shall have the right, in addition to
any other rights or remedies it may have under this Agreement, to conduct an audit to
determine these sales, and Kemper shall immediately reimburse the City for the cost of
the audit on written demand by the City. If the actual monthly or annual Gross
Revenues shown by any audit of the City (whether hereunder or under Sections 7.5 or
7.6) is found to be three percent or greater than the amount of the Gross Revenues
shown on the statement provided by Kemper, or if there are any other material
irregularities, the overstatement or such irregularities shall be deemed willful and the
City may terminate this Agreement upon written notice given at any time within 60 days
after receipt of the audit by the City. If at any time Kemper causes an audit of Kemper's
business at the Golf Resort to be made by an independent accountant, Kemper shall
furnish the City a copy of the report of this audit at no cost to the City, within ten days
after Kemper's receipt of the audit report.Kemper Payroll, Accounting Software,
Computer Software, Computers and Hardware . Kemper agrees to provide the Golf
Resort with all computer hardware, software and all information technology necessary
for the daily operations of the Golf Resort; the costs of which shall be a golf resort
expense. Kemper shall maintain all the licenses, regulations, and be in compliance with
all rules and regulations associated with software, hardware and credit card
transactions.
ARTICLE VIII
TERMINATION RIGHTS
8.1 Termination by the City. In addition to the City's option to terminate this
Agreement pursuant to Section 2.1, the City shall have the right to terminate this
Agreement, without further compensation to Kemper, other than as to amounts
theretofore accrued, upon the occurrence of any one of the following events:
8.1.1 Kemper has misappropriated any funds of the City;
8.1.2 Kemper fails to perform its operation and maintenance duties
described in Section 3.8 and the expiration of the cure periods described therein;
8.1.3 Kemper fails to comply with the provisions of Sections 3.4.1, 7.4 or
7.7.2.
8.1.4 Kemper fails to keep, observe or perform any other material
covenant, agreement, term or provision of this Agreement to be kept, observed or
performed by Kemper, and such default continues for a period of 30 days after written
notice of such default by the City; or
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8.1.5 (i) Kemper applies for or consents to the appointment of a receiver,
trustee or liquidator of Kemper or of all or a substantial part of its assets; (ii) Kemper
files a voluntary petition in bankruptcy or commences a proceeding seeking
reorganization, liquidation, or an arrangement with creditors; (iii) Kemper files an answer
admitting the material allegations of a bankruptcy petition, reorganization proceeding, or
insolvency proceeding filed against Kemper; (iv) Kemper admits in writing its inability to
pay its debts as they come due; (v) Kemper makes a general assignment for the benefit
of creditors; or (vi) an order, judgment or decree is entered by a court of competent
jurisdiction, on the application of a creditor, adjudicating Kemper a bankrupt or insolvent
or approving a petition seeking reorganization of Kemper or appointing a receiver,
trustee or liquidator of Kemper or of all or a substantial part of its assets, and such
order, judgment or decree continues unstayed and in effect for any period of 90
consecutive days.
8.2 8.1.6 Pursuant to notifications by Kemper under Section 7.4 hereof, the
City shall have made additional deposits into the Golf Resort Accounts to satisfy the
daily working capital needs of the Golf Resort, which additional deposits in the
aggregate exceed $500,000 during each Operating Year provided, however the
foregoing right to terminate shall not apply in the event (i) all or part of the Golf Resort is
closed for any reason, (ii) the occurrence of a Force Majeure Event as defined in
Section 10.3, (iii) the Annual Plan agreed by the City contemplates a negative cash flow
for the applicable Operating Year, or (iv) if the City has withdrawn any amounts from the
Golf Resort Accounts including pursuant to its rights to do so under Section 7.4 above.
The City's right to terminate this Agreement pursuant to this Section 8.1 shall be
exercised upon written notice to Kemper given at any time. The City's termination notice
shall specify the effective date of such termination, which may be effective immediately,
but which date shall not be more than 30 days after the date of the City's termination
notice.
8.3 Termination by Kemper. Kemper shall have the right to terminate this
Agreement if the City fails to keep, observe, or perform any other material covenant,
agreement, term or provision of this Agreement to be kept, observed or performed by
the City, and such default continues for a period of 30 days after notice of such default
by Kemper to the City. Kemper's right to terminate this Agreement pursuant to this
Section 8.2 shall be exercised upon written notice to the City given at any time after the
applicable grace period has expired. Kemper's termination notice shall specify the
effective date of such termination, which date shall not be less than 90 days after the
date of Kemper's termination notice.
8.4 Curing Defaults. Any default by Kemper or the City under the provisions of
Section 8.1 or 8.2, as the case may be, which is susceptible of being cured shall not
constitute a basis for termination of this Agreement if the nature of such default will not
permit it to be cured within the grace period allotted; provided that within such grace
period the alleged party in default shall have given notice of its intent to cure, has
commenced to cure such default, and is proceeding to complete the cure in good faith
and with reasonable diligence, and such cure is effected, in any event, within 90 days of
the date of the notice of default.
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8.5 Effect of Termination. The termination of this Agreement under the
provisions of this Article VIII shall not affect the rights of the terminating party with
respect to any damages it has suffered as a result of any breach of this Agreement, nor
shall it affect the rights of either party with respect to any liability or claims accrued, or
arising out of events occurring, prior to the date of termination.
8.6 Remedies Cumulative. Neither the right of termination, nor the right to sue
for damages, nor any other remedy available to a party under this Agreement shall be
exclusive of any other remedy given under this Agreement or now or hereafter existing
at law or in equity.
ARTICLE IX
TITLE MATTERS; ASSIGNMENT
9.1 Ownership of Improvements and Personal Property. All improvements to
the Golf Resort made during the term of this Agreement and all Furnishings and
Equipment and Operating Inventory purchased by Kemper during the term of this
Agreement shall be property owned by the City at such time as the improvements are
made or the Furnishings and Equipment or Operating Inventory are purchased.
9.2 Assignments. The City may assign its rights and obligations hereunder to
another governmental entity without Kemper's consent, and upon the effective date of
such assignment and the assignee's assumption of the City's obligations hereunder, the
City shall be released from any obligations hereunder accruing from and after the
effective date of such assignment. Except for an assignment of this Agreement by the
City to another nonprofit corporation or to a governmental entity, neither party shall
assign this Agreement without the prior written consent of the other party, which
consent may be granted or withheld in the sole and absolute discretion of the other
party. It is understood and agreed that any consent granted by a party to any such
assignment shall not be deemed a waiver of any consent required under this Section
9.2 as to any future assignment. Any assignment by either party of this Agreement in
violation of the provisions of this Section 9.2 shall be null and void and shall result in the
termination of this Agreement. In addition to any other remedies available to the parties,
the provisions of this Section 9.2 shall be enforceable by injunctive proceeding or by suit
for specific performance.
9.3 Successors and Assigns. Subject to the foregoing, this Agreement shall
inure to the benefit of and be binding upon the parties and their respective heirs, legal
representatives, successors and assigns.
ARTICLE X
DAMAGE OR DESTRUCTION;
EMINENT DOMAIN; FORCE MAJEURE EVENTS
10.1 Damage or Destruction. Should the Golf Resort be destroyed or
substantially damaged by fire, flood, acts of God, or other casualty, the City shall have
the right to terminate this Agreement, by written notice to Kemper given within 60 days
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following the occurrence of such event, and in such event neither party shall have any
further obligation to the other party under this Agreement, except with respect to
liabilities accruing, or based upon events occurring, prior to the effective date of such
termination. For the purpose of this Section 10.1, the Golf Resort shall be deemed to
have been substantially damaged if the estimated length of time required to restore the
Golf Resort, or any portions thereof, substantially to its condition and character just prior
to the occurrence of such casualty shall be in excess of six months, as indicated by an
architect's certificate or other evidence reasonably satisfactory to Kemper. If this
Agreement is not terminated in the event of damage to the Golf Resort either because:
(i) the damage does not amount to substantial damage as described
above, or
(ii) notwithstanding destruction of or substantial damage to the Golf
Resort, the City elects to restore the Golf Resort,
then the City shall proceed, at the City's own expense, with all due
diligence to commence and complete restoration of the Golf Resort to its condition and
character just prior to the occurrence of such casualty. If as a result of any damage or
destruction to the Golf Resort as provided in this Section 10.1, the responsibilities of
Kemper under this Agreement are substantially changed, then the parties shall meet
and discuss in good faith appropriate modifications to this Agreement including the
Management Fees.
10.2 Eminent Domain. If all of the Golf Resort (or such a substantial portion of
the Golf Resort so to make it unfeasible, in the reasonable opinion of the City, to restore
and continue to operate the remaining portion of the Golf Resort for the purposes
contemplated in this Agreement) shall be taken through the exercise (or by agreement
in lieu of the exercise) of the power of eminent domain, then upon the date that the City
shall be required to surrender possession of the Golf Resort or of that substantial
portion of the Golf Resort, this Agreement shall terminate and neither party shall have
any further obligation to the other party under this Agreement except with respect to
liabilities accruing, or based upon events occurring, prior to the effective date of such
termination. If such taking of a portion of the Golf Resort shall not make it unfeasible, in
the reasonable opinion of the City, to restore and continue to operate the remaining
portion of the Golf Resort for the purposes contemplated in this Agreement, then this
Agreement shall not terminate, and the City shall proceed, at the City's own expense,
with all due diligence to alter or modify the Golf Resort so as to render it a complete
architectural unit which can be operated as a golf resort of substantially the same type
and character as before. If as a result of any alternation or modification of the Golf
Resort as provided in this Section 10.2, the responsibilities of Kemper under this
Agreement are substantially changed, than the parties shall meet and discuss in good
faith appropriate modifications to this Agreement including the Management Fees.
10.3 Force Majeure Events. As used in this Agreement, the term "Force
Majeure Event" means declared or undeclared war, sabotage, riot or acts of civil
disobedience, acts or omissions of governmental agencies, accidents, fires, explosions,
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floods, earthquakes, or other acts of God, strikes, labor disputes, shortages of
materials, or any other event not within the control of Kemper and not caused by the
gross negligence or intentional wrongful conduct of Kemper. For purposes of this
Agreement, any disruption of the operation of the Golf Resort caused by a Capital
Improvement project shall also constitute a Force Majeure Event. If as a result of the
occurrence of a Force Majeure Event, the responsibilities of Kemper under this
Agreement are substantially changed, then the parties shall meet and discuss in good
faith appropriate modifications to this Agreement including the Management Fees.
ARTICLE XI
GENERAL PROVISIONS
11.1 Purchases by Kemper. In connection with any purchases made by
Kemper or an Affiliate of Kemper for the account of the City, or the City on behalf of the
City, it is understood that Kemper or such Affiliate may perform services as a
representative of the manufacturer to secure the benefits of lower costs, and that any
resulting savings shall be passed on to the City, including representatives' fees. In
addition, all trade discounts, rebates and refunds pertaining directly to purchases for the
Golf Resort shall accrue to the benefit of the City. Any rebates earned for the benefit of
the City due to Kemper's national agreements with major manufacturers for equipment
and golf carts will be deposited into the Capital Reserve Account as referenced in
Section 7.1.1 of this Agreement.
11.2 Purchases from Kemper Affiliates. If any purchases of goods or services
for the Golf Resort are made from or through an Affiliate of Kemper, the charges to the
Golf Resort for such goods or services shall be on the same terms as those made to
other golf courses and country clubs operated by Kemper and such charges shall not
exceed the market prices for such goods and services. Before consummating any such
purchase of goods or services, Kemper shall (i) notify the City Manager in writing of the
type of merchandise and services proposed to be purchased and the price and fees
therefor, and (ii) obtain the prior written consent of the City Manager for the purchase of
any such goods or services.
11.3 Indemnities.
11.3.1 Kemper's Indemnity. Kemper agrees to indemnify, defend (with
counsel reasonably satisfactory to the City Manager), protect, and hold harmless the
City, the Agency, and all City Personnel from and against any and all claims, demands,
actions, lawsuits, proceedings, damages, liabilities, judgments, penalties, fines,
attorneys' fees, costs, and expenses:
(a) which result from any action taken by Kemper relating to the
Golf Resort (i) that is expressly prohibited by this Agreement, or (ii) that is not within the
scope of Kemper's duties under this Agreement, or (iii) that is not within Kemper's
delegated authority under this Agreement; or
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(b) which result from any violations by Kemper or Kemper's
agents, employees, invitees, contractors, subcontractors or assignees of any law,
ordinance, rule or regulation governing or otherwise affecting the business operations of
Kemper or Kemper's performance of services and obligations under this Agreement; or
(c) which result from any injury or death of any person
(including, without limitation, injury or death of Kemper's employees, agent, visitors,
invitees, assignees, contractors or subcontractors within Kemper's control) or damage
or destruction of the property of any person or entity which occurs by reason of the
negligent actions or omissions or willful misconduct of Kemper or Kemper's agents,
employees, invitees, contractors, subcontractors, or assignees, or material breach or
default by Kemper or Kemper's agents, employees, invitees, contractors,
subcontractors, or assignees, in performance of Kemper's services under this
Agreement or otherwise caused by the negligent actions or omissions or willful
misconduct of Kemper or Kemper's agents, employees, invitees, contractors,
subcontractors, or assignees; or
(d) which result from Kemper's material breach of the covenant
contained in Section 3.11 of this Agreement; or
(e) which result from any other act or omission not enumerated
above constituting the negligence or willful misconduct by Kemper or any officer,
director, or employee of Kemper.
(f) for any costs, fees, fines or losses that may result from
environmental contamination or natural resource damage on the subject property if
caused by Kemper's performance in storing, using or disposing of hazardous or toxic
substances or materials or wastes such as, but not limited to, herbicides, pesticides,
algicides or other water treatment chemicals
This indemnity provision shall survive the expiration or termination of this Agreement.
Kemper hereby stipulates and agrees that no condition precedent to its indemnification
obligations stated herein, whether by way of notice or otherwise, exists or shall
constitute a defense to its obligation to defend, indemnify and hold harmless the Agency
and the City, and the City Personnel in any of such circumstances.
11.3.2 City's Indemnity. The City agrees to indemnify, defend (with
counsel reasonably satisfactory to Kemper), protect, and hold harmless Kemper and its
owners, officers, directors, and employees from and against any and all claims,
demands, actions, lawsuits, proceedings, damages, liabilities, judgments, penalties,
fines, attorneys' fees, costs, and expenses arising from (i) any act or omission to the
extent caused by the negligence or willful misconduct by the City or any officer, director,
employee, or agent of the City, (ii) the ownership, leasing, organization, development or
construction of the Golf Course, (iii) any environmental contamination conditions that
are the result of the presence of hazardous or toxic substances or materials or wastes
that were pre-existing before the original agreement between Kemper and the City first
executed, and which may be uncovered or discovered during or after the term of this
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Agreement, or if present on the Golf Resort by any cause other than Kemper's
performance in storing, using or disposing of hazardous or toxic substances or materials
or wastes, such as, but not limited to, herbicides, pesticides, algicides or other water
treatment chemicals or (iv) claims by third-parties against Kemper arising from any
other actions or omissions of the City, the Agency, the City Personnel or others for
whom any of them are responsible but only if such claim or claims also neither arise
from, nor are caused in whole or in any part by, the wrongful or negligent act, error or
omission of Kemper, any officer, director, or employee of Kemper or others for whom
any of them are responsible.
11.4 Bonds. In connection with the Agency's issuance or refunding of any
bonds or certificates of participation, Kemper shall have the right to approve, which
approval shall not be unreasonably withheld, any description of Kemper or any
description of this Agreement or of the City's relationship with Kemper under this
Agreement, which description is contained in any prospectus or similar materials
delivered in connection with such bonds or certificates of participation. The City agrees
to furnish to Kemper copies of all such materials for such purpose not less than 20 days
prior to the delivery of such materials to the public.
11.5 Golf Course Names. The Golf Resort shall be known by such trade name
and/or trademark or logo as may from time to time be determined by the City. The
parties acknowledge and understand that the names, logos, and designs used in the
operation of the Golf Resort, together with appurtenant goodwill, are the exclusive
property of the City. Kemper may identify the Golf Resort as a golf resort managed and
operated by Kemper.
11.6 Notices. All notices, demands, requests, consents, approvals, replies and
other communications ("Notices") required or permitted by this Agreement shall be in
writing and may be delivered by any one of the following methods: (a) by personal
delivery; (b) by deposit with the United States Postal Service, postage prepaid to the
addresses stated below or (c) by deposit with an overnight express delivery service.
Notice deposited with the United States Postal Service in the manner described above
shall be deemed effective three business days after deposit with the Postal Service.
Notice by overnight express delivery service shall be deemed effective upon receipt.
Notice by personal delivery shall be deemed effective at the time of personal delivery.
For purposes of Notices hereunder, the address of the City shall be:
City of Palm Desert
73-510 Fred Waring Drive
Palm Desert, California 92260
Attention: City Manager
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For purposes of Notices hereunder, the address of Kemper shall be:
Kemper Sports Management, Inc.
500 Skokie Boulevard
Suite 444
Northbrook, Illinois
Attention: CEO
Each party shall have the right to designate a different address within the
United States of America by the giving of notice in conformity with this Section 11.6.
11.7 Independent Contractor. Kemper shall at all times be considered an
independent contractor under this Agreement. Nothing contained in this Agreement
shall be construed to be or create a partnership or joint venture between the City and its
successors and assigns, on the one part, and Kemper and its successors and assigns,
on the other part.
11.8 Modification and Changes. This Agreement may be amended or modified
only by a writing signed by both parties.
11.9 Understandings and Agreements. This Agreement constitutes all of the
understandings and agreements of whatever nature or kind existing between the parties
with respect to Kemper's management and operation of the Golf Resort, and this
Agreement supersedes all prior understandings and Agreements, whether written or
oral, between the City and Kemper pertaining to the management and operation of the
Golf Resort.
11.10 Headings. The Article, Section and Subsection headings contained in this
Agreement are for convenience and reference only and are not intended to define, limit
or describe the scope or intent of any provision of this Agreement.
11.11 Survival of Covenants. Any covenant, term or provision of this Agreement
which in order to be effective must survive the termination of this Agreement shall
survive any such termination.
11.12 Third Parties. None of the obligations under this Agreement of either party
shall run to or be enforceable by any party other than the party to this Agreement or by
a party deriving rights under this Agreement as a result of an assignment permitted
pursuant to the terms of this Agreement.
11.13 Waivers. No failure by Kemper or the City to insist upon the strict
performance of any covenant, agreement, term of condition of this Agreement or to
exercise any right or remedy consequent upon the breach of this Agreement shall
constitute a waiver of any such breach or any subsequent breach of the same covenant,
agreement, term or condition. No covenant, agreement, term or condition of this
Agreement and no breach of this Agreement shall be waived, altered or modified except
by a written instrument. A waiver of any breach of this Agreement shall only affect this
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Agreement to the extent of the specific waiver, and all covenants, agreements, terms
and conditions of this Agreement shall continue in full force and effect.
11.14 Applicable Law. This Agreement shall be construed and interpreted in
accordance with, and shall be governed by, the laws of the State of California. The
parties agree that the Superior Court of the State of California, County of Riverside shall
have jurisdiction of any litigation between the parties relating to this Agreement.
11.15 No Presumption Regarding Drafter. The City and Kemper acknowledge
and agree that the terms and provisions of this Agreement have been negotiated and
discussed between the City and Kemper, and that this Agreement reflects their mutual
agreement regarding the subject matter of this Agreement. Because of the nature of
such negotiations and discussions, it would be inappropriate to deem either the City or
Kemper to be the drafter of this Agreement, and therefore no presumption for or against
the drafter shall be applicable in interpreting or enforcing this Agreement.
11.16 Enforceability of Any Provision. If any term, condition, covenant, or
obligation of this Agreement shall be determined to be unenforceable, invalid, or void,
such determination shall not affect, impair, invalidate, or render unenforceable any other
term, condition, covenant, or obligation of this Agreement.
11.17 United States Currency. All amounts payable pursuant to this Agreement
shall be paid in lawful money of the United States of America.
11.18 Counterparts. This Agreement and any amendment may be executed in
counterparts, and upon all counterparts being so executed each such counterpart shall
be considered as an original of this Agreement or any amendment and all counterparts
shall be considered together as one agreement.
11.19 Attorneys' Fees. In the event of a dispute involving the non-performance
by a party hereto of its obligations under this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees and all other expenses (including fees and costs
related to discovery) reasonably incurred in connection with such dispute, whether or
not litigation is commenced, in addition to all other relief to which the party is entitled. If
the successful party recovers judgment in any legal action or proceeding, the attorneys'
fees and all other expenses of litigation shall be included in and made a part of any
such judgment.
11.20 Easements. Kemper shall recognize all easements of record affecting the
Golf Resort.
11.21 Publicity. Any commercial advertisements, press releases, articles, or
other media information using the City's or the Agency's name shall be subject to the
prior approval of the Agency or the City (as the case may be), which approval shall not
be unreasonably withheld.
11.22 Covenants Against Discrimination. Kemper agrees that in connection with
its performance under this Agreement, there shall be no discrimination by Kemper
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against any person on account of race, color, creed, religion, sex, marital status,
national origin or ancestry. Kemper agrees to include a provision similar to this Section
11.22 in all subcontracts entered into by Kemper in connection with work being
performed under this Agreement.
11.23 Time of the Essence. Time is of the essence of this Agreement. The
parties understand that the time for performance of each obligation has been the
subject of negotiation by the parties.
11.24 Authority. The parties represent for themselves that (a) such party is duly
organized and validly existing, (b) the person or persons executing this Agreement on
behalf of such party is/are duly authorized to execute and deliver this Agreement on
behalf of such party, (c) by so executing this Agreement, such party is formally bound to
the terms and provisions of this Agreement, and (d) the execution of this Agreement
does not violate any provision of any other agreement to which such party is bound.
11.25 Possessory Interest. Pursuant to California Revenue and Taxation Code
Section 107.6, the City hereby informs Kemper that this Agreement may create a
possessory interest subject to property taxation, and in such event Kemper may be
subject to the payment of property taxes levied on such interest. The parties agree that
in the event possessory interest property taxes are levied against Kemper in connection
with this Agreement, such taxes shall be considered a Golf Resort Expense and shall
be paid from the Golf Course Accounts.
11.26 Conflict of Interest. The parties hereto hereby covenant that during the
term of this Agreement they will not employ any person to administer any portion of this
Agreement that has an interest, direct or indirect, which would conflict in any manner or
degree with the performance of services required under this Agreement.
11.27 Supercede and Replace. This Agreement supercedes and replaces any
and all agreements regarding the management, operation and maintenance of the Golf
Resort by Kemper.
ARTICLE XII
CLUBHOUSE RESTAURANT
12.1 Restaurant Operations.
12.1.1 The City hereby assigns to PDRFC, and PDRFC hereby assumes,
all rights and obligations of the City set forth herein, to the extent applicable to the
restaurant at the clubhouse.
12.1.2 The parties agree that the Lease Agreement shall have no effect on
Kemper's management obligations or rights set forth in this Agreement, except as
herein specified to the contrary. To that end, Kemper shall continue to have the
obligation to manage and operate the restaurant as provided, inter alia, in Sections
3.5.1 and 3.5.16 hereof.
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12.1.3 Notwithstanding the foregoing, the parties agree that PDRFC shall
obtain the license to sell alcoholic beverages from the restaurant, and Kemper shall
assist PDRFC in receiving such license.
12.1.4 Kemper agrees to attorn to PDRFC with respect to performance of
the management, operation and maintenance obligations with respect to the restaurant.
The City Manager shall have oversight responsibilities over the restaurant as with the
oversight responsibilities over management, operation and maintenance of the other
portions of the Golf Resort.
12.1.5 Pursuant to the PDRFC's Articles of Incorporation, and a resolution
of the PDRFC, all income from the restaurant is payable to the City, and Kemper may
aggregate the cash held by and amounts payable to PDRFC together with other
amounts payable to the City, on the same terms as are provided in this Agreement.
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IN WITNESS WHEREOF, the parties have executed or caused this Agreement
to be executed as of the day and year first written above.
CITY: KEMPER:
CITY OF PALM DESERT KEMPER SPORTS MANAGEMENT, INC.
By: By:
Mayor Its:
ATTEST:
By:
City Clerk Its:
PDRFC:
PALM DESERT RECREATIONAL
FACILITIES CORPORATION
By:
Its:
By:
Its:
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State of California )
County of Riverside )
On , before me,
(insert name and title of the officer)
Notary Public, personally appeared
who proved to me on the basis of satisfactory evidence to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of
which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California
that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature (Seal)
State of California )
County of Riverside )
On , before me,
(insert name and title of the officer)
Notary Public, personally appeared
who proved to me on the basis of satisfactory evidence to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of
which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California
that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature (Seal)
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