HomeMy WebLinkAboutC32381 - Xtnsn - DWGR Management AgmtContract No. C32381
CITY OF PALM DESERT
ECONOMIC DEVELOPMENT DEPARTMENT
STAFF REPORT
REQUEST: APPROVE THE ONE YEAR OPTION TO EXTEND THE
CURRENT 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
SUBMITTED BY: John M. Wohlmuth, City Manager
Rudy P. Acosta, Assistant City Manager
DATE: December 10, 2015
CONTENTS: Management Agreement with Kemper Sports and Palm Desert
Recreational Facilities Corporation
Desert Willow Study Session `Power Point Presentation' (11/12/15)
Recommendation
By Minute Motion, that the City Council approve a one year extension to
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.
Background
On November 15, 2012 the City Council approved the current 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 and Kemper staff negotiated and agreed upon the
management agreement attached. The agreement term (for three years) commenced
on July 1, 2013 and is scheduled to expire on June 30, 2016. 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.
Council may recall, the current management agreement includes revisions that did not
significantly alter previous management agreements with Kemper. As a reminder, the
following items were addressed and added to the current management agreement:
1) Operating and maintenance standards were added as Exhibit "A" per Section
3.8. The maintenance standards act as a useful tool when evaluating the whole
golf resort in terms of how well Kemper is operating and maintaining the golf
resort. The evaluation standards require a review of all items related to the golf
Staff Report
Approval of Management Agreement Extension — Kemper Sports Management, Inc.
December 10, 2015
Page 2of4
course such as; the greens, roughs, tee boxes, bunkers, fairways and landscape
areas along with the maintenance of the clubhouse, golf academy, maintenance
facility and other ancillary golf course support structures.
2) The monthly fixed fee was reduced (from the previous agreement) by $8,820 per
month. The current monthly fixed management fee is $65,750.
3) The percentage management fee was capped at $175,000 with a 3% annual
adjustment on the cap. Previously, the incentive was open-ended with no cap.
Further, the threshold was increased from $6 million to $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 $175,000
during the first year. Each subsequent year the cap on the incentive fee will
increase by 3%.
4) The current agreement establishes a capital reserve account to be used for
capital projects for the Golf Resort. The capital reserve account is replenished
with net income from annual operations and rebates or refunds from acquisition
of equipment, golf carts and the like.
In addition to the four above noted revisions, four (4) key components were secured
within the current agreement continuing exclusive features of benefit to 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 guarantees to fund all deficits by agreeing to maintain a cash reserve of
$500,000 at the end of each month they operate and manage Desert Willow. The
guarantee protects the City's General Fund from having to provide cash for
operations during any period the facility is managed by Kemper.
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.
The aforementioned key components of the agreement are exclusive to Desert Willow
and Kemper. No other Kemper -managed property agreement includes these four key
components. Additionally, staff's analysis of management agreements in the Coachella
Valley and within the State of California did not produce another agreement with all the
key components included.
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Staff Report
Approval of Management Agreement Extension — Kemper Sports Management, Inc.
December 10, 2015
Page 3 of 4
Discussion
Section 2.1 (B) allows the City of Palm Desert, at its discretion, to extend the
management agreement for two one-year options with the first option commencing on
July 1, 2016. Written notification of the 'option to extend' is required by January 1, 2016
or, six months prior to the agreement termination date (or June 30, 2016). If approved,
the 'first option' would revise the current agreement termination date to June 30, 2017.
Should Council, prior to January 1, 2017, elect, at its discretion, to exercise a second
one year extension to the agreement, such action would take place at a December 2016
regularly scheduled meeting.
On November 12, 2015, the City Council conducted a Study Session specific to the
topics of 'resident play' at Desert Willow and, the 'management agreement' with Kemper
Sports Management, Inc. A copy of the distributed 'power point' presentation is
attached to this report as Exhibit 'B' for the Council's reference. Specific to the
management agreement, pages 6-9 provide several bullet point topics (under various
headings) which were discussed during the study session. In general, there were no
negative issues raised with Kemper's current performance at Desert Willow.
In fact, Kemper's experience and expert institutional 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. In addition, Kemper's commitment of honoring the agreement to cover any
cash shortfalls while managing the golf resort forces Kemper to manage all operations
of the Desert Willow Golf Resort with fiscal prudence.
Kemper has proven their ability to manage Desert Willow with their expert knowledge
and professionalism. 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.
Therefore, staff recommends approval of the one-year option to the current
management agreement between Kemper, PDRFC, and the City of Palm Desert for the
operations at Desert Willow Golf Resort commencing on July 1, 2016.
Fiscal Analysis:
There are no changes recommended to the current monthly management fee of
$65,750 or an annual fee of $789,000 which is paid directly from the operations of the
golf resort operating accounts. Please note, this amount represents on overall decrease
of $105,840 (11.82%) over the previous management agreement with Kemper. The fee
also includes the costs of three key employees whose salaries are not paid through
operations. These key employees are the golf course Superintendent, the golf resort
General Manager, and the Clubhouse Manager.
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Staff Report
Approval of Management Agreement Extension — Kemper Sports Management, Inc.
December 10, 2015
Page 4 of 4
Desert Willow Golf Resort is efficiently managed by Kemper Sports Management
Company, Inc. Since inception, the golf resort has utilized its own cash flows to sustain
the annual operations which encompass paying for all of its costs directly related to the
day-to-day operations, including the payment of 100% of the management fee, without
any subsidy from the City's General Fund.
Submitted by:
Rudy . Acosta, Assistant City Manager
aul S. Gibson, Finance Director
Approval:
Johg4jY Wohlmuth, City Manager
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CONTRACT NO. C32380
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement") is made and entered into this
1 st day of July, 2013 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.
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.
City Manager - The person holding the position of City Manager of the City.
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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 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
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 or the Compensation of any employee of Kemper except as otherwise
provided in Section 3.4.3 of this Agreement.
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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 9.2 of this Agreement.
Key Employees - The on -site general manager, the golf course superintendent,
and the clubhouse manager, and director of food and beverage are Key Employees of Kemper.
Learning C� - 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.
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.
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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, 2013 (the
"Commencement Date") and continue through July 1, 2016 (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, 2016, 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 one year
by giving written notice of the exercise of such option to Kemper prior to January 1, 2016. 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, 2017", shall be the new Termination Date in Section 2.1 A hereof. In
the event that the City exercises the option described above in this paragraph B, the City at its
further option, may extend the term of this Agreement for a second year by giving written notice
of the exercise of such option to Kemper prior to January 1, 2017. In the event of the exercise of
such second option by the City, all other terms of this Agreement shall remain the same, except
"July 1, 2018," shall be the new Termination Date in Section 2.LA hereof.
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 resolution
setting rates and the season schedule shall govern to the extent of its terms. All policies and
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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%). 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, 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 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
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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;
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;
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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.
3.4 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 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. Kemper shall hire and maintain the Key
Employees, and the compensation of such Key Employees shall be at Kemper's expense.
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
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Kemper intends to hire to fill the positions of General Manager, Golf Course Superintendent
Clubhouse Manager, Director of Food & Beverage, and Controller.
3.4.5 Key Employ. It is understood and agreed by the City that the City shall
not employ, seek to employ or discuss employment opportunities with any Key Employees
during the term of this Agreement or for a period of two years after the termination of this
Agreement.
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 overseeding. 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 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.
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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.
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 shops 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.
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C.,
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 60 days' written
notice to Kemper.
3.5.12 Golf Instruction. Kemper shall either employ or shall retain 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 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
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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.
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. Kemper shall keep for 60 days computer back-up
tapes for all accounts payable and accounts receivable information. All records at the Golf Resort
shall be kept by Kemper in fireproof files.
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 golf professional
contracts, 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. 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
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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
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.
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
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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 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 concerning the use of the Golf
Resort, including agreements by which the City offers special privileges to Residents of the City
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A.., ^
4%.e ti./
of Palm Desert, to owners of interests in the timeshare development adjacent to the Golf Resort,
and to guests of any hotels adjacent to the Golf Resort. To the extent that such agreements
impact on the operation of the Golf Courses, Kemper shall have the right to review and comment
on such agreements prior to their approval by the City. The City may approve or disapprove of
any such agreements 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
5.1 Coverage. Kemper agrees to procure and maintain, on behalf of the City as a Golf
Resort Expense, at all times during the term of this Agreement, a minimum of the following
insurance:
5.1.1 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
available), in an amount no less than $5,000,000 or such other amount as the parties may agree in
writing. The City and the Agency shall be named as a loss payees. The parties agree that Kemper
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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.
5.1.2 if requested by the City in writing or by electronic mail, if available,
business interruption insurance related to contents damage only covering actual losses to the
contents sustained due to fire, lightning and 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 available) in an amount equal to the annual value
of lost business. The City and the Agency shall be named as a loss payees to the extent of the
their interests under this Agreement.
5.1.3 commercial general liability insurance including without limitation bodily
injury, personal injury, property damage, advertising injury, products liability, contractual
liability, and liquor liability, in an amount not less than $10,000,000.00 single limit per
occurrence. Defense costs must be paid in addition to limits. This insurance shall be primary and
non-contributing insurance for the work performed. The City, PDRFC, the Agency and their
officers, officials, employees, agents, representatives, and volunteers (collectively, "City
Personnel"), shall be named as an additional insureds. Coverage for the additional insured shall
not be limited to its vicarious liability. If excess or umbrella liability insurance is used to meet
the limits, the policy shall provide coverage as broad as specified for the underlying coverages.
Such excess or umbrella policies shall include as insured those of the underlying policies,
including additional insureds. Such policies shall have defense costs payable in addition to policy
limits.
5.1.4 automobile liability insurance in an amount not less the $10,000,000.00
single limit per occurrence. This insurance shall be primary and non-contributing insurance for
the work performed. The City and the Agency shall be named as additional insureds.
5.1.5 workers' compensation insurance covering all Golf Resort employees who
are Kemper's employees in an amount of $1,000,000, and employer's liability insurance in an
amount of $1,000,000 covering all Golf Resort employees who are Kemper's employees.
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 5.1 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 5.1 are the requirements of the City
in connection with the operation of the Golf Resort. The City acknowledges and understands that
Kemper has made no representations or warranties that such insurance is adequate to protect the
City or the Agency. Any losses, damages, liability, or expenses that may not be covered by any
of the insurance specified in this Section 5.1 shall be a Golf Resort Expense.
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l
5.2 Policies and Endorsements.
5.2.1 Policies. All insurance coverage provided for under Section 5.1 above
shall be secured through policies issued by insurance companies of good reputation and of sound
and adequate financial responsibility having a general policy holder's rating of not less than "A-"
and a financial rating of not less than Class VIII in the most current edition of Best's Rating
Guide, unless such requirements are waived in writing by the City. Such insurance companies
shall be qualified to do business and in good standing in California. Prior to the Effective Date,
Kemper shall deliver to the City certificates of insurance with respect to all of the policies of
insurance to be maintained by Kemper pursuant to Section 5.1 and the City shall have approved
(which approval shall not unreasonably be withheld) such certificates of insurance. In the case of
insurance about to expire, Kemper shall deliver to the City certificates of insurance with respect
to renewal policies not less than ten days prior to the respective dates of expiration. All
certificates of insurance shall be signed by a person authorized by the insurance company to bind
coverage on its behalf. In the event any subcontractors perform work for Kemper under this
Agreement, Kemper shall include such subcontractors as insureds under the policies of insurance
to be maintained by Kemper pursuant to Section 5.1 or in the alternative, Kemper shall obtain
from such subcontractors separate certificates of insurance that satisfy the requirements of
Section 5.1 unless otherwise waived by the City. Neither the procuring of insurance by Kemper
pursuant to Section 5.1 nor the delivery by Kemper to the City of certificates of insurance
evidencing such insurance coverages shall be construed as a limitation of Kemper's indemnity
obligations under Section 11.3.1 of this Agreement.
5.2.2 Endorsements. All policies of insurance to be maintained by Kemper
pursuant to Section 5.1 shall, to the extent obtainable, have attached an endorsement that such
policy shall not be canceled or materially changed without at least 30 days prior written notice to
the City by certified mail, return receipt requested. If such endorsement is not obtainable from
the insurer(s), Kemper shall provide to the City the required 30-day prior written notice in the
manner set forth in this Section 5.2.2.
5.2.3 Blanket Policies. Any insurance policies provided by Kemper under this
Article V may be effected under policies of blanket insurance which cover other properties in
addition to the Golf Resort, and in such case an allocable portion of the premiums for such
blanket policies of insurance shall be considered a Golf Resort Expense.
5.2.4 Workers Compensation Insurance. Prior to the Effective Date, Kemper
shall deliver to the City a certificate of workers compensation insurance indicating that such
insurance complies with all requirements of California law. Such policy shall not be cancelled or
materially changed by Kemper without the City's approval, which shall not be withheld
unreasonably. Kemper shall require all subcontractors performing work for Kemper under this
Agreement to maintain workers compensation insurance covering such subcontractors'
employees. Prior to the Effective Date, Kemper shall file with the City the following signed
certification:
"The undersigned is aware of, and will comply with,
Divisions 4 and 5 of the California Labor Code by securing, paying
for, and maintaining in full force and effect for the duration of the
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Agreement, complete workers compensation insurance, and shall
furnish a certificate of insurance to the City prior to the
commencement of the term of the Agreement."
The City, the Agency, and the City Personnel shall not be responsible for any
claims in law or equity occasioned by the failure of Kemper to comply with this Section 5.2.4 or
with the provisions of California law relating to workers compensation insurance.
5.3 Waiver of Subrogation. Neither Kemper nor the City shall assert against the other,
and Kemper and the City hereby waive with respect to each other, any claims and rights of
recovery for any losses, damages, liability or expenses (including attorneys' fees) incurred or
sustained by either of them on account of injury to persons or damage to property arising out of
the ownership, operation, and maintenance of the Golf Resort to the extent that the same are
covered by the insurance required to be obtained (or self -insured) under this Article V. The City
and Kemper hereby grant to each other, on behalf of any insurance company providing insurance
covering the Golf Resort, a waiver of any right of subrogation which any insurer or party may
acquire against the other party by virtue of payment of any loss under any insurance policy. The
City and Kemper shall give notice to the insurance companies providing insurance under this
Agreement of the mutual waiver of subrogation contained in this Section 5.3.
5.4 Insurance Maintained by Kemper. Any insurance maintained by Kemper under
this Article V may contain deductible provisions and self-insurance or self -assumption
provisions in such amounts as are approved by the City Manager. The parties acknowledge and
understand that as of the Effective Date the following applies to insurance to be maintained by
Kemper: (a) $5,000.00 deductible per occurrence for property damage insurance, and
(b) $250.00 self -insured retention per occurrence for comprehensive public liability insurance,
automobile liability insurance. The City understands and agrees that with respect to all policies
of insurance required under this Article V, 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 Article V. Any failure to comply with reporting or
other provisions of the policies including breach of warranties shall not affect coverage provided
to the City, the Agency and City Personnel.
5.5 Claims Review Procedures. Kemper and the City shall mutually establish a claims
review process for the coordination of all claims under this Article V.
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, Kemper shall receive a "Fixed Management Fee" of sixty-five thousand
seven hundred fifty dollars ($65,750) 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
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C
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 One Hundred Seventy -Five Thousand Dollars ($175,000) ("Percentage Management Fee
Cap"). Notwithstanding the above or the Threshold Amount below, the Percentage Management
Fee Cap shall increase by three percent (3%) 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.
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.
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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.
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.
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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 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. There shall be on deposit the sum of $500,000, which shall be
maintained, as described in more detail in Section 7.4. Kemper shall have check writing
privileges with respect to the Operating Account, 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 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
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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 Operating 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 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 maintain at all times, in the reasonable
judgment of the City and Kemper, 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 $500,000. If at any time, or from time to time, the Golf
Resort Expenses are greater than the operating income of the Golf Resort, to the point that funds
equal to less than the amount of $500,000 are on deposit in the Golf Resort Accounts, then
Kemper shall advance into the Golf Resort Accounts, monthly, within 15 days after the last day
each calendar month, an amount sufficient to restore the Golf Resort Accounts to an amount
equal to $500,000. All net operating income shall be retained in the Golf Resort Accounts until
the Golf Resort Accounts are restored to an amount equal to $500,000; and after the Golf Resort
Accounts have been restored to an amount equal to $500,000, then the next amounts of net
operating income shall be used to reimburse Kemper for any unreimbursed amounts that Kemper
advanced to the Golf Resort Accounts pursuant to the preceding sentence. 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. Any capital expenditures under Section 4.2 in excess of $100,000 annually
will be credited to the $500,000 minimum set forth in the Golf Resort Accounts under this
Section 7.4. The City shall have the right to withdraw and retain any net operating income in
excess of the amounts required for maintaining the Operating Accounts or reimbursing Kemper
as described in this Section. The City shall pay to Kemper on May 15 of each year the
investment earnings, if any, on amounts deposited by Kemper into the Golf Resort Accounts and
remaining unspent as of the immediately prior April 30. Upon termination of this Agreement,
amounts deposited by Kemper into the Golf Resort Accounts and remaining unspent, together
with investment earnings thereon, if any, shall be paid to Kemper. Investment earnings shall be
those as calculated by Union Bank of California (or such other depository of moneys in the Golf
Resort Accounts as selected by the City) based upon deposits in the Highmark Money Market
Account (or such other money market or other account selected by the City).
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
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Kemper. 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 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
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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
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.
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.
7.8 Kemper Payroll and Accounting Software. Kemper shall provide the City with all
computerized data in a DBF format, or another format acceptable to the designee of the City
Manager,
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;
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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 Section 3.4.1 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
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 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.
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
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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 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
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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, 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.
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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 such transaction, Kemper shall notify the City
Manager in writing of any such purchase, including the type of merchandise and services to be
purchased and the price and fees therefore.
11.3 Indemnities.
11.3.1 Kemler'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
(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
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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
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
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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
For purposes of Notices hereunder, the address of Kemper shall be:
Kemper Sports Management, Inc.
500 Skokie Boulevard
Suite 444
Northbrook, Illinois 60062
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 maybe 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
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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 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.
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12812-0001 \ 1488707v2.doc
T
11.18 Counterparts. This Agreement and any amendment maybe 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 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.
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12812-0001A488707v2.doc
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.
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:
CITY OF PALM DESERT
By: Q
Mayor
ATTEST:
C-4'r'� k.
City Clerk
PDRFC:
PALM DESERT RECREATIONAL
FACILITIES CORPORATION
KEMPER:
KEMPER SPORTS MANAGEMENT, INC.
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12812-0001 \ 1488707v2.doc
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