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HomeMy WebLinkAbout5.A1 Operations & Management Agreements~ ~ C ~~ ~a ~ ~ ~.~ c ~y j - ~ f' a ~ ;~ , ~~~ ~ ~ ~ `~ } ~ ~~. ~ ~:~~~~"~ KITSON & PARTNERS CLUB SERVICES BLACKTHORN GOLF COURSE OPERATIONS MANAGEMENT AGREEMENT THIS AGREEMENT entered into this 1st day of January, 2010 (the "Commencement Date"), by and between the South Bend Redevelopment Commission, governing body of the City of South Bend Department of Redevelopment, organized and operating pursuant to IC 36-7-14, with offices at 1200 County-City Building, South Bend, Indiana 46601 (Owner) and Kitson & Partners Club Services, LLC, a limited liability company organized and operating pursuant to the laws of the State of Delaware, with offices at 4500 PGA Boulevard, Palm Beach Gardens, Florida 33418 (Manager): WITNESSETH: WHEREAS, Owner owns a 19-hole public play golf course, golf practice center, clubhouse, maintenance building, parking lot and other related facilities, known as the Blackthorn Golf Course; and WHEREAS, Manager is engaged in the business of developing, marketing, maintaining and managing public golf facilities; and WHEREAS, Owner desires to retain the services of Manager to manage and operate the Blackthorn Golf Course and all related facilities and has hereby engaged the services of Manager to manage and operate the Blackthorn Golf Course and all related facilities; and WHEREAS, Owner and Manager desire to memorialize the terms and conditions of their agreement. NOW, THEREFORE, for good and valuable consideration, including the mutual covenants and agreements herein contained and to be performed by Owner and Manager, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: SF.C'TT(~N 1 DEFINITIONS 1.1 "Annual Plan and Budget" shall mean the annual business plan and operating budget of the Golf Course proposed by Manager and approved by Owner with the consent of the Joint Committee, which shall include goals, objectives, estimated revenues, operating expenses and capital expenditures for the ensuing fiscal year. -1- 1.2 "Clubhouse" shall mean the Blackthorn Golf Course Clubhouse and all facilities, structures, fixtures, equipment, etc. comprising or used in the operation of the Blackthorn Golf Course Clubhouse. 1.3 "Commencement Date" shall mean January 1, 2010. 1.4 "Course" shall mean that portion of the Golf Course comprising the 19- hole golf course and golf practice complex. 1.5 "Fiscal Year" shall mean from January 1 to December 31. 1.6 "Food and Beverage Services" shall mean all food and beverage services required or appropriate for any and all events at the Golf Course, including without limitation, dining, catering, vending and Food and Beverage Services, through fixed and portable Food and Beverage stands, carts, vending machines roving vendors, snack bars, Food and Beverage Service Areas and any other areas of the Golf Course for which it is reasonable and appropriate to serve food and beverages. 1.7 "Food and Beverage Service Areas" shall mean all areas, improvements, fixtures and trade fixtures at or in connection with the Golf Course which are used in connection with the operation of Food and Beverage Services. 1.8 "Golf Course" shall mean all land, facilities, structures, including the Clubhouse, fixtures, equipment, etc. comprising the Blackthorn Golf Course, located within the Blackthorn Corporate Park in the City of South Bend. 1.9 "Golf Season" shall mean the period commencing on or about April 1 of each full calendar year of this Management Agreement and ending on or about November 15 of such full calendar year, weather permitting. 1.10 "Gross Revenue" shall mean all receipts from the sale of memberships, individual or special group greens fees, events tickets conducted at the Golf Course; all golf cart rentals; all advertising sales; the sale of royalty and logo rights; all revenues generated from the rental of the Club House or Golf Course; all receipts from the sale of food and beverage items, merchandise or practice balls; all receipts from club repairs or club rentals; private golf lessons; and any and all other fees and revenues generated from play or events taking place at the Golf Course, including the Blackthorn Golf Academy. Excepted from this definition is any state sales tax applicable to any transaction at the Golf Course. 1.11 "Joint Committee" shall mean the Joint Committee created pursuant to the Agreement among the South Bend Redevelopment Authority, the South Bend Redevelopment Commission, and the St. Joseph County Airport Authority for the Operation and Management of Blackthorn Golf Course, dated October 8, 1992, and exercising policy and oversight responsibilities with respect to the Golf Course. -2- 1.12 "Management Services" shall mean and consist of the following: a. General Management -shall include but not be limited to the conduct, supervision, and management of the day-to-day operations of the Golf Course in accordance with the Annual Plan and Budget, and other business plans, budgets, pricing schedules, and other policies, procedures and instructions, of the Owner. b. Grounds Maintenance, Course Preparation -shall include but not be limited to maintenance of the Course and the landscaped areas surrounding the Club House and other landscaped areas of the Golf Course all as provided in the Minimum Maintenance Standards, or in other written policies, procedures, and instructions, of the Owner. Pre-Event Preparation -shall include the preparation of the Course for any Special Event as maybe required for that event including but not limited to installation of any supplemental equipment. d. Janitorial Services -shall include the cleaning and maintenance of the Club House, including the kitchen, locker room and patio areas, and the Maintenance Facility, each on a daily basis during the Golf Season including the stocking of all restrooms with paper products as required prior to the opening of the Golf Course during each such day, the disposal of all trash collected at the Golf Course during and at the end of each such day, the pick-up of all trash and debris from all areas of the Golf Course during and at the end of each such day. All Janitorial Services provided shall include all action necessary to maintain the Golf Course in a clean and attractive manner and in compliance with all legal requirements. e. Facility Services -shall include the operation and staffing of the Club House, pro shop, maintenance facility, parking lot attendant services, security services; rental of the Club House for receptions, seminars, business meetings, and similar events; and the opening and closing of the Golf Course. f. Food and Beverage Services -shall include the provision of all Food and Beverage Services. g. Marketing -shall include all marketing, advertising and promotional events, activities and related literature serving to promote the Golf Course, as approved by Owner and as carried out in accordance with the Annual Plan and Budget. h. Membership Services - shall include the operation and supervision of the Association Membership program, as set forth in the Operations Policies. i. Merchandise Sales -shall include all activities relative to the sale of golf related merchandise in the Pro Shop. -3- 1.13 "Manager" shall mean Kitson & Partners Club Services, a corporation organized and operating pursuant to the laws of the State of Delaware, with offices at 4500 PGA Boulevard, Palm Beach Gardens, 33418. 1.14 "Membership" shall mean individual or corporate membership in the Blackthorn Golf Association, as detailed in the Operations Policies. 1.15 "Minimum Maintenance Standards" shall mean the Minimum Maintenance Standards of the Blackthorn Golf Course, a copy of which is attached hereto as Exhibit "A" as the same maybe amended from time to time. 1.16 "Operations Policies" shall mean the Operations Policies of the Blackthorn Golf Course, a copy of which is attached hereto as Exhibit "B" as the same may be amended from time to time. 1.17 "Owner" shall mean the South Bend Redevelopment Commission, as lessee pursuant to that certain lease dated July 1, 1992, by and between the South Bend Redevelopment Authority as lessor and the South Bend Redevelopment Commission, 1200 County City Building, South Bend, Indiana 46601. 1.18 "Owner Events" shall mean any event or activity held at the Golf Course under the authority of the Owner, the South Bend Redevelopment Authority, the City of South Bend and/or the St. Joseph County Airport Authority. SECTION 2 APPOINTMENT OF MANAGER; OBJECTIVES 2.1 Appointment of Manager. Subject to the terms and conditions of this Management Agreement, Owner hereby appoints Manager as its Manager of the Golf Course to provide all Management Services with respect to the management and operation of the Golf Course. This designation shall remain effective for the term of this Agreement and any extensions or renewals thereof, unless sooner terminated or provided for herein. 2.2 Acceptance of Appointment. Manager hereby accepts such appointment and agrees reasonably to cooperate with Owner in creating, approving, and implementing all decisions and actions with respect to its responsibilities and obligations under this Management Agreement. 2.3 Independent Contractor Status. Regardless of any other language contained in this agreement, it is expressly understood and agreed that this Agreement shall cause Manager to be an independent contractor, managing and operating the Golf Course on Owner's behalf and shall not create any employer-employee, joint venture, or partnership -4- relationship, either express or implied, between Manager (or any person employed by Manager) and Owner. 2.4 Objectives of the Parties. Owner and Manager acknowledge and agree that their joint and principal objectives are to protect and maintain the facilities of the Golf Course; to properly supervise and manage the daily operations of the Golf Course; to provide full and accurate accounting for the financial affairs of the Golf Course; to maximize revenue and profit from the operations of the Golf Course to provide for all operating costs (exclusive of debt service) of the Golf Course to be funded from Golf Course revenues; and to determine the best long-range business strategy for the Golf Course as an asset of the City of South Bend. 2.5 Tax-Exempt Status of Bonds. Owner and Manager acknowledge that tax- exempt (from gross income for federal tax purpose) bonds have been, or may be, issued and outstanding with respect to the development and/or operation of the Golf Course. So as not to jeopardize the tax-exempt status of said bonds, Manager shall not, unless specifically authorized in writing in advance by Owner, take any of the following actions: a. Entering into any contract for the use of the Golf Course, or a portion thereof, for a period in excess of one year. b. Entering into any contracts for the operation of the Golf Course, or a portion thereof, for a period in excess of one year. c. Entering into any contracts with a private company to provide staffing for the Golf Course. d. Sub-contracting with a management company to provide management services for the Golf Course. fiF("TTC1N ~ GOLF COURSE OPERATIONS AND SERVIC 3.1 Management Services. Manager shall provide all Management Services required for the proper and efficient operation of the Golf Course and shall retain, employ, compensate, train and manage sufficient numbers of personnel to provide such Management Services in a high quality and professional manner during the term of this Agreement, including those personnel described at Article VI, herein. Management Services shall be performed in accordance with the terms and conditions of this Management Agreement and the Operations Policies. Owner shall be responsible for all operating expenses of the Golf Course, in accordance with the Annual Plan, Annual Budget, and the provisions of this Agreement. -5- 3.2 Quality of Management Services. The Management Services shall be provided by the Manager in a manner to promote the use of the Golf Course, attract the public to the Golf Course and Special Events conducted at the Golf Course, and shall be of acceptable quality consistent with the standards required of a professional golf course facility, the Annual Plan and Budget and/or in other policies and procedures of the Owner. Owner retains the right to seek independent review of Manager's performance under this Management Agreement. This Section does not authorize the Owner to retain, terminate, supervise or take other direct actions relating to the employees of the Manager. 3.3 Operation of Club House. Manager shall operate and staff the Club House, including such activities as scheduling tee times, renting golf carts, golf equipment, making course reservations and facilities rental, monitoring the locker room and lockers, cleaning out lockers each evening when the Course is closed, maintaining and operating a lost and found service and log for items left in lockers or otherwise found at the Golf Course. 3.4 Operation of the Pro Shop. Manager shall operate the Pro Shop, including such activities as ordering and stocking merchandise such as golf apparel, golf clubs, balls, tees and other equipment attractive to golfers, displaying, pricing and selling merchandise, cleaning and repairing golf clubs and other golf equipment, and providing other services customarily available at a golf pro shop. 3.5 Operation of Parking Areas. The removal of debris from all parking areas as an element of the Management Services, shall be completed by 7:00 A.M. of the morning of each day during the Golf Season. Should the services not be completed by that time, and upon reasonable advance notice to Manager, Owner reserves the right to conduct such services and invoice for the same. Power sweeping of the parking lot shall be included by Manager, as needed or as directed by Owner. 3.6 Speed and Manner of Play. Manager shall schedule rounds and tee times and operate the Golf Course to encourage a four hour and 40 minute playing time for 19 holes on the Course. 3.7 Marshals. Manager shall employ Marshals to supervise the Course on a continual basis throughout the day, throughout the Golf Season during the term of this Management Agreement. 3.8 Dress Code. Manager shall monitor and enforce a dress code for play on the Course and shall do so in a courteous and responsible manner and without precipitating confrontations with or embarrassing patrons at the Golf Course, as provided for in the Operations Policies. 3.9 Staffing. a. Manager shall hire, train, promote, discharge and supervise the work of the executive staff and all employees necessary to operate the Golf Course, subject to -6- the approval of the Owner and in accordance with the Annual Plan and Budget. Golf Course employees, including those working at the Golf Course under this Agreement, shall be employees of the Manager, or the employees of leasing company utilized by Manager, and shall not be deemed or understood to be employees of the Owner, the South Bend Redevelopment Authority, the City of South Bend, or the St. Joseph County Airport Authority. b. Manager shall be responsible for compliance with all laws, regulations, tax requirements relative to payroll and employment, with all such expenses to be paid out of the Operating Account maintained by the Manager. 3.10 Corporate Supervision. To insure adequate supervision of on-site personnel employed by Manager, and to insure effective communications between Manager and Owner at the corporate level, Manager shall provide, at a minimum level, the following level of support and participation by corporate supervisory personnel: a. Periodic inspection visits, not fewer than one (1) per month during the Golf Season, including meeting with the on-site management team for purposes of reviewing and evaluating conditions and performance at the Golf Course, by a qualified corporate employee of Manager. b. If requested by Owner, monthly management visits, followed up by a written report to Owner and Joint Committee, shall be conducted by Manager's principal or by Manager's Director of Operations assigned to the Golf Course. Each monthly visit shall include a management review meeting with Owner. c. Manager's agronomist or senior maintenance consultant shall visit and inspect the facility not fewer than three (3) times annually. d. Semi-annually, or more frequently as determined necessary by Owner and/or Joint Committee, management review and planning meetings, for the purpose of discussing quarterly revisions and updates to the Annual Plan and Budget, and other matters, shall be held at the Golf Course, and shall be attended by a Manager's officer, and by Manager's Director of Operations assigned to the Golf Course, in addition to any other on-site personnel invited to participate. e. The foregoing schedule of meetings, visits and inspections notwithstanding, Manager shall provide additional qualified corporate personnel and corporate supervision on an "as-needed" basis to support the successful operation of the Golf Course. There shall be no additional fee to Owner for providing this service, although expenses are reimbursable as provided herein. SECTION 4 STAFFING -7- 4.1 Staffing Plan. Manager shall staff and supervise all positions it deems necessary to carry out its obligations hereunder, including, but not limited to the following positions: a. Facility Manager. The Facility Manager shall supervise and direct the daily operations of the golf course. This individual shall have appropriate qualifications and background in golf facility operations management, including food service, marketing and golf course business management. The Facility Manager shall be a full-time, year-round employee of Manager with full benefits. Any employment agreement or compensation agreement between Manager and the Director of Golf shall be subject to the prior written approval of the Owner. At Manager's option, subject to prior written approval of Owner, the position of Facility Manager may be combined with the position of Golf Professional as described in the next paragraph herein. The Facility Manager reports to Manager's corporate Vice President, Operations Director or other corporate manager assigned by Manager to supervise operations at Blackthorn. b. Golf Professional. The Golf Professional shall be a Class "A", PGA or LPGA Golf Professional with appropriate qualifications and experience in the management of golf and clubhouse operations. The Golf Professional shall report to the Facility Manager, unless the positions of Golf Professional and Facility Manager are combined. The Golf Professional is responsible for day-to-day management of the golf program, including but not limited to: ! outings and tournaments, ! golf car operation, ! golf merchandise sales, ! personnel assigned to golf shop & clubhouse ! food & beverage services in support of the golf program. Subject to the provisions of paragraph 6.01 a. above, the position of Golf Professional maybe combined with the position of Facility Manager. In that event, at Manager=s option, the title for the combined position may be changed to "Director of Golf." c. Teaching Professional. The Teaching Professional shall be a Class "A", PGA or LPGA Golf Professional. The Teaching Professional shall supervise and direct the Golf Academy. Any employment agreement or compensation agreement between Manager and the Teaching Professional shall be subject to the prior written approval of the Owner. d. Course Superintendent. The Course Superintendent shall hold a college degree in agronomy or related field and shall be a member of the Golf Course Superintendents Association. The Course Superintendent shall supervise and direct maintenance of the Course and other landscaped areas of the Golf Course and shall supervise and direct the grounds crews. The Course Superintendent shall be a full-time, salaried position with benefits. -8- 4.2 Uniforms. All employees of Manager shall be neatly attired in laundered uniforms which properly identify the Golf Course and the individual employee, and which are mutually approved by the Manager and Owner. 4.3 Employee Policies. a. Manager's employees shall be allowed to purchase meals, while working, at 50% of the posted menu price. Employees may not purchase or consume alcoholic beverages while on duty. b. Manager's employees shall be entitled to purchase merchandise for 10% over cost. c. Owner maintains a drug-free workplace. Manager shall comply with all regulations, rules and policies of the Owner with respect to the same, including, but not limited to pre-employment drug testing. SECTION 5 GOLF INSTRUCTION 5.1 Golf Instruction Clinics. Manager shall provide and conduct through its Teaching Professional, at different times during the day and evening and at reasonable cost in accordance with the Annual Plan and Budget, instruction clinics open to the public during the Golf Season, and "Learn to Golf' sessions for beginning golfers of various skill levels. 5.2 Golf Academy. Manager shall provide and operate the "Blackthorn Golf Academy" which shall be the umbrella for all instructional programs under its Teaching Professional. Manager shall make commercially reasonable efforts to develop the Golf Academy into a regional golf school, with 2-day and 3-day instructional programs of a quality comparable to that provided at golf resort-based schools or "Golf Digest" schools. 5.3 Junior Golf. Manager shall provide and conduct a Junior Golf Program in cooperation with the Junior Golf Program conducted by the City of South Bend. In connection with the operation of the Junior Golf Program, Manager shall conduct programs of instruction in groups organized by age and ability, at a reasonable cost and in accordance with the Annual Plan and Budget. The Junior Golf Program shall emphasize basic knowledge of the rules and etiquette of the game and playing skills, as well as exposure to the Course as they progress through the instruction. Better players shall be exposed to some competition. Manager shall conduct and operate a Junior Golf Tournament near the conclusion of the Golf Season. -9- SECTION 6 OPERATIONS; ANNUAL BUSINESS PLAN & BUDGET; RESPONSIBILITY FOR OPERATING EXPENSES 6.1 Operations. Manager shall be responsible for conducting the day-to-day operations and management of the Golf Course in accordance with the Annual Operating Budget approved by Owner and in accordance with the terms of this Agreement. Manager shall have assumed responsibility for the operation and management of the Golf Course as of 12:01 a.m. on the Commencement Date. 6.2 Annual Business Plans and Annual Operating Budgets. Within sixty (60) days after the Commencement Date with respect to the initial calendar year of operations and on or before November 1 of each succeeding calendar year of operations, Manager shall prepare and submit to Owner for approval a proposed annual business plan for the operation and maintenance of the Golf Course (the "Annual Business Plan"). The proposed Annual Business Plan shall include aline-by-line annual budget substantially in the form of that attached hereto as Exhibit "C" (the "Annual Operating Budget''). Within thirty (30) days after the receipt of each proposed Annual Business Plan (which shall include the Annual Operating Budget) Owner shall be responsible for reviewing and approving the same or revising the same in consultation with Manager. Owner shall have final approval over the Annual Business Plan and Annual Operating Budget and, once approved by Owner, the new approved Annual Business Plan and Annual Operating Budget shall replace all prior Annual Business Plans and Annual Operating Budgets. Pending Owner approval of the Annual Business Plan and Annual Operating Budget, from and after January 1 of the applicable calendar year, Manager shall be authorized to operate and manage the Golf Course in accordance with the proposed Annual Business Plan and Annual Operating Budget for that year. Owner acknowledges that the financial and operational performance of the Golf Course could be affected by circumstances or events beyond Manager's control and Manager shall not be deemed to have made any guarantee, warranty or representation whatsoever with respect to or in connection with the Annual Business Plan or Annual Operating Budget. Under no circumstances shall Owner have any claim or cause of action against Manager in the event that the goals, targets and benchmarks established in the Annual Business Plan and Annual Operating Budget are not met or achieved. From time to time Manager may consider it advisable to propose changes to the currently approved Annual Business Plan or Annual Operating Budget. In that event, Manager shall discuss the proposed changes with Owner, and Owner shall make the final determination as to what changes, if any, shall be made. Any such changes, once approved by Owner, shall be deemed to be included in the currently approved Annual Business Plan and Annual Operating Budget. -10- 6.3 Operating Expenses: Owner is responsible for all operating expenses of the Golf Course, including fees and expenses payable to Manager hereunder, and Owner shall provide sufficient funds to cover all such operating expenses. Manager, acting as Owner's agent and on behalf of Owner, shall deposit all Golf Course revenues into an operating account (the "Operating Accounts"), and Manager shall have authority to draw upon the funds in the Operating Accounts to cover operating expenses in accordance with the Annual Business Plan, Annual Operating Budget, and Owner's fiscal policies. In the event that funds in the Operating Accounts are not sufficient to cover operating expenses, Manager shall advise Owner of the shortfall or potential shortfall and Owner shall deposit additional funds into the Operating Accounts in a timely manner in order to insure that sufficient funds are available to meet the operational requirements of the Golf Course as they become due and payable. Manager shall have no obligation either to cover any operating expenses or to contribute funds to any Golf Course's Operating Account. In the event that additional funds are required due to such shortfall or potential shortfall, the Owner shall have the option of terminating this Agreement without any further liability to the Manager. Manager shall monitor the cash flow and cash requirements of the Golf Course and shall prepare quarterly cash flow forecasts and reports for Owner. In addition, Manager shall communicate with Owner via a-mail and telephone on a regular basis so that Owner may reasonably anticipate the cash flow requirements of the Golf Course and have as much advance notice as possible relative to the need to provide supplemental funding over and above the funds available from the Golf Course' operations. Owner acknowledges that some funding requests may, of necessity, be submitted on a short notice basis. Manager may, without prior Owner approval, cause the Golf Course to incur any expense that is included in the approved Annual Operating Budget. Manager may, with prior Owner approval, cause the Golf Course to incur an expense that is needed to remedy any emergency situation that, in Manager's professional judgment is potentially hazardous, unsafe or damaging to any of the Golf Course or that is needed, in Manager's professional judgment, to avoid the Golf Course incurring a fine, penalty or similar charge. Any other expense shall be incurred by Manager only if approved by Owner in writing in advance. Manager shall not incur any expense that is not consistent with the Annual Operating Budget without the prior written consent of Owner, except as otherwise provided in this Agreement. Manager may reallocate up to ten percent (10%) of any amount budgeted with respect to any one line item in the Annual Operating Budget to another line item budgeted therein, provided that the aggregate expenditures in the Annual Budget are unaffected, and further provided that Owner is notified in writing of the reallocation within ten (10) days. 6.4 Accounting and Cost Control System. Manager shall provide an accounting and cost control system covering all aspects of the operation and maintenance of the Golf Course that meets with Owner's approval. Charts of accounts and all accounting systems shall be maintained in accordance with ordinary accounting -11- procedures and generally-accepted accounting principles that meet with Owner's reasonable approval. Owner and its duly authorized representatives, including the State Board of Accounts, shall have the right, at any time, to examine all account books and records and all other documents and materials in the possession of Manager or under the control of Manager with respect to any aspect of the operation and/or maintenance of the Golf Course and shall have free and full access thereto for the purpose of making copies thereof. Manager shall provide Owner with written accounting reports on a monthly basis, in such form and containing such information as reasonably determined by Owner. 6.5 Ownership of Accounting Records and On-Site Equipment. Upon termination of this Agreement for any reason, all source documents, work papers, financial statements, and other supporting materials, documents, and the like shall be and remain the property of Owner. Any on-site equipment or systems purchased by Owner, such as cash registers or computers, also shall be and remain property of Owner. Complete financial statements shall be furnished by Manager to Owner through the month of termination of this Agreement. SECTION 7 DUTIES, AUTHORITY, AND RESPONSIBILITIES OF MANAGER 7.1 Duties, Authority, and Responsibilities of Manager. On and after the Commencement Date, except as expressly set forth herein, Manager, acting as Owner's agent and on behalf of Owner, shall be responsible for the management and operation of the Golf Course. Manager shall have the authority and responsibility to exclusively operate and manage the Golf Course and supervise Owner-approved capital improvements as hereinafter provided in such manner as it, in its professional discretion, deems most likely to accomplish the objectives set forth in the Annual Business Plan and Annual Operating Budget in accordance with this Agreement. The responsibilities of Manager under this Agreement shall include, without limiting the generality of the foregoing, the following: Prepare and submit for Owner approval, a proposed Annual Business Plan and Annual Operating Budget by October 15 of the year prior to the Plan & Budget year. b. Employ, either directly or through a third-party professional employer or employee leasing company, all personnel required for the operation and maintenance of the Golf Course in accordance with the Annual Business Plan and Annual Operating Budget and otherwise on terms approved by Owner. Such employees shall be employees of Manager and not of Owner or the Golf Course. Owner shall have the right to require Manager to discharge from any Golf Course duties an employee which Owner reasonably deems unsuitable for employment at the Golf Course, provided, such termination would not, in the opinion of -12- Manager's counsel, be unlawful or otherwise expose Owner, Manager or the Golf Course to potential liability. c. In accordance with provisions herein, assist Owner in obtaining, at Owners expense, appropriate insurance coverage for the Golf Course. d. Collect all gross operating revenues derived from the operation the Golf Course and deposit all such gross operating revenues into the Operating Account. e. Develop and implement quality control programs, customer service standards, operating policies and procedures, employee handbooks and other guidelines for the operation of the Golf Course. f. Develop and implement golf course maintenance standards and practices that shall be sufficient, in Manager's professional judgment, to provide playing conditions that are consistent with the Golf Course' market position and competitive with conditions at comparable facilities. g. In accordance with the Annual Operating Budget, enter into service contracts and vendor agreements, on behalf of Owner, as necessary to support the operation and maintenance of the Golf Course. Such agreements may include, but may not necessarily be limited to: janitorial services, waste collection and disposal services, linen or uniform services, pest control services and the like. Any service contracts, vendor agreements and/or any other written contracts and/or agreements entered into on behalf of Owner by Manager (collectively "Service Contracts"), as provided hereunder, shall include a right of cancellation on not more than thirty (30) days notice. In the event that a contract vendor refuses to agree to the thirty (30) day cancellation right provided above, then any such Service Contract shall only be entered into with Owner's prior approval. h. In accordance with the Annual Operating Budget, purchase operating supplies and inventories, and purchase or lease equipment, as necessary to support the operation and maintenance of the Golf Course. i. Develop and implement, in accordance with the Annual Operating Budget, housekeeping and preventive maintenance programs for all buildings, grounds and facilities at the Golf Course. j. In accordance with the Annual Business Plan and the Annual Operating Budget, undertake minor (i.e., having a cost of less than $5,000) repair and replacement projects. k. Monitor compliance with pre-existing lease or other contractual obligations and recommend new leases or contracts as necessary to support the operation and maintenance of the Golf Course. -13- 1. With the cooperation of Owner as necessary, use all commercially reasonable efforts to insure that all Golf Course facilities and Golf Course operations conform to the requirements of local, county, state and/or federal regulations, licenses, orders, permits and similar requirements. m. With the cooperation of Owner as necessary, use all commercially reasonable efforts to insure that licenses and permits necessary to support the operation and maintenance of the Golf Course are kept current and in good standing. n. With the cooperation of Owner as necessary, use all commercially reasonable efforts to insure that tax reporting and payment obligations relating to the day-to- day operation of the Golf Course are satisfied in a complete, accurate and timely manner (provided that Manager shall have no responsibility for the tax compliance and reporting obligation of Owner or any of its affiliated entities). o. With the cooperation of Owner as necessary, use all commercially reasonable efforts to monitor the Golf Course' facilities for situations that are, in Manager's professional judgment, potentially unsafe or potentially hazardous and if such situations are determined to be present, take appropriate steps to remedy the situation in acost-effective manner. Manager shall notify Owner immediately of any situations that are, in Manager's professional judgment, potentially unsafe or potentially hazardous and the remedial actions that Manager believes are necessary. 7.2 Financial and Banking Matters. Owner shall establish or designate the Operating Account. Funds in the Operating Account shall not be combined with any other accounts of Manager, and Golf Course funds shall not be co-mingled with any funds of Manager. Manager, for benefit of Owner, shall provide centralized accounting services and financial management functions, which shall be provided from Manager's golf operations accounting office in Palm Beach Gardens, Florida. Manager shall provide for adequate controls, policies and procedures to safeguard cash, inventories and all other tangible assets of the Golf Course. Manager's responsibilities in this regard shall include, but may not necessarily be limited to, the following: a. Collect and promptly deposit into the Operating Accounts all revenue from Golf Course operations. b. Pay all Golf Course expenses so long as they are included in the Annual Operating Budget or otherwise approved in writing by Owner. Manager shall provide appropriate oversight over Golf Course expenditures, including review of all invoices, periodic reviews of purchase orders, delivery tickets, payroll reports and other records of Golf Course expenditures. Amounts due to Manager as fees or reimbursable expenses must be approved by Owner prior to each payment. Consulting fees shall be paid as provided in paragraph 18.5 herein. c. Make distributions of excess cash to Owner as Owner may direct. -14- d. Prepare a daily report of Golf Course cash receipts in all revenue categories. e. Provide appropriate cash controls, including reviews and comparisons of daily bank deposits against cash register tapes, tee sheets and daily revenue reports, and periodic spot audits of on-site cash control measures. f. Maintain the chart of accounts and general ledger for Golf Course. g. Balance all accounts and maintain the balance sheet for Golf Course. h. Prepare monthly profit & loss statements and other financial statements and reports as are requested by Owner or by any Golf Course first mortgage lender requiring the same (provided, however, that all financial statements and reports shall be prepared by Manager's personnel and any audited or certified financial statements or reports prepared by outside auditors that may be requested by Owner or any lender shall be prepared at Owner's expense). i. Conduct monthly physical count inventories in all departments of the Golf Course, and match physical inventory reports to point of sale reports and delivery tickets. j. Reconcile each bank statements on a monthly basis. k. Prepare and file all documents necessary to meet Owner's obligations with respect to local, state and federal tax filings, licenses, franchise fees, etc. 1. Within seven (7) days following the close of each month, provide to Owner monthly financial reports, which shall include ayear-to-date report indicating actual income and expenses compared to budgets for such period. Any substantial variance of actual income and expenses from the Annual Operating Budget shall be explained in the report. 7.3 Consulting Services. In addition to the operations management services described herein, Manager also shall provide consulting services to owner in the areas of market analysis and long-range strategic planning relative to the Golf Course. In general, consulting services to be provided by Manager shall include, but may not necessarily be limited to, the following: a) Conduct market research and prepare a written analysis of the South Bend golf market, with emphasis on public golf and market factors most affecting the Golf Course;. b) Prepare reports and facilitate planning meetings.; c) Identify and evaluate alternative long-range strategy options; -15- d) Prepare and submit by October 31, 2010 to Owner a final written report on the conclusions and recommendations coming out of the above process. 7.4 Capital Improvements. In conjunction with the preparation and submittal of the Annual Operating Budget, or as otherwise requested by Owner, Manager shall prepare annual capital improvement plans and cost estimates for Owner's review and approval. Funding for all capital improvements shall be Owner's responsibility. No capital improvement project shall be undertaken by Manager without Owner's written approval in advance. 7.5 Personnel and Employment Matters. In accordance with the approved Annual Business Plan and Annual Operating Budget, Manager shall hire, in its own name, supervise and discharge any personnel necessary to be employed in order to properly fulfill Manager's obligations hereunder in accordance with the approved Annual Business Plan and Annual Operating Budget. Owner acknowledges and agrees that Manager may, at Manager's option, employ Golf Course personnel directly or through a professional employment services subcontractor or employee leasing company. Employees of the Manager and/or professional employment services subcontractor or employee leasing company are referred to as employees of the Manager in this Agreement. All salaries, wages and other employment-related costs of personnel employed by Manager hereunder at the Golf Course, including, if applicable, but not limited to: fringe benefits, social security taxes, worker's compensation insurance, and costs associated with employee recruitment, relocation, or separation, shall be deemed an operating expense of the Golf Course and therefore payable from the Operating Accounts. All such salaries, wages and employment-related costs, including but not necessarily limited to those set forth immediately above, shall be the responsibility of Owner and shall be paid by Manager from the Operating Accounts. In the event that funds in the Operating Accounts are not sufficient to cover employment costs, it shall be Owner's responsibility to provide sufficient funds in accordance with the provisions herein. 7.6 Payroll Funding. It shall be Manager's responsibility to insure that sufficient funds are transferred from the Operating Account to the Payroll Account designated by Manager or by Manager's professional services subcontractor or employee leasing company. ("Payroll Account") to fund all payroll and all other employment- related costs at least five (5) business days prior to each payday. Advance funding for payroll obligations shall be accomplished via an electronic transfer of funds from the Operating Account to the Payroll Account. In the event that funds on deposit in the Payroll Account are insufficient to fund an upcoming payroll, Manager shall notify Owner and Owner shall be responsible for immediately depositing additional funds directly into the Payroll account. In the event that Owner fails to deposit the additional funds needed to fund an upcoming payroll, despite having received due notice from Manager, it shall be an event of default by Owner under the terms of this Agreement. -16- 7.7 Other Employment Matters. Manager shall be responsible for compliance with all laws, regulations and tax requirements relative to payroll and employment of the Golf Course' employees, with all such expenses to be considered operating expenses of the Golf Course and covered from the Operating Accounts or other funds provided by Owner. Manager shall be responsible for resolving any issues related to employee compensation, unemployment claims and benefits, and all related expenses, including attorneys' fees or other litigation expenses as approved by Owner, shall be operating expenses of the Golf Course. Manager shall be responsible for providing (either directly or through a professional services subcontractor or employee leasing company) Workers Compensation & Employers Liability Insurance and any Statutory Disability Coverage as may be required by State regulatory authorities for the employees of the Golf Course. The cost of such coverage shall be an operating expense of the Golf Course and shall be included in the Annual Operating Budget. Owner covenants that it shall not, during the term of this Agreement or for a period of one year after the expiration of the term hereof, employ or offer to employ, at or in connection with the Golf Course, or at any other Golf Course or facilities of Owner, any personnel of Manager without the prior written consent of Manager, which consent may be withheld in the sole discretion of Manager. 7.8 Mortgages. Nothing herein contained shall prevent Owner from causing the Golf Course or any portion thereof from being encumbered by a bond, mortgage, deed of trust or trust deed in the nature of a mortgage. Manager shall use diligent efforts to cause the operation of the Golf Course to comply with all terms, conditions, covenants and obligations contained in any bond, mortgage or loan agreement related to the Golf Course, including, without limitation, the obligation to prepare and deliver required financial statements and materials with respect to the Golf Course, or any substitute therefore of which Manager is made aware. The rights of Manager under this Agreement to receive payment of management fees and reimbursement of expenses shall not be subordinated to the rights of any lender. SECTION 8 INSURANCE 8.1 Insurance Policies on the Golf Course. Owner shall provide for all insurance coverage on the Golf Course at Owner's expense. All insurance shall be obtained from financially sound and reputable companies, with amounts and types of coverage no less than those normally secured by Owners of comparable golf course properties in comparable locations. Owner will include Manager as an additional insured on a primary and non-contributory basis on Owner's commercial general liability, commercial automobile and umbrella liability policies. Owner shall be responsible, at no additional -17- cost to Manager, for the payment of any and all deductibles, self-insured retentions or self insurance in connection with the additional insured status on the commercial general liability, commercial automobile and umbrella liability policies. In addition, Owner shall maintain property insurance on the Golf Course and include a waiver of subrogation in favor of Manager. 8.2 Insurance Policies on Manager Property. Manager shall, effective as of the Commencement Date, obtain policies of insurance on any of its property or equipment placed within or upon the Golf Course and maintain such policies on all its property or equipment placed in or upon the Golf Course during the term of this Management Agreement. Such policies shall provide for fire, theft, vandalism and extended coverage for the Manager's equipment and property. The Manager shall include a waiver of subrogation in favor of Owner. 8.3 Required Policies of Insurance at Manager's Expense. The Manager shall, effective as of the Commencement Date, and through the terms of this Management Agreement, unless modified by the Owner and the Manager in accord with the provisions herein, keep in full force and effect the following policies of insurance at Manager's expense: Commercial general liability insurance, including products liability insurance against bodily injury and property damage claims in the following minimum amounts: a. Personal Injury - $1,000,000 each person and each accident, $1,000,000 aggregate; b. Bodily Injury and Property Damage Liability - $1,000,000 each incident; $1,000,000 aggregate; c. Umbrella Liability Coverage and Umbrella Liability Policy in an amount not less than $S,000,OOOfor any one occurrence in excess of the aforementioned general liability insurance; e. Liquor Liability - $1,000,000 each occurrence. Workers Compensation -Manager shall provide and keep in full force and effect during the term of this Management Agreement, Workers compensation insurance in full compliance with the laws of the State of Indiana; 8.4 Certificates of Insurance. All such policies shall contain an endorsement giving the Owner or Manager Thirty (30) days prior written notice of cancellation or non- renewal except Ten (10) days for non-payment of premium of said policies. All such -18- insurance policies shall be written by companies authorized to do business in the State of Indiana. Owner and Manager shall each provide Certificates of Insurance evidencing all required coverages to the other party on or before the Commencement Date, and updated Certificates of Insurance shall be provided to each party as requested or needed. RF(''TTCIN 9 CATIONS AND DUTIES OF OWNER 9.1 Obligations and Duties of Owner. Owner shall fully cooperate with Manager so as to enable Manager to carry out its obligations and responsibilities under this Agreement. This cooperation shall include, but shall not be limited to, the following: a. Performing all contractual obligations to which it is, at any time, a party relating in any way to the Golf Course, including, without limitation, those agreements which Manager enters into on behalf of Owner pursuant to this Agreement to the extent that performance of such agreements can only be rendered by Owner and not Manager on Owner's behalf; b. Cooperating with Manager and promptly responding to all inquiries and requests for information, documentation or approvals to enable Manager to carry out its obligations under this Agreement. c. Fulfillment or all Owner obligations under this Agreement. 9.2 Owner Responsibility for Operating Expenses. Owner agrees to pay for the costs of operating and maintaining the Golf Course in accordance with the terms of this Agreement, expressly including all payroll-related costs and management fees and expense reimbursements to Manager, as set forth in the approved Annual Operating Budget or as otherwise provided for in this Agreement. To the extent funds generated by the Golf Course operating revenues are not sufficient to fund payroll expenses or other operating expenses, Manager shall advise Owner, and Owner then shall provide such funds as required by immediately depositing them into the Operating Account. SECTION 10 FACILITY MAINTENAN 10.1 Vendor Services. The selection of vendors to perform services and/or supply materials at the Golf Course under this Agreement shall be made jointly by Manager and Owner, and Owner shall have the right of final approval. 10.2 Repairs and Maintenance. Within approved budgetary limitations and in accordance with the Annual Plan and Budget or otherwise in accordance with this -19- Agreement, Manager shall arrange for the making or installing, at Owner's expense and in the name of Owner, of such alterations, repairs, modifications, or replacements of furnishings or equipment at the Golf Course, as Manager and Owner deem reasonably necessary. Manager shall not, however, make any changes or modifications to either the general layout of the Golf Course or any of the buildings, structures, or fixtures located at the Golf Course without express and explicit prior written consent of Owner. 10.3 Structural and System Maintenance. Manager shall be responsible for contracting for or performing maintenance of all structural components of the Golf Course and all heating, ventilating, air conditioning, plumbing and electrical systems, in accordance with the Annual Plan and Budget. 10.4 Operation of Heating and Air Conditioning Systems. Manager shall train appropriate staff to regulate the heating and air conditioning systems properly. Manager shall be responsible for contracting for or performing maintenance on the heating and electrical systems in accordance with the Annual Plan and Budget. 10.5 Site Maintenance. In addition to the Course maintenance, Manager shall be responsible for all maintenance of the remainder of the grounds and landscaping at the Golf Course, with Owner responsible for expenses associated with same, as provided in the Annual Plan and Budget. 10.6 Capital Expenditures. Owner agrees to expend such budgeted amounts for capital items as shall be required, and as are otherwise available for such purpose, in Owner's sole discretion, in the ordinary course of operation of the Golf Course in order to allow for the operation of the Golf Course in accordance with Owner's recommended standards. Manager shall make recommendations to Owner regarding the expenditure of funds budget for capital items and, if requested by Owner, supervise the installation of such capital items. CF('TTfIN 11 11TTT TTTFC 11.1 Water and Sewage Service. The Owner shall provide hook up to the Golf Course for all water and sewage service required for the operation of the Golf Course during the term of this Management Agreement. 11.2 Utilities. The Owner shall provide hook up for the Golf Course for all electrical and gas service required for the operation of the Golf Course during the term of this Management Agreement. 11.3 Light Bulb Replacement. The Manager shall be responsible for all light bulb replacement at the Golf Course during the term of this Management Agreement, at Owner's expense. -20- 11.4 Telephones. The Owner shall be responsible for the installation of an adequate number of telephones in administrative offices and an adequate number of pay telephones at the Clubhouse and Maintenance Facility. The Manager shall be invoiced by the Owner on a monthly basis for telephone service for long distance charges not directly necessary and attributable to the management of the Golf Course. The Manager shall promptly pay all such invoices within a reasonable period of time but in no case more than thirty (30) days after receipt of the same. ~FrTinN i ~ SCHEDULING 13.1 Agreement of the Parties. The Owner and Manager agree that all scheduling for events at the Golf Course should be coordinated in a fashion to maximize the beneficial use of the Golf Course and in accordance with the Operations Policies. 13.2 Schedule of Events. The Owner shall receive a written report, updated on a monthly basis, listing all events to take place at the Golf Course. 13.3 Owner Events. Not later than March 1 of each year during the term of this Management Agreement, the Owner shall provide the Manager with a listing of those Owner Events which are priority events for purposes of scheduling during the Golf Season. In no case shall such events or the preparation for such events result in the preemption of the Golf Course for more than a total of five (5) days during the Golf Season with no single event being more than two (2) days in duration. Such dates shall be incorporated into the Manager's proposed Golf Season schedule. 13.4 Coordination of Scheduling. All scheduling shall be coordinated with the Manager to assure that the required Manager Services can be provided in a manner consistent with the Manager's obligations hereunder. SECTION I3 OWNER'S REPRESENTATIONS AND WARRANTIES; MANAGER'S REPRESENTATIONS AND WARRANTIES 14.1 Owner's Representations. Owner makes the following representations and warranties to Manager: a. That Owner has been validly formed and duly exists and operates as the governing body of the City of South Bend, Department of Redevelopment pursuant to LC. 36-7-14; -21- b. That as the governing body of the City of South Bend Redevelopment Commission, and with the approval of the Joint Committee established pursuant to the Agreement among the South Bend Redevelopment Authority, the South Bend Redevelopment Commission, and the St. Joseph County Airport Authority for the Operation and Management of Blackthorn Golf Course, dated October 8, 1992, Owner has the sole and exclusive right to enter into this Management Agreement; c. That Owner is not prevented from entering into this Management Agreement by its charter or bylaws, by any statute, regulation, or order of any court or governmental authority, or by any license, debt instrument, lease, contract or other agreement or instrument binding upon it or any of its property; d. That Owner is duly authorized to enter into this Agreement and has taken all necessary action to obtain such authorization, and that no consent of or notice to any other individual, private entity or governmental authority is required in connection with the execution and delivery of this Management Agreement; e. That this Management Agreement, when properly executed, by both parties, shall constitute a valid and binding agreement, enforceable by Manager in accordance with its terms; and f. That neither the execution and delivery of this Agreement by Owner nor Owner's performance of any obligation hereunder (i) constitutes a violation of any law, ruling, regulation, or order to which Owner is subject, nor (ii) constitutes a default of any term or provision nor causes an acceleration of the performance required under any other agreement or instrument binding upon Owner or to which the Golf Course or any part thereof are subject. 14.2 Manager's Representations. Manager makes the following representations and warranties to Owner: a. That Manager has been validly formed and duly exists and operates as a limited liability Company under the enabling and other statutes of the State of Delaware and that is it is qualified to do business in the State of Indiana; b. That Manager has the right and authority to enter into this Management Agreement and is not prevented from entering into this Management Agreement by its charter or bylaws, by any statute, regulation, or order of any court or governmental authority, or by any license, debt instrument, lease, contract or other agreement or instrument binding upon it or any of its property; c. That it is duly authorized to enter into this Agreement and has taken all necessary action to obtain such authorization, and that no consent of or notice to any other individual, private entity or governmental authority is required in connection with the execution and delivery of this Management Agreement; and -22- d. That this Management Agreement, when properly executed by both parties, shall constitute a valid and binding agreement, enforceable by Owner in accordance with its terms. e. That neither the execution and delivery of this Agreement by Manager nor Manager's performance of any obligation hereunder constitutes a violation of any law, ruling, regulation, or order to which Manager is subject. SECTION 14 EVENTS OF DEFAULT; REMEDIES 15.1 In the event that either party hereto shall materially breach, violate or fail fully to perform any term or provision contained in this Management Agreement, the non-breaching party may, upon thirty (30) days written notice (five (5) days written notice with respect to Owner's obligation to fund payroll expenses in accordance with Section 7.6 herein) thereof, terminate this Management Agreement: Provided, however, that the defaulting party shall have the right and opportunity to cure the default within said thirty (30) day period (five (5) days with respect to Owner's obligation to fund payroll expenses in accordance with Section 7.6 herein), or, if such breach, violation or non-performance cannot be cured within a thirty (30) day period (five (5) days with respect to Owner's obligation to fund payroll expenses in accordance with Section 7.6 herein), to begin diligently to effect such cure during such period. In the event that such breach, violation or non-performance is not cured with said thirty (30) day period (or as to defaults not curable within thirty (30) days (five (5) days with respect to Owner's obligation to fund payroll expenses in accordance with Section 7.6 herein), diligent efforts to effect a cure during such thirty day period have not begun), then, this Management Agreement shall terminate upon the expiration of such period and the non- breaching party shall thereupon have the right to exercise such additional rights or remedies as it may have bylaw. 15.2 If Manager, or any officer or corporate-level employee of Manager, shall commit any act of fraud, theft or dishonesty against Owner or against the Golf Course. 15.3 If Manager shall be deemed insolvent or shall file a petition seeking protection from creditors under any bankruptcy or insolvency laws. 15.4 Rights Cumulative; No Waiver. No right or remedy herein conferred upon or reserved to either parties hereto is intended to be exclusive of any other right or remedy, and each and every right and remedy shall be cumulative and in addition to any other right or remedy given hereunder, or now or hereafter legally existing upon the occurrence of an Event of Default hereunder. The failure of either party hereto to insist any time upon the strict observance or performance of any of the provisions of this Agreement or to exercise any right or remedy as provided in this Agreement, shall not impair any such right or remedy or be construed as a waiver or relinquishment thereof with respect to subsequent -23- defaults. Every right and remedy given by this Agreement to the parties hereof may be exercised from time to time and as often as may be deemed expedient by the parties hereto, as the case maybe. Provided, however, neither party shall have the right to seek punitive or consequential damages of any type of nature. SECTION 15 TERM AND TERMINATION 16.1 Term. The term of this Agreement shall be three (3) years. The services of Manager shall commence on January 1, 2010, and shall terminate December 31, 2012, unless terminated sooner as provided herein. It is the intent of Owner and Manager that nothing in this Section affecting the term of this Agreement is intended to be contrary to or interfere with any Internal Revenue regulations as the same may be applicable to the tax- exempt status of bonds issued by Owner to finance or refinance the construction of the Golf Course. 16.2 Right to Terminate. Manager acknowledges and agrees that in order to permit Owner to comply with Section 141 of the Internal Revenue Code of 1986, as amended (the "Code"), Owner has an absolute right to terminate this Agreement for any reason and without cause on the third (3rd) anniversary of the Commencement Date by giving thirty (30) days written notice to Manager: In the event that said notice is not given by Owner to Manager, this Agreement shall be extended automatically for an additional term of two (2) years under the same terms and conditions as herein. It is the intent of Owner and Manager that nothing in this Section affecting the term of this Agreement is intended to be contrary to or interfere with any regulations, the interpretation of which shall jeopardize the tax-exempt status of the bonds issued by Owner to finance or refinance the construction of the Golf Course. 16.3 One Time Option to Cancel. Owner shall have aone-time option to cancel this Management Agreement without cause at the end of the first year. If Owner elects to exercise this option, Owner shall provide written notice of its election to cancel to Manager on or before December 1, 2010. 16.4 Event of Termination. This Agreement shall terminate upon the occurrence of any of the following events (an "Event of Termination"): a. If Owner makes a decision, for whatever reason, to close the Golf Course permanently or for a continuous period of nine (9) continuous months (except to carry out capital improvements or to recover from a natural disaster), this Agreement shall terminate upon the closure or cessation of operations of the Golf Course or Golf Course by Owner, provided that Owner provides Manager with written notice of the pending sale at least sixty (60) days in advance of the closing date. -24- b. If Owner sells the Golf Course, or all of the equity interests of Owner therein are transferred to a third party not affiliated with Owner, this Agreement shall terminate upon the sale or closing of the Golf Course, or the equity interests therein, by Owner provided that Owner provides Manager with written notice of the pending sale at least sixty (60) days in advance of the sale or transfer date. c. If the Golf Course is taken in its entirety in a condemnation proceeding or a substantial portion of the Golf Course is taken such that Owner determines in its reasonable judgment that the Golf Course can no longer be operated. Any termination under this clause shall be effective sixty (60) days after receipt by Manager of written notice of Owner's election to so terminate. d. If the Manager fails to keep a positive cash balance in any or all of the Operating Accounts. e. This Agreement is terminated in accordance with the terms of this Agreement. 16.5 Notice and Payments to Manager. Upon an Event of Termination. Manager shall cooperate with Owner to effect an orderly transition or an orderly closing of the Golf Course. Owner shall be obligated to make payments as follows: a. Funding for all payroll expenses and any and all other operating expenses for which Owner normally would be responsible under this Agreement; b. Reimbursement for payroll expenses and any and all other budgeted and approved expenses for which Manager normally would be entitled to reimbursement under this Agreement; c. Payment of any and all installments of the Monthly Management Fee (as hereinafter defined) and any Project Management Fee (as hereinafter defined) and payment of the Incentive Management Fee (as hereinafter defined) due and payable up to the date of termination; d. Reimbursement of any travel, lodging or other expenses for which Manager normally would be entitled to reimbursement under this Agreement. All such payments shall be made by Owner on or before the date of termination or within twenty (20) days of receipt of an invoice for the same for expenses incurred in the two (2) month period prior to the date of termination. e. A lump sum payment to Manager (the "Termination Fee") in the event that Owner terminates under any of the provisions of Section 6.3 or Sections 6.4 a, b, or c. The Termination Fee shall not be payable if Owner terminates this Agreement under the provisions of Section 6.4 d (Failure to maintain positive cash balances). The Termination Fee shall be payable immediately, on or before the actual date of termination. The amount of the Termination Fee shall vary over time as follows: -25- i. $40,000 if this Agreement is terminated on or before Dec. 31, 2010; ii. $30,OOOif this Agreement is terminated after Dec. 31, 2010 but on or before Dec. 31, 2011; iii. $20,000 if this Agreement is terminated after Dec. 31, 2011 but on or before June 30, 2012, The deleted early termination provisions were included as part of Manager's amdended proposal to City, and were accepted by City representatives. Therefore, these provisions should be included in contract. f. Payment of any other amounts due to Manager under this Agreement through the date of termination. CFf'TT(1N 1 F, INDEMNIFICATION 17.1 Indemnification by Manager. Manager agrees to indemnify and hold harmless the Owner, the South Bend Redevelopment Authority, the City of South Bend, Indiana, and the St. Joseph County Airport Authority, and their respective officers, directors, duly authorized agents and employees from any and all claims brought against them for personal injury, death, property damage and any other losses, damages, charges or expenses, including attorney fees, which are in connection with, or by reason of any intentional wrongful act or omission, fraud, willful misconduct or gross negligence of the Manager or its officers, directors, subcontractors, duly authorized agents or employees. 17.2 Indemnification by Owner. Owner agrees to indemnify and hold harmless Manager and its officers, directors, duly authorized agents and employees from any and all claims brought against them for personal injury, death, property damage and any other losses, damages, charges or expenses, including attorney fees, which are in connection with, or by reason of any intentional wrongful act or omission, fraud, willful misconduct or gross negligence of the Owner or its officers, directors, subcontractors, duly authorized agents or employees. 17.3 Indemnification for Loss, Theft or Damage to Personal Property. Manager agrees to indemnify and hold harmless the Owner, the South Bend Redevelopment Authority, the City of South Bend, Indiana, and the St. Joseph County Airport Authority, and their respective officers, directors, employees and agents with respect to any claim or liability for loss or theft or damage to personal property of the Manager, its employees, sub-contractors, and others, except to the extent that such loss, theft or damage is from the intentional wrongful act, fraud, willful misconduct or gross negligence of the Owner, its employees, agents or sub-contractors. 17.4 Indemnification for Loss, Theft or Damage to Personal Property. Owner agrees to indemnify and hold harmless the Manager, its officers, directors, employees and -26- agents with respect to any claim or liability for loss or theft or damage to personal property of the Manager, its employees, sub-contractors, and others, except to the extent that such loss, theft or damage is from the intentional wrongful act, fraud, willful misconduct or gross negligence of the Owner, its employees, agents or sub-contractors. 17.5 Procedure Relating to Indemnification. Upon the occurrence of an event that gives rise to indemnification, the party seeking indemnification shall notify the other party hereto and provide the other party hereto with copies of any documents reflecting the claim, damage, loss or expense. The party seeking indemnification is entitled to engage such attorneys and expert witnesses to defend against the claim, damage, loss or expense, as it may choose. The party providing indemnification shall pay the reasonable charges and expenses of such attorneys and expert witnesses. 17.5 Survival of Indemnity Obligations. The provisions of this Section 17 shall survive any expiration or termination of this Agreement. SECTION 17 COMPENSATION OF MANAGER 18.1 ' Monthly Management Fee. During the three (3)-year term of this Agreement, Manager shall be entitled to receive a fixed monthly management fee of $8,000 per month (the "Monthly Management Fee"). In addition to the Monthly Management Fee, the Manager shall be entitled to receive a fixed monthly accounting services fee of $2,000 per month (the "Monthly Accounting Services Fee"). These fees shall be paid by Owner payable on or before the 15th day of the month for which the installment is being paid. 18.2 Incentive Fees. In addition to the Monthly Management Fee, Manager shall be entitled to receive an annual incentive management fee (the "Incentive Management Fee") equal to five percent (5%) of the gain in total gross revenue, if any, over the average annual total gross revenue for the Golf Course for the 2008 and 2009 operating seasons (the "Incentive Benchmark"). Based on information provided to Manager by Owner, the total gross revenue for the Golf Course for 2008 was $1,488,676 . The total gross revenue figure for 2009, when it becomes available, shall be added to the $1,488,676 and the result shall be divided by two (2) to determine the Incentive Benchmark, which shall be applied in each of the three years of the Initial Term of this agreement. For purposes of calculating total gross revenueand determining the Incentive Management Fee, if any, total gross revenue shall be determined on the same basis as is reflected in the financial statements provided to Manager by Owner for the 2008 operating year. In addition, at the sole discretion of Owner, Owner may pay Manager an additional Incentive Fee ("Performance Incentive") based on objective and/or subjective evaluation by Owner of Manager's overall performance in any given year. The amount of the -27- Performance Incentive shall be no greater than one-quarter of the amount of the Incentive Management Fee, and in no event shall the combined total of the Incentive Management Fees for any year exceed the amount of the total Monthly Management Fees paid in that year. The Incentive Management Fees, if any, are due and payable within thirty (30) days of the receipt by Owner of the financial statement for each operating year together with the calculation by Manager of the amount of such Incentive Management Fee. The Annual Operating Budgets approved by Owner shall include provisions for payments of the Monthly Management Fee and the Incentive Management Fee. 18.3 Fee Payment. Owner expressly agrees that Manager shall be entitled to receive monthly installments of the Monthly Management Fee on or before the last day of the month for which the installment is being paid. Owner shall be responsible for insuring that the Operating Accounts contain sufficient funds for this purpose, just as the Owner is responsible for insuring that sufficient funds are available for payroll and for all other approved operating expenses. 18.4 Reimbursable Expenses. In addition to the Monthly Management Fee and the Incentive Management Fee, during the term of this Agreement, Manager shall be entitled to receive reimbursement for reasonable and necessary travel and lodging expenses incurred by Manager's corporate employees (as opposed to Golf Course-level employees) in direct relationship to Manager's responsibilities under this Agreement, up to an annual maximum reimbursement of $10,000. A budget for such expenses shall be prepared by Manager, and submitted to Owner for approval, as part of the Annual Operating Budget. 18.5 Fees for Consulting Services. Manager's obligations under this Agreement include certain consulting services to assist Owner in determining the best long-range strategy for the Golf Course. Manager shall receive a consulting fee of $5,000 upon the completion of item 7.3 (a) herein and shall receive a second payment of $5,000 upon the completion of consulting item 7.3 (e) herein. Fees for Consulting Services shall be invoiced to Owner separately and shall not be paid out of the Operating Account. SECTION 19 FORCE MAJEURE 19.1. Circumstances Beyond the Control of Either Party. The Manager and the Owner agree that with respect to any services to be provided, payments to be made, or action to be taken by either party during the term of this Management Agreement, the party required to furnish or perform the same shall in no event be liable for the failure to do so when prevented by any cause beyond the reasonable control of such parties such as strike, lock-out, breakdown, accident, order or regulation of or by any governmental -28- authority ("Governmental authority" for purposes of this provision shall not include the South Bend Redevelopment Authority, the City of South Bend, Indiana, , or the St. Joseph County Airport Authority), or failure of supply or inability by the exercise of reasonable diligence, to obtain supplies, parts, or employees necessary to furnish such services, or because of war or other emergency, or for any cause due to any act or neglect of the other party hereto, or in servants, agents, employees, any assignee, or successor in interest to such other party. The time within which such services, payments, or actions shall be performed or rendered shall be extended for a period of time equivalent to the delay of such cause. SECTION 20 COMPLIMENTARY PLAY AND PRIVILEGES 20.1 Complimentary Play and Privileges for Manager. Owner and Manager agree that employees of Manager are entitled to complimentary golf course and practice range privileges, consistent with normal golf industry standards and practices. Playing and practice privileges for employees shall be available to employees on personal time only, on a space available basis, at the discretion of the Facility Manager. Employees may not make advance tee time reservations for complimentary play. Guests or family members accompanying employees shall pay full applicable fees. Employees and their guests shall conform with all policies that apply to the paying public utilizing the Golf Course. 20.2 Complimentary Play and Privileges for Owner. Except as provided herein, Owner and Manager agree that no complimentary playing privileges shall be granted to Owner's employees or any public official. Owner shall maintain an account with Manager at the Golf Course which designated officials may use for Owner-related marketing purposes. Each month Manager shall bill Owner for all charges on this account. 20.3 Complimentary Play and Privileges for Marketing. For purposes of marketing the Golf Course, Manager may elect to grant complimentary playing privileges to golf professionals, sponsors of potential golf events at the Golf Course, prospective corporate site purchasers, or others, who, in the opinion of Manager, can promote the Golf Course, bring business to the Golf Course, or help the Golf Course reach its marketing goals with respect to local, state, regional or national recognition. Manager is to keep a log of all such complimentary rounds, stating the name of the individual and the marketing purpose. At Owner's discretion, restrictions may be placed on the granting of complimentary playing privileges by Manager. 20.4 Merchandise Purchases by Manager's Employees. At the discretion of Manager, employees of Manager may be permitted to purchase golf shop merchandise at a discount price. The maximum allowable discount is a price that is 10% over the wholesale price paid by Manager for the item being purchased. Employees of Manager -29- may exercise this discount privilege only for personal use, or for use by members of the employee=s immediate family, which is defined as including only the employee=s spouse and dependent children. The total annual discount purchases made by any employee shall not exceed the amount of the annual salary paid to the employee by Manager. Owner and Manager agree that no discount purchasing privileges shall be granted to Owner=s employees or to any public official. SECTION 21 DESTRUCTION OF GOLF COURSE 21.1 Partial Destruction. If, in the sole opinion of the Owner, the Golf Course is partially destroyed by any cause and can be repaired or restored to its prior condition and the destruction does not render the Golf Course unusable, this Management Agreement shall continue in full force and effect. The Owner shall, at its expense, promptly and diligently complete the restoration of the Golf Course to the same condition as of the Commencement Date of this Management Agreement, reasonable wear and tear excepted. 21.2 Reduction in Fixed Fee. Should the Course be unavailable for 30 or more consecutive days in any given Golf Season as a result of the partial destruction of the Golf Course or by reason of the Owner's election to repair or restore the Golf Course subsequent to partial destruction, the Fixed Fee shall be reduced $150 per day for each day beyond the 30 days that the Course in unavailable. 21.3 Total Destruction. In the event the Golf Course is totally destroyed, in the sole and reasonable opinion of the Owner, by fire or other casualty, the Owner may elect to suspend this Management Agreement. Such election shall be exercised by the Owner by giving written notice to the Manager within thirty (30) days after such destruction. If, after due consideration, the Owner elects not to restore the Golf Course to playable condition, this Management Agreement shall terminate at no penalty to either party. If and when the Owner does restore the Golf Course, this Management Agreement shall again be in force, effective 60 days prior to the scheduled re-opening of the Course, and continuing for the unexpired term that remained in the Management Agreement at the time it was suspended. In such event, Owner shall be responsible and liable for all costs associated with the closure, interim care, insurance, security, maintenance, and re- opening of the Golf Course, including, but not limited to, all costs associated with the dismissal and re-hiring of Manager's employees. RF('TTf1N ~~ SIGNAGE -30- 22.1 Sign Approvals. The placement of any and all signage, either temporary or permanent, at the Golf Course, including, but not limited to the Food and Beverage Services Areas, shall be subject to the prior written approval of the Owner. SECTION 23 PARKTN(; 23.1 Use of Property. Manager shall, during the term of this Management Agreement, maintain the Parking Lots at the Golf Course, and pay such expenses from the Operating Account. 23.2 Snow Removal. Manager shall remove snow from the Parking Lots as it deems necessary. 23.3 Employee Parking. Manager shall assign employee parking spaces so as to afford maximum access to customers and to insure sufficient and convenient parking for daily patrons and participants in special events. In general, it is expected that Manager's employees shall use spaces farthest from the Clubhouse. Manager shall encourage employees to park in the parking area adjacent to the Maintenance Facility. SECTION 24 ADVERTISING 24.1 Manager Marketing Responsibilities on Behalf of Owner. Manager shall cooperate with Owner's developer of the Blackthorn Corporate Park in the advertising and marketing of the Golf Course in connection with the development of Blackthorn Corporate Park. Manager, on behalf of Owner, shall market and advertise the Golf Course only in a manner that is consistent with the Owner's goals for the development of the Blackthorn Corporate Park. 24.2 Owner's Approval Required. Manager shall not advertise or allow advertising in any manner or form, on or about the Golf Course, including but not limited to advertising on golf cart panels, except with the prior written approval of Owner. SECTION 25 ASSIGNMENT 25.1 Assignment. Except as otherwise provided herein, neither party hereto may assign, either wholly or in part, any of its rights or obligations under this Agreement to any other natural person or legal entity without the prior written consent of the other -31- party hereto: provided, however, that either party may assign, upon written notice to the other party but without requiring the other party's consent, its rights and obligations hereunder to a subsidiary or affiliate with substantially the same ownership, controlling authority, and professional qualifications; and provided, further, that Manager may assign this Agreement to any successor entity which agrees to retain substantially all of the employees of Manager then providing management services to the Golf Course. SECTION 26 MISCELLANEOUS 26.1 Nondiscrimination. The Manager shall not discriminate in any manner on the basis of gender, race, color, creed, age, handicap or national origin with respect to any applicant or employee, and shall conform in all respects to the pertinent provisions of federal, state or local laws, ordinances, rules and regulations of employment practices. The Manager further agrees that in serving the public, its employees shall not, on the grounds of gender, race, creed, color, age, handicap or national origin discriminate or permit discrimination or refuse to serve a person or group of persons in any manner prohibited by federal, state or local laws, rules, ordinances and regulations. 26.2 Food and Beverage Services; Licenses and Permits. a. The parties acknowledge that the Golf Course currently is permitted by the Indiana Alcoholic Beverage Commission to serve liquor. Owner shall make every reasonable effort to retain said permit. Said permit shall authorize Manager, as manager of the Golf Course, to serve liquor on the licensed premises in the normal course of business. Manager shall comply with all local, county, state and federal laws and regulations governing the serving of alcoholic beverages, and shall properly direct all Golf Course personnel in this regard through policies, posting of notices and supervision. Manager shall secure for all wait staff and bartenders any permit required by the Indiana Alcoholic Beverage Commission. The liquor license shall be and shall remain the sole property of the Owner. b. Manager is responsible to assure that all other applicable state and/or local permits and licenses for the provision of Food and Beverage Services at the Golf Course shall be obtained. c. Manager shall provide all Food and Beverage Service. The Clubhouse Restaurant shall be open for food services at all times during which the Course is open. Alcoholic beverages shall not be served before 10:00 A.M. d. Manager acknowledges that the provision of high quality Food and Beverage Services in a manner pleasing to the public is of utmost importance to the overall success of the Golf Course. Manager shall take all reasonable efforts to assure -32- that food is of high quality and consistent with the goals of the Owner to enhance attendance at the Golf Course. e. Manager shall provide Janitorial Services to the Food and Beverage Service Areas during the Term of this Management Agreement. £ Manager shall post signs in appropriate locations at the Golf Course which shall prohibit patrons from bringing food, beverages, beverage containers or alcoholic beverages onto the Golf Course. g. Owner reserves the right to approve the location, extent, and use of vending machines provided by or at the direction of Manager at the Golf Course. Manager acknowledges that is the Owner's desire that vending machines be used appropriately to supplement the provision of Food and Beverage Services rather than to substitute for the provision of said services at the Golf Course. h. Chewing gum shall not be sold by Manager, either manually or through vending machines. 26.3 Validity of Agreement. The parties warrant that the execution and performance of this Agreement by such parties does not and shall not conflict with or violate any provision of their respective articles of incorporation, by-laws or operating agreements. 26.4 Severability. If any one or more of the provisions contained in this Management Agreement shall for any reason be held to be invalid, illegal, or unenforceable in any respect, and if such holding does not affect the ability of the Manager to perform and have access to the Golf Course as provided for herein, such invalidity, illegality or unenforceability shall not affect any other provision hereof, and this Management Agreement shall be construed as if such invalid, illegal or unenforceable provision was not contained therein. 26.5 Binding Effect: Governing Law: Counterpart. This Agreement shall inure to the benefit of and be binding upon the parties hereto, their successors and permitted assigns. This Agreement shall be governed by and enforced and construed in accordance with the laws of the State of Indiana and any action to enforce any of the terms hereof shall be filed in the Superior Court of St. Joseph County, Indiana. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original without the production of the other and all such counterparts together shall constitute but one and the same instrument. 26.6 Partnership or Joint Venture. Owner and Manager are not partners or joint venturers with each other and nothing in this Agreement shall be construed to make them such partners or joint venturers or impose any liability of such on either of them. The parties hereto hereby acknowledge that Manager and Owner have no power to bind or obligate the other party except as set forth in this Agreement. -33- 26.7 Notices and Addresses. All notices required to be given under this Management Agreement shall be given by certified or registered mail, addressed to the proper party to the following addresses, or at such other address as may be subsequently given pursuant to this Section and shall be deemed given when deposited in the U.S. mails, postage prepaid: Owner: Manager: South Bend Redevelopment Commission Kitson & Partners Club Services, LLC 1200 County-City Building 4500 PGA Boulevard, Suite 400 South Bend, Indiana 46601 Palm Beach Gardens, FL 33412 Attn: Donald E. Inks, Director Attn: Mr. George Speer The above noted addresses may be changed by either party by mailing written notice of such change to the other party at the last designated address of the other party as provided herein, with such change to be effective upon receipt of said notice. 26.8 Time of the Essence. Time is of the essence of this Agreement. 26.9 Rights and Remedies Cumulative. The rights and remedies provided by this Management Agreement are cumulative and the use of any right or remedy by either party shall not preclude or waive its rights to use any and all other remedies. Said rights and remedies are given in addition to any other rights the parties may have bylaw, statute, ordinance or otherwise. 26.10 Status of Parties. Parties hereto shall be deemed independent contractors with respect to one another for all purposes and nothing contained in this Management Agreement shall be determined to create a partnership or joint venture between the Manager, the Owner, the City of South Bend, or the St. Joseph County Airport Authority with respect to the Manager's activities conducted at the Golf Course pursuant to the terms of this Management Agreement. 26.11 Waiver. The waiver by either the Manager or the Owner of any default or breach by the other party of any of the provisions of this Management Agreement shall not be deemed a continuing waiver or waiver of any other breach by the other party of the same or another provision of this Management Agreement. 26.12 Improvements. The Manager shall make no improvements to the Golf Course without the prior written approval of the Owner. 26.13 Waste or Nuisance. The Manager shall not commit or permit any waste on or about the Golf Course during the term of this Management Agreement nor shall it maintain, commit or permit the maintenance or commission of any nuisance on or about the Golf Course nor use the Golf Course for any unlawful purpose. Any factors or risks associated with errant golf shots, the noise associated with golf maintenance equipment -34- and any other aspects of normal golf course operations and maintenance shall not under any circumstances be deemed a nuisance for purposes of this clause. 26.14 The Manager shall not permit any mechanics lien or other encumbrances or liens to exist against the Golf Course and shall within thirty (30) days of any such lien or encumbrance being asserted against the Golf Course as a result of action or inaction by the Manager either cause the same to be released of record or obtain title insurance coverage or other bonding reasonably satisfactory to the Owner over such lien and proceed diligently to contest the same in good faith. 26.15 References to the Owner. All references to the Owner in this Management Agreement also shall be deemed to be references to such officers or employees or other designees of the Owner as may be appropriate to implement the terms of this Management Agreement. 26.16 Valid Delaware Corporation Registered to Do Business in Indiana. The Manager represents that as of the date of the execution of this Management Agreement it is organized and in good standing under the corporation laws of the State of Delaware and registered with the office of the Indiana Secretary of State to do business in the State of Indiana, that it is duly authorized to enter into this Management Agreement and has taken all requisite corporate action to obtain such authorization and that no consent of or notice to any other individual, private or public entity or governmental authority is required in connection with the execution, delivery and performance of this Management Agreement. 26.17 Headings. Headings, captions and paragraph headings contained in this Agreement are for convenience and reference only and in no way define, describe, extend or limit the scope or intent of this Agreement. 26.18 Complete Agreement. This Agreement shall constitute the entire agreement between the parties hereto relative to the subject matter hereof and supersedes all prior and contemporaneous agreements and understandings of the parties and no variance or modification hereof shall be valid or enforceable except by supplemental agreement in writing, dated subsequent to the date hereon and executed by the parties in the same manner as this Agreement. [CONTINUED ON SIGNATURE PAGE) -35- IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date indicated below effective as of the Commencement Date. FOR THE OWNER: SOUTH BEND REDEVELOPMENT COMMISSION FOR THE MANAGER: Kitson & Partners (Club Services) LLC Marcia Jones, President Attest: Nancy King, Secretary Date Signed: By: Sydney W. Kitson, Chairman and CEO Date Signed: -36- Exhibit "A" Minimum Maintenance Standards of the Blackthorn Golf Course Exhibit "B" Operations Policies of the Blackthorn Golf Course Exhibit "C" Form of Line-by-Line Annual Budget for the Blackthorn Golf Course -37-