MANAGEMENT AGREEMENT
THIS AGREEMENT, made as of the 12 day of November, 1999, is between
Owner (hereinafter named), and BMC-The Benchmark Management Company, a Texas
corporation doing business as Benchmark Golf (hereinafter called "Operator"):
W I T N E S S E T H:
WHEREAS, Owner proposes to provide the first-class golf club and
conference center known as Newport Golf Club & Conference Center whose Site is
located at 00000 Xxxxxxx Xxxx Xxxxx, Xxxxxxx, Xxxxx (hereinafter referred to and
defined as the "Project"); and
WHEREAS, Owner desires to obtain the benefits of Operator's expertise
in the management and operation of the Project, and Operator desires to provide
its management upon the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, Owner and Operator agree as follows:
ARTICLE I
DEFINITIONS
1.1 BASE FEE. The Base Fee of SEVEN THOUSAND DOLLARS ($7,000.00) per
month, or pro rata portion thereof. The Base Fee shall be adjusted annually
according to the increase in the Consumer Price Index, mutually agreeable to
both parties.
1.2 BUDGETS. An estimate of income, revenues and expenditures
(including capital expenditures and replacements) approved by Owner pursuant to
Paragraph 4.3 below.
1.3 BUILDINGS. The buildings and improvements to be located on the
Project, including locker room, pro shop, golf cart storage and maintenance
area, restaurant, bar, and other public rooms, recreational facilities,
landscaped grounds and other facilities necessary for the operation of a
first-class golf club and conference center, together with all fixtures and
equipment necessary for the efficient operation of the buildings and other
improvements, including without limitation, heating, air conditioning, lighting,
sanitation, laundry, refrigeration, kitchen, and other similar fixtures and
equipment.
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1.4 EXECUTIVE COMMITTEE MEMBERS. The members of this committee shall be
the general manager, head golf professional, golf course superintendent,
marketing manager, and food & beverage manager, or any positions mutually agreed
upon between Owner and Operator. Owner will have the right to approve the
general manager, head golf professional, golf course superintendent and food &
beverage manager or require their removal if such request is for cause which
directly affects his ability to operate the Project, or maintain the Project's
image in the community. Owner will have the right to attend Executive Committee
meetings.
1.5 FISCAL YEAR. The year ending December 31, which is the fiscal year
established by Owner for the Project.
1.6 FURNISHINGS AND EQUIPMENT.
(a) The Operating Equipment;
(b) All furniture, furnishings and specialized golf
course equipment;
(c) Office furniture and equipment.
1.7 GROSS REVENUES. Income derived from aggregate sales to unaffiliated
as well as affiliated customers of all products and services offered at the
Project, including annual golf contract fees and trail fees, food and beverage
sales, guest privilege fees, service charges, golf operations and other user
fees, and other revenues; but, excluding:
(a) revenues from sales of goods or services by
concessionaires;
(b) sales and use taxes or other similar impositions
collected directly from customers or included as the sales price of any
goods or services;
(c) revenues from the sale of disposition of capital
assets;
(d) proceeds from financings or refinancings; (e) sales
allowances, discounts, rebates and adjustments;
(f) golf revenue derived from the annual charity event
held one day each year on behalf of the Boys and Girls Harbor.
1.8 INCENTIVE FEE. Twenty percent (20%) of Net Operating Income over
approved operating budget for calendar year 2000 (attached hereto as Exhibit
"C"), or pro rata portion thereof, if applicable. For each of the years two
through five, the incentive Fee shall be 20%
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of net operating income over each prior year. In each of years six through
ten, the Incentive Fee shall be 15% of the increased net operating income
over the four-year average actual net operating income for contract years two
through five. The Incentive Fee will be calculated annually and paid to
Operator within thirty (30) days of the presentation of final year-end
financial statements.
1.9 INCOME BEFORE FIXED CHARGES. For any period, the sum of Gross
Revenues and business interruption insurance proceeds less all direct expenses
but before Replacement Reserves, depreciation and amortization, property and
liability insurance, interest, real estate and personal property taxes, and any
state or federal income taxes.
1.10 NET OPERATING INCOME. For any period, the sum of Gross Revenues
and business interruption insurance proceeds less all direct and undistributed
operating expenses but before Base Fee, Incentive Fees, Replacement Reserves,
depreciation and amortization, property and liability insurance, interest, real
estate and personal property taxes, and any state or federal income taxes.
1.11 OPERATING EQUIPMENT. All chinaware, glasses, utensils, silverware
and uniforms necessary for the operation of the Project.
1.12 OPERATING SUPPLIES. Supplies, cleaning materials, food and
beverages, and other consumable items.
1.13 OPERATING YEAR. A twelve-month year of operation under this
Agreement.
1.14 OWNER. Rampart Properties Corporation, a wholly owned subsidiary
of Rampart Capital Corporation.
1.15 OWNERS MEETING. There will be a quarterly meeting between the
Owner, the Operator's Home Office representatives and the appropriate members
of the Project's Executive Committee. At the quarterly meeting, the agenda
will consist of review of financial performance, ninety (90) day forecasts,
review of marketing strategies, reviews and status of all capital projects,
capital planning sessions and any matters relevant to management and
operation of the Project.
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1.16 PROJECT. The Buildings, the Site, the Furnishings and Equipment,
together with all entrances, exits, rights of ingress and egress, riparian
rights, easements and appurtenances thereunto belonging or appertaining to the
property known as Newport Golf Club & Conference Center.
1.17 REPLACEMENT EXPENDITURES. Unless otherwise specified by the
Budget, the amount of Replacement Expenditures during a fiscal year will be:
YEAR OF OPERATION PERCENT OF GROSS SALES
----------------- ----------------------
1 2 percent
2 3 percent
3 4 percent
4 5 percent
1.18 SITE. A tract of real property described in Exhibit A and A-1
attached hereto on which the Buildings, golf course and nine expansion golf
holes are located.
1.19 TERM. The original term shall be five (5) years commencing on
January 1, 2000, and Operator shall have the right as set forth in Article III
to renew the term for five (5) years.
1.20 TERM OF THIS AGREEMENT. The phrase "Term of this Agreement" as
used herein shall mean the original term and any renewal or renewals thereof
then in effect in accordance with the provisions of Article III.
1.21 UNIFORM SYSTEM. A Uniform System of Accounts for Hotels, as
revised from time to time and approved by The American Hotel and Motel
Association. Accounting terms used in this Agreement have the meanings given
them in the Uniform System and must conform to Generally Accepted Accounting
Principles ("GAAP").
ARTICLE II
OWNER'S TITLE
Owner represents and warrants as follows:
(a) Owner is the fee simple owner of the Project and has full power and
authority to enter into this Agreement.
(b) The Project is used as a golf club and conference center and all
necessary
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governmental and other permits and approvals which Owner is required to
obtain under the terms of this Agreement for such use has been obtained and
are in full force and effect.
ARTICLE III
TERM OF AGREEMENT
3.1 RENEWALS. This Agreement shall continue for the term described in
Paragraph 1.19 hereof. Operator shall have the right and option to renew such
term for successive periods as set out in Paragraph 1.19 hereof, upon the
following terms and conditions:
(a) Each renewal term shall be upon the same terms, covenants
and conditions as in this Agreement, except as modified in this Article
III;
(b) The term of this Agreement shall have been renewed for the
prior renewal term (if applicable);
(c) Operator shall exercise its right to renew the term by
written notice to Owner at least six (6) months prior to the expiration
of the then existing term.
ARTICLE IV
DUTIES OF OPERATOR
4.1 MANAGEMENT AND OPERATION. During the term of this Agreement,
Operator agrees, for and in consideration of the compensation hereinafter
provided, to supervise and direct the management and operation of the Project
including but not limited to the responsibility for all matters relating to
human resources, accounting, management information services support, and
facilities evaluation in addition to management oversight, as the independent
contractor of Owner, and Owner hereby grants Operator the sole and exclusive
right to do so. Without limiting the generality of the foregoing, Owner grants
to Operator the sole and exclusive right, and Operator agrees.
4.2 GENERAL STANDARD. To operate the Project in the same manner as is
customary and usual in the operation of comparable facilities, to provide such
services as are customarily provided by operators of a golf club and conference
center of comparable class and standard consistent with the Project's
facilities, and to consult with Owner and keep Owner advised as to
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all major policy matters affecting the Project; provided, however, that
Operator will make no major policy changes not reflected in the Budget
without prior written approval of Owner. In this connection, and except as
otherwise required by this Agreement, Operator shall have all reasonable
discretion in the operation, direction, management and supervision of the
Project, including without limitation, labor policies, credit policies
(including entering into agreements with credit card organizations),
cashiering, terms of admittance food and beverages, purchases of Operating
Equipment not to exceed $5,000, maintenance of the Project, repairs to and
replacements of Furnishings and Equipment, the institution of such legal
proceedings as are necessary in connection with tenants or otherwise in the
operation of the Project, all matters relating to employee safety, health and
welfare, insurance, benefits and the like, and all phases of advertising,
promotion, publicity, marketing and sales strategy relating to the Project.
4.3 BUDGETS. To submit for Owner's approval, within sixty (60) days,
prior to the first day of the succeeding Fiscal Year, a Budget in reasonable
detail, including special repairs and maintenance projects and Replacement
Expenditures. In conjunction with submittal of the Budget, Owner will review the
marketing strategy, major operating assumptions, any proposed changes in
physical facilities, and the proposed Replacement Expenditures. These items may
not then be changed without the consent of both parties. If Owner and Operator
cannot agree upon a budget for the ensuing year, then the last budget submitted
by Operator along with written objections of Owner shall be submitted to a
mutually acceptable nationally recognized independent firm with expertise in the
financial aspects of golf club and conference center operations such as Xxxxxxx
Xxxx Xxxxxxx ("Consultant"). Consultant shall review the documents and recommend
a budget for the ensuring year. The budget so recommended by Consultant shall be
considered the Budget under which the Project will be administered. Until such
time that a Budget is approved, the prior year's actual revenues and expenses
adjusted by a percentage equal to the increase year over year in the U. S.
Consumer Price Index. Such Budgets shall, in general, form the basis on which
expenditures for the Project shall be made, it being understood and agreed that,
subject to the limitations contained in this Agreement, Operator may deviate
from such Budgets if in Operator's reasonable judgment a deviation is necessary
or desirable for the efficient operation of the Project as a first-class golf
club and
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conference center. Operator makes no guarantee, warranty or representation
whatsoever in connection with the Budgets, other than that the Budgets will
be prepared in good faith to the best of Operator's ability and will be
reasonable estimates of anticipated operations. Operator will notify Owner as
soon as reasonably possible of any anticipated or actual significant variance
in the budgeted monthly income or expenses for any department, and will
provide an explanation of the reason for the variance and measures being
taken in response to it. Any variance which exceeds the monthly budgeted
total departmental amount for that department by fifteen percent (15%) per
individual item or ten percent (10%) aggregate will be deemed significant.
Any expenditures not in the approved budget and exceeding $5,000 or with a
term of longer than one year must have written Owner approval.
4.4 EMPLOYEES. To hire, promote, discharge and supervise the work of
the management staff (i.e., general manager, assistant managers and department
heads) of the Project and to supervise through said management staff the
recruiting, hiring, promoting, discharging and work of all other operating and
service employees performing services in or about the Project, all in Project's
name. Operator agrees to hire the current Head Golf Professional, Golf Course
Superintendent and Chef and to evaluate their performance over ninety (90) days.
All Executive Committee Members shall be employees of Operator and all other
employees working in or about the Project shall be employees of Operator or its
subsidiary. Operator will, in the hiring of the management staff and other
operating and service employees of the Project, use or cause said management
staff to use reasonable care to select qualified, competent and trustworthy
employees. Operator will not enter into any agreement with an employee for an
annual base salary in excess of the General Manager's Base Salary without the
consent of the Owner. Operator may arrange a bonus plan to be paid to the
General Manager and the other members of the Executive Committee as an incentive
to maximize the total Income Before Fixed Charges, provided this plan is
specific for the Project, and not part of Operator's company-wide bonus, pension
or profit plans.
The General Manager and other Executive Committee Members assigned to
the Project shall be employees of Operator and their total aggregate
compensation, including salary and related fringe benefits will be expenses of
the Project. The term "fringe benefits" will include
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the items listed in Payroll Taxes and Employee Benefits in the Uniform
System, and will also include the Project's prorata share of costs of any of
Operator's company-wide incentive compensation plan, pension or profit plans
for employees involved in the Project if required by applicable federal
income tax laws. However, Operator will diligently and in good faith attempt
to structure its operations so that on-site employee wage and benefit plans
will be competitive with other such wages and benefits in the local area for
comparable employees and facilities.
Operator may from time to time find it desirable to assign one or more
of its supervisory employees to the Project on a temporary basis. Owner will
reimburse Operator for all actual expenses to and from the Project and for all
room and board while at the Project for such employees while on Project
business, but only if Owner has previously approved the assignment of such
employees, which approval will not be unreasonably withheld. If such an employee
is filling a vacant position, salary and benefits will be charged to the
Project; if such an employee is on an audit or supervisory overview function,
salary and benefits will not be charged to the Project.
Human Resource supervision and benefit administration will be handled
by Operator's Home Office personnel with no additional Human Resource fees.
The Project will participate in Benchmark University Training Programs
for its managers. The prorata expense of the training program will be an expense
of the Project.
4.5 CONCESSIONS. To consummate in the name of and for the benefit of
Owner, arrangement with concessionaires, licensees, tenants, or other intended
users of the facilities of the Project.
4.6 CONTRACTS. To enter into contracts on behalf of the Owner with
prior approval of owner for the furnishing to the Project of electricity, gas,
water, steam, telephone, cleaning (including window cleaning where necessary),
vermin extermination, boiler maintenance, air conditioning maintenance, and
other utilities, services and concessions which are provided in connection with
the maintenance and operation of a first-class golf course.
4.7 SUPPLIES. To purchase all Operating Supplies and other materials
and supplies as agent for the Owner. Owner acknowledges that Operator may
perform services as a
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representative of the manufacturer of any of such items in order to secure
the benefits of lower costs in connection with purchasing arrangements for
Owner.
4.8 MAINTENANCE. Cause to be made or installed, through a schedule of
preventative maintenance and supervisory program, all necessary or desirable
repairs, decorations, renewals, revisions, alterations, re-buildings,
replacements, additions and improvements in and to the Project; provided,
however, that such are included in the Budget or do not exceed Five Thousand
Dollars ($5,000) per item. Operator also agrees to cause needed repairs to be
recorded and serviced on a priority basis through the use of a work order
system.
4.9 PERMITS. To apply for, obtain and maintain in the name of Owner, if
legally permitted, all licenses and permits required of Owner or Operator in
connection with the management and operation of the Project. Owner agrees to
execute and deliver any and all applications and other documents and to
otherwise cooperate to the fullest extent with Operator in applying for,
obtaining and maintaining such licenses and permits.
4.10 COMPLIANCE WITH LAWS. Owner and Operator covenant to each other
that throughout the term of this Agreement, they will not take any action which
would intentionally violate any statutes, ordinances, laws, rules, regulations,
orders and requirements of any federal, state or municipal government and/or
appropriate departments, commissions, boards or officers having jurisdiction
over the Project or the construction, maintenance or operator thereof. Owner and
Operator are to comply with all orders and requirements of the local Board of
Fire Underwriters, or any other body which may hereafter exercise similar
functions, and any requirements of any agreements concerning financing of the
Project (other than the payment of loan monies, taxes or insurance). If Owner
shall adequately secure and protect Operator from loss, cost, damage and expense
by bond or other means satisfactory to Operator, Owner at its sole expense and
without cost to Operator, shall have the right to contest by proper legal
proceedings the validity of any such statute, ordinance, law, rule, regulations,
order or requirements involving Owner's actions, provided such contest shall not
result in the suspension of operations of the Project. Subject to the foregoing,
Owner may postpone compliance with any such law, ordinance, order, rule,
regulation or requirement to the extent and in the manner provided by law until
final determination of any such proceedings.
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Owner shall prosecute all such proceedings with all due diligence and
dispatch. Notwithstanding the foregoing, if failure to comply promptly with
any statute, ordinance, law, rule, regulations, order or requirement would
result in the suspension of operations of the Project or would expose Owner
or Operator to the imminent danger of criminal liability other than the
payment of fines, then in such event Operator may (but shall not be obligated
to) cause the same to be compiled with at Owner's expense.
4.11 CASH ACCOUNTS. As agent for Owner, to deposit in a banking
institution or institutions in a segregated account with both Owner and Operator
having signatory and withdrawal capacity, in the Project's name all monies
furnished by Owner as working capital and all monies received by Operator from
the Project's operation or for or on behalf of Owner, and subject to the
limitations in this Agreement, to disburse and pay the same on behalf of the
Project in such amounts and at such times as the same are required in connection
with the ownership, maintenance and operation of the Project:
(a) OPERATING COSTS. All costs and expenses of
maintaining, operating and supervising the operation of the Project,
including, without limitation, the following:
(i) The cost of all purchase of Operating Supplies.
(ii) Reimbursement to Operator for salaries, fringe
benefits and expenses of Project employees, including the Executive
Committee and General Manager.
(iii) Out-of-pocket expenses incurred for the account of or
in connection with the Project, including reasonable traveling expenses
of executives and employees of Operator and its subsidiaries and
affiliates.
(iv) All expenditures which are of an ordinary nature and
which have been covered in the Budget for the then current year, for
repairs and maintenance, Furnishings and Equipment for capital
improvements.
(v) All legal and accounting fees, paid to outside third
parties.
(vi) The Base Fee, Incentive Fee, and all reimbursements
or other payments due to Operator under the provisions of this
Agreement.
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(vii) Cost and expense of utilities, services and
concessions at the Project and any and all other expenditures provided
for in this Agreement.
(viii) Any other charge, item or expense or other item which
Owner, in writing, directs to be paid.
(ix) Any charges for outside security consultant, approved
in operating budget or approved directly by owner.
(x) If property is linked to Benchmark's Sales and
Catering Operating System and national database, any mutually agreed
allocations will be expenses of the property.
(b) TRANSFER OF FUNDS. At the end of each calendar month, Operator will
determine the amount of cash reserves which reasonably need to be retained in
the operating account, which cash reserves shall not exceed the projected cash
expenditure requirements for operating costs, debt service, taxes, Replacement
Expenditures and maintenance for the following calendar month. The balance of
funds in the operating account (if any) will then be transferred to one or more
accounts designated by Owner, which will be Owner's sole accounts, within
fifteen (15) days after the end of such calendar month.
(c) INTEREST. Interest earned on Project funds will not be considered
Project income, but will be Owner's funds and will be used to offset Owner's
required working capital contributions (if needed).
(d) RESOLUTIONS. Owner shall provide all necessary corporate
resolutions required in order to open Cash Accounts within a reasonable period
of time, not to exceed thirty (30) days from such time as the same are required
in connection with the ownership, maintenance and operation of the Project.
4.12 Owner to be responsible for paying all real estate and personal
property taxes and to notify Operator of payments and proper allocations for
financial statement preparation.
4.13 INSURANCE. Owner will take out and maintain at all times during
the term of this Agreement, insurance as provided in the Insurance Exhibit B
attached hereto and made a part of this Agreement for all purposes. Owner will
pay insurance premiums for policies specified in Exhibit B and notify Operator
of payments and proper allocations for financial statement preparation.
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Operator will take out and maintain Worker's Compensation
insurance on its employees with limits of $1,000,000. The cost of such insurance
shall be an expense of the Project.
Operator will take out and maintain a crime policy on its home
office employees and its employees at the Project with limits of not less than
one million dollars. The cost of such policy will be an expense of the Operator.
Operator shall name Owner and Owner shall name Operator as
Additional Insured.
4.14 FINANCIAL STATEMENTS. To deliver or cause to be delivered to Owner
statements as follows:
(a) MONTHLY. Within fifteen (15) days after the end of each
calendar month, Operator shall deliver or cause to be delivered to Owner a
complete financial statement, including but not limited to balance sheet and
statement of earnings before income taxes showing the results of operation of
the Project for that calendar month and the cumulative results of operation for
the Fiscal Year to date, and having annexed thereto a computation of the
management fee for such month and the Fiscal Year to date. Such statement and
computation shall be prepared by the Operator's Home Office and taken and made
from the books of account of the Project. In addition to the monthly statement,
Operator shall provide to Owner the Project's check registers, accounts payable
and accounts receivable, detailed ledgers and bank reconciliations. Operator's
Senior Vice President, Financial Operations shall warrant these monthly
statements to fairly present the Project's operation results provided that such
warrant may be subject to future changes resulting from year-end audit
adjustments.
(b) NINETY-DAY FORECAST. Simultaneously, with the presentation
of the monthly financial statement; but no later than five (5) days prior to the
commencement of the first month of the ninety (90) day forecast period, Operator
shall present and review with Owner a ninety (90) day forecast. Such forecast
shall project revenues and expenses for the next ninety (90) day period as well
as cash needs or surpluses during the ninety (90) day period.
(c) ANNUAL. Within thirty (30) days after the end of each
Fiscal Year,
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Operator will deliver or cause to be delivered to Owner a balance sheet and
related statements of earnings before income taxes, and changes in Owner's
equity and financial position for the year then ended. If required and at the
expense of the project, these financial statements may be audited by
independent public accountants recognized in the club management field,
approved by both Owner and Operator and retained by Owner. In addition, the
computation of the Base Fees and Incentive Fees, shall be included in the
footnotes to the audited financial statements and shall be included within
the scope of the independent auditor's examination.
The preparation of financial statements, payment of accounts payable
and maintenance of accounting records by Operator are included in the Base Fee
and no additional accounting fees will be paid to Operator.
4.15 LEGAL MATTERS. To institute, in its own name or in the name of
Owner, and at the Project's expense, any and all legal actions or proceedings to
collect charges, rent or other income for the Project or to oust or dispossess
guests, tenants or other persons in possession therefrom, or to cancel or
terminate any lease, license or concessions agreement for the breach thereof or
default thereunder by the tenant, licensee or concessionaire; provided, however,
that Operator shall not institute any legal actions or proceedings to oust or
dispossess tenants or other persons in possession thereunder, or cancel or
terminate any lease, license or concession agreement involving in excess of Five
Thousand Dollars ($5,000), or having a then unexpired term of one (1) year or
more, without prior consent of Owner.
ARTICLE V
FEES
5.1 PAYMENT. As compensation for the services to be rendered by
Operator during the term of this Agreement, Owner authorizes Operator to pay its
base fee monthly from the authorized Cash Accounts specified in Section
4.11.Atime specified in Section 1.8, Incentive Fees, derived from the Project in
each Fiscal Year, or portion thereof if applicable shall be paid by Owner.
5.2 ADJUSTMENTS. If, based on the audited yearly financial statements,
the aggregate installments of the management fee paid in any Fiscal Year shall
be more or less than the total
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annual management fee due for the Fiscal Year, Operator, or Owner, as the
case may be, shall pay to the other the amount of such overpayment or
underpayment within thirty (30) days after the date of the Auditor's report
on the year-end financial statements.
ARTICLE VI
GENERAL COVENANTS OF OWNER AND OPERATOR
6.1 BOOKS AND RECORDS. Operator shall supervise and direct the keeping
of, full and adequate books of account and such other records reflecting the
results of the operation of the Project. Such books and records shall be kept in
all material respects in accordance with the Uniform System of Accounts and
according to GAAP. Operator will establish an internal control program designed
to stay abreast of all operational responsibilities and to provide constructive
development of such responsibilities.
6.2 WORKING CAPITAL. Owner will, upon the commencement of this
Agreement and thereafter, provide One Hundred Thousand Dollars ($100,000) in
funds required for the uninterrupted and efficient operation and maintenance of
the Project in accordance with the previously approved Budget and sound cash
management. If, at any time during the term of this Agreement, the funds
available from Project operations for the payment of all financial requirements
of the Project, including any of the fees and the costs and expenses specified
in Paragraph 4.11, 5.1 are insufficient to pay the same as they become due and
payable, Owner shall make deposits of funds into the Project's bank accounts
sufficient to make the payments. To implement this obligation, Owner agrees to
establish and maintain, at its sole cost and expense, a financing program for
the Project to ensure that sufficient funds exist at all times to meet all
financial requirements of the Project. To the extent that Owner fails to
establish and maintain such a financing program, and fees earned and expenses
incurred by Operator are unpaid and outstanding, the fees and expenses shall
accrue interest at the annual rate of the lesser of one and one-half percent
(1.5%) over the prime lending rate of Bank One (Houston) computed on the first
day of each month or the maximum interest rate allowable unable applicable law.
A similar rate of interest shall be paid by Owner to Operator on any advances
Operator may elect, without obligation, to make on Owner's behalf in payment of
any
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obligations of Owner to third parties or Operator.
6.3 OPERATING EXPENSES. Operator will pay for the costs and expenses of
maintaining and operating the Project from funds in the operating account, as
supplemented by Owner's working capital contributions provided pursuant to
Paragraph 6.2.
6.4 OWNER'S RIGHTS OF INSPECTION AND REVIEW. Operator shall accord to
Owner, its accountants, attorneys and agents, the right to enter upon any part
of the Project during normal business hours and upon prior reasonable notice to
the Project's general manager during the term of this Agreement for the purpose
of examining or inspecting the same or examining or making extracts of books and
records of the Project or for any other purpose which Owner, in its discretion,
shall deem necessary or advisable, but the same shall be done with as little
disruption to the business of the Project as possible. Books and records of the
Project shall be kept at the Project or such other place as the parties may
hereafter agree. In all cases, prior reasonable notice and proper identification
must be given to management in charge of the Project before inspection or review
is granted.
6.5 REPLACEMENT EXPENDITURES. Funds for Replacement Expenditures shall
be provided by Owner as reasonably required, but not to exceed those specified
in that year's Budget. These funds will be used for making capitalized
replacements, substitutions and additions to the Furnishing and Equipment of the
Project in accordance with the Budget. Any expenditure for replacement,
substitution of or addition to Furnishings and Equipment during each Fiscal Year
may be made by Operator in accordance with the Budget up to the cumulative total
of Replacement Expenditures specified in the applicable Budget. Any Replacement
Expenditure of five percent (5%) or more in excess of the budgeted amount shall
be subject to Owner's discretionary approval. If the Project's Total Income
Before Fixed Charges differs from that projected by the Budget, Owner and
Operator will revise the budgeted Replacement Expenditures as appropriate to
reflect such change on a quarterly basis. Upon termination of this Agreement,
the remaining balance of any Replacement Expenditure funds advanced by Owner
shall be returned to Owner.
6.6 INDEMNIFICATION OF OPERATOR.
(a) Operator, its agents and employees, shall not be liable to
Owner or to any
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other person for any omission, negligent, tortuous or otherwise, of any agent
or employee of Owner or Operator in the performance of this Agreement, except
this provision will not apply to any such liability arising from any fraud,
willful misconduct or negligence or intentional acts of Operator, its
employees or agents. Owner hereby agrees to indemnify and hold harmless
Operator, its agents and employees from and against any such liability, loss,
damage, cost or expense (including attorneys' fees) by reason of any such act
or omission which is covered by the preceding sentence.
(b) Owner, its agents and employees, shall not be liable to
Operator or to any other person for any omission, negligent, tortuous or
otherwise, of any agent or employee of Owner or Operator in the performance of
this Agreement, except this provision will not apply to any such liability
arising from any fraud, willful misconduct or negligence or intentional acts of
Owner, its employees or agents. Operator hereby agrees to indemnify and hold
harmless Owner, its agents and employees from and against any such liability,
loss, damage, cost or expense (including attorneys' fees) by reason of any such
act or omission which is covered by the preceding sentence.
6.7 EMPLOYMENT OF EXECUTIVE COMMITTEE MEMBERS. If any of the Executive
Committee Members of the Project or other off-site executive employees of
Operator or any of its affiliated entities leave the employment of Operator or
the affiliate involved for any reason, including termination by Operator, Owner
will not hire or cause to be hired such Executive Committee Members or other
employees in any capacity for at least two (2) years following such termination
of employment with Operator, without prior written consent of Operator. This
restriction will not apply to Executive Committee Members if Operator elects not
to renew this Agreement for any additional terms permitted hereunder.
6.8 MAJOR CONTRACTS. Any expenditure, concession, contract or agreement
made by Operator under this Agreement which has a term (including renewal
options) longer than one (1) year, or involves a total expenditure in excess of
Five Thousand Dollars ($5,000), is called a "Major Contract" and must have
Owner's prior approval. Unless otherwise provided for herein, or Owner otherwise
consents, Major Contracts will be in Owner's name.
6.9 APPEALS. Unless otherwise directed by Owner, Operator may (but
shall not be
16
obligated to) take, at the Project's expense, any appropriate steps to
protest and/or litigate to final decision in any appropriate court or forum
any violation, order, rule or regulation affecting the Project. Any counsel
to be engaged under this paragraph or Paragraph 4.14 above shall be mutually
approved by Owner and Operator.
ARTICLE VII
TRADE NAME
7.1 USE. The trademarks and service marks of both Owner and Operator
may be used in connection with the operation of the Project but only with the
party involved's prior consent of the proposed use. It is expressly agreed that
neither party will, by virtue of the operations under this Agreement, acquire
any right to any trademark or service xxxx of the other party. Each party agrees
to cooperate with the other party by all reasonable means in the protection of
its trademarks and service marks.
7.2 RESTRICTION. Anything contained in this Article VII to the contrary
notwithstanding, upon the expiration or earlier termination of this Agreement,
Owner shall have the right to use, in connection with the operation of the
Project, any and all items of Operating Equipment and Operating Supplies then on
hand bearing the trademarks or service marks of Operator but shall not reorder
any such items; and thereafter Owner shall not use any trademark or service
marks of Operator for any purpose. It is expressly provided, however, that
Operator may, at its expense, replace any such items with supplies of comparable
quality at its expense, and from and after such replacement Owner shall have no
right to use such items bearing Operator's trademarks or service marks. Any
merchandise in the golf shop utilizing the Benchmark Golf logo must first
receive Owner's approval.
ARTICLE VIII
TRANSFERS
8.1 TRANSFERS BY OPERATOR. Operator may not sell or transfer any of its
interests in this Agreement without Owner's prior written consent. This
restriction shall not apply to transfers to entities in which the Operator or
Benchmark Hospitality, Inc., has at least fifty-one
17
percent (51%) ownership interest and which the Operator controls.
8.2 TRANSFERS BY OWNER.
(a) RESTRICTIONS. If Owner sells, transfers or leases either
the Project or its interest in this Agreement and it is not due to:
(i) any transfer or restructuring by Owner, so long
as Owner retains control over the entity owning the Project
and remains obligated to make the contributions of working
capital required by this Agreement; or
(ii) any transfer or restructuring made pursuant to
bona fide financing or refinancing of the Project;
either party hereto will then have the right to terminate this
Agreement. Termination will be effective sixty (60) days after Operator
and/or Owner has received the notice of termination. Upon termination
pursuant to this Paragraph 8.2(a), Owner will pay Operator a
termination payment as defined in Paragraph 9.4.
8.3 EFFECT OF TRANSFER. This Agreement will inure to the benefit
of, and be binding upon, any permitted successors and assigns of the
parties. No transfer or assignment will relieve the transferring party
of its obligations hereunder.
ARTICLE IX
TERMINATION
9.1 BY OWNER. Owner may terminate this Agreement if:
(a) BANKRUPTCY. Operator shall apply for or consent to the
appointment of a receiver, trustee or liquidator of Operator or of all or a
substantial part of its assets, file a voluntary petition in bankruptcy, or
admit in writing its inability to pay its debts as they come due, make a general
assignment for the benefit of creditors, file a petition or an answer seeking
reorganization or arrangement with creditors or to take advantage of any
insolvency law, or file an answer admitting the material allegations of a
petition filed against Operator in any bankruptcy, reorganization or insolvency
proceedings, or if an order, judgement or decree shall be entered by any court
of competent jurisdiction on the application of a creditor adjudicating Operator
bankrupt or insolvent or approving a petition seeking reorganization of Operator
or
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appointing a receiver, trustee or liquidator of Operator or of all or a
substantial part of its assets, and such order, judgment or decree shall
continue unstayed and in effect for any period of ninety (90) consecutive
days; or
(b) DEFAULT. Operator shall fail to keep, observe or perform
any covenant, agreement, term or provision of this Agreement to be kept,
observed or performed by Operator and such default shall continue for a period
of thirty (30) days after notice thereof by Owner to Operator, or if such
default cannot be cured within thirty (30) days, then such additional period as
shall be reasonable, provided that Operator has proceeded to cure such default.
(c) FAILURE TO MEET PERFORMANCE STANDARD. If for any two
consecutive fiscal years beginning with the calendar year 2000, during the
term of this Agreement, Income Before Fixed Expenses is less than eighty
percent (80%) of the Owner approved budgeted amount ("The Performance
Standard"), Owner may elect to terminate this Agreement by notice given to
the Operator within sixty (60) days after receipt of the necessary financial
information from the Operator, which termination shall be effective not less
than sixty (60) days nor more than ninety (90) days after the giving of such
notice. If the Owner does not deliver to Operator the notice provided for
herein and within the period provided, Owner shall be deemed to have waived
its rights under this section with respect to such fiscal year. Owner's
election to terminate under this Paragraph 9.1(c) shall be null and void when
Income Before Fixed Expenses does not meet the Performance Standard if the
Operator is able to show (i) that the operations of comparable facilities in
the local metropolitan area suffered similar loses in Income Before Fixed
Charges by reason of unfavorable economic climate (comparable statistics are
to be furnished by Xxxxxxx Xxxx Xxxxxxx (PKF) or another recognized industry
expert, as agreed upon, in the event PKF no longer provides such services),
or (ii) that failure to meet the Performance Standard was because Owner
failed to advance working capital funds to the extent required by this
Agreement. In measuring a performance standard of the operational comparison
with other operators, reference shall be made to rates of percentage change
rather than absolute dollar amounts. Comparable and competing properties will
be agreed between Owner and Operator prior to the commencement of each year
to which this standard may apply. In the event that there is disagreement
regarding the
19
preceding, PKF or another recognized industry expert will be engaged (the
cost of which will be borne by the losing party) to arbitrate. Its decision
will be final. Notwithstanding the foregoing, should Income Before Fixed
Expenses not meet the Performance Standard for any fiscal year the Operator
may, at its option, contribute the difference from its separate funds and
thereupon the required level of performance shall be deemed achieved for such
fiscal year.
(d) COMPETITIVE FACILITIES. If during the term of this
Agreement, Operator contracts to operate or manage a comparable golf club and
conference center that provides services consistent with the Projects that is
located within twenty-five miles of the Project in any direction without
Owner's written approval.
9.2 BY OPERATOR. Operator may terminate this Agreement if:
(a) DEFAULT. Owner shall fail to keep, observe or perform any
covenant, agreement, term or provision of this Agreement to be kept, observed or
performed by Owner and such default shall continue for a period of thirty (30)
days after notice thereof by Operator to Owner, or if such default cannot be
cured within thirty (30) days, then such additional period as shall be
reasonable, provided that Owner has proceeded to cure such default.
(b) CASUALTY. The Project or any portion thereof shall be
materially damaged by fire or other casualty and if Owner fails to repair,
restore, rebuild or replace any such damage or destruction within one hundred
twenty (120) days after such fire or other casualty, or shall fail to complete
such work diligently.
(c) BANKRUPTCY. Owner shall apply for or consent to the
appointment of a receiver, trustee or liquidator of Owner or of all or a
substantial part of its assets, file a voluntary petition in bankruptcy or admit
in writing its inability to pay its debts as they come due, make a general
assignment for the benefit of creditors, file a petition or an answer seeking
reorganization or arrangement with creditors or to take advantage of any
insolvency law, or file an answer admitting the material allegations of a
petition filed against Owner in any bankruptcy, reorganization or insolvency
proceeding, or if any order, judgment or decree shall be entered by any court of
competent jurisdiction on the application of a creditor adjudicating Owner
bankrupt or insolvent or approving a petition seeking reorganization of Owner or
appointing a
20
receiver, trustee or liquidator of Owner or of all or a substantial part of
the assets of Owner and such order, judgment or decree shall continue
unstayed and in effect for any period of ninety (90) consecutive days.
9.3 PROCEDURE.
(a) GENERALLY. Termination shall be by written notice from
the party entitled to terminate which will specify the effective date of
termination, which will not be less than sixty (60) or more than ninety (90)
days after the notice is delivered, ("Termination Date"). On the date of
termination, Operator will transfer to Owner all funds, accounts, deposits,
receivables, Operating Supplies, equipment, reservations, contracts,
information concerning prospective customers and other items or things of any
kind under its control or supervision pertaining to the operation and
management of the Project and will fully disclose to Owner any information
Operator may have concerning operation or management of the Project which had
not previously been made available to Owner. In addition, Owner will have the
option to employ any on-site staff of Operator (excluding members of the
Executive Committee), effective as of termination. As promptly as possible
after termination, Operator will deliver to Owner audited financial
statements for the Project up to the date of termination. The auditor's costs
for preparing these statements will be paid by Owner. If Operator terminates
this Agreement pursuant to Paragraph 9.2, Owner will pay Operator a
reasonable termination fee to cover relocation expenses of Operator's
full-time on-site employees, but in no event will this fee be greater than
one (1) month's regular salary for each such employee who has not been
employed by Owner after termination pursuant to this Paragraph 9.3.
(b) EFFECT OF TERMINATION. All obligations of the parties
under this Agreement shall automatically terminate on the effective date of
the Termination Date, except as other explicitly provided for hereunder, and
except for any such obligations which have accrued or arose prior to
Termination Date.
9.4 TERMINATION PAYMENTS. If, during the initial term of this
Agreement, Operator terminates this Agreement pursuant to Paragraphs 8.2(a)
or 9.2(a), Owner shall pay Operator a termination payment equal two times the
Base and Incentive Fees earned by Operator during the preceding twelve (12)
month period, or in the event a twelve (12) month period has not
21
been completed, based upon the agreed upon Budget for the next twelve (12)
month period ("Termination Payment") and thereafter, the Termination Payment
shall be one (1) times Base and Incentive Fees.
Termination payments are considered full liquidated damages with no
right or cause of action on the part of the Operator. In addition, Owner
shall pay a reasonable fee to cover relocation expenses of Operator's
full-time on-site employees, but in no event will this relocation fee be
greater than one (1) month's regular salary for each such employee who has
not been employed by Owner after termination. If this Agreement is terminated
pursuant to Paragraph 9.1(a), 9.1(b). 9.1(c) or 9.1(d) there are no
termination payments or fees due Operator pursuant to this paragraph.
9.5 PAST DUE FEES. Except as specifically provided herein all fees
payable under Paragraph 9.4 are in addition to any past due fees payable to
Operator under other portions of this Agreement.
ARTICLE X
CONDEMNATION
10.1 TOTAL. If the whole of the Project shall be taken or condemned
in any eminent domain, condemnation, compulsory acquisition or like
proceeding by any competent authority for any public or quasi-public use or
purpose, or if such a portion thereof shall be taken or condemned as to make
it imprudent or unreasonable, in Operator's reasonable opinion, to use the
remaining portion as a golf club and conference center of the type and class
immediately preceding such taking or condemnation, then in either of such
events the Term of this Agreement shall cease and terminate as of the date on
which Owner shall be required to surrender possession of the Project as a
consequence of such taking or condemnation, and Operator shall be paid any
damages awarded in condemnation to the extent any award for such taking or
condemnation includes compensation to Operator for any loss of income
resulting from such taking or condemnation. If the award contains no express
award to the Operator, then any such award for loss of income shall be fairly
and equitably apportioned between Owner and Operator so as to compensate
Operator for any such loss of income that it would have derived from its
management fee for the longer of the remainder of the then current term
22
of this Agreement (excluding renewal options) or two (2) years. Operator
shall continue to supervise and direct the management and operation of the
Project until such time as Owner shall be required to surrender possession of
the Project as a consequence of such taking or condemnation.
10.2 PARTIAL. If only a part of the Project shall be taken or
condemned and the taking or condemnation of such part does not make it
unreasonable or imprudent, in Operator's reasonable opinion, to operate the
remainder as a golf club and conference center of the same type and class as
immediately preceding such taking or condemnation, this Agreement shall not
terminate. In such event, the entire award shall belong to Owner, but out of
the award to Owner, so much thereof as shall be reasonably necessary to
repair any damage to the Project, or any part thereof, or to alter or modify
the Project, or any part thereof, so as to render the Project a complete and
satisfactory architectural unit as a golf club and conference center of the
same type and class as immediately preceding the taking or condemnation,
shall be used for that purpose.
ARTICLE XI
NOTICES
11.1 GENERAL. Any approvals, consents or notices by either party to
the other shall be in writing and shall be given and be deemed to have been
duly given if either delivered personally or five (5) days after having been
mailed in a registered or certified postpaid envelope addressed as set forth
below, or, if the address for the notice of either party shall be duly
changed as hereinafter provided, delivered or mailed as aforesaid to such
party at such changed address. Either party may at any time change the person
or address for notice to such party by the delivery or mailing as aforesaid
of a notice stating the change and setting forth the changed address. Notices
shall be addressed as follows:
If to Owner, to the attention of:
Xxx Xxxxxxxxx
President
Rampart Properties Corporation
000 Xxxxxxxxx, Xxxxx 0000
00
Xxxxxxx, Xxxxx 00000
If to Operator, to the attention of:
Xxxx Xxxxxxx
Chairman & Chief Executive Officer
BMC-The Benchmark Management Company
0000 Xxxxxxxxxx Xxxxx, Xxxxx 000
Xxx Xxxxxxxxx, Xxxxx 00000
11.2 APPROVALS. If any approvals or consents are required by this
Agreement, they will be given within the time period specified, or if none is
required, within thirty (30) days. Failure to either approve or deny within
the required time will be deemed approval.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 NO PARTNERSHIP OR JOINT VENTURE. Nothing contained in this
Agreement shall constitute or be construed to be or create a partnership or
joint venture between Owner, its successors or assigns, on the one part, and
Operator, its successors or assigns, on the other part.
12.2 AGREEMENT NOT AN INTEREST IN REAL PROPERTY; SUBJECT AND
SUBORDINATE. This Agreement shall not be deemed at any time to be an interest
in real estate or a lien of any nature against the Project or the land on
which it is erected. This Agreement shall at all times be subject and
subordinate to all mortgages on the Project or the land on which is erected
which may now or hereafter be outstanding, to all renewals, modifications,
consolidations, replacements and extensions thereof. This clause shall be
self-operative and no further instrument of subordination shall be required
by any mortgagee. However, Owner and Operator shall execute promptly any
certificate or other document that any mortgagee may request as to the
subordination of this Agreement.
12.3 NON-COMPETE. Operator agrees that during the term of this
Agreement, it will not operate or manage a comparable golf club and
conference center that provides services consistent with the Projects and is
located within twenty-five miles of the Project in any
24
direction without Owner's written approval.
Operator and Owner acknowledge that Redstone Capital,
Operator's capital partner, is attempting to purchase the El Dorado Golf
Club. If Redstone is successful in its attempt to purchase El Dorado and
either Operator or Owner determine this to be in direct competition with the
Newport Golf Club and Conference Center, either may terminate this Management
Agreement with written notice. This shall also apply to any golf club or
conference center owned by Redstone and managed by Benchmark.
12.4 FORCE MAJEURE. Except for failure to pay any sums required by
this Agreement, neither party hereto shall be in default for failure to
perform any of its obligations pursuant to this Agreement if and to the
extent that it can establish that such failure was occasioned by any
circumstances which were beyond its control and which by the exercise of due
diligence and foresight it could have not prevented or overcome.
12.5 MODIFICATION AND CHANGES. This Agreement cannot be changed or
modified except by another agreement in writing signed by the party sought to
be charged therewith or by its duly authorized agent.
12.6 UNDERSTANDINGS AND AGREEMENTS. This Agreement constitutes all
of the understandings and agreements of whatsoever nature or kind existing
between the parties with respect to Operator's management of the Project.
Operator makes no guarantee, warranty or representation that there will be
profits or that there will not be losses from the operation of the Project,
but does warrant that any financial or other projections or forecasts it may
deliver to Owner will be reasonable and made in good faith and to the best of
its ability.
12.7 HEADINGS. The article and paragraph headings contained herein
are for convenience of reference only and are not intended to define, limit
or describe the scope or intent or any provision of this Agreement.
12.8 COSTS OF ENFORCEMENT. In any action to enforce this Agreement,
collect damages as a result of a breach of its provisions, or to collect any
indemnity provided for herein, the prevailing party shall also be entitled to
collect all its costs in such action, including the costs of investigation,
settlement, expert witnesses and reasonable attorneys' fees, together with
all additional costs incurred in enforcing or collecting any judgment
rendered.
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12.9 GOVERNING LAW. This Agreement shall be deemed to have been made
and shall be construed and interpreted in accordance with the laws of the State
of Texas.
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IN WITNESS WHEREOF, the parties hereto have executed or caused to be
executed this Agreement, all as of the day and year first above written.
OWNER
RAMPART PROPERTIES CORPORATION
By: /s/ X. X. XXXXXXXXX
-------------------------------
X. X. Xxxxxxxxx
President
OPERATOR
BMC-THE BENCHMARK MANAGEMENT COMPANY
By: /s/ R. XXXXXX XXXXXXX
--------------------------------
R. Xxxxxx Xxxxxxx
Senior Vice President
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EXHIBIT "A" INSURANCE
Several pages of mete and bounds legal description of the Newport Golf Club
and Conference Center.
28
EXHIBIT "B" INSURANCE
INSURANCE. Owner shall carry or cause to be carried, at its expense,
insurance with responsible and reputable companies in such amounts and
covering such risks as is usually carried by companies engaged in similar
businesses and owning similar properties in the same area and which will be
consistent with all lenders' requirements. Such insurance shall include, but
not be limited to:
a. All Risk Property insurance coverage including boiler and
machinery and sprinkler leakage insurance on all facilities
and all improvements thereto and contents therein in an amount
of not less than the full replacement value.
b. Business Interruption and/or Rental insurance providing
coverage on all facilities for loss of income resulting from
the shutdown arising from a peril usually insured under a
standard all risk policy form. Such coverage shall be for a
period of one (1) year or the estimated time to rebuild the
facilities in a diligent manner following the loss, whichever
is greater.
c. General Liability insurance coverage providing third party
bodily injury and property damage coverage with endorsements
provided for contractual liability, owners protective
liability, liquor liability and completed operations/products
liability coverage.
d. Automobile Liability insurance providing third party bodily
injury and property damage coverage for losses arising from
the ownership, operation or use of an owned, non-owned or
hired vehicle.
e. Umbrella Liability coverage providing limits of liability
protection in an amount of not less than Ten Million Dollars
($10,000,000) per occurrence excess of the limits provided
under (a), (d) and (e) above.
Operator shall carry or cause to be carried insurance with responsible and
reputable companies in such amounts and covering such risks as is usually
carried by companies engaged in similar businesses and owning similar properties
in the same area and which will be consistent with all lenders' requirements.
Such insurance shall include, but not be limited to:
a. Workers Compensation and Employers Liability coverage (in
accordance with all
29
state and federal laws) on all employees of Operator employed
at the Project with limits of coverage for workers
compensation based on the statutory benefits established
within the State of Texas and Employers Liability limits of
not less than One Million Dollars ($1,000,000) as a Project
expense.
b. Crime policy to cover Operator's employees at the Project and
at Operator's Home Office with limits of coverage not less
than One Million Dollars at Operator's expense.
All such insurance shall name Owner, Operator and any Contractors so
designated by Owner or Operator that are employed in performance of this
Contract as additional insureds. Owner shall cause all insurance carried by
the construction contractor and any subcontractors employed by the
construction contractor to contain a waiver of subrogation in favor of Owner
and Operator. Owner shall furnish Operator with certificates of insurance or
at the written request of Operator, copies of insurance policies relative
thereto. Such policies shall not be cancelable or subject to modification
without at least sixty (60) days' written notice to Owner. This insurance
will be coordinated with any other insurance required by lenders, contractors
or others to avoid duplication or excessive costs. Any deductibles on
insurance policies maintained by Owner shall be for the account of the Owner.
All insurance coverages carried will be with the mutual agreement of Owner
and Operator.
30
