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Five Flags Management Agreement Extension with SMGMasterpiece on the Mississippi TO: The Honorable Mayor and City Council Members FROM: Michael C. Van Milligen, City Manager SUBJECT: Extension of Five Flags Management Agreement with SMG DATE: October 2, 2013 Dubuque band AI- America City 1 2007 • 2012 • 2013 Leisure Services Manager Marie Ware recommends City Council approval of the Third Amendment to Management Agreement with SMG for management of the Five Flags Center. This agreement is for the period July 1, 2014 to June 30, 2019, with an option for a five -year extension and additional terms. In addition, SMG will be providing $100,000 for use for Five Flags. Leisure Services Manager Marie Ware recommends that $70,000 be directed toward a Programming Fund to allow Five Flags to entice and promote activity within the facility, with the remaining $30,000 to be utilized as a match to future funding of a study to look at any facility improvements needed to make Five Flags more competitive in the market. I concur with the recommendation and respectfully request Mayor and City Council approval. Michael C. Van Milligen MCVM:jh Attachment cc: Barry Lindahl, City Attorney Cindy Steinhauser, Assistant City Manager Teri Goodmann, Assistant City Manager Marie L. Ware, Leisure Services Manager Masterpiece on the Mississippi TO: Michael C. Van Milligen, City Manager FROM: Marie L. Ware, Leisure Services Manager DATE: September 30, 2013 SUBJECT: Extension of Five Flags Management Agreement with SMG X INTRODUCTION The purpose of this memorandum is to recommend that the City Council extend the Management Agreement with SMG for management of the Five Flags Center. BACKGROUND On May 17, 2004, the City Council voted to enter into a contract for private management of the Five Flags Center with SMG. Staff negotiated an agreement that was approved on June 21,2004. The agreement was for a five -year term, July 1, 2004 through June 30, 2009, and provided that the City Council may, in its sole discretion, extend the term for an additional five - year term, commencing July 1, 2009 and ending June 30, 2014. The Council approved this extension November 17, 2009. The nine plus years SMG has managed the Center have been successful in many ways. A property tax benchmark is set each year, and each year SMG has beaten the benchmark. This has been accomplished through good management decisions and increased revenue. DISCUSSION SMG has played a leadership role in the transitions that have taken place at Five Flags Civic Center the last five years. They have adapted their business model to continue building new successes for the Center. Last year the Five Flags Civic Center hosted 142 events and performances that served over 61 800 people. Thirty -four percent (34 %) of the events were community related with twenty -five percent (25 %) as performing arts. The remainder of events are entertainment, family concerts, sports and meetings and conventions. The SMG staff has also played leadership roles in the community with Joyce White, General Manager, serving as the current Chair of the Dubuque Convention and Visitors Bureau Board. Joyce and other SMG staff participate in the Rotary Club of Dubuque, Chamber of Commerce, Dubuque Jaycees, Dubuque Main Street, American Legion Post6 and Dubuque County Fine Arts Society to name a few. In light of our excellent working relationship with SMG I discussed an opportunity for contract extension with Joseph Romano, Senior Regional Vice - President of SMG, H.R. Cook, Regional General Manager for SMG and Joyce White, General Manager of Five Flags. Mr. Romano forwarded the attached letter regarding their interest and proposal for extending the Management Agreement. The proposed terms of the agreement amendment are as follows: • Additional five (5) year term effective July 1 , 2014 —June 30, 2019 Option for an additional five (5) year extension term • Incorporate all contractual elements of original Management Agreement dated June 21 , 2004 • SMG proposed a capital investment of one hundred thousand dollars ($100800) effective July 1, 2014 with distribution of total funding at the discretion of the City. SMG recommends $70800 directed toward a programming fund to allow Five Flags to entice and promote activity within the facility. The remaining $30,000 recommended by SMG for capital expenditures. • The annual base management fee will be $93,687 for July 1, 2014 —June 30,2015. This would be the same fee as FY 2014. Each year thereafter would be adjusted by the CPI. These terms have been reviewed by Barry Lindahl, City Attorney and the attached amendment and resolution has been drafted by his office. The extension will allow for a continuation of our excellent working relationship. The capital investment by SMG will allow reinvestment into Five Flags Civic Center and its future. A proposal for use of these funds will be in a separate memo. RECOMMENDATION I wholeheartedly and respectfully recommend the City Council extend the relationship with SMG with a five -year term from July 1, 2014 — June 30, 2019 with an option for an additional five -year extension term as well as other terms shown in the amendment. ACTION TO BE TAKEN The action requested is that the City Council adopt the attached resolution and agreement amendment extending and amending the Five Flags Management Agreement with SMG for the period July 1, 2014 to June 30, 2019, with option for a five -year extension and additional terms. Prepared by: M LW:et cc: Joyce White, General Manager, Five Flags H.R. Cook SMG Regional General Manager Joseph Romano, SMG Senior Regional Vice - President Barry Lindahl, City Attorney Jenny Larson, Budget Director Prepared by Barry A. Lindahl 300 Main Street Suite 330 Dubuque IA 52001 563 583 -4113 RESOLUTION NO. 299 -13 A RESOLUTION APPROVING THE THIRD AMENDMENT TO THE MANAGEMENT AGREEMENT BETWEEN THE CITY OF DUBUQUE, IOWA AND SMG WHEREAS, the City of Dubuque (City) and SMG entered into a Management Agreement dated for reference purposes June 21, 2004, with a five -year term expiring on June 30, 2009; and WHEREAS, pursuant to the Second Amendment to the Agreement, the term of the Agreement was extended from July 1, 2009 through June 30, 2014; and WHEREAS, the parties now desire to amend the Agreement by establishing the Fixed Fee to be paid by City to SMG and by extending the term of the Agreement from July 1, 2014 through June 30, 2019, with an option on the part of SMG to renew the Agreement for an additional five -year term; and WHEREAS, the City Council of the City of Dubuque finds that the Third Amendment to the Agreement is in the best interest of the City. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF DUBUQUE, IOWA AS FOLLOWS: Section 1. The Third Amendment to the Management Agreement attached hereto is hereby approved. Section 2. The Mayor is hereby authorized and directed to sign the Third Amendment on behalf of the City of Dubuque. Passed, approved and adopted this 7th day of October, 2013. Attest: Kevi . S. Firnstahl, ity C erk THIRD AMENDMENT TO MANAGEMENT AGREEMENT BETWEEN THE CITY OF DUBUQUE, IOWA AND SMG This Third Amendment to Management Agreement between the City of Dubuque, Iowa and SMG is dated for reference purposes the day of , 2013. Whereas, the City of Dubuque, Iowa (City) and SMG entered into a Management Agreement dated June 21, 2004 (the Agreement), which Agreement has been amended by the First Amendment and the Second Amendment; and Whereas, City and SMG now desire to amend the Agreement as set forth herein. NOW, THEREFORE, IT IS AGREED BY AND BETWEEN THE PARTIES AS FOLLOWS: 1. Sec. 3.1 of the Agreement is amended to read as follows: 3.1 Management Term and Renewal Term. The terms of the original agreement and amendments not modified by this, the third amendment, shall remain in effect during the term of the third amendment.The term of the third amendment shall commence on July 1, 2014 and end at midnight on June 30, 2019, unless earlier terminated pursuant to the provisions of this Agreement. City may, at its option, extend the term hereof on the same terms and conditions for an additional five -year term commencing July 1, 2019 and ending at midnight on June 30, 2024 by giving written notice of not less than one hundred eighty (180) days prior to the date of expiration to SMG. 2. Sec. 4 of the Agreement is amended to read as follows: 4. SMG's Compensation. 4.1 Fixed Fee. As base compensation to SMG for providing the services herein specified during the Management Term and any Renewal Term, the City shall pay SMG during the Management Term commencing July 1, 2014, an annual fixed fee of ninety three thousand six hundred eighty seven dollars ($93,687), which amount shall be adjusted upward on the first day of each Fiscal Year, other than the first Fiscal Year ending June 30, 2014, during the term hereof by the percentage change in the Consumer Price Index -- All Urban Consumers (CPI -U) -- U.S. City Average -- All Items, during the one -year period ending in May immediately preceding such Fiscal Year, as published by the Bureau of Labor Statistics of the U.S. Department of Labor, or of any revised or successor index hereafter published by the Bureau of Labor Statistics or other agency of the United States Government succeeding to its functions. The foregoing annual fixed compensation shall be payable in equal monthly installments due on or before the last day of each month during such Fiscal Year, and SMG shall be entitled to draw such amounts from the account described in Section 5.7. 091713bal 4.2 Incentive Fee. (a) Amount. SMG shall be entitled to an annual incentive fee with respect to each Fiscal Year during the Management Term or Renewal Term which shall be equal to the amount calculated in accordance with (i) below; provided, however, that the fixed fee under Section 4.1 above and the incentive fee for any Fiscal Year shall not exceed on an aggregate basis the sum of two hundred fifty thousand dollars ($250,000). (i) Subject to the immediately preceding provision, the annual incentive fee shall be an amount calculated with respect to each Fiscal Year equal to fifty percent (50%) of the amount by which the actual Net Operating Loss is less than the Net Operating Loss Benchmark. The "Net Operating Loss Benchmark" has been agreed by the parties to be an amount which is equal to the average of the Net Operating Loss for each of the Fiscal Years ending June 30, 2002, 2003 and 2004. The parties acknowledge that such losses for Fiscal Years 2002 and 2003 were, respectively, $679,133 and $705,858. By August 15, 2004, the City shall calculate the Net Operating Loss for the Fiscal Year ending June 30, 2004 and the parties shall promptly thereafter calculate the Net Operating Loss Benchmark as provided above. Such amount shall be adjusted upward on the first day of each Fiscal Year, other than the first Fiscal Year ending June 30, 2005, in the same manner as provided in Section 4.1 above. Additionally, the City acknowledges that certain events outside of SMG's reasonable control may occur (such as, the partial destruction of the Facility or material increases in utility service charges at the Facility) which may affect SMG's ability to generate savings for the City and to reduce the Net Operating Loss. In such event, the parties shall meet to discuss in good faith any adjustment to the Net Operating Loss Benchmark to reflect the economic impact of such event on the Facility. (b) Payment. The incentive fee determined pursuant to Section 4.2(a) above shall be payable to SMG within thirty (30) days after the City's receipt of an invoice from SMG accompanied by an annual statement certified by one of its officers setting forth the Operating Revenues and Operating Expenses for the previous Fiscal Year and showing the calculation of the incentive fee payable with respect to such Fiscal Year. SMG shall thereupon be entitled to deduct the amount of such fee from the account described in Section 5.7 below, provided that to the extent that SMG projects that such a deduction would leave insufficient funds in such account to cover Operating Expenses for the remainder of the then-current fiscal quarter, SMG shall be entitled not to deduct all or a portion of such fee from such account, and, upon notice thereof from SMG, the City shall promptly pay SMG the amount of the fee that has not been deducted from such account. Promptly following the availability of the audited annual financial statements described in Section 6.1 hereof for a Fiscal Year, SMG shall recalculate the incentive fee payable for that Fiscal Year; in the event that the amount of the incentive fee which was paid based on SMG's invoice differs from such recalculated amount, SMG shall promptly remit to the City any excess amount which was paid, or the City shall promptly pay (or SMG shall be entitled to deduct from any account specified in Section 5.7) the shortfall, as the case may be. 3. Sec. 5.12 of the Agreement is amended by adding thereto the following: (c) By no later than July 1, 2014, SMG will make a capital contribution to City in the amount of one hundred thousand dollars ($100,000) to be used by City in its sole discretion amortized 091713ba1 over the five (5) year term of this extension. The parties reserve the right to negotiate a further capital contribution by SMG upon the exercising of the additional five (5) year option by the City.. 4. Insurance Schedule C is hereby deleted and Schedule C attached hereto is substituted in lieu thereof. CITY OF DUBUQUE, IOWA SMG By: /(k-1 Roy D. g ol, Mayor ATTEST: By: 091713ba1 vin S. Firnst. hl, Cit Clerk By: Name: John F Burns Title: Chief Financial Officer City of Dubuque Insurance Requirements for Professional Services 1. Insurance Schedule C shall fumish a signed Certificate of Insurance to the City of Dubuque, Iowa for the coverage required in Exhibit I prior to commencing work and at the end of the project if the term of work is longer than 60 days. Providers presenting annual certificates shall present a Certificate at the end of each project with the final bi Iling. Each Certificate shall be prepared on the most current ACORD form approved by the Iowa Department of Insurance or an equivalent. Each certificate shall include a statement under Description of Operations as to why issued. Eg: Project # or Lease of premises at or construction of 2. All policies of insurance requ iced hereunder shall be with a carrier authorized to do business in Iowa and all carriers shall have a rating of A or better in the current A.M. Best's Rating Guide. 3. Each Certificate shall be fum ished to the contracting department of the City of Dubuque. 4. Failure to provide minimum coverage shall not be deemed a waiver of these requirements by the City of Dubuque. Failure to obtain or maintain the required insurance shall be considered a material breach of this agreement. 5. Subcontractors and sub subcontractor performing work or service shall provide a Certificate of Insurance in accord with Exhibit I. 6. All required endorsements to various policies shall be attached to Certificate of insurance. 7. Whenever a specific ISO form is listed, an equivalent form may be substituted subject to the provider identifying and listing in writing all deviations and exclusions that differ from the 50 form. 8. Provider shall be required to carry the minimum coverage /limits, or greater if required by law or other legal agreement, in Exhibit I. 9. Whenever an ISO form is referenced the current edition of the form must be used. Page 1 of 3 091713b al City of Dubuque Insurance Requirements for Professional Services Insurance Schedule C (continued) Exhibit I A) COMMERCIAL GENERAL LIABILITY General Aggregate Limit 52,000,000 Products - Completed Operations Aggregate Limit 51,000,000 Personal and Advertising Injury Limit 51,000,000 Each Occurrence 51,000,000 Fire Damage Limit (any one occurrence) 5 50,000 Medical Payments $ 5,000 a) Coverage shall be written on an occurrence, not claims made, form. All deviations from the standard ISO commercial general liability form CG 0001, or Business owners form BP 0002, shall be clearly identified. b) Include 150 endorsement form CG 25 04 "Designated Location(s) General Aggregate Limit" or CG 25 03 "Designated Construction Project (s) General Aggregate Limit" as appropriate. c) Include endorsement indicating that coverage is primary and non - contributory. d) Include endorsement to preserve Governmental Immunity. (Sample attached). e) Include an endorsement that deletes any fellow employee exclusion. f) Include additional insured endorsement for: The City of Dubuque, including all its elected and appointed officials, all its employees and volunteers, all its boards, commissions and /or authorities and their board members, employees and volunteers. Use ISO form CG 2026. B) AUTOMOBILE LIABILITY 51,000,000 (Combined Single Limit) C) WORKERS' COMPENSATION & EMPLOYERS LIABILITY Statutory benefits covering all employees injured on the job by accident or disease as prescribed by Iowa Code Chapter 85 as amended. Coverage A Coverage 8 Statutory—State of Iowa Employers Liability Each Accident Each Employee- Disease Policy Limit- Disease 5100,000 5100,000 5500,000 Policy shall include an endorsement providing a waiver of subrogation to the City of Dubuque. Coverage 8 limits shall be greater if required by Umbrella Carrier. D) UMBRELLA LIABILITY 52,000,000 Umbrella liability coverage must be at least following form with the underlying policies included herein. E) PROFESSIONAL LIABILITY 51,000,000 F) DRAM SHOP 53,000,000 Page 2 of 3 091713b al City of Dubuque Insurance Requirements for Professional Services Preservation of Governmental Immunities Endorsement 1. Nonwaiver of Governmental Immunity. The insurance carrier expressly agrees and states that the purchase of this policy and the including of the City of Dubuque, Iowa as an Additional Insured does not waive any of the defenses of governmental immunity ava ilable to the City of Dubuque, Iowa under Code of Iowa Section 670.4 as it is now exists and as it may be amended from time to time. 2. Claims Coverage. The insurance carrier further agrees that this policy of insurance shall cover only those claims not subject to the defense of governmental immunity under the Code of Iowa Section 670.4 as it now exists and as it may be amended from time to time. Those daims not subject to Code of Iowa Section 670.4 shall be covered by the terms and conditions of this insurance policy. 3. Assertion of Government Immunitv. The City of Dubuque, Iowa shall be responsible for asserting any defense of governmental immunity, and may do so at any time and shall do so upon the timely written request of the insurance carrier. 4. Non- Denial of Coverage. The insurance carrier shall not deny coverage under this policy and the insurance carrier shall not deny any of the rights and benefits accruing to the City of Dubuque, Iowa under this policy for reasons of governmental immunity unless and until a court of competent jurisdiction has ruled in favor of the defense(s) of governmental immunity asserted by the City of Dubuque, Iowa. No Other Change in Policy. The above preservation of governmental immunities shall not otherwise change or alter the coverage available under the policy. Page 3 of 3 091713b al SPECIMEN WORLDWIDE ENTERTAINMENT AND CONVENTION VENUE MANAGEMENT August 10, 2013 Ms. Marie Ware Leisure Services Manager Five Flags Center Contract Administrator City of Dubuque 2200 Bunker Hill Rd. Dubuque, IA 52001 Dear Marie: JOE ROMANO Senior Regional Vice President P: 515.294.3347 C: 515.231.1398 F: 515.294.4594 jromano @iastate.edu Iowa State Center Scheman Building, Suite 4 Ames, IA 50011 www.smgworld.com I was pleased to learn that SMG has been offered the opportunity to extend our Management Agreement with the City of Dubuque for an additional five year term running through June 30, 2019. SMG values its relationship with the City of Dubuque and we very much appreciate the City's business. We agree that the relationship that has developed between the City and SMG has been a beneficial one for both parties and we look forward to continuing that relationship in the future. Based on discussions I have had with both H. R. Cook, SMG Regional General Manager and Joyce White, SMG Five Flags General Manager, I have developed the attached proposed "Terms" sheet for the City's review. I understand further that the City was comfortable continuing the terms of the original Management Agreement; and, as such, the "Terms" sheet incorporates all of the contractual elements of the original July 2004, Management Agreement. Per your discussions with both H.R. and Joyce, SMG would propose the execution of a contract addendum extending the Management Agreement between the City of Dubuque and SMG for an additional five years with an option of one, additional five -year extension. Additionally, SMG would propose to make a capital investment of $100,000 (one hundred thousand dollars) effective July 1, 2014. Distribution of total funding would be at the discretion of the City. However, SMG would recommend that $70,000 (seventy thousand dollars) would be directed toward a Programming Fund to allow Five Flags Center to entice and promote activity within the facilities. The remaining $30,000 (thirty thousand dollars) would be utilized for Capital Expenditures. The only exception in terms to the current agreement expiring June 30, 2014, would be utilizing the current annual base management fee of $93,687 for the first year's fees. Each year thereafter to be adjusted by CPI as defined in the original Management Agreement. I look forward to discussing the opportunity to extend the City of Dubuque and SMG's ongoing business relationship and to the successful and mutually beneficial conclusion of WORLDWIDE ENTERTAINMENT AND CONVENTION VENUE MANAGEMENT JOE ROMANO Senior Regional Vice President P: 515.294.3347 C: 515.231.1398 F: 515.294.4594 jromano@iastate.edu Iowa State Center Scheman Building, Suite 4 Ames, IA 50011 www.smgworld.com our discussions. Please contact me directly with any questions or issues you might have concerning the attached. On behalf of SMG, I want to thank -you and the City of Dubuque for this opportunity. Best Regards, Joseph F. Romano Senior Regional Vice President SMG Attachments cc with attachment: H.R. Cook, Regional General Manager Joyce White, General Manager, Five Flags Center /SMG WORLDWIDE ENTERTAINMENT AND CONVENTION VENUE MANAGEMENT JOE ROMANO Senior Regional Vice President FIVE FLAGS CENTER RENEWAL OPTION PROPOSED TERM SHEET P: 515.294.3347 C: 515.231.1398 F: 515.294.4594 jromano @iastate.edu Iowa State Center Scheman Building, Suite 4 Ames, IA 50011 www.smgworld.com Management Term: Additional Five (5) Year Term - Effective July 1, 2014 — June 30, 2019 With the option for an additional Five (5) Year Extension Term. Investment: SMG will make a capital investment of $100, 000 (One hundred thousand dollars) to be utilized at the discretion of the City of Dubuque. However, SMG recommends that $70, 000 (Seventy thousand dollars) be deposited in the Programming Fund to be used to attract events and to assist in the ongoing development of event activity; the remaining $30, 000 (Thirty thousand dollars) would be directed toward Facility's Capital Expenditures budget. Management Fees: Base Management Fee: $93, 687 annually with CPI Adjustment Incentive Fee: 50% of the amount by which the actual Net Operating Loss is less than the Net Operating Loss Benchmark In no event shall SMG's Total Annual Compensation exceed $250,000.00 annually Masterpiece on the Mississippi TO: Michael C. Van Milligen, City Manager FROM: Marie L. Ware, Leisure Services Manager SUBJECT: SMG Capital Investment Distribution Toward Five Flags DATE: September 16, 2013 INTRODUCTION Dubuque kittrel All-America City 1 2007 • 2012 • 2013 The purpose of this memorandum is to recommend distribution and a method of distribution of SMG's $100,000 capital investment toward Five Flags. BACKGROUND SMG as a part of the terms for the extension of the Five Flags Management Contract would provide a $100,000 capital investment. The distribution of the total funding is at the discretion of the City. SMG recommended that $70,000 be directed toward a Programming Fund to allow Five Flags to entice and promote activity within the facility. The remaining $30,000 was recommended to be utilized for capital expenditures. DISCUSSION Joyce White as Five Flags General Manager has been creative with a new business model since the ice part of the business ceased when Mystique Ice Center opened. In addition recently the University of Dubuque opened the Heritage Center with some Dubuque Symphony Orchestra performances moving to that venue. The recommen- dation of SMG for $70,000 to a Programming Fund would assist Joyce in her continued efforts at Five Flags. She has over the past three years experimented with events and activities and worked with the Dubuque community to continue a sustainable operation. The Five Flags Commission has discussed at several meetings that if there was seed money available for the Center, SMG might be able to bring shows that have been a little out of reach, partner on a new event or even host a new event or activity. Joyce and the staff are very innovative. To have a programmatic fund which spurs innovation and limits the risk especially for new ventures will be very positive for Five 1 Flags and this community. I support and would also recommend establishment of a Programmatic Fund in the amount of $70,000. Administratively I would propose that Joyce White or any subsequent general manager of Five Flags request use of the Program Fund through the Leisure Services Manager. The Leisure Services Manager would then recommend approval to the City Manager. In order for any expense to be approved it would take approval of the Leisure Services Manager and City Manager. This would allow fast action for example should a touring or production company be booking and a quick response is needed. SMG also recommended $30,000 be utilized for capital expenditures. With the changing entertainment venues in the Dubuque area as well as the region we will need to continue to look at Five Flags and its continued sustainability. Locally there are numerous entertainment venues. The casinos, Heritage Center and Grand Opera House as well as other entertainment venues compete for some of the same market. In the region, Cedar Rapids has opened their venue. A CIP was proposed last year to study how Five Flags competes in the local and regional markets and what building modifications are needed to enable the Center to better compete. Dubuque Main Street has also had conversations about the importance of Five Flags to a strong downtown. I propose that the $30,000 be put as matching money for such a study. In the coming years significant investments are necessary in the infrastructure improvements and rehabilitation of Five Flags. Before significant investments are made it is critical we study the future, how Five Flags can compete in the future and how our building should or could be adopted. This could include looking at niche markets. RECOMMENDATION I respectfully request and recommend the above outlined distribution and method of distribution for SMG's $100,000 capital investment. MLW:et copy Barry Lindahl, City Attorney Jenny Larson, Budget Director 2 MANAGEMENT AGREEMENT BETWEEN CITY OF DUBUQUE, IOWA AND SMG Dated as of June 21, 2004 © 1995-2003. SMG. All rights reserved Doc. #361753v.3 MANAGEMENT AGREEMENT THIS MANAGEMENT AGREEMENT (this "Agreement ") dated as of the 21st day of June, by and between the CITY OF DUBUQUE, IOWA, an Iowa municipal corporation (the "City "), and SMG, a Pennsylvania general partnership, whose current address is 701 Market Street, 4th Floor, Philadelphia, PA, 19106 ( "SMG "). Whereas, the City is the owner and current operator and manager of the Five Flags Center (the "Facility ") located in the City of Dubuque, Iowa; and Whereas, SMG is engaged in the business of providing management services, including operations and marketing services for public assembly facilities; and Whereas, the City desires to engage SMG, and SMG desires to accept such engagement, to provide management services for the Facility on the terms and conditions set forth herein; and Whereas, the City intends to work in mutual accord with SMG in order to ensure provision of high quality management services, thereby enhancing the use and enjoyment of the Facility. NOW, THEREFORE, in consideration of the mutual premises, covenants and agreements herein contained, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Definitions For purposes of this Agreement, the following terms have the meanings referred to in this Section 1: "Affiliate" -- a person that directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, a specified person. For purposes of this definition, "control" means ownership of equity securities or other ownership interests which represent more than 40% of the voting power in the controlled person. "Approved Budget" -- any budget submitted by SMG, as approved by the City pursuant to Section 5 hereof. "Capital Equipment" -- any and all furniture, fixtures, machinery or equipment, either additional or ©1995 -2003. SMG. All rights reserved Doc. #361753v.3 replacement, which according to the City's past practices is defined as a capital item. "Capital Improvements" -- any and all building additions, alterations, renovations, repairs or improvements that have an initial dollar cost of not less than $3,000 per project and an expected useful life of at least ten years. "City" -- as defined in this first paragraph of this Agreement. "City Council" -- the City Council of the City of Dubuque, Iowa. "City Manager" -- the senior administrative official of the City as from time to time appointed by the City Council, or such person as may from time to time be authorized in writing by such administrative official to act for him /her with respect to any or all matters pertaining to this Agreement "Employment Period" - for (i) the Group 1 Employees (as defined in Section 7.2), the three (3) month period beginning on July 1, 2004 and ending at midnight on September 30, 2004, (ii) the Group 2 Employees (as defined in Section 7.2), the six (6) month period beginning on July 1, 2004 and ending at midnight on December 31, 2004, and (iii) the Group 3 Employees (as defined in Section 7.2), the eighteen (18) month period beginning on July 1, 2004 and ending at midnight on December 31, 2005. "Event Expenses" - any and all expenses incurred or payments made by SMG in connection with the occurrence of events at the Facility, including but not limited to costs for event staffing including ushers, ticket takers, security and other event staff, and costs relating to setup and cleanup. "Facility" -- as defined in the first paragraph of the Background section of this Agreement, which consists of the Five Flags Theater, the Five Flags Arena, three meeting rooms and promenade space, office space and storage areas related thereto. "Fiscal Year" -- a one year period beginning July 1 and ending the following June 30. "Management Term" -- the period commencing on July 1, 2004 and ending at midnight on June 30, 2009. 2 © 1995 -2003. SMG. All rights reserved Doc. #361753v.3 "Net Operating Loss" -- with respect to a Fiscal Year, the excess of Operating Expenses for such Fiscal Year over Operating Revenues for such Fiscal Year. "Net Operating Loss Benchmark" -- as defined in Section 4.2 hereof. "Operating Expenses" - (a) any and all expenses and expenditures of whatever kind or nature incurred, directly or indirectly, by SMG in promoting, operating, maintaining and managing the Facility, including, but not limited to: costs associated with the operation of food and beverage concession and catering services at the Facility, employee compensation and related expenses (e.g., base salaries, bonuses, severance and car allowances), employee benefits and related costs (e.g., relocation and other related expenses pursuant to SMG's relocation policy (a copy of which shall be provided upon request), parking and other fringe benefits), supplies, material and parts costs, costs of any interns and independent contractors, advertising, marketing and public relations costs and commissions, janitorial and cleaning expenses, data processing costs, dues, subscriptions and membership costs, the costs of procuring and maintaining the insurance and surety and performance and fidelity bonds referred to in Section 8 below, amounts expended to procure and maintain permits and licenses, charges, taxes, excises, penalties and fees, professional fees, printing and stationery costs, Event Expenses, postage and freight costs, equipment rental costs, computer equipment leases and line charges, repairs and maintenance costs (e.g., elevators and HVAC), security expenses, utility and telephone charges, travel and entertainment expenses in accordance with SMG's policies, the cost of employee uniforms, safety and medical expenses, exterminator and waste disposal costs, costs relating to the maintenance of signage inventory and systems, the cost of compliance with laws and regulations, costs incurred under agreements, commitments, licenses and contracts executed as provided in Section 2.3(c) hereof, and the fixed management fees payable to SMG pursuant to Section 4.1 below, all as determined in accordance with generally accepted accounting principles and recognized on a full accrual basis; provided that Operating Expenses shall not include expenses or expenditures in connection with Capital Improvements and Capital Equipment purchases, the incentive fee payable pursuant to Section 4.2 below and any expenses relating to SMG personnel based in SMG's corporate headquarters in Philadelphia, Pennsylvania or its regional field locations (other than the reasonable costs of travel by such corporate or regional personnel in connection ©1995 -2003. SMG. All rights reserved 3 Doc. %361753v.3 with SMG's management of the Facility, which costs shall be Operating Expenses). (b) Solely for purposes of (i) calculating Net Operating Loss and SMG's incentive fee hereunder and (ii) identifying Operating Expenses which shall be budgeted in Approved Budgets, Operating Expenses shall include the amounts paid by the City to cover the costs of the City's employees at the Facility who remain on the City payroll during the applicable Employment Periods and shall exclude (A) Event Expenses which are deducted from the gross receipts of all event activities at the Facility (in accordance with subparagraph (b) of the definition of Operating Revenues), and (B) all extraordinary expenses and all interest, income tax, depreciation and amortization expenses. "Operating Revenues" - (a) any and all revenues of every kind or nature derived from owning, operating, managing or promoting the Facility, including, but not limited to: license, lease and concession fees and rentals, revenues from merchandise sales, advertising sales, equipment rentals, utility revenues, box office revenues, parking revenues, food service and concession and catering revenues, commissions or other revenues from decoration and set -up, security and other subcontractors (however, if such revenues are collected in the first instance by and retained by such subcontractors, the amount of such revenues paid by such contractors to the Facility shall be included as Operating Revenues), miscellaneous operating revenues, revenues generated from separate agreements with SMG Affiliates pertaining to the Facility, and interest revenues, all as determined in accordance with generally accepted accounting principles and recognized on a full accrual basis. For the sake of clarity, the parties acknowledge that revenues from the sale of tickets for events at the Facility are not Operating Revenues, but are instead revenues of the promoter and /or performer of each such event. To the extent that SMG collects such ticket sale revenue on behalf of such promoter and /or performer, such ticket sale revenue shall be the source of funds from which SMG collects the rental charges and other event reimbursements due by such promoter and /or performer for use of the Facility, which such charges and reimbursements are Operating Revenues hereunder. (b) Solely for purposes of (i) calculating Net Operating Loss, (ii) identifying Operating Revenues which will be budgeted in Approved Budgets, and (iii) calculating SMG's incentive fee hereunder, Operating Revenues from all event © 1995-2003. SMG. All rights reserved 4 Doc. #361753v.3 activity at the Facility shall be calculated to encompass the gross receipts from each such event, less Event Expenses. "Pre - existing Agreement" -- each contract, license, agreement, option, lease and commitment existing as of the date of this Agreement that grants any person or entity any right (i) to license, use, occupy or rent all or any portion of the Facility, or (ii) to provide services to be used in the management, operation, use, possession, occupation, maintenance, promotion or marketing of all or any portion of the Facility, and that are listed on Exhibit "A" hereto. "Renewal Term" -- the five -year period from July 1, 2009 to midnight on June 30, 2014, for which this Agreement may be renewed at the option of the City Council in accordance with Section 3.1 hereof beyond the Management Term. "SMG" -- as defined in the first paragraph of this Agreement. "SMG Capital Contribution" shall mean the sum of $75,000 to be contributed by SMG to the Facility and to be utilized, as provided in Section 5.12 hereof. The amount of the SMG Capital Contribution may be contributed by SMG in cash and /or in property purchased by SMG, provided, however, that if any such contribution is in property, the value of such property to be credited to the amount of SMG's contribution hereunder shall be proposed by SMG and approved by the City (which approval shall not be unreasonably withheld). "Systems" -- all computer hardware, software (commercial or custom), peripherals, technology products, operational systems, including, without limitation, telephone systems, HVAC systems, elevator and escalator systems, security systems and all other automated systems and equipment, and all components of any of the foregoing. 2. Engagement of SMG; Scope of Services. 2.1 Engagement. (a) General Scope. The City hereby engages SMG to promote, operate and manage the Facility during the Management Term and the Renewal Term, if any, upon the terms and conditions hereinafter set forth, and SMG hereby accepts such engagement. (b) Manager of the Facility. Subject to the terms of this Agreement, SMG shall be, as agent for the City, the sole 0 1995 -2003. SMG. All rights reserved 5 Doc. 0361753v.3 and exclusive manager of the City to manage, operate and promote the Facility during the Management Term and the Renewal Term, if any. In such capacity, SMG shall have exclusive authority over the day -to -day operation of the Facility and all activities therein; provided that SMG shall follow all policies and guidelines of the City hereafter established or modified by the City that the City notifies SMG in writing are applicable to the Facility (including without limitation any methodology pertaining to the allocation of any costs and expenses by the City to the Facility as permitted herein); provided further that to the extent that such policies or guidelines hereafter established or modified by the City adversely affect revenues or expenses at the Facility, then and in that event, the Net Operating Loss Benchmark shall be correspondingly adjusted so that it reflects the additional costs or reduced revenues resulting from such established or modified policies or guidelines. 2.2 Scope of Services -- Generally. SMG shall perform and furnish such management services and systems as are appropriate or necessary to operate, manage and promote the Facility in a manner consistent with SMG's policies and procedures and the operations of other similar facilities. 2.3 Specific Services. Without limiting the generality of the foregoing, SMG shall have, without (except as otherwise expressly noted below) any prior approval by the City, sole right and authority to: (a) employ (subject to Section 7.2), supervise and direct employees and personnel consistent with the provisions of this Agreement; (b) administer relationships with all subcontractors, concessionaires and all other contracting parties to the Pre - Existing Agreements, assume responsibility for any and all negotiations, renewals and extensions (to the extent SMG deems any of the foregoing to be necessary or desirable) relating to such Pre- Existing Agreements, and enforce the Pre - Existing Agreements; (c) negotiate, execute in its name as agent for the City, deliver and administer any and all licenses, occupancy agreements, rental agreements, booking commitments, advertising 6 ©1995 -2003. SMG. All rights reserved Doc. #361753v.3 agreements, concession agreements, supplier agreements, service contracts (including, without limitation, contracts for cleaning, decorating and set -up, snow removal, general maintenance and maintenance and inspection of HVAC systems, elevators, stage equipment, fire control panel and other safety equipment, staffing and personnel needs, including guards and ushers, and other services which are necessary or appropriate) and all other contracts and agreements in connection with the management, promotion and operation of the Facility, provided that (i) if any such license, agreement, commitment or contract other than those involving the license, lease or rental of the Facility in the ordinary course has a term that extends beyond the remaining Management Term or Renewal Term, as the case may be, such license, agreement, commitment or contract shall be approved and executed by the City (which approval shall not be unreasonably withheld) and (ii) with respect to the scheduling and booking of events at the Facility, the provisions of Section 2.6 hereof shall also apply; (d) to the extent that Operating Revenues or funds supplied by the City are made available therefor, maintain the Facility in the condition received, reasonable wear and tear excepted; provided that the City shall be responsible for undertaking all Capital Improvements and Capital Equipment purchases as provided in Section 5.9; (e) to the extent that Operating Revenues or funds supplied by the City are made available therefor, rent, lease or purchase all equipment and maintenance supplies necessary or appropriate for the operation and maintenance of the Facility, provided that the City shall be responsible for undertaking all Capital Improvements and Capital Equipment purchases pursuant to Section 5.9, subject to the SMG Capital Contribution as provided in Section 5.12; (f) recommend fees, rates and rate schedules for users of the Facility, which fees, rates and rate schedules are subject to approval by the City pursuant to the annual budget process under Section 5 hereof. Notwithstanding the foregoing, if SMG determines that such fees, rates and /or rate schedules need to be modified for any event(s) that SMG believes in good faith shall generate net revenues for the Facility, then SMG shall be entitled to make such modification, provided that SMG gives the City Manager advance notice of such modification. In providing such recommendations and modifications, SMG shall evaluate comparable charges for similar goods and services at similar and /or competing facilities; 7 ©1995 -2003. SMG. All rights reserved Doc. #361753v.3 (g) pay, when due, on behalf of the City, all Operating Expenses from accounts established pursuant to Sections 5.7 and 5.8 of this Agreement; (h) after consultation with the Corporation Counsel or the Corporation Counsel's designee, institute as agent for the City and at the reasonable expense of the City, with counsel selected by SMG, such legal actions or proceedings as SMG shall deem necessary or appropriate in connection with the operation of the Facility, including, without limitation, to collect charges, rents or other revenues due to the City or to cancel, terminate or sue for damages under, any license, use, advertisement or service agreement for the breach thereof or default thereunder by any licensee, user, advertiser, or service provider at the Facility; (i) maintain a master set of all booking records and schedules for the Facility; (j) provide day -to -day administrative services in support of its management activities pursuant to Approved Budgets and annual plans described herein, including, but not limited to, the acquisition of services, equipment, supplies and facilities; internal budgeting and accounting; maintenance and property management; personnel management; record- keeping; collections and billing; and similar services; (k) manage and operate the food and beverage concession and any catering services at the Facility, including setting the prices for such concession items and catering services with the approval of the City and in connection therewith, SMG shall evaluate comparable prices for similar items and services at similar and /or competing facilities; and (1) engage in such advertising, solicitation, and promotional activities as SMG deems necessary or appropriate to develop the potential of the Facility and the cultivation of broad community support (including without limitation selling advertising inventory and securing product rights for the Facility). SMG shall work with the City's Convention Bureau to market the Facility for public entertainment shows. In connection with its activities under this Agreement, including without limitation advertising relating to the Facility, SMG shall be permitted to use the terms "Five Flags Center ", "Five Flags Theater" or "Five Flags Arena" and logos for such names in its advertising, subject to the approval of the City Manager. 8 © 1995 -2003. SMG. All rights reserved Doc. #361753v.3 2.4 Right of Entry Reserved. Representatives of the City designated in writing by the City Manager shall have the right, upon reasonable advance notice to SMG and at appropriate times, to enter all portions of the Facility to inspect same, to observe the performance of SMG of its obligations under this Agreement, to install, remove, adjust, repair, replace or otherwise handle any equipment, utility lines, or other matters in, on, or about the premises, or to do any act or thing which the City may be obligated or have the right to do under this Agreement or otherwise. Nothing contained in this Section is intended or shall be construed to limit any other rights of the City under this Agreement. The City shall not interfere with the activities of SMG hereunder, and the City's actions shall be conducted such that disruption of SMG's work shall be kept to a minimum. Nothing in this Section shall impose or be construed to impose upon the City any independent obligation to construct or maintain or make repairs, replacements, alterations, additions or improvements or create any independent liability for any failure to do so. 2.5 Confidentiality /Nondisclosure. (a) Confidentiality /Nondisclosure. In connection with the performance of SMG's services hereunder, each party acknowledges that each of them (a "Disclosing Party ") may provide the other party and its employees, agents and subcontractors (including without limitation any architectural and engineering firm retained for the Facility) (collectively, a "Recipient Party ") with Confidential Information (as defined below). In addition, in connection with the performance of the services hereunder, a Disclosing Party may provide to a Recipient Party with materials that are protected by copyright of the Disclosing Party. (i) Each Recipient Party agrees that to the extent permitted by law, it shall keep secret and confidential any and all Confidential Information already disclosed and /or to be disclosed to it by a Disclosing Party, and each Recipient Party shall not divulge any such information, in whole or in part, to any third party except as is expressly permitted below in this Section 2.5. (ii) Except as otherwise required by law, each Recipient Party shall not use any such information, except for the express purpose of utilizing it in connection with the operation of the Facility. Except as otherwise required by law, 9 ©1995 -2003. SMG. All rights reserved Doc. #361753v.3 each Recipient Party shall (A) not directly or indirectly disclose or discuss any such information with any person or entity, other than employees, agents and subcontractors of the Recipient Party who are directly concerned with the development, construction and operation of the Facility, and (B) take all steps it would normally take to protect its own confidential information to ensure that the Confidential Information of the Disclosing Party received by it shall be maintained in confidence and not disclosed or used as provided herein. Notwithstanding the foregoing, each Recipient Party shall be liable to the Disclosing Party for any breaches or violations of this Agreement by any director, officer, employee, subcontractor or agent of the Recipient Party. (iii) "Confidential Information" means to the extent permitted by law any and all information disclosed (orally, in writing, by inspection or otherwise) to a Recipient Party by a Disclosing Party pursuant to this Agreement and any information developed by a Recipient Party and based upon the information disclosed to the Recipient Party pursuant to this Agreement. Such information includes, but is not limited to, plans, proposals, and lists of furniture, fixtures and equipment. The restrictions upon confidentiality and use of Confidential Information set forth in this Section 2.5 do not apply to information which a Recipient Party can demonstrate was publicly available or lawfully in its possession at the time of its disclosure to the Recipient Party by the Disclosing Party; however, Confidential Information shall not be deemed in a Recipient Party's possession or publicly known simply because it is embraced by more general information in a Recipient Party's possession. (iv) With respect to any information or material which is protected by copyright of a Disclosing Party, no part of such materials may be reproduced, stored in a data base and retrieval system or transmitted in any form or by any means - graphic, electronic, photocopying, recording, mechanical or otherwise - without the prior written permission of the Disclosing Party. (b) Specific Performance. Each Recipient Party agrees that the provisions of this Section 2.5 are reasonable and necessary to protect the interests of the Disclosing Party and that the Disclosing Party's remedies of law for a breach of any of the provisions of this Section 2.5 shall be inadequate and that, in connection with any such breach, the Disclosing Party shall be entitled, in addition to any other remedies ©1995 -2003. SMG. All rights reserved 10 Doc. #361753v.3 (whether at law or in equity), to temporary and permanent injunctive relief in accordance with applicable law. Notwithstanding the foregoing, if.a court of competent jurisdiction shall determine any of the provisions of this Section 2.5 to be unreasonable, each Recipient Party agrees to a reaffirmation of such provisions by such court to any limits which such court finds to be reasonable, and each Recipient Party shall not assert that such provision shall be eliminated in their entirety by such court. 2.6 Scheduling and Booking of Events. (a) The goals and objectives of the City concerning the management and operation of the Facility are as follows (the `City's Goals "): (i) to hold the line on, or reduce, the level of property tax support now provided to the Facility by maintaining or reducing the level of Net Operating Loss, (ii) to maximize the utilization of the Facility among all segments of the local and regional population, and (iii) to maximize the net revenue generated by or for the City from the operation of Facility, within the requirements of the Booking Policy (as defined below). (b) SMG shall develop a Booking Policy for the Facility (the "Booking Policy ") and shall deliver the same to the City within ninety (90) days after the execution and delivery of this Agreement, for the City's review and approval (which approval shall not be unreasonably withheld or delayed). The parties understand that the Booking Policy shall be consistent with (i) the booking policies of similarly situated facilities and (ii) the City's Goals. Notwithstanding anything to the contrary contained herein, the parties acknowledge that the Facility shall not compete for the same type of events that can be held at the Grand River Center in Dubuque, Iowa, unless the event comes through the Grand River Center. Those events include, but are not limited to, conferences /conventions, dinners /banquets, meetings, receptions, and flat floor events. 3. Term And Renewal. 3.1 Management Term and Renewal Term. The Management Term of this Agreement shall commence on July 1, 2004 and end at midnight on June 30, 2009, unless earlier terminated pursuant to the provisions of this Agreement. The City Council may, in its sole discretion, extend the term hereof on the same terms and conditions for an additional five- 11 © 1995 -2003. SMG. All rights reserved Doc. #361753v.3 year period commencing July 1, 2009 and ending at midnight on June 30, 2014 by giving written notice not less than one hundred eighty (180) days prior to the date of expiration of the Management Term to SMG. 3.2 New Contract. If (i) the City intends, upon termination of the Management or Renewal Term to continue to provide management at the Facility through a private provider and (ii) this Agreement has not been terminated upon a default by SMG, then the City shall during the final year of the Management Term, unless the City exercises its option to renew under Section 3.1 or Renewal Term, as the case may be, negotiate and discuss in good faith a new contract or arrangement with SMG for the provision of such services following the completion of such term. The obligation to negotiate with SMG is not intended to guarantee any contract rights for a future contract with SMG or any specific terms of a new contract. 4. SMG's Compensation. 4.1 Fixed Fee. As base compensation to SMG for providing the services herein specified during the Management Term and any Renewal Term, the City shall pay SMG during the Management Term and the Renewal Term, if any, an annual fixed fee of $75,000, which amount shall be adjusted upward on the first day of each Fiscal Year, other than the first Fiscal Year ending June 30, 2005, during the term hereof by the percentage change in the Consumer Price Index -- All Urban Consumers (CPI -U) -- U.S. City Average -- All Items, during the one year period ending in May immediately preceding such Fiscal Year, as published by the Bureau of Labor Statistics of the U.S. Department of Labor, or of any revised or successor index hereafter published by the Bureau of Labor Statistics or other agency of the United States Government succeeding to its functions. The foregoing annual fixed compensation shall be payable in equal monthly installments due on or before the last day of each month during such Fiscal Year, and SMG shall be entitled to draw such amounts from the account described in Section 5.7. 4.2 Incentive Fee. (a) Amount. SMG shall be entitled to an annual incentive fee with respect to each Fiscal Year during the 12 © 1995-2003. SMG. All rights reserved Doc. #361753v.3 Management Term or Renewal Term which shall be equal to the amount calculated in accordance with (i) below; provided, however, that the fixed fee under Section 4.1 above and the incentive fee for any Fiscal Year shall not exceed on an aggregate basis the sum of $250,000, which amount shall be adjusted upward on the first day of each Fiscal Year, other than the first Fiscal Year ending June 30, 2005, in the same manner as provided in Section 4.1 above. (i) Subject to the immediately preceding proviso, the annual incentive fee shall be an amount calculated with respect to each Fiscal Year equal to fifty percent (50 %) of the amount by which the actual Net Operating Loss is less than the Net Operating Loss Benchmark. The "Net Operating Loss Benchmark" has been agreed by the parties to be an amount which is equal to the average of the Net Operating Loss for each of the Fiscal Years ending June 30, 2002, 2003 and 2004. The parties acknowledge that such losses for Fiscal Years 2002 and 2003 were, respectively, $679,133 and $705,858. By August 15, 2004, the City shall calculate the Net Operating Loss for the Fiscal Year ending June 30, 2004 and the parties shall promptly thereafter calculate the Net Operating Loss Benchmark as provided above. Such amount shall be adjusted upward on the first day of each Fiscal Year, other than the first Fiscal Year ending June 30, 2005, in the same manner as provided in Section 4.1 above. Additionally, the City acknowledges that certain events outside of SMG's reasonable control may occur (such as, the partial destruction of the Facility or material increases in utility service charges at the Facility) which may affect SMG's ability to generate savings for the City and to reduce the Net Operating Loss. In such event, the parties shall meet to discuss in good faith any adjustment to the Net Operating Loss Benchmark to reflect the economic impact of such event on the Facility. (b) Payment, The incentive fee determined pursuant to Section 4.2(a) above shall be payable to SMG within 30 days after the City's receipt of an invoice from SMG accompanied by an annual statement certified by one of its officers setting forth the Operating Revenues and Operating Expenses for the previous Fiscal Year and showing the calculation of the incentive fee payable with respect to such Fiscal Year. SMG shall thereupon be entitled to deduct the amount of such fee from the account described in Section 5.7 below, provided that to the extent that SMG projects that such a deduction would leave insufficient funds in such account to cover Operating Expenses for the remainder of the then- current fiscal quarter, ©1995 -2003. SMG_ All rights reserved 13 Doc. #351753v.3 SMG shall be entitled not to deduct all or a portion of such fee from such account, and, upon notice thereof from SMG, the City shall promptly pay SMG the amount of the fee that has not been deducted from such account. Promptly following the availability of the audited annual financial statements described in Section 6.1 hereof for a Fiscal Year, SMG shall recalculate the incentive fee payable for that Fiscal Year; in the event that the amount of the incentive fee which was paid based on SMG's invoice differs from such recalculated amount, SMG shall promptly remit to the City any excess amount which was paid, or the City shall promptly pay (or SMG shall be entitled to deduct from any account specified in Section 5.7) the shortfall, as the case may be. 5. Funding; Budgets; Bank Accounts. 5.1 Operating Funds. Subject to Section 5.2, following the approval of the annual operating budget for a Fiscal Year (including, without limitation, any annual operating budget applicable to the first Fiscal Year during the term hereof), the City shall make available to SMG all funds necessary to pay all Operating Expenses incurred or accrued in such Fiscal Year. To the extent that Operating Revenues during a calendar quarter period are insufficient, or expected to be insufficient, to cover Operating Expenses plus, with respect to the first quarter of a Fiscal Year, the amount of the projected incentive fee payable pursuant to Section 4.2(b) for the prior Fiscal Year ( "Cash Flow Shortfall ") for such period, the City shall advance funds to SMG as follows. Thirty (30) days prior to the beginning of each calendar quarter during the Management Term and any Renewal Term, SMG shall submit to the City an invoice for the projected Cash Flow Shortfall for such quarter and the City shall transfer such funds to SMG within five (5) business days after the start of such calendar quarter. Such funds shall be deposited by SMG in the operating or payroll account(s) established pursuant to Section 5.7 and used to pay Operating Expenses. For sake of clarity, the costs of the City employees at the Facility who remain on the City payroll during the applicable Employment Periods are not an Operating Expense for purposes of determining the Cash Flow Shortfall. 5.2 Non - Funding. 14 © 1995 -2003. SMG. All rights reserved Doc. #361753v.3 (a) The City shall have no obligation to provide funds for the payment of Operating Expenses incurred or committed for after the date SMG receives written notice (an "Appropriation Deficiency Notice ") of the fact that insufficient funds or no funds have been appropriated for the Facility. (b) If the Appropriation Deficiency Notice is of insufficient funds, the City shall pay all Operating Expenses incurred or committed for after such date that are within the aggregate level of appropriated funds specified in the Appropriations Deficiency Notice. The City shall pay all Operating Expenses incurred or committed for prior to the date SMG receives the Appropriation Deficiency Notice. Any failure by the City to provide funds (beyond the aggregate level of appropriated funds) for the payment of Operating Expenses incurred or committed for after SMG receives an Appropriations Deficiency Notice shall not be a breach of or default under this Agreement by the City. Any failure by SMG to perform its obligations under this Agreement shall not be a breach of or default under this Agreement if such breach or default results from the City's failure to appropriate sufficient funds for the management, operation and promotion of the Facility. (c) If the City appropriates funds at (or reduces appropriated funds to) a level that, in SMG's judgment, renders the management of the Facility not feasible, SMG may, at its option, either (i) continue management of the Facility at a reduced level consistent with anticipated Operating Revenues and available funding or (ii) terminate this Agreement pursuant to Section 12.2 (with the effect set forth in Section 12.3). Following such termination, SMG shall have the right to resume management of the Facility at such time as the City shall first restore appropriated funds to reasonable levels, but only if the City restores such funds during the remainder of the Management Term or the Renewal Term, if applicable. In such event, SMG shall have the right to resume management of the Facility for the period of time that was remaining under the Management Term or the Renewal Term, if applicable, at the time SMG exercised is rights under clause (ii) above. 5.3 Annual Budget; Cash Flow Budget. (a) As part of the annual plan described in Section 6.2 herein, on or before April 1 of each year (beginning April 1, 2005), SMG shall prepare an annual operating budget for the next Fiscal Year to meet the scope of services and objectives under this Agreement. Such budget shall contain 15 © 1995 -2003. SMG. All rights reserved Doc. #361753v.3 appropriate line items for revenues and expenses and the projected net operating deficit or surplus. (b) SMG shall prepare and submit to the Civic Center Commission, the City Manager and the City Council by April 1 of each year during the term hereof (beginning April 1, 2005) an annual cash flow budget for the succeeding Fiscal Year. Additionally, SMG shall submit with such annual budgets its recommendations for fees, rates and rate schedules for users of the Facility who are booked in the upcoming Fiscal Year. (c) The annual budgets referred to in subparagraphs (a) and (b) above, as well as the proposed user fees and rates, shall be reviewed and are subject to review by the Civic Center Commission and the City Manager and approval by the City Council. By June 1 of each year during the term of this Agreement, beginning June 1, 2005, the City Manager shall notify SMG of any changes to the annual operating budget, the cash flow funding budget and the user fees and rate schedule for the succeeding Fiscal Year proposed by SMG and with such changes, if any, as are made by the City prior to June 1, such budgets shall be the Approved Budgets for the following Fiscal Year and such fee /rate schedules shall be the fee /rate schedule for the following Fiscal Year, provided that if the annual operating budget, the annual cash flow budget or the fee /rate schedule as proposed by SMG are modified by the City in a manner which. in SMG's judgment, could materially interfere, impede or impair the ability of SMG to manage, operate or promote the Facility, SMG shall have the right to terminate this Agreement pursuant to Section 12.2 (with the effect set forth in Section 12.3), and provided further that if the approved annual operating budget, annual cash flow budget or the fee /rate schedule departs from the budgets or schedule proposed by SMG, SMG shall not be construed to have breached its obligations under this Agreement if the alleged breach has been caused by the limitations in the Fiscal Year's budgets. 5.4 Budget Modifications Initiated by SMG. SMG may submit to the City Council at any time prior to the close of a Fiscal Year a supplemental or revised annual operating budget or cash flow budget for such Fiscal Year. Upon the approval of the City Council of such supplemental or revised budget, the Approved Budgets for such Fiscal Year shall be deemed amended to incorporate such supplemental or revised budget. The Approved Budgets may only be amended as set forth in Section 5.5 below or in the two preceding sentences except © 1995-2003. SMG. All rights reserved 16 Doc. #361753v.3 that SMG shall have the right to amend the Approved Budgets as may be necessary or appropriate as the result of the scheduling by SMG of additional events or activities at the Facility (and the incurrence of additional Operating Expenses arising from the scheduling of additional events or activities at the Facility) as long as prior to the scheduling of such events or activities, SMG had a good faith belief that the projected Net Operating Loss for the Fiscal Year as set forth in the Approved Budgets would not be increased as a result of such additional events or activities. 5.5 Budget Modifications Initiated by the City. In the event that it appears reasonably likely, in any year during the term hereof, that the actual Net Operating Loss for such Fiscal Year shall be larger than projected in the annual operating budget for such Fiscal Year, the City Manager may request from SMG a plan for reduction of Operating Expenses to a level consistent with the budgeted Net Operating Loss amount. SMG shall forthwith comply with any such expense reduction requested by the City Manager and the approved budgets for such Fiscal Year shall be modified accordingly, provided that if the annual operating budget or annual cash flow budget is modified in a manner which, in SMG's judgment, could materially interfere, impede or impair the ability of SMG to manage, operate or promote the Facility, SMG shall have the right to terminate this Agreement pursuant to Section 12.2 (with the effect set forth in Section 12.3) and provided further that SMG shall not be construed to have breached its obligations under this Agreement if such alleged breach has been caused by the limitations in the Fiscal Year's budgets. 5.6 Marketing Fund. SMG shall establish a Thirty Thousand Dollar ($30,000) marketing fund, which shall be used by SMG to attract new events to the Facility. 5.7 Receipts and Disbursements. SMG shall establish and maintain in one or more depositories designated by the City's Treasurer one or more operating, payroll and other bank accounts for the promotion, operation and management of the Facility, in the name of the City, with SMG as agent and with signature authority in such employees of SMG as SMG shall determine. All revenues collected by SMG from the operation of the Facility shall be deposited 17 © 1995-2003. SMG. All rights reserved Doc. $361753v.3 into such accounts and Operating Expenses (other than Operating Expenses to be paid from an account described in Section 5.8) shall be paid by SMG as agent for the City from such accounts. All revenues collected by SMG arising from operation of the Facility, including revenues from box office sales, facility or equipment rentals, utility rental agreements, food and beverage concessions, or any other source, are the sole property of the City, held in trust by SMG for the City for application as provided herein. Any amounts remaining in such accounts upon termination of this Agreement for any reason, after payment of all outstanding Operating Expenses, shall be promptly paid by SMG to the City. 5.8 Ticket Sales Revenues. SMG shall hold in a separate interest - bearing account in a banking institution depository in Dubuque, Iowa any ticket sale revenues which it receives with respect to an event to be held at the Facility pending the completion of the event. Such monies are to be held for the protection of ticket purchasers, the City and SMG, and to provide a source of funds, as required for such payments to performers and promoters and for such payments of Operating Expenses in connection with the presentation of events as may be required to be paid contemporaneously with the event. Following the satisfactory completion of the events, SMG shall make a deposit into the operating account(s) established pursuant to Section 5.7 above of the amount in such account and shall pay from the operating account Event Expenses and provide the City with a full event settlement report. Interest which accrues on amounts deposited in the operating account(s) referred to in Section 5.7 and the ticket account referred to above shall be considered Operating Revenues. Bank service charges, if any, on such account(s) shall be considered Operating Expenses. 5.9 Capital Improvements; Capital Equipment. The obligation to pay for, and authority to perform, direct and supervise Capital Improvements and Capital Equipment purchases shall remain with the City, except as otherwise provided in Section 5.12, and shall not be considered Operating Expenses. The annual plan submitted pursuant to Section 6.2 shall include SMG's recommendation for Capital Improvements and Capital Equipment purchases to be accomplished during the year and shall be accompanied by an estimate of the cost of all such items and projects and a request that the City budget funds therefor. The City shall retain the discretion to determine © 1995 -2003. SMG. All rights reserved 18 Doc. #361753v.3 whether and to what level to fund Capital Improvements and Capital Equipment purchases to the Facility, except as otherwise provided in Section 5.12. 5.10 Limitation of SMG Liability. Notwithstanding any provision herein to the contrary and except for SMG's express indemnification undertakings in Section 8.1 and its express reimbursement undertakings in Section 6.1(b), SMG shall have no obligation to fund any cost, expense or liability with respect to the operation, management or promotion of the Facility. 5.11 Funds for Emergency Repairs. SMG shall have the right to act, with the prior consent of the City Manager, in situations which SMG determines to be an emergency with respect to the safety, welfare and protection of the general public, including spending and committing funds held in the operating account(s) of the Facility, even if such expenses are not budgeted; provided, however, SMG shall have no obligation under any circumstance to spend or commit funds other than funds then available in such accounts for any such purpose. Immediately following such action, SMG shall inform the City Manager of the situation and the action(s) taken, and the City shall pay into such account(s) the amount of funds, if any, spent or committed by SMG pursuant to this Section 5.11 in excess of budgeted amounts. 5.12 SMG Capital Contribution. (a) SMG shall provide to the Facility the aggregate sum of Seventy -Five Thousand Dollars ($75,000) for Capital Improvements and Capital Equipment purchases relating to mutually agreed upon revenue generating projects for the Facility. Such contribution shall be made at the commencement of such project(s). If appropriate (i.e., such improvements and purchases are for several different items), SMG shall work with the City to prepare, and mutually agree upon, a budget of the Capital Improvements and Capital Equipment purchases to be funded with such contribution, along with the scope of work to be performed thereunder, the supervision of tasks and the estimated time frames for the projects listed in such budget. Such budget shall take into account the Capital Improvements and Capital Equipment purchases to be funded by the City pursuant to Section 5.9. 19 © 1995-2003. SMG. All rights reserved Doc. #361753v.3 (b) Amortization of the SMG Capital Contribution. The amount of the SMG Capital Contribution shall be amortized over a period of sixty (60) months during the Management Term and the Renewal Term, if any, on a straight -line basis. In the event of the expiration or termination of this Agreement for any reason, the City shall pay, or cause any successor management company to pay, to SMG unconditionally and without set -off the unamortized amount of the SMG Capital Contribution existing as of such expiration or termination. The payment bf any such unamortized amounts shall be made to SMG no later than the effective date of such expiration or termination. 6. Records, Audits and Reports. 6.1 Records and Audits. (a) SMG shall keep full and accurate accounting records relating to its activities at the Facility in accordance with generally accepted United States accounting principles. SMG shall maintain a system of bookkeeping adequate for its operations hereunder. SMG shall give the City's authorized representatives access to such books and records maintained at the Facility during reasonable business hours and upon reasonable advance notice. SMG shall keep and preserve for at least three (3) years following each Fiscal Year all sales slips, rental agreements, purchase order, sales books, credit card invoices, bank books or duplicate deposit slips, and other evidence of Operating Revenues and Operating Expenses for such period. In addition, on or before November 1 following each Fiscal Year for which SMG is managing the Facility hereunder (beginning November 1, 2005), SMG shall furnish to the City a balance sheet, a statement of profit or loss and a statement of cash flows for the Facility for the preceding Fiscal Year, prepared in accordance with generally accepted United States accounting principles and accompanied by an independent auditor's report of a nationally recognized, independent certified public accountant. The audit shall contain an opinion expressed by the independent auditor of the accuracy of financial records kept by SMG and of amounts due to the City. The audit shall also provide a certification of Operating Revenues and Operating Expenses as defined in this Agreement for such Fiscal Year. The audit shall be conducted by a reputable firm selected by the City and the costs of such audit shall be paid by the City. (b) The City shall have the right at any time, and from time to time, to cause nationally recognized independent © 1995-2003. SMG. All rights reserved 20 Doc. #361753v.3 auditors to audit all of the books of SMG relating to Operating Revenues and Operating Expenses, including, without limitation, cash register tapes, credit card invoices, duplicate deposit tapes, and invoices. No costs incurred by the City in conducting such audit shall be considered an Operating Expense. If any such audit demonstrates that the Operating Revenues or Operating Expenditures reflected in any financial statements prepared by SMG and audited as specified in the foregoing subparagraph (a) are understated (in the case of-Operating Expenses) or overstated (in the case of Operating Revenues), in either case by more than five percent (5%), SMG shall pay to the City the reasonable cost of such audit and shall promptly refund to the City any portion of the incentive fee paid for such Fiscal Year which is attributable to the overstatement or understatement, as the case may be. The City's right to have such an audit made with respect to any Fiscal Year and SMG's obligation to retain the above records shall expire three (3). years after SMG's statement for such Fiscal Year has been delivered to the City. 6.2 Annual Plan. (a) SMG -shall provide to the City on or before April 1 of each year, an annual management plan, which shall include the annual operating budget described in Section 5.3 for the next Fiscal Year. The annual plan shall include information regarding SMG's anticipated operations for such Fiscal Year, including planned operating maintenance activities by SMG, a five -year plan for requested Capital Improvements and Capital Equipment purchases and an anticipated budget therefor,' anticipated events at the Facility, anticipated advertising and promotional activities, and planned equipment and furnishings purchases. The annual plan shall be subject to review, revision and approval by the Civic Center Commission, the City Manager and the City Council. Following review and revision and final approval by the City Council, SMG shall have thirty (30) days to incorporate the City Council's revisions into its plan. Upon approval by the City Council, such annual plan shall constitute the operating program for SMG for the following Fiscal Year. 6.3 Monthly Reports. By the twenty -fifth day of each month beginning on the 25th day of August, 2004, SMG shall provide to the City a written monthly report in a form approved by the City and similar to that used in other SMG - managed facilities setting out the Facility's anticipated activities and financial condition for © 1995 -2003. SMG. All rights reserved 21 Doc. #361753v.3 the upcoming month and reporting on the prior month's activities and finances. 7. Employees. 7.1 SMG Employees. (a) Subject to Section 7.2, SMG shall select, train and employ at the Facility such number of employees as SMG deems necessary or appropriate to satisfy its responsibilities hereunder; SMG shall use its best efforts to recruit employees who shall be proficient, productive, and courteous to patrons, and, subject to Section 7.2, SMG shall have authority to hire, terminate and discipline any and all personnel working at the Facility. (b) Subject to Section 7.2, SMG shall assign to the Facility a competent, full -time general manager. From time to time the general manager may provide assistance in connection with the consulting and /or management services provided by SMG or any of its Affiliates at other facilities managed, owned or leased by SMG or any of its Affiliates, provided that (i) such assistance does not affect in any material respect the responsibilities and duties of the general manager to the Facility and (ii) the cost of the salary and benefits of the general manager for the time spent in connection with providing such assistance shall be reimbursed by SMG to the operating account of the Facility. Prior to SMG's appointment of such general manager, SMG shall consult with the City Manager with respect to the qualifications of the general manager proposed by SMG. (c) SMG employees at the Facility shall not for any purpose be considered to be employees of the City, and SMG shall be solely responsible for their supervision and daily direction and control and for setting, and paying as an Operating Expense, their compensation and any employee benefits, and all costs related to their employment shall be an Operating Expense. 7.2 City Employees. (a) As of the date hereof, the parties have agreed to classify the City's employees at the Facility into the following groups for purposes of the transitioning such employees to SMG as provided herein: (i) the General Manager and all part -time employees (which part-time employees total approximately 85 individuals as of the date hereof) (the "Group 1 Employees "), 22 © 1995-2003. SMG. All rights reserved Doc. #361753v.3 (ii) the Events Coordinator, Technical Director, Concessions Manager and Building Supervisor (the "Group 2 Employees "), and (iii) all other City employees at the Facility (the "Group 3 Employees "), which group consists of two full time utility workers who are bargaining unit employees ( "Bargaining Unit Employees "). During the applicable Employment Period, all such City employees who remain at the Facility (collectively, the "Remaining City Employees ") shall be entitled to continue working at the Facility. During the applicable Employment Period, the Remaining City Employees shall retain their status and benefits as City employees. During such period and with respect to the Remaining City Employees, SMG (which shall supervise and direct the activities of the Remaining City Employees) shall comply with applicable collective bargaining contracts, personnel rules and procedures regarding salary changes, disciplinary action and discharge of which SMG has notice from the City. Notwithstanding the foregoing, any City employee at the Facility may transfer to SMG prior to the end of the applicable Employment Period, if SMG chooses to offer such employee employment at that time, subject in the case of the Bargaining Unit Employees to applicable terms and conditions under the applicable collective bargaining agreements. (b) At or prior to the end of the applicable Employment Period, SMG shall have the right, in its sole discretion, to offer employment to any Remaining City Employee, subject in the case of the Bargaining Unit Employees to applicable terms and conditions under the applicable collective bargaining agreement(s). Any such offer shall be on such terms as SMG, in its sole discretion, shall determine, subject in the case of the Bargaining Unit Employees to applicable terms and conditions under the applicable collective bargaining agreements. Any Remaining City Employee who chooses to accept any such offer of employment by SMG shall thereupon cease to be an employee of the City, shall become an employee of SMG upon such terms and conditions as determined by SMG, and shall no longer be deemed a Remaining City Employee for purposes of subparagraph (a) above. (c) At the end of the applicable Employment Period, the City shall cause all Remaining City Employees in the applicable group who have not been offered employment by SMG or who have not accepted an offer of employment by SMG to cease working at the Facility. 23 © 1995 -2003. SMG. All rights reserved Doc. #361753v.3 (d) If SMG elects or is required in connection with the performance of its services hereunder to retain any Bargaining Unit Employees or to hire employees who are covered by any collective bargaining agreements, the parties acknowledge that SMG may, as a result thereof, be required to make contributions to multi- employer plans (as that term is defined in Section 4001(a)(3) of the Employee Retirement Income Security Act of 1974, as amended ( "ERISA ")), on behalf of or for the benefit of such employees during the term of this Agreement, which contribution obligation may expose SMG to withdrawal liability for a share of any unfunded vested benefits under such plans. Accordingly, the City shall indemnify, defend and hold harmless SMG from and against any Losses (as defined in Section 8.1(a) below) in respect of any withdrawal liability for unfunded vested benefits that SMG may have under any such multi - employer plans in connection with the hiring and firing of such employees by SMG during the term of this Agreement or the termination of this Agreement. The obligation of the City under this Section 7.2(d) shall survive the termination of this Agreement. In addition, if requested by the City, SMG shall during the Employment Period pertaining to the Union Employees use its best efforts to obtain information from such multi - employer plans regarding the withdrawal liability status, if any, of such plans and the applicability of any statutory exemptions under ERISA with respect to withdrawal liability and shall advise the City of the status of any such information which it obtains from such plans. 7.3 No Solicitation or Employment by City. During the period commencing on the date hereof and ending one (1) year after the termination of this Agreement, except with SMG's prior written consent, the City shall not, for any reason, solicit for employment, or hire, any of the senior management personnel employed by SMG at the Facility, including, without limitation, the general manager, director -level employees and department heads. In addition to any other remedies which SMG may have, specific performance in the form of injunctive relief shall be available for the enforcement of this provision. 7.4 Termination. Upon any termination of this Agreement, the City shall require that any successor management contractor offer employment for six months following such termination , subject to dismissal for cause, in similar positions at the Facility and 24 © 1995-2003. SMG. All rights reserved Doc. 4361753v.3 with similar compensation and benefits, to all those employees of SMG that (i) are employed at the Facility at the time of such termination of this Agreement, and (ii) SMG has not notified the City that SMG wishes to continue to employ elsewhere. This Section shall not apply to senior management personnel, as defined in Section 7.3 above. 8. Indemnification and Insurance. 8.1 Indemnification. (a) SMG shall indemnify, defend and hold harmless the City, its officers, agents and employees from and against any and all losses, liabilities, claims, damages and expenses (including reasonable attorneys fees) (collectively, `Losses ") arising from any negligent act or omission by SMG, its officers, agents or employees, or any material default or breach by SMG of its obligations specified herein; provided, however, that the foregoing indemnification shall not extend to Losses to the extent such Losses (i) arise from any breach or default by the City of its obligations under Section 8.1(b) below, (ii) are caused by or arise out of the services provided by the architects, engineers and other agents (other than SMG) retained by the City in connection with Capital Improvements or Capital Equipment purchases at the Facility, or (iii) relate to or arise from occupational related diseases of any City employees who provide any services at the Facility (whether as an employee of the City or as a part -time employee of SMG). Notwithstanding the foregoing, to the extent that such occupational disease described in clause (iii) above is demonstrated to be directly related to the work of any such City employee at the Facility, then the provisions of clause (iii) shall not apply to the extent thereof. (b) The City shall indemnify, defend and hold harmless SMG, its partners, officers, agents and employees from and against any and all Losses arising from (i) any material default or breach by the City of its obligations specified herein, (ii) the fact that at any time prior to, as of, or after the commencement of the Management Term hereunder the Facility has not been operated, or the Facility and its premises are not or have not been, in compliance with all Laws (as defined in Section 11.2 hereof), including, but limited to, the Americans with Disabilities Act, 42 U.S.C. Sections 12101 -12213 as amended by the Civil Rights Act of 1991 (42 U.S.C. Section 1981(a)), as it now exists and as it may be amended in the future by statute or judicial interpretation (collectively, the "ADA "), (iii) the © 1995-2003. SMG. All rights reserved 25 Doc. #361753v.3 fact that prior to, as of, or after the commencement of the Management Term hereunder there is any condition on, above, beneath or arising from the premises occupied by the Facility which might, under any Law, give rise to liability or which would or may require any "response," "removal" or "remedial action" (as such terms are defined under the Comprehensive Environmental Response, Compensation and Liability Act, as amended by the Superfund Amendments and Reauthorization Act), (iv) any structural defect or unsound operating condition with respect to the Facility or the premises occupied by the Facility prior to, as of or after the commencement of the Management Term hereunder, (v) any obligation or liability under or in respect of any contract, agreement or other instrument executed by SMG as agent for the City as authorized herein, (vi) any obligation or liability for physical damage or other Loss to any real property and personal property assets located at the Facility or intended to be incorporated therein, whether such assets are insured by the City or whether the City decides not to insure for such damage and Losses (including without limitation damages or Losses falling within any policy deductible), (vii) any non- compliance with any Pre - Existing Agreement on or prior to the commencement of the Management Term, or (viii) any act or omission carried out by SMG at or pursuant to the direction or instruction of the City, its agents or employees (including without limitation the City Manager); provided, however, that the foregoing indemnification under clauses (i) and (ii) above shall not extend to Losses to the extent such Losses arise from any default or breach by SMG of its obligations specified herein. (c) The provisions set forth in subparagraphs (a) and (b) above shall survive termination of this Agreement; provided, however, that except for indemnification based upon Section 8.1(b) (ii), (iii), (iv), (v), (vi), (vii), or (viii) above, a claim for indemnification pursuant to Section 8.1 shall be valid only if the party entitled to such indemnification provides written notice thereof to the other party prior to three (3) years following the date of termination of this Agreement. (d) The terms of all insurance policies referred to in Section 8, including without limitation (i) the property insurance policies of the City, and (ii) the policies of any independent contractors retained by the City or hired by SMG (such as, emergency medical technicians who are not employed by SMG), shall preclude subrogation claims against SMG, its partners, the City and their respective officers, directors, employees and agents. 26 © 1995 -2003. SMG. All rights reserved Doc. #361753v.3 (e) The foregoing indemnification rights shall be the exclusive remedies of each party hereto (other than any right to terminate this Agreement pursuant to Section 12) arising from any breach of, default under or performance pursuant to this Agreement. 8.2 Liability Insurance. (a) SMG shall at all times during the Management Term, and the Renewal Term, if any, maintain insurance as required by the City's standard Insurance Schedule for Professional Services as such schedule may from time to time be amended not more frequently than once a year by the City. A copy of the City's current schedule is attached hereto as Exhibit "B." (b) SMG shall also maintain Comprehensive Automotive Bodily Injury and Property Damage Insurance for business use covering all vehicles operated by SMG officers, agents and employees in connection with the Facility, whether owned by SMG, the City, or otherwise, with a combined single limit of not less than One Million Dollars ($1,000,000.00) per occurrence (including an extension of hired and non -owned coverage). (c) All of the insurance policies described in this Section 8 shall contain a provision covering the parties' indemnification liabilities to each other. (d) Notwithstanding the provisions of this Section 8.2, the parties hereto acknowledge that the above policies may contain exclusions from coverage which are reasonable and customary for policies of such type. 8.3 Fidelity Bond and Surety and Performance Bond. (a) SMG shall provide, during the term of this Agreement, to the City a Fidelity Bond covering all of SMG's personnel under this Agreement in the amount of One Million Dollars ($1,000,000.00) for each loss, to reimburse the City for losses experienced due to the dishonest acts of SMG's employees. (b) During the term of this Agreement, SMG shall also provide to the City a surety and performance bond in the amount of One Hundred Thousand Dollars ($100,000) to protect the City against loss due to the inability or refusal of SMG to perform under this Agreement. 8.4 Property Insurance. 27 ©1995 -2003. SMG. All rights reserved Doc. #361753v.3 (a) The City shall, subject to Section 5.2, maintain its current property insurance covering the premises of the Facility and its personal property located thereat. The City shall, with respect to the Losses covered by such property and hazard insurance and business interruption and extra expenses insurance, waive any subrogation rights that it may have against SMG, its partners and their respective officers, employees and agents, whether or not the City self - insures for the Losses covered by such insurance. Nothing in this Agreement is intended to require SMG to maintain property and hazard insurance covering the premises at the Facility, the City's personal property located thereat or business interruption insurance covering the interruption of operations by or for whatever cause at the Facility. (i) The original or a certified copy of the above policy, or policies, referred to in Section 8.4(a) (with all required policy endorsements), plus certificates evidencing the existence thereof, all in such form as SMG may reasonably require, shall be delivered to SMG prior to the commencement of this Agreement. Notwithstanding the provisions of this Section 8.4(a), the parties hereto acknowledge that the above policies may contain exclusions from coverage which are reasonable and customary for policies of such type. Each such policy or certificate shall contain a valid provision or endorsement stating, "This policy shall not be canceled or materially changed or altered without first giving thirty (30) days' written notice thereof to "SMG, Risk Management Director, 701 Market Street, 4th Floor, Philadelphia, PA, 19106, sent by certified mail, return receipt requested." (ii) A renewal binder of coverage (or satisfactory evidence of such renewal) shall be delivered to SMG at least twenty (20) days before a policy's expiration date except for any policy expiring on the termination date of this Agreement or thereafter. 8.5 Certain Other Insurance. If any of the Pre - Existing Agreements consist of agreements with independent contractors to provide services in respect of the Facility, the City shall use its best efforts to cause such contractors to name SMG as an additional insured under any insurance maintained by such contractors pursuant to the terms of such Pre - Existing Agreements and in such event to deliver to SMG promptly after request therefor a certified copy of such policy and a certificate evidencing the existence © 1995-2003. SMG. All rights reserved 28 Doc. #361753v.3 thereof. In addition, if SMG enters into any agreements during the term of this Agreement with any independent contractors for the provision of services hereunder, SMG shall have the right to require such contractors to name SMG as an additional insured under any insurance required by SMG thereunder and to deliver to SMG prior to the performance of such services a certified copy of such policy, plus a certificate evidencing the existence thereof, which policy contains the same type of endorsements and provisions as provided in Section 8.4(a)(i) and (ii). 9. Ownership of Assets. 9.1 Ownership. The ownership of buildings and real estate, technical and office equipment and facilities, furniture, displays, fixtures, vehicles and similar tangible property located at the Facility shall remain with the City. Ownership of and title to all intellectual property rights of whatsoever value, held in the City's name shall remain in the name of the City. The ownership of consumable assets (such as office supplies and cleaning materials) purchased with Operating Revenues or City funds shall remain with the City, but such assets may be utilized and consumed by SMG in the performance of services under this Agreement. The ownership of data processing programs and software owned by the City shall remain with the City, and the ownership of data processing programs and Software owned by SMG shall remain with SMG. SMG shall not take or use, for its own purposes, customer or exhibitor lists or similar materials developed by the City for the use of the Facility, unless written consent is granted by the City Manager. Ownership of equipment, furnishings, materials, or fixtures not considered to be real property and other personal property purchased by SMG with City funds for use at and for the Facility shall vest in the City automatically and immediately upon purchase or acquisition. The assets of the City as described herein shall not be pledged, liened, encumbered or otherwise alienated or assigned other than in the ordinary course of business of the Facility without the prior approval of the City. 9.2 City Obligations. Except as herein otherwise set forth, throughout the term of this Agreement, the City shall maintain full beneficial use and ownership of the Facility and shall pay, keep, observe and perform all payments, terms, covenants, conditions and obligations under any bonds, debentures or other security 29 © 1995-2003. SMG. All rights reserved Doc. #361753v.3 agreements or contracts relating to the Facility to which the City may be bound. 10. Assignment; Affiliates. 10.1 Assignment. Neither this Agreement nor any of the rights or obligations hereunder may be assigned by either party hereto without the prior written consent of the other party hereto. For sake of clarity, the parties acknowledge that the foregoing does not preclude the assignment by SMG of its rights to receive its management and incentive fees hereunder to its lender(s) as collateral security for SMG's obligations under any credit facilities provided to it by such lender(s), provided that such collateral assignment shall not in any event cover SMG's rights to manage, promote or operate the Facility hereunder. 10.2 SMG Affiliates. (a) Transactions with Affiliates. In connection with its management responsibilities hereunder relating to the purchase and /or procurement of equipment, materials, supplies, inventories, and services for the Facility, SMG shall have the right, but not the obligation, to purchase and /or procure from, or otherwise transact business with, an Affiliate of SMG. In the event SMG purchases and /or procures from, or otherwise transacts business with, an Affiliate of SMG as contemplated by the foregoing sentence, the prices charged and services rendered shall be competitive with those obtainable from others rendering comparable goods and /or services of like kind. To ensure compliance in this respect, SMG agrees to obtain at least two (2) other competitive bids from persons other than SMG's Affiliates whenever SMG proposes to transact business with an Affiliate for the provision of such goods or services hereunder. In addition, SMG, as agent for the City, may license the use of the Facility or any part thereof to itself in connection with any event in the promotion of which SMG is involved, so long as the license fee charged is on prevailing rates and terms or such other rates and terms as the City Manager or the City Council approves. (b) Conflicts of Interest. The City acknowledges that SMG manages other public assembly facilities which may, from time to time, be in competition with the Facility. The management of-competing facilities shall not, in and of itself, be deemed a conflict of interest or breach of SMG's duties 30 © 1995 -2003. SMG. All rights reserved Doc. #361753v.3 hereunder; provided, however, in all instances in which the Facility is in competition with other public assembly facilities managed by SMG for the solicitation of certain events, SMG shall not involve its principal office (currently in Philadelphia, Pennsylvania) on behalf of any such other facility in an attempt to influence the decision - making process regarding the selection of a site by such events. 11. Laws and Permits. 11.1 Permits, Licenses, Taxes and Liens. SMG shall use reasonable efforts to procure any permits and licenses required for the business to be conducted by it hereunder. The City shall cooperate with SMG in applying for such permits and licenses. SMG shall deliver copies of all such permits and licenses to the City Manager. SMG shall pay promptly, out of the accounts specified in Section 5.7, all taxes, excises, license fees and permit fees of whatever nature arising from its operation, promotion and management of the Facility. SMG shall use reasonable efforts to prevent mechanic's or materialman's or any other lien from becoming attached to the premises or improvements at the Facility, or any part or parcel thereof, by reason of any work or labor performed or materials furnished by any mechanic or materialman, so long as the work, labor or material was provided at SMG's direction and the City has supplied funds for the payment of charges therefor in accordance'with this Agreement. 11.2 Governmental Compliance. SMG, its officers, agents and employees shall comply with all federal, state, local and municipal regulations, ordinances, statutes, rules, laws and constitutional provisions (collectively, "Laws ") applicable to SMG's management of the Facility hereunder, including without limitation Title III of the ADA and the provision of such auxiliary aids or alternate services as may be required by the ADA. Nothing in this Section 11.2 or elsewhere in this Agreement shall, however, require SMG to undertake any of the foregoing compliance activity, nor shall SMG have any liability under this Agreement therefor, if (a) such activity requires any Capital Improvements or Capital Equipment purchases, unless the City provides funds for such Capital Improvements and Capital Equipment purchases pursuant to Section 5.9 hereof, or (b) any Pre - Existing Agreement fails to require any licensee, lessee, tenant, promoter or user of any portion of the Facilities to comply, and to be financially 31 © 1995-2003. SMG. All rights reserved Doc. #361753v.3 responsible for compliance, with Title III of the ADA in connection with any activities of such licensee, lessee, tenant, promoter or user at the Facilities. Furthermore, SMG shall have the right to require any licensee, lessee, tenant, promoter or user of any portion of the Facility to comply, and to be financially responsible for compliance, with Title III of the ADA in connection with any activities of such licensee, lessee, tenant, promoter or user at the Facility. 11.3 No Discrimination in Employment; Affirmative Action. In connection with the performance of work under this Agreement, SMG shall not refuse to hire, discharge, refuse to promote or demote, or to discriminate in matters of compensation against, any person otherwise qualified, solely because of race, color, religion, gender, age, national origin, military status, sexual orientation, marital status or physical or mental disability. 12. Termination. 12.1 Termination Upon Default. Either party may terminate this Agreement upon a default by the other party hereunder. A party shall be in default hereunder if (i) such party fails to pay any sum payable hereunder within thirty (30) days after same is due and payable, or (ii) such party fails in any material respect to perform or comply with any of the other terms, covenants, agreements or conditions hereof and such failure continues for more than sixty (60) days after written notice thereof from the other party. In the event that a default (other than a default in the payment of money) is not reasonably susceptible to being cured within the sixty (60) day period, the defaulting party shall not be considered in default if it shall within such sixty (60) day period have commenced with due diligence and dispatch to cure such default and thereafter completes with dispatch and due diligence the curing of such default. 12.2 Termination Other than Upon Default. (a) SMG shall have the right to terminate this Agreement upon sixty (60) days written notice to the City (i) under the circumstances described in Sections 5.2, 5.3 or 5.5 hereof, or (ii) if the City fails to make Capital Improvements or Capital Equipment purchases at the Facility to the extent that such omission, in SMG's judgment, materially interferes 32 © 1995-2003. SMG. All rights reserved Doc. #361753v.3 with, impedes or impairs the ability of SMG to manage the Facility effectively. (b) Either party shall have the right to terminate this Agreement under the circumstances specified in Section 13.6 (d) . 12.3 Effect of Termination. In the event this Agreement expires or is terminated, (i) all Operating Expenses incurred or committed for prior to the date of expiration or termination shall be paid using funds on deposit in the account(s) described in Sections 5.7 and 5.8 and to the extent such funds are not sufficient, the City shall pay all such Operating Expenses and shall indemnify and hold SMG harmless therefrom, and (ii) the City shall promptly pay SMG all fees earned to the date of expiration or termination (the fixed and incentive fees described in Section 4 hereof being subject to proration), provided that the City shall be entitled to offset against such unpaid fees any damages (actual, not consequential) directly incurred by the City in remedying any default by SMG hereunder which resulted in such termination (other than the fees or expenses of any replacement manager for the Facility), and (iii) the City shall pay, or cause any successor management company to pay, to SMG unconditionally and without set -off the unamortized amount of the SMG Capital Contribution existing as of such expiration or termination as provided in Section 5.12 hereof. Upon the expiration of this Agreement or a termination pursuant to Section 12.1 or 12.2, all further obligations of the parties hereunder shall terminate except for the obligations in this Section 12.3 and in Sections 7.2(d), 7.3, 7.4, 8.1 and 12.4; provided, however, that if such termination is the result of a willful default, the nondefaulting party exercising its right to terminate this Agreement shall be entitled to recover damages for breach arising from such willful default. 12.4 Surrender of Premises. Upon termination of this Agreement (termination shall, for all purposes in this Agreement, include termination pursuant to the terms of this Section 12 and any expiration of the term hereof), SMG shall surrender and vacate the Facility upon the effective date of such termination. The Facility and all equipment and furnishings shall be returned to the City in good repair, reasonable wear and tear excepted, to the extent funds were made available therefor by the City. All reports, records, 33 © 1995-2003. SMG. All rights reserved Doc. 361753v.3 including financial records, and documents maintained by SMG at the Facility relating to this Agreement other than materials containing SMG's proprietary information shall be immediately surrendered to the City by SMG upon termination. 13. Miscellaneous. 13.1 Use of Facility at Direction of City. (a) The City shall have the right to use the Facility or any part thereof, upon reasonable advance notice and subject to availability, for such purposes as meetings, seminars, training classes or other City uses without the payment of any rental or use fee, except that direct out -of- pocket expenses incurred in connection with such uses (including without limitation staff and food and beverage costs) shall be paid by the City. (b) Additionally, the Dubuque Community School District shall have the right to use the Facility or any part thereof, upon reasonable advance notice and subject to availability, for non - ticketed events sponsored by the School District without the payment of any rental or use fee, except that c,irect out -of- pocket expenses incurred in connection with such uses (including without limitation staff and food and beverage costs) shall be paid by the School District. As of the date hereof, graduation ceremonies are the only events that fall within such type of events. If the School District sponsors an event where tickets are sold, the foregoing provisions do not apply to such event. (c) Except as otherwise provided in the Booking Policy, the events described in subparagraphs (a) and (b) above will not be booked if they will conflict with paying events booked by SMG and shall in all instances be subordinate to paying events in terms of priority of use of the Facility. The parties have agreed that based upon past historical use by the City and the School District, the Facility has foregone approximately $11,000 in rental fees for such events in any Fiscal Year. To the extent that in any Fiscal Year under this Agreement the total amount of rental fees which otherwise would have been chargeable for the events described in subparagraphs (a) and (b) above exceeds the foregoing estimated number, the amount of such excess rental fee shall be deemed to have been paid to the Facility and shall be included in the Operating Revenues for purposes of calculating SMG's incentive fees pursuant to Section 4.2 above. 34 © 1995 -2003. SMG. AU rights reserved Doc. $361753v.3 13.2 Dispute Resolution. (a) The parties desire to cooperate with each other in the management and operation of the Facility pursuant to the terms hereof. In keeping with this cooperative spirit and intent, any dispute arising hereunder shall first be referred to the parties' respective agents or representatives prior to either party initiating a legal suit, who shall endeavor in good faith to resolve any such disputes within the limits of their authority and within forty -five (45) days after the commencement of such discussions. If and only if any dispute remains unresolved after the parties have followed the dispute resolution procedure set forth above, the matter shall be resolved pursuant to Section 13.2(b) and (c) below. (b) If any dispute between the parties has not been resolved pursuant to Section 13.2(a) above, the parties shall endeavor to settle the dispute by mediation under the then current Center for Public Resources ( "CPR ") model procedure for mediation of business disputes or, if such model procedure no longer exists, some other mutually agreeable procedure. Within ten (10) business days from the date that the parties cease direct negotiations pursuant to Section 13.2(a) above, the City shall select a neutral third party mediator, who shall be subject to the reasonable approval of SMG. Each party shall bear its own cost of mediation; provided, however, the cost charged by any independent third party mediator shall be borne equally by the parties. (c) The parties agree that any mediation proceeding (as well as any discussion pursuant to Section 13.2(a) above) shall constitute settlement negotiations for purposes of the federal and state rules of evidence and shall be treated as non - discoverable, confidential and privileged communication by the parties and the mediator. No stenographic, visual or audio record shall be made of any mediation proceedings or such discussions. All conduct, statements, promises, offers and opinions made in the course of the mediation or such discussion by any party, its agents, employees, representatives or other invitees and by the mediator shall not be discoverable nor admissible for any purposes in any litigation or other proceeding involving the parties and shall not be disclosed to any third party. (d) The parties agree that this mediation procedure shall be obligatory and participation therein legally binding upon each of them. In the event that either party refuses to ©1995 -2003. SMG. All rights reserved 35 Doc. #361753v.3 adhere to the mediation procedure set forth in this Section 13.2, the other party may bring an action to seek enforcement of such obligation in any court of competent jurisdiction. (e) The parties' efforts to reach a settlement of any dispute shall continue until the conclusion of the mediation proceeding. The mediation proceeding shall be concluded when: (i) a written settlement agreement is executed by the parties, or (ii) the mediator concludes and informs the parties in writing that further efforts to mediate the dispute would not be useful, or (iii) the parties agree in writing that an impasse has been reached. Notwithstanding the foregoing, either party may withdraw from the mediation proceeding without liability therefor in the event such proceeding continues for more than forty -five (45) days from the commencement of such proceeding. For purposes of the preceding sentence, the proceeding shall be deemed to have commenced following the completion of the selection of a mediator as provided in Section 13.2(b). (f) If any dispute has not been resolved pursuant to the foregoing, either party may terminate this Agreement as provided in Section 12 hereof and each is free to file suit in a court of competent jurisdiction to enforce its rights hereunder. (g) The procedure specified in this Section 13.2 shall be the sole and exclusive procedures for the resolution of disputes between the parties arising out of or relating to this Agreement; provided, however, that a party, without prejudice to the above procedures, may file a complaint to seek a preliminary injunction or other provisional judicial relief, if in its sole discretion such action is necessary to avoid irreparable damage or to preserve the status quo ( "Equitable Litigation "). Despite such action, the parties shall continue to participate in good faith in the procedures specified in this Section 13.2. (h) Any interim or appellate relief granted in such Equitable Litigation shall remain in effect until the alternative dispute resolution procedures described in this Section 13.2 concerning the dispute that is the subject of such Equitable Litigation result in a settlement agreement. Such written settlement agreement shall be the final, binding determination on the merits of such dispute, shall supercede and nullify any decision in the Equitable Litigation, and shall preclude any subsequent litigation on such merits, notwithstanding any determination to the contrary in connection with any Equitable Litigation granting or denying interim relief or any appeal therefrom. 36 ©1995 -2003. SMG. All rights reserved Doc. #361753v.3 (i) All applicable statutes of limitation and defenses based upon the passage of time shall be tolled while the procedures specified in this Section 13.2 are pending. The parties shall take such action, if any, required to effectuate such tolling. Each party shall be required to perform its obligations under this Agreement pending final resolution of any dispute arising out of or relating to this Agreement, unless to do so would be impossible or impracticable under the circumstances. 13.3 No Partnership or Joint Venture. Nothing herein contained is intended or shall be construed in any way to create or establish the relationship of partners or a joint venture between the City and SMG. None of the officers, agents or employees of SMG shall be or be deemed to be employees of the City for any purpose whatsoever. 13.4 Entire Agreement. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings with respect thereto. No other agreements, representations, warranties or other matters, whether oral or written, shall be deemed to bind the parties hereto with respect to the subject matter hereof. 13.5 Written Amendments. This Agreement shall not be altered, modified or amended in whole or in part, except in a writing executed by each of the parties hereto. 13.6 Force Majeure. (a) No party shall be liable or responsible to the other party for any delay, damage, loss, failure, or inability to perform caused by "Force Majeure" if notice is provided to the other party within ten (10) days of date on which such party gains actual knowledge of the event of "Force Majeure" that such party is unable to perform. The term "Force Majeure" as used in this Agreement means the following: an act of God, strike, war, public rioting, lightning, fire, storm, flood, explosions, inability to obtain materials, supplies, epidemics, landslides, lightening storms, earthquakes, floods, storms, washouts, civil disturbances, explosions, breakage or accident to machinery or lines of equipment, temporary failure of equipment, freezing of 37 © 1995 -2003. SMG. All rights reserved Doc. #361753v.3 equipment, terrorist acts, and any other cause whether of the kinds specifically enumerated above or otherwise which is not reasonably within the control of the party whose performance is to be excused and which by the exercise of due diligence could not be reasonably prevented or overcome (it being acknowledged that under no circumstances shall a failure to pay amounts due and payable hereunder be excusable due to a Force Majeure). (b) Neither party hereto shall be under any obligation to supply any service or services if and to the extent and during any period that the supplying of any such service or services or the provision of any component necessary therefor shall be prohibited or rationed by any Law. (c) Except as otherwise expressly provided in this Agreement, no abatement, diminution or reduction of the payments payable to SMG shall be claimed by the City or charged against SMG, nor shall SMG be entitled to additional payments beyond those provided for in this Agreement for any inconvenience, interruption, cessation, or loss of business or other loss caused, directly or indirectly, by any present or future Laws, or by priorities, rationing, or curtailment of labor or materials, or by war or any matter or thing. (d) In the event of damage to or destruction of the Facility by reason of fire, storm Dr other casualty or occurrence of any nature or any regulatory action or requirements that, in either case, is expected to render the Facility materially untenantable, notwithstanding the City's reasonable efforts to remedy such situation, for a period estimated by an Architect selected by the City at the request of SMG of at least one hundred eighty (180) days from the happening of the fire, other casualty or any other such event, either party may terminate this Agreement upon written notice to the other. In the event that the Facility becomes either wholly or partially untenantable as a result of any of the foregoing, appropriate adjustments to the Expense and Revenue Benchmarks shall be made. (e) SMG may suspend performance required under this Agreement, without any further liability, in the event of any act of God or other occurrence, which act or occurrence is of such effect and duration as to effectively curtail the use of the Facility so as effect a substantial reduction in the need for the services provided by SMG for a period in excess of ninety (90) days; provided, however, that for the purposes of this subsection, SMG shall have the right to suspend performance © 1995 -2003. SMG. All rights reserved 38 Doc. #361753v.3 retroactively effective as of the date of the use of the Facility was effectively curtailed. "Substantial reduction in the need for these services provided by SMG" shall mean such a reduction as shall make the provision of any services by SMG economically impractical. No payments of the management fees otherwise due and payable to SMG shall be made by the City during the period of suspension. In lieu thereof, the City Manager and SMG may agree to a reduced management fee payment for the period of reduction in services required. (f) In the event of a material increase in any Operating Expense not reasonably within the control of either party (including, by way of example and not by limitation, an increase in the cost of insurance or utilities), the parties shall mutually negotiate and agree upon in good faith an adjustment to the Net Operating Loss Benchmarks to take into account such increased cost. 13.7 Binding Upon Successors and Assigns; No Third -Party Beneficiaries. (a) This Agreement and the rights and obligations set forth herein shall inure to the benefit of, and be binding upon, the parties hereto and each of their respective successors and permitted assigns. (b) This Agreement shall not be construed as giving any person, other than the parties hereto and their successors and permitted assigns, any legal or equitable right, remedy or claim under or in respect of this Agreement or any of the provisions herein contained, this Agreement and all provisions and conditions hereof being intended to be, and being, for the sole and exclusive benefit of such parties and their successors and permitted assigns and for the benefit of no other person or entity. 13.8 Notices. Any notice, consent or other communication given pursuant to this Agreement shall be in writing and shall be effective either (a) when delivered personally to the party for whom intended, (b) on the second business day following mailing by an overnight courier service that is generally recognized as reliable, (c) on the fifth day following mailing by certified or registered mail, return receipt requested, postage prepaid, or (d) on the date transmitted by telecopy as shown on the telecopy confirmation therefor as long as such telecopy transmission is 39 © 1995-2003. SMG. All rights reserved Doc. #361753v.3 followed by mailing of such notice by certified or registered mail, return receipt requested, postage prepaid, in any case addressed to such party as set forth below or as a party may designate by written notice given to the other party in accordance herewith. To the City: City Manager City Hall 13th and Central Avenues Dubuque, IA 52001 To SMG: SMG 701 Market Street, 4th Floor Philadelphia, PA 19106 Attention: President Telecopy: (215) 592 -6699 With a copy to: Stradley, Ronon, Stevens & Young 2600 One Commerce Square Philadelphia, PA 19103 Attention: William R. Sasso, Esq. Or Steven A. Scolari, Esq. Telecopy: (215) 564 -8120 13.9 Section Headings and Defined Terms. The section headings contained herein are for reference purposes only and shall not in any way affect the meaning and interpretation of this Agreement. The terms defined herein and in any agreement executed in connection herewith include the plural as well as the singular and the singular as well as the plural, and the use of masculine pronouns shall include the feminine and neuter. Except as otherwise indicated, all agreements defined herein refer to the same as from time to time amended or supplemented or the terms thereof waived or modified in accordance herewith and therewith. 13.10 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original copy of 40 © 1995-2003. SMG. All rights reserved Doc. #361753v.3 this Agreement, and all of which, when taken together, shall be deemed to constitute but one and the same agreement. 13.11 Severability. The invalidity or unenforceability of any particular provision, or part of any provision, of this Agreement shall not affect the other provisions or parts hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provisions or parts were omitted. 13.12 Non - Waiver. A failure by either party to take any action with respect to any default or violation by the other of any of the terms, covenants, or conditions of this Agreement shall not in any respect limit, prejudice, diminish, or constitute a waiver of any rights of such party to act with respect to any prior, contemporaneous, or subsequent violation or default or with respect to any continuation or repetition of the original violation or default. 13.13 Certain Representations and Warranties. (a) The City represents and warrants to SMG the following: (i) all required approvals have been obtained, and the City has full legal right, power and authority to enter into and perform its obligations hereunder, and (ii) this Agreement has been duly executed and delivered by the City and constitutes a valid and binding obligation of the City, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally or by general equitable principles. (b) SMG represents and warrants to the City the following: (i) all required approvals have been obtained, and SMG has full legal right, power and authority to enter into and perform its obligations hereunder, and (ii) this Agreement has been duly executed and delivered by SMG and constitutes a valid and binding obligation of SMG, enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally or by general equitable principles. 13.14 Governing Law. 41 ©1995 -2003. SMG. All rights reserved Doc. #361753v.3 This Agreement shall be governed by and construed in accordance with the internal laws of the State of Iowa, without giving effect to otherwise applicable principles of conflicts of law. IN WITNESS WHEREOF, this Agreement . has been duly executed by the parties hereto as of the day and year first above written. ATTEST: eanne F. Schneider, CITY OF DUBUQUE, IOWA By: Tefrance M. Duggan, City Clerk Mayor SMG By: Name: Title: 42 ©1995 -2003. SMG. All rights reserved Doc. » 361753v.3 EXHIBIT "A" PRE- EXISTING AGREEMENTS H - "Hold" F - "Firm (no contract)" "City" no charge 2004 F July 12 H July 29, 30 & 3 Concert H August 4 F August 5 F August 9 O August 10 Charge) C August 13 C August 14 F August 27 -29 F August 30 C September 11 O September 14 F September 16 C September 24 &25 F September 27 F September 25 &26 C October 1 -3 F October 2 &3 H October 5 -8 F October 7 & 8 Lipizzaners H 0 F. F October 16 &17 C October 23 F October 25 F October 26 -31 F October 29 &30 F November 5 -7 0 F F Orpheum 1 Arena Bijou Orpheum Orpheum Majestic FC - "Contract" US Trustees AEG - Chad Cheek 0 - for Blood Center US Trustees US Trustees Management Team (City - No Theater NICC Graduation Ballroom Jazmine's Variety Spectacular Theater Symphony Auditions Orpheum US Trustees Arena /Theater Irish Dance Feis Majestic Management Team Orpheum Bijou Orpheum Arena Bijou Arena Theater Arena US Trustees Fly -By -Night Productions US Trustees Thunderbirds Hockey Fly -By -Night Productions Thunderbirds Hockey Watchable Wildlife Conference White Stallion October 9 Ballroom University of Dubuque Homecoming October 12 Majestic Management Team October 12 -17 Theater Dubuque Symphony Orchestra Arena Arena Orpheum Theater Arena Arena Thunderbirds Hockey Wayne Brady US Trustees Dubuque Symphony Orchestra Thunderbirds Hockey Thunderbirds Hockey November 9 Majestic Management Team November 9 -14 Theater Dubuque Symphony Orchestra November 12 -14 Arena Thunderbirds Hockey A -1 ©1995 -2003. SMG. All rights reserved Doc. #361753v.3 F November 19 -21 Arena Thunderbirds Hockey F November 22 -24 Arena Sesame Street (contract issued, not signed) F November 22 Orpheum US Trustees H November 27 -30 Arena Trans Siberian Orchestra F November 28 Theater Dubuque Dance Studio Recital F November 30 Theater Dubuque Symphony Orchestra F December 1 -5 Theater Dubuque Symphony Orchestra H December 1 Arena Trans Siberian Orchestra F December 3 -5 Arena Thunderbird Hockey F December 6 -19 Theater The Nutcracker F December 10 &11 Arena Thunderbird Hockey H December 14 Majestic Management Team F December 20 Orpheum US Trustees 2005 H January 7 H January 7 &8 F January 10 H January 14 F January 15 Basketball Classic H January 16 F January 21 -29 F January 21 -23 F January 28 -30 F January 29 F February 1 -3 Olympics F February 4 -6 F February 8 -13 F February 12 Classic F F F C C F F F Arena Bijou Orpheum Arena Arena Arena Bijou Arena Arena Theater Arena Arena Theater Arena Thunderbird Hockey Fly -By -Night Productions US Trustees Thunderbird Hockey Wendy's Women's Thunderbird Hockey Fly -By -Night Productions Thunderbird Hockey Thunderbird Hockey Women's Conference Illinois Special Iowa Games Dubuque Symphony Orchestra Wendy's Men's Basketball February 13 Arena Thunderbird Hockey February 18 -20 Arena Thunderbird Hockey February 25 -27 Arena Thunderbird Hockey February 14 -28 Theater Grand Opera House Show March 1 -7 March 4 &5 March 8 -13 March 11 &12 F March 13 -26 F March 18 &19 F March 25 -27 F March 30 &31 F April 1 -4 Zoo Theater Arena Theater Arena Theater Arena Arena Bijou Arena -2- Grand Opera House Show Thunderbird Hockey Dubuque Symphony Orchestra Thunderbird Hockey Hempstead High School Musical Thunderbird Hockey AKC Dog Show Fly -By -Night Productions Terry's Wilderness Ranch & Doc. #361753v.3 F April 1 &2 F April 1 -11 F April 5 F April 7 -9 Championship O April 11 -14 F April 12 -17 F April 20 -21 F May 1 F May 6 &7 H May 10 F May 13 F May 14 F May 15 Rainsite F May 20 -29 F May 27 Practice F May 29 Arena F June 1 -12 Bijou H November 22 &23 Arena Bijou Theater Arena Arena Arena Theater Arena Theater Arena Theater Arena Arena Arena Fly -By -Night Productions Wahlert High School Musical All School Chorale Budlight Bullriding City Expo Dubuque Symphony Orchestra NICC Skills Competition Dubuque Youth Symphony Dubuque Symphony Arena Pops Goldstar Teaching Awards NICC Graduation Loras College Baccalaureate Loras College Graduation Bijou Fly -By -Night Productions Arena High School Graduation -3- High School Graduation Fly -By -Night Productions Sesame Street Doc. $361753v.3 Masterpiece on the Mississippi TO: FROM: SUBJECT: DATE: The Honorable Mayor and City Council Members Michael C. Van Milligen, City Manager Extend Five Flags Management Agreement November 10, 2008 Dubuque * * * ** AFAmefica CAU 111111 2007 Leisure Services Manager Gil Spence recommends City Council approval to extend the Five Flags Management Agreement with SMG for the period July 1, 2009 to June 30, 2014. I concur with the recommendation and respectfully request Mayor and City Council approval. Micha I C. Van Milligen MCVM /jh Attachment cc: Barry Lindahl, City Attorney Cindy Steinhauser, Assistant City Manager Gil Spence, Leisure Services Manager Masterpiece on the Mississippi TO: FROM: SUBJECT: DATE: Michael C. Van Milligen, City Manager Gil D. Spence, Leisure Services Manage Extend Five Flags Management Agreement November 10, 2008 INTRODUCTION Dubuque * * * ** M- AmeiicaCny I II If 2007 The purpose of this memorandum is to recommend that the City Council extend the Management Agreement with SMG for management of the Five Flags Center. DISCUSSION On May 17, 2004, the City Council voted to enter into a contract for private manage- ment of the Five Flags Center with SMG. Staff negotiated an agreement that was approved on June 21, 2004. The agreement is for a five year term, July 1, 2004 through June 30, 2009, and provides that the City Council may, in its sole discretion, extend the term for an additional five year term, commencing July 1, 2009 and ending June 30, 2014, by giving written notice not less than one hundred eighty (180) days prior to June 30, 2009. The four years SMG has managed the Center have been successful in many ways. Property tax increases have slowed and more traveling shows have, appeared in the building. These were the two main goals we set when the decision was made to use a private management firm. A property tax benchmark is set each year, and each year SMG has beaten the benchmark. This has been accomplished through good management decisions and increased revenue. We face new challenges in the near future if the ice arena is constructed, if the University of Dubuque builds a performing arts center, the 800 seat theater in the new Diamond Jo complex, and the theater proposed in the Dubuque Greyhound Park and Casino renovation. These facilities will compete with the Five Flags Center and will likely take major tenants away. SMG's leadership will be helpful guiding us through this period. (continued) extend five flags management agreement, page two RECOMMENDATION SMG would like a five year extension and I recommend the City Council extend this relationship with SMG. ACTION STEP The action requested is that the City Council adopt the attached resolution extending the Five Flags Management Agreement with SMG for the period July 1, 2009 to June 30, 2014. GDS:jIr attachments copy Joyce White Tom Lorenz Private Management for Public Facilities Joseph F Romano Regional Vice President November 21, 2008 Mr. Gil Spence Leisure Services Director Five Flags Center Contract Administrator City of Dubuque, IA 2200 Bunker Hill Road Dubuque, IA 52001 -3010 VIA FEDERAL EXPRESS Dear Gil: Please allow this letter to serve as acknowledgement of the Dubuque City Council's November 17, 2008, action to extend SMG's Management Agreement for the Five Flags Center, via Resolution No. 406 - 08 . All terms and conditions of the original Management Agreement remaining in effect, the new Agreement expiration date to be June 30, 2014. SMG values its business relationship with the City of Dubuque and we look forward to serving the City throughout this next contract term. Best regards, (Joseph F. Romano Sr. Regional Vice President Received and Acknowledged for the City of Dubuque: By: Name: -,y 4 5-- /4 Date: /1/21, 45 - Cc. with attachment: John Burns, Executive Vice President /CFO, SMG Hank Abate, Senior Vice President, SMG Tom Lorenz, Regional General Manger, SMG Joyce White, General Manger, Five Flags Center, SMG Stadiums o Arenas s Convention Centers • Theatres Iowa State Center o Scheman Building, Suite 004 o Ames, IA 50011 -0011 o Voice: 515.294.3347 ® Fax: 515.294.4594 E -Mail: Jromano @iastate.edu Preparer: Gil D. Spence Address: 2200 Bunker Hill Rd Phone: (563} 589-4263 RESOLUTION NO. 406 -08 A RESOLUTION APPROVING THE FIRST AMENDMENT TO THE MANAGEMENT AGREEMENT BETWEEN THE CITY OF DUBUQUE, IOWA AND SMG. Whereas, the City of Dubuque has identified the need for private management of the Five Flags Center; and Whereas, the City of Dubuque (City) and SMG entered into a Management Agreement on June 21, 2004; and Whereas, the current five year term of the Agreement expires on June 30, 2009; and • Whereas, City and SMG now desire to amend the Management Agreement to provide for an additional five year term, July 1, 2009 through June 30, 2014. NOW, THEREFORE, BE IT RESOLVED, BY THE CITY COUNCIL OF THE CITY OF DUBUQUE, IOWA: Section 1. That the First Amendment to the Management Agreement between the City of Dubuque, Iowa and SMG be approved. Passed, approved and adopted this 17th day of Nov'mber , 2008. Attest: Jeanne F. Schneider, City Clerk PK Roy D. Buol, Mayor