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AMENDED AND RESTATED MANAGEMENT AGREEMENT
BETWEEN
CITY OF FRESNO
AND
SMG
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TABLE OF CONTENTS
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AMENDED AND RESTATED
MANAGEMENT ÄGREEMENT
THIS AMENDED AND RESTATED MANAGEMENT AGREEMENT (this
"Agreement") is dated as of this _ day of Decemb e42013,to be effective on the 1s day of January,
2074 (the "Effective Date"), by and between the CITY OF FRESNO, a municipal corporation
organizedand existing under the laws of the State of California ("Owner" or "City"), and SMG, a
Pennsylvania general partnership ("SMG").
RECITALS
A. The Owner is the owner or lessee of facilities comprising the Fresno Convention
& Entertainment Center (Saroyan Theatre, Selland Atena, Fresno Convention Center, and Ernie
YaldezExhibit Hall (formerly known as Exhibit Hall South)), located downtown in the City of Fresno
(individually and collectively, the "Facility"). The Facility no longer includes the Robert A. Schoettler
Conference Center and the parking garage attached to the Robert A. Schoettler Conference Center.
SMG is engaged, among other things, in the business of providing management services, including
operations and marketing services for public assembly facilities.
B. The Owner and SMG originally entered into that certain Management
Agreement dated as of January 7,2}}4,pertaining to SMG's management and operation of the Facility
(the "Original Management Agreemenf'). The parties thereafter entered into that certain Management
Agreement dated as of Decemb er 17 ,2008, which superseded the Original Management Agreement
(the "Management Agreemenf'). The Owner 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.
C. The parties acknowledge that, during the term of the Original Management
Agreement, SMG expended approximately $1,900,000.00 to pay for certain Operating Expenses
(which amounts consisted primarily of benefits for employees of the Facility, workers compensation
insurance and liability insurance premiums pertaining to the Facility's operations) in order to ensure
the operation of the Facilþ for which SMG did not receive reimbursement from the Owner. The
parties herein disagreed over their respective obligations related to these cost and in fuilherance of
settling all claims or rights related to these payments of eithel party herein, Owner agrees to amortize
the sum of $1,000,000.00 of these costs, ("Employee Benefit Cost Payments") amortized through the
Management Tetm of this Agreement as provided for in Section 5.4 below.
D. The parties have agreed to certain revisions to the Management Agreement to
increase the number of revenue producing events, and to reduce the City's Contribution from its
Genelal Fund to the operation of the Facility by a net total of $665,000.00 through the end of Fiscal
Year 2015.
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NOW, THEREI'ORE, in consideration of the foregoing and of the mutual promises,
covenants and agreements herein contained, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Definitions
In addition to the capitalizedtenns defined elsewhere in this Agreement, the following
terms have the meanings referred to in this Section 1:
"Affiliate" - a person that directly or indirectly controls or is controlled by, or is under
coÍtmon control with, a specified person. For purposes of this definition, "control" means ownership
of equity securities or other ownership interests that represent more than 50% of the voting power in
the controlled person.
"Actual Cost Increases" - any increase in SMG's Operation Expense Budget in excess
or of a greater amount than the prior Fiscal Year Budget supported by such documentation as may be
reasonably requested by the City Manager.
"Advance Fund" - an annual operating teserve fund created by the City, in accordance
with Section 5.1(d).
"Approved Budget" - any budget submitted by SMG that is accepted by the City
Manager and approved by the City Council, in accoldance with Section 5 hereof.
"CaprtalEquipmenf'and "Capital Improvements" - any and all furniture, fixtures,
machinery or equipment, either additional or replacement, and any and all building additions,
alterations, renovations, repairs or improvements, the depreciable life of which, according to generally
accepted accounting principles ("GAAP"), is in excess of three (3) years and any other item of expense
that, according to GAAP, is not properly deducted as a curuent expense on the books of SMG, but
rather should be capitalized.
"City Council" - the Cþ Council of the City of Fresno.
*CiW Manager" - the City Manager of the Owner (defined as the Chief Administrative
Officer in the Charter of the City of Fresno).
"City Contribution" - as defined in Section 5.1(d) below.
"Commercial Rights" - naming rights, pouring rights, advertising signage (including
event sponsorships), branding of food and beverage products for resale, premium seating (including
but not limited to suites and club seats) and memorial gifts, to the extent legally possible.
"Contract Administrator" - the City Manager or his/her designee as designated fi'om
time to time in writing by the City Manager.
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"Employee Benef,rt Cost Payments" - as defined in Recital "C" hereinabove.
"Encumbered Cash Accounts" - sepalate cash accounts maintained and controlled by
SMG, which include revenues fi'orn advance ticket sales and event deposits.
"Fiscal Year" - a one-year period beginning July I and ending June 30.
"Laws" - all federal, state, local and municipal regulations, ordinances, statutes, rules,
laws and constitutional provisions.
"Losses" - any and all losses,liabilities, claims (including, without limitation, claims for
bodily injury, death or damage to property), damages and expenses (including reasonable attorneys'
fees).
"Management Tetm" - as defured in Section 3.1 helein.
. "Management Fee" - as defined in Section 4 herein.
"Net Operating Loss/Profit" - with respect to a Fiscal Year, the excess, if any, of
Operating Expenses for such Fiscal Year over Operating Revenues for such Fiscal Year, in the case of
a loss, and the excess, if any, of Operating Revenues for such Fiscal Year over Operating Expenses for
such Fiscal Year, in the case of a profit.
'T.{ormally Touring Attractions" - the shows or events that customarily tour facilities
similar. to the Facility in regional or national markets, including without limitation touring family
shows (including without limitation, ice shows and the circus), touring Broadway-type shows,
professional wrestling, sporting competitions and exhibition games/matches (including amateur, minor
league and professional), and touring gospel, motivational and religious shows.
"Operating Expenses" - the Operating Expenses listed in Section 5.1 of this Agreement
and approved by the City Council as part of the Approved Budget.
"Operating Revenues" - The revenues listed in Section 5.1 of this Agreement and
approved by the Cþ Council as part of the Approved Budget.
"Parking Alea'' - The parking lot located just east of the Selland Arena"" in the City of
Fresno.
"Renewal Term" - the additional period for which this Agreementrnay be renewed in
accordance with Section 3.2 hereof beyond the Management Term.
2. Engagement of SMG.
2.1 Subject to the terms and conditions set forth in this Agreement, Owner hereby
engages SMG, on an exclusive basis, as an independent contractor, to manage, operate, and promote
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the Facility during the Mànagement Term and the Renewal Term, if any, and SMG hereby accepts
such engagement. In no event shall SMG hold itself out as, act as, or be the agent of the Owner,
without the Owner's express written authority. In such capacity, SMG shall have exclusive authority
over the day-to-day operation of the Facility and all activities therein. The standard for performance of
services by SMG will be in accord with the express provisions of this Agreement, and where not
expressed, in accord with generally accepted industry standards. V/ithout limiting the generality of the
foregoing, the services to be provided by SMG shall include those described on Exhibit "A" attached
hereto.
2.2 Representatives of the Owner shall have the right 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 Owner may be obligated or
have the right to do under this Agreement or otherwise. In connection with the exercise of such rights,
the Owner will endeavor to provide (but is not obligated to provide) advarice notice to SMG for
security pulposes and to minimize any interference with or disruption of SMG's work under this
Agreement. Nothing contained in this Section is intended or shall be construed to limit any other
rights of the Owner under this Agreement nor shall impose or be construed to impose upon the Owner
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.
3. Management Term and Renewal Term.
3.1 The remaining term of this Agreement shall end at midnight on June 30,2079,
unless earlier terminated pursuant to the provisions of this Agreement (the "Management Term").
3.2 The parties may agree to extend the term on such terms and conditions as the
parties mutually agree in writing prior'to the end of the Management Terrn (the "Renewal Term").
4. SMGts Compensation; Management X'ee.
As of the Effective Date, during the Management Term, SMG's compensation for
providing the services hereunder shall be an annual fee of One Hundred and Forty-Five Thousand Six
Hundred and Thiúy-Six Dollars ($145,636.00) (he "Management Fee"). Provided that SMG for the
immediately preceding Fiscal Year (1) meets its Approved Budget and (2) increases the number of
events held at the Facilþ by 10 events (excluding professional hockey games), the Management Fee
paid in the prior Fiscal Year shall be adjusted upward on the first day of each Fiscal Year following the
first complete Fiscal Year starting July l, 2014, and ending June 30, 2015 ("First Complete Fiscal
Year"), by the percentage change in the Consumer Price Index -- All Urban Consumers (CPI-U) --
West Region -- All Items, as published by the Bureau of Labor Statistics of the U.S. Department of
Labor (the "Base Fee"), provided that such CPI increase shall not exceed 4.3Yoinany such Fiscal
Year. To the extent íhat any Fiscal Year hereunder is less than a twelve (12) month period (including
the initial short Fiscal Year of January 1, 2014, to the end of June 30,2014), such fee shall be pro-rated
using the initial fixed fee of One Hundred and Forly-Five Thousand Six Hundred and Thirty-Six
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Dollars ($145,636.00) or the last fee paid fiom a cornplete Fiscal Year as adjusted by this provision
which fee will be calculated based upon a fraction, the numerator of which is the number of rnonths in
such year and the denominator of which is 12. Such fee shall be payable in equal monthly installments
due on or before the last day of each month duling such Fiscal Year, and SMG shall be entitled to draw
such amounts from the account described in Section 5.2.
5. Budgets; Bank Accounts.
5.1 Budgets.
(a) The parties acknowledge that the annual operating Approved Budget and annual
cash flow budget for the Fiscal Year hereunder (July 1,2073, through June 30, 2014),*" has already
been submitted by SMG to the City Manager and accepted and provided to the City Council for its
approval, which has also been obtained. As part of the annual plan described in Section 6.2 herein,
SMG will prepare a proposed annual operating budget and annual cash flow budget for the First
Complete Fiscal Year and each year thereafter using the historical budgetary dataand consistent with
the budget escalation provisions of this Section. SMG shall submit each Fiscal Year's budget to the
City Manager by March 15 of each year, coÍlmencing Malch 15,2074. The proposed annual
operating budget prepared by SMG shall include projected Operating Expenses and Operating
Revenues on a line item basis. The line items shall include, but not be limited to, the following
categories:
(Ð Projected Operating Expenses:
(A) Employee payroll, benefits, 401(k) contribution, relocation costs,
bonus and related costs;
(B) Operating supplies (including general office supplies);
(C) Advertising, marketing, group sales, and public relations;
(D) Cleaning;
(E) Data processing and storage and other related information
technology;
(F) Dues, subscriptions and memberships;
(G) The Management Fee;
(H) The shortfall, if any, in the Advance Fund from the immediate
past Fiscal Year;
(I) Printing and stationary;
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(J) Postage and fi'eight;
(K) Equipment and rental;
(L) Repails, maintenance, and equipment servicing (excluding
Capital Equipment or Capital Improvernents);
(M) Security;
G\D Telephone and communication;
(O) Travel and entertainment;
(P) Employee uniforms and identifrcation;
(a) Exterminator and trash removal;
(R) Ttaining;
(S) Parking;
(T) Utilities;
(U) Professional fees, including accounting and legal fees (including
audit expenses);
(V) Commissions and other fees payable to third parties;
(\Ð Insurance, to the extent required in Exhibit rr6'Cr,r of this
Agreement; and
(Ð Taxes, including any possessory interest tax arising from any
determination by the Fresno County Assessor that the license granted herein under
constitutes a taxable interest, except any possessory use tax as a result of SMG's selÊ
promoting activities (e.g., booking an event for SMG, whereby SMG benefits beyond
the consideration provided hereunder for its services).
(iÐ Projected Operating Revenues:
(Ð Advertising;
(B) Telephone and fax;
(C) Parking;
(D) Rentals;
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(E) Equipment charges;
(F) Food and beverage;
(G) Retail sales;
(H) Electrical;
(D Catering;
(Ð Box Offrce fees;
(K) Advertising and naming rights;
(L) Interest;
(M) Leases; and
G,D Other miscellaneous forms of revenue.
(b) Operating Expenses do not include applicable excise, sales, occupancy and use
taxes, or similar governmental taxes, duties, levies or charges collected directly from patrons or guests,
or as a part of the sales price of any goods, services, or displays, such as gross receipts, admission,
cabaret, or similat or equivalent taxes, nor any gratuities collected (or to be collected) for the benefit of
and paid to any of SMG's personnel. Furthermore, Operating Revenues do not include (i) monies
collected (or to be collected) for the benefit of and paid to third parties such as event promoters,
including the Co-Promoter Fund (as dehned in Section 8 below), or (ii) parking income from the
Parking Area, unless City requests, and SMG consents, to operate such parking aleas.The annual
budgets referred to in subparagraph (a) that ale submitted each year shall only contain (i) increases in
the Operating Expenses to the extent consistent with Actual Cost Increases; or (ii) the pelcentage
increase represented by the percentage change in the Consumer Price Index -- All Urban Consumers
(CPI-U) -- 'West Region -- All Items, as published by the Buleau of Labor Statistics of the U.S.
Department of Labor, whichever is less. Any proposed operating budget showing increases in
Operating Revenue shall be substantiated with sufficient documentation. City Manager shall require
all relevant dataand documentation required at his sole discretion to substantiate Operating Revenue or
Actual Cost Increases in any submitted budget. All budgets submitted are subject to approval by the
City Manager before their submission to the City Council for final approval. If the City Manager
elects to modify such budgets submitted by SMG, he or she shall noti$r SMG in writing of such
modifications at least ten (10) days prior to his or her submission of such budgets to the City Council
for approval. In the event that SMG disagrees with the City Manager's modifications of the annual
budget, SMG shall have the right to noti$ the City Council of its concems and request a modification
to the annual budget.
(") Within thiúy (30) days before the end of each Fiscal Year, the City Council
shall notiff SMG of any changes to the ar¡rual operating budget and the annual cash flow budget for
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the succeeding Fiscal Year proposed by SMG (or provided by the City Manager with his or hei'
changes, as the case may be). The budgets, as finally approved by the City Council, shall be the
Approved Budget for the following Fiscal Year.
If (i) the Capital Equipment and Capital Improvements purchases authorized by the
Owner or any capital project occuning next to or near any portion of the Facility (e.g., the construction
of a proposed restaurant on the parking lot adjacent to and east of the Selland Arena) materially impact
the use of any portion of the Facility during any Fiscal Year (such materiality being defined as
$10,000.00 or more); or (ii) if there are Extraordinary Circumstances (defined as facts or circumstances
tha| are beyond SMG's control) which adversely affect Operating Revenues or Operating Expenses
during any Fiscal Year, SMG shall have the right to submit to the City Manager for submission to the
City Council a revised annual operating budget or annual cash flow budget for such Fiscal Yeal to the
Owner to reflect (A) the impact of such Capital Equipment and Capital lmprovements pruchases or
capital projects on the Operating Revenues andlor Operating Expenses; or (B) such other changed
Extraordinary Circumstances. If the City Manager elects not to submit such a revised budget to the
City Council or proposes to modiff it, SMG shall have the right to petition the City Council for an
annual operating budget or annual cash flow budget. If the City Council does not approve such
proposed amended budget(s) or modifies such proposed amended budget(s) in a manner which SMG
disagrees with, then both parties are entitled to mediate the issue consistent with SectionI4.2 (c). Any
amended budget that is so approved by the City Council shall be considered the Approved Budget for
such year.
(d) Citv Contribution: Advance. By July 1 of each Fiscal Year' (beginning Fiscal
Year 2014-2015), the City shall advance to SMG the City's entire annual financial conh'ibution to the
Facilþ (the "City Contribution"). For illustrative purposes only, the City Contribution, without
additional funding for extraordinary Operating Expenses for the Facility for Fiscal Year 2013-2014, is
$1,064,136.00. When determining the annual City Contribution, the City shall not ofÊset, or otherwise
consider, funds contained in Encumbered Cash Accounts. Additionally, the City shall create an
operating reserve fund of $500,000 by July 1't of each Fiscal Year to assist with Facility operational
cash flows (the "Advance Fund"). SMG, with Facility Operating Revenue, shall replace all funds
taken from the Advance Fund by March t5tl' of that same Fiscal Year and shall provide to the City
Manager with an accounting of SMG's use of the Advance Fund in a manner consistent with Section
6.1 below. 'SMG shall promptly notifu the City Manager if SMG anticipates a shortfall in the Advance
Fund. Under no circumstance shall SMG be responsible for any shortfall in the Advance Fund.
Rather, the shorfall in the Advance Fund shall be considered an Operating Expense.
5.2 Receipts and Disbursernents.
With the approval of the City, SMG shall establish and maintain in one or more
depositories one or more operating, payroll and other bank accounts for the promotion, operation and
management of the Facility, which such accounts shall be in the name of the City and with signature
authority in a City-designated officer and in such employees of SMG as SMG shall determine. All
Operating Revenues collected by SMG shall be deposited into such accounts and Operating Expenses
shall be paid by SMG fi'om such accounts. The funding of all of the foregoing accounts shall be made
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by Owner to cover all projected Operating Expenses atthe Facility to the extent not covered by the
Operating Revenues. As part of the monthly meetings described in Section 6.3, SMG will promptly
report to the Contract Administrator any material change or variance from the Approved Budget and
any change to the total expenses (as opposed to any particular line item expense) fi'orn that provided
for in the Approved Budget (unless such change or variance is a result of, or offset by, a corresponding
increase in Operating Revenues).
5.3 Capital Equipment: Capital lmprovements.
The obligation to pay for, and autholity to perform, direct and supervise Capital
Equipment and Capital Improvements purchases shall remain with Owner and will not be considered
Operating Expenses. The annual plan submitted pursuant to Section 6.2 shall include SMG's
recommendation for Capital Equipment and Capital lmprovements 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 Owner budget funds therefor. In corurection with the preparation of such
rrcommendations by SMG, SMG may need to engage outside professionals, in which event SMG shall
obtain the approval of the City Manager prior to such engagement (which approval shall not be
unreasonably withheld) and the costs of such engagement shall be paid by the City and not considered
an Operating Expense. Owner shall retain the discretion to determine whether and to what level to
fund Capital Equipment and Capital Improvements purchases to the Facility.
5.4 SMG's Emplo]¡ee Benefit Cost Pavments.
As of the Effective Date, the parties agreethatFive Hundred Thousand Dollals
($500,000.00) of the Ernployee Benefit Cost Payments rernain unpaid. Prior to the Effective Date, the
City shall pay SMG, on or before the end of each month, Eight Thousand Three Hundred and Thirty-
Three and 33/100 Dollars ($8,333.33). Cornmencing on January l,20l4,the City shall pay SMG Two
Hundred and Fifty Thousand Dollars ($250,000.00) of the Employee Benefit Cost Payments over a
period of sixty (60) rnonths (the "Amortized Period") during the Management Term on a straight-line
basis in equal monthly payments of Four Thousand One Hundled and Sixty-Six Dollars and Sixty-
Seven Cents (54,166.67) on or before the end of each month duling the Amortized Period,
commencing January 3I,20I4. The City shall pay the remaining balance of Two Hundred and Fifty
Thousand Dollars ($250,000.00) at any time during the Management Term or as otherwise provided in
this Agreement. Notwithstanding the foregoing, City may pay off the entire balance of the Employee
Benefit Cost Payments at any time without penalty. In the event this Agreement terminates due to
City's failure to perform or comply with any terms, covenants, agreements or conditions in any
material respect, the City shall pay, or cause any successor management company to pay,
unconditionally and without set-off, to SMG the outstanding unpaid amount of the Employee Benefit
Cost Payments existing as of such termination. In the event that (i) the City terminates this Agreement
due to SMG's failure to perform or comply with any terms, covenants, agreements or conditions in any
material respect; or (ii) this Agreement is terminated under the circumstances described in Paragraph
2(c) of Exhibit "A" hereto, the City will continue paying to SMG, unconditionally and without set-ofl
the Employee Benefit Cost Payments over the temainder of the Amortized Period. Notwithstanding
the foregoing, in the event of the tennination of this Agleement by the City pulsuant to Section 13.2
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hereof, the City shall not be obligated to pay to SMG (and SMG shall forfeit the light to receive) the
next twelve (12) monthly installments of the Employee Benefit Cost Payment following the effective
date of such termination hereunder.
5.5 Emergency Repairs.
If any repairs are of an emergency nature, SMG shall immediately contact the Contract
Administrator to inform him/her of the emergency and make such repairs in accordance with the
following: the City shall reirnburse SMG for the full amount of the emergency repair by depositing the
same in the Facility operating account to replenish such amount utilized from such account. City shall
make every effort to provide reimbursement within thirty (30) days of invoice. An emergency repair is
defined herein as the repair of a condition which, if not performed immediately, creates an imminent
danger to persons or property or would, in SMG's reasonable judgment, significantly impact the
operational functions of the Facility (including without limitation the holding of any scheduled event at
the Facility) and was not the result of lack of preventative maintenance, improper operation, or the
negligence or willful misconduct of SMG or any of its officers, employees, or agents.
5.6 Limitation of SMG Liabilitv.
Notwithstanding any provision herein to the contrary, except (i) for SMG's express
indemnification undertakings in Section 1 I . I ; (ii) as provided in the last sentence of Section 5.a; (iii)
the Energy Audit described in Section 7.1 (subject to the limitations contained therein); (iv) the
Convention Consultant described in Section 7.2 (subject to the limitations contained therein); and (v)
the provisions contained in Section13.2 hereof, SMG shall have no obligation to fund any cost,
expense or liability with respect to the operatior¡ management or promotion of the Facility, and any
costs, expenses or liabilities related to the operation, management or promotion of the Facility shall be
Operating Expenses.
6. Records, Audits, and Reports.
6.1 Records and Audits.
SMG shall keep full and accurate accounting records relating to its activities at the
Facility and shall provide to the Owner monttrly financial statements in a format agreed upon by the
Owner. SMG shall give the Owner'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. Additionally,
SMG shall deliver to the Owner annual financial statements within ninety (90) days after the close of
each Fiscal Year with a statement that they \ryere prepared in accordance with genelally accepted
accounting principles.
1420355v1 I 14239.0004 11
SMG shall also supply to Owner a complete financial audit in compliance with the
Government Accounting Standards Board prepaled by a reputable Certified Public Accounting firm.
The actual cost of such audit shall be paid equally by SMG, as a Facility Operating Expense, and
Owner; except that SMG's share of audit expenses shall never exceed Fifteen Thousand Dollars
($15,000.00) per year. SMG must submit such audit to City within one hundred twenty (120) days
after the close of the Fiscal Year. In the event additional costs and expenses relating to field visits to
the Facility by auditors are incun'ed due to errors and/or omissions in the financial statements plepared
and delivered by SMG hereunder, SMG shall be liable for such additional costs and expenses.
6.2
During the Management Term and the Renewal Term, if any, SMG shall provide to
Owner an annual management plan, which shall include the annual operating budget and annual cash
flow budget described in Section 5.1 for the next Fiscal Year. The annual plan shall include
information regarding SMG's anticipated operations for such Fiscal Year and requested Capital
Equipment and Capital Improvements purchases, and anticipated budgets therefor. The annual plan
shall be subject to review, revision and approval by Owner. As part of the annual plan, but no later
than June 1 of each Fiscal Year, SMG shall provide to Owner with a preliminary "projected actual to
budget" report estimate for the financial performance of the Facility in a form reasonably acceptable to
Owner. By October 1 of each Fiscal Year, SMG shall provide to Owner a final "actual to budget"
repolt in a form reasonably acceptable to Owner. Along with the final "actual to budget" report, SMG
shall provide a detailed explanation of any Operating Expense that exceeds the Facility Budget,
including any shortfall in the Advance Fund.
6.3 Monthly Reports and Meetings.
By the thirtieth (30'5 day of each month during the Management Term and the Renewal
Term, if any, SMG shall provide to Owner a wlitten monthly operational report in a format reasonably
acceptable to Owner setting out the Facility's anticipated activities and financial condition for the
upcoming month and detailed monthly financial, programmatic, and statistical reports for all Facilþ'
activities in the prior month. These reports must include all standard financial reports including those
unique to the industry; detailed financial reports on subcontract transactions; information on the
activities associated with the operation, management, supervision and maintenance of the Facilþ; a
list of upcoming events; a discussion of operating and maintenance issues and concerns; anticipated
changes in management operations or maintenance activities; and other infor-mation as appropriate or
as requested by Owner through the Contract Administrator. SMG and Owner shall work together to
tailor these reports so that all reviewing parties will understand the information provided. SMG shall
provide the Mayor, members of the City Council, and the Cþ Attorney copies of this report along
with the other reports provided for in this Section 6. SMG shall promptly notify the City Manager, and
copy the Mayor, each member of the City Council and the City Attomey, when SMG determines that a
Facility Operating Expense, including a shortfall in the Advance Fund, could cause the Facility not to
meet the Approved Budget and may require a budget amendment by the City Council. Additionally, to
facilitate communication between SMG and the City, SMG shall have the ability to meet with the City
Manager on a monthly basis to present and discuss the monthly reports, and the City Manager shall
1420355v1 I 14239.00M t2
make himself or herself available for such meetings. Moreover, on a quarterly basis, the City Manager
shall schedule a presentation by the Facility General Manager in front of the City Council to discuss
Facility operations and any changes in operating costs caused by forces outside of SMG's control.
6.4 Pa)¡able and Receivable: Monitoring and Reporting.
SMG shall make all reasonable efForts to keep accounts payable at ninety (90) days or
less. In the event that any account payable exceeds ninety (90) days, SMG will imrnediately noti$r the
City in writing of such accounts payable, along with an explanation of why this accorurt payable has
not been fully satisfied, and a reasonable plan to resolve the matter, which may include a budget
amendment approved by the City Council. Accounts receivable aged in excess of ninety (90) days
shall be reported to the City and SMG shall use commercially reasonable efforts to collect or write-off
the uncollectable balance.
6.5 Advisory Board.
The parties agree to establish and reasonably participate in an advisory board to review
Facility operations. The Advisory Board may consist of the City Manager, a City Councilmember, the
SMG General Manager, and one replesentative from each of the following: the Fresno Convention
and Visitors Bureau, the Fresno Chamber of Commerce, the Downtown Fresno Partnership, and the
Fresno area Hotel/lvfotel Industry (the "Advisory Board"). SMG will make every reasonable effort to
respond to the inquiries of the Advisory Board; however, in the event that the Facility General
Manager informs the City Manager that SMG does not have the capacity and resources to provide
information to the Advisory Board, City Manager shall promptly intervene to resolve such concern.
7. X'acility and Operational fmprovements.
7.1 Enerev Audit.
Immediately following the Effective Date of this Agreement, SMG shall retain, at its
own expense, a qualified and reputable energy management consultant acceptable to Owner to conduct
a comprehensive energy audit of the Facility (the "Energy Audif'). Within ninety (90) days of the
Effective Date, the consultant shall ptovide SMG and the City with the Energy Audit, which shall
include a report on operational and structural changes that may be made at the Facility to reduce
energy costs. SMG will institute all reasonable operational recommendations and the City may elect to
make structural improvements to the Facility based upon the Energy Audit and consultation with the
Facility General Manager. Under no circumstances, shall SMG be obligated to pay for any structural
improvements to the Facility. Within sixty (60) days after SMG's receipt of the Energy Audit, the
Facility General Manager shall present the Energy Audit repoft to the City Council with specific
recofirmendation, if any, for structural improvements to the Facility.
7.2 ConventionConsultant.
Within thifty (30) days of the Effective Date, SMG shall spend up to Five Thousand
Dollars ($5,000.00) to retain a qualified and reputable consultant, acceptable to the City, to evaluate
1420355v1 / 14239.0004 13
the reasons why the Facility has not retained more convention and other room-night business (the
"Convention Consultanf'). The Convention Consultant shall prepare a report detailing his or her
findings. In preparing the report, the Convention Consultant shall interr¡iew past Facility clients and
promoters, and make reasonable attempts to interview parties that selected other like facilities. The
cost relating to the retention of the Convention Consultant shall not be an Operating Expense but rather
shall be incurred by SMG so long as such cost does not exceed the $5,000.00 limit provided in this
Section 7.2.
7.3 Advertising and Naming Rights.
Within ninety (90) days of the Effective Date, SMG shall make available, to Owner,
local industry and legal experts and experts from SMG corporate offrces to create a plan for increasing
advertising and pursuing naming rights opportunities for the Facility. Such plan will include
recoÍtmendations for changes to the City's rnunicipal code to allow for outside signage on the Facility,
including Selland Arena and Saroyan Theater. SMG preliminalily estimates the cost of such plan to be
approximately Five Thousand Dollars ($5,000.00), which shall be a Facility Operating Expense. In the
event that it becomes apparent to SMG that professional costs for preparing an advertising and naming
rights plan will exceed Five Thousand Dollars ($5,000.00), City will be responsible and SMG will
work with the City Manager to prepare a budget amendment for approval by the City Council. In the
event that SMG brings a specific, credible, and valid proposal consistent with industry standards for a
sirnilar convention complex in California for advertising or naming rights to the attention of the City
and the City either does not accept the proposal or does not make sufficient changes to its municipal
code to allow for the proposal to proceed, SMG shall annually receive a credit, as Operating Revenue,
the amount of lost revenue dilectly attributable to that specific advertising or naming rights proposal
(the "Disallowed Proposal"). The duration of such credit shall last one or more years, consistent with
the terms contained in the Disallowed Proposal. Revenue generated from the sale of advertising and
naming rights shall be considered Operating Revenue of the Facility. The City, at its sole disuetion,
may apply net cash from such revenues to capital reserves, Employee Benefit Cost Payments, or for
the Co-Promoter Fund (as def,rned in Section 8).
8. Co-Promoter Fund.
Within sixty (60) days of the Effective Date, SMG shall create a new separate account
to be used exclusively to pay promoters to draw events to the Facility (the "Co-Promoter Fund"). Each
Fiscal Year, Cþ shall allocate Fifty Thousand Dollars ($50,000.00), at minimum, to the Co-Promoter
Fund. SMG will work with City regarding developing a plan for obtaining additional contributions to
the Co-Promoter Fund. SMG will regularly update the City Manager on progress to athact events at
the Facility and will not disburse any funds from the Co-Promoter Fund without City Manager's
approval.
9. Chukchansi Stadium.
9.1 Events at Chukchansi Stadium: Compensation.
1420355v1 I 14239.0004 l4
As of the Effective Date, SMG shall book and market, on a non-exclusive basis,
entefiainment events at the Chukchansi Stadium (the "Stadium") on such dates when the Fresno
Grizzlies Baseball Club (the "Grizzlies") does not have sole use of the Stadium (each a "stadium
Event"). For each Stadium Event, City shall retain fifty percent (50%) of the net profit and SMG shall
retain the remaining fifty percent (50%). The net profit for each Stadium Event shall not be considered
Facility Operating Revenue. Accordingly, SMG's share of Stadium Event net profit shall be additional
compensation to SMG. Any Operating Expenses incurred for each Stadium Event from the Facilþ
Approved Budget shall be treated as Stadium Event expense and shall be reimbursed to the Facility
from Stadium Event gross revenues.
9.2 . Management. Operation. and Promotion.
For each Stadium Event, SMG shall have exclusive authority over the operations of the
Stadium and all activities during each Stadium Event. SMG shall manage the Stadium for each
Stadium Event consistent with the standards for performance of services in this Agreement, and where
not expressed herein, in accordance with generally accepted industry standards.
9.3 Communication with Fresno Gtizzlies Baseball Club.
SMG shall use reasonable efforts to communicate and work with the Grizzlies or any of
its subcontractors, agents, employees, or volunteers, as the case may be. In the event that SMG
determines that it is unable to effectively carry out the obligations described in this Agreement due to
the lack of cooperation by the Glrizzlies, the City shall reasonably intervene to resolve SMG's
conceÍrs.
9.4 Right of Owner.
During each Stadium Event, Owner shall have the right to enter all porlions of the
Stadium 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 Owner may be obligated or
have the right to do under this Agreement or otherwise. In connection with the exercise of such rights,
the Owner will endeavol to provide (but is not obligated to provide) advance notice to SMG for
security purposes and to minimize any interference with or disruption of SMG's work under this
Agreement. Nothing contained in this Section 9 is intended or shall be construed to limit any other
rights of the Owner under this Agreement nor shall impose or be construed to impose upon the Owner
any independent obligation to construct or maintain or make repails, replacements, alterations,
additions or improvements to the Stadium or create any independent liability for any failure to do so.
1420355v1 I 14239.0004 15
9.5 SMG Access.
For each Stadium Event, SMG shall have access to all areas of the Stadium, except as
described in this Subsection 9.5. SMG acknowledges that the Grizzlies shall retain a portion of the
Stadium to house their administrative off,rces and to store equipment (the "Team Areas"). SMG shall
only access Team Areas with the prior consent of the City, which shall not be unreasonably withheld,
and the prior consent of the Gtizzlies. SMG also acknowledges that certain areas of the Stadium are
secured from general access due to safety and related conceÍrs (the "Secure Areas"). SMG shall only
access Secule Areas with the prior consent of the City, which shall not be unreasonably withheld.
9.6 SponsorshipsandAdvertisements.
SMG may obtain sponsorships and advertisements for each Stadium Event. All funds
obtained from such sponsorships and advertisements shall be treated as operating revenues for that
particular Stadium Event. If such sponsorships or advertisements are applicable to multiple Stadium
Events, such funds shall be allocated by SMG on a per capitabasis as reasonably determined by SMG.
10. SMG Employees.
10.1 SMG Employment.
SMG may during the Management Term and the Renewal Term, if any, select, train and
employ atthe Facility such number of employee(s) as SMG deems necessary or appropriate to satisff
its responsibilities hereunder, and SMG shall have authority to hire, terminate and discipline any and
all personnel working at the Facility. SMG shall assign to the Facility a competent general manager
and if SMG elects after the date hereof to replace the general manager who is curtently serving as of
the commencement of this Agreement, SMG shall consult with the Owner with respect to the
qualifications of the replacement general manager proposed by SMG and obtain the approval of the
Owner with respect to any such replacement (which approval shall not be unleasonably witlrheld).
Owner shall have the right to direct SMG to remove the Facility's General Manager with ninety (90)
days written notice accompanied by a written explanation of the reason for removal. In such an event,
SMG shall consult with the Owner with respect to the qualifications of the replacement general
manager proposed by SMG and obtain the approval of the Owner with respect to any such
replacement, which approval shall not be unreasonably withheld.
10.2 SMG's Employees Not Considered Employees of Owner.
SMG employees at the Facility shall not for any pulpose be considered to be employees
of Owner, 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 (including federal, state and
local income tax withholding) and any employee benefits, and all costs related to their employment
shall be an Operating Expense.
10.3 Restriction on Owner's Solicitation or Hiring of SMG's Senior Management.
1420355v1 I 14239.0004 t6
During the period comrnencing on the date hereof and ending one (1) year after the
expiration or termination of this Agreement, except with SMG's prior written consent, the Owner will
not, for any reason, directly or indirectþ, solicit for employment, or hire, any of the senior
management personnel employed by SMG at the Facility, which encompass the general manager,
director-level employees and departrnent 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.
10.4 Reduction in Employee-Related Expenses.
From the Effective Date of this Agreement to the end of Fiscal Year 2014-2015 (the
"Employee Expense Reduction Period"), the parties anticipate that the City will rcalize atotal savings
of $338,807 (or $18,822per month). Specifically, during the Employee Expense Reduction Period,
SMG shall reduce the total annual employee-related expenses for the Facility by five percent (5%) - as
compared to actual employee-related expenses in Fiscal Year 2012-2013. For illustration purposes, for
Fiscal Year 2012-2013, actual employeo-related expenses were $2,352,990. A five percent (5%)
reduction of employee-related expenses during the Employee Expense Reduction Period equates to a
total of $ 1 77 ,650, thereby reducing the total budgeted employee-related expenses to 52,235 ,340.
Additionally, the City acknowledges that the Facility will realize an additional reduction of employee-
related expenses of 5221,157 through the end of the Employee Expense Reduction Period. By
forgoing certain employee-related salary and benefit increases that were included in the Fiscal Year
2073-2014 Approved Budget and freezing employee-r'elated salaries and benefits that ale proposed to
be included in the Fiscal Year 2014-2015 proposed budget, SMG anticipates that the City's subsidy to
the Facility will be reduced by an additional S22l,l5l, which, in addition to the five percent reduction
in employee-related salaries and benef,rts ($117,645), is anticipated to result in a total savings to the
City of $338,807 during the Employee Expense Reduction Period.
Effective Noverrber 22,2013, SMG has provided written notice to eligible Facility
employees of a five percent (5%) r'eduction in salaries and benefits (the "Employee Notice"). While
the Employee Notice occurred prior to the Effective Date, City acknowledges that the Employee
Notice is credited towards the obligations contained in this Section 10.4 during the Employee Expense
Reduction Period. The City expressly acknowledges that SMG, at its sole discretion, shall detennine
the means and methods for this reduction in employee-related expenses, including reducing wages
andlor benefits. The City also acknowledges that there may be times during the course of a Fiscal
Year, including during the Employee Expense Reduction Period, that increases in the number or scope
of Facility events necessitate additional hiring for the Facility or additional hours for existing SMG
Facility employees. Additionally, during the Employee Expense Reduction Period, extemal factors
(e.g., the Affordable Care Act, any increases in payroll taxes) may cause increases in Facility
employee-related expenses. These expense may result in Actual Cost Increases in the Facility's
overall budget. Therefore, as part of the report and meeting requilements contained in Section 6.3,
SMG shall notify the City Manager of positive or negative variances of the Facility related to
employee-related expenses. Pursuant to Section 5.1, SMG shall have the right to request, at any time,
that the City Council approve a Facility budget amendment and shall have the sole discretion in using
all funds resulting from the budget amendment. SMG's failure to comply with Section 10.4 shall not
1420355v1 I 14239.0004 n
constitute a default as provided in Section 13.1, unless, as provided in Section 13.2,the actual Net
Operating Loss/Profit for any Fiscal Year hereunder, as set forth in the annual financial statements
described in Section 6.1, is greater than (or less than, as the case may be) the Net Operating LossÆrofit
set forth in the Approved Budget for such year.
11. Indemnifrcationandlnsurance.
11.1 Indemnification.
(a) General. To the fullest extent permitted by law, SMG shall indemni$r, defend
(at SMG's sole cost and expense), protect and hold harrnless City and each of its officers, officials,
ernployees, agents and volunteers, and all ofsuch party's representatives, successors and assigns, and
any lender of City with an interest in the Facility (the "Indemnifred Party(ies)"), from and against any
and all claims (including, without limitation, claims for bodily injury, death or damage to property),
demands, obligations, damages, actions, causes of action, suits, losses, judgments, fines, penalties,
forfeitures, liabilities, costs and expenses (including, without limitation, attorneys' fees, disbursements
and court costs, and any and all other professional, expert or consultants' fees and costs and SMG's
and City's general and administrative expenses) of every kind and nature whatsoever (individually, a
"Claim;" collectively, "Claims") which may arise from or in any manner relate (directly or indirectly)
to, and only to the extent of, the negligent and/or willful acts, enors andlor omissions of SMG, its
principals, officers, agents, employees, person(s) under the supervision of SMG, vendors, suppliers,
consultants, subconsultants, subcontractors, anyone employed directly or indirectly by any of them or
for whose acts they may be liable for any or all of them in performing any work or services to be
provided under this Agreement or in the course of conducting SMG's activities at or on behalf of the
Facilþ, provided, however, that the foregoing indemnification shall not extend to Claims to the extent
that such Claims relate to (i) any breach or default by the City of its obligations under this Agreernent;
(ii) the factthatthe design or condition of the Facility as of the date hereof is not in compliance with
applicable Law, including without limitation the Americans With Disabilities Act, as amended
("ADA"); (iii) changes in the design or condition of the Facility after the date hereof that are not in
compliance with applicable Law caused by Capital Improvements to the Facility contracted for by the
City; (iv) any structural defect with respect to the Facility; or (v) any act or omission carried out by
SMG at or pursuant to the direction or instruction of the City, its agents or employees. For sake of
claÅq, the following is an example of how the foregoing indemnity provision (including the above
proviso) is intended to operate, as between SMG and the City - Assume that a third party Claim is
made against SMG and the City alleging, among other things, negligence against SMG and the City
and it is discovered that in connection with such Claim, (A) the City's actions constituted a breach of
one of its obligations under the Agreement; and (B) such breach constitutes 10% of the overall liability
of SMG and the City with respect to such Claim. In such instance, SMG's indemnification of the City
with respect to such Claim would be reduced by l0% of such overall amount (related to the City's 10%
contribution to such liability); however, the City's breach of such obligation would not operate to
relieve SMG from its indemnity obligations for the remaining 90% of the amount of such Claim.
(b) Stadium Events. In relation to Section 9 of this Agreement only, to the fullest
extent permitted by law, City shall indemniff, defend (at City's sole cost and expense), protect and
t420355v1 I 14239.0004 18
hold harmless SMG and each of its officers, employees, agents, and volunteets, and all of such party's
representatives, successors, and assigns from and against any and all Clairns which may arise from or
in any manner relate (directly or indirectly) to, and only to the extent of, the negligent and/or willful
acts, erroLs andlor omissions of City, its officers, officials, agents, employees, person(s) under the
supervision of City, vendors, suppliers, contractors (including, but not limited to, the Glizzlies, Fresno
Baseball, LLC), subcontractors, consultants, subconsultants, subcontractors, anyone employed directly
or indirectly by any of them or for whose acts they may be liable for any or all of them in performing
any work or services to be provided for each Stadium Event or in the course of conducting City's
activities at or on behalf of Stadium Events, provided, however, that the foregoing indemnification
shall not extend to Claims to the extent that such Claims relate to any breach or default by SMG of its
obligations urder this Agreement.
To the fullest extent permitted by law, SMG shall indemniff, defend (at SMG's sole
cost and expense), protect and hold harmless the City and each of its officers, employees, agents, and
volunteers, and all of such party's representatives, successors, and assigns from and against any and all
Claims which may arise from or in any manner relate (directly or indirectly) to, and only to the extent
of, the negligent and/or willful acts, erors andlor omissions of SMG, its offrcers, officials, agents,
employees, person(s) under the supervision of SMG, vendors, suppliers, contractors, subconhactors,
consultants, subconsultants, subcontractors, anyone employed directþ or indirectly by any of them or
for whose acts they may be liable for any or all of them in performing any work or services to be
provided for each Stadium Event or in the coulse of conducting SMG's activities at or on behalf of
Stadium Events, provided, however, that the foregoing indemnification shall not extend to Claims to
the extent that such Claims relate to any breach or default by City of its obligations under this
Agreement.
lI.2 Subcontractorlndemnification.
If SMG should subcontract all or any portion of the work to be performed or services to
be provided under this Agreement, SMG shall require each subcontractor to indemniff, defend, protect
and hold harmless the Indemnif,red Parties in accordance with the provisions of this Section 11.
11.3 Approved Budeet.
SMG's duty hereunder to indemniff, defend, protect and hold harmless the Indemnified
Parties at SMG's sole cost and expense pursuant to Section 1 1.1 and I 1.5 hereof includes that such
cost and expense will not be paid from funds in the Approved Budget; except to the extent that (i)
SMG prevails in its action as against claimant; and (ii) such cost and expense is not recovered and
recoverable by SMG with reasonable due diligence from claimant or from any insurance proceeds
(including, without limitation, proceeds from any policy that SMG is required to maintain hereunder).
11.4 Action to Enjoin or Set Aside Agreement. SMG warrants that SMG has the
authority to enter into this Agreement and that there is no existing court order or judgment to either (i)
enjoin SMG from entering into this Agreement; or (ii) to set aside this Agreement based upon any
prior court order related to SMG directþ or indirectly. SMG shall also indemniff, hold harmless,
1420355v1 / 14239.0004 t9
protect and defend the Indemnified Parties at SMG's sole cost and expense fi'om and against all Claims
arising fi'om all suits of law or actions of every nature to enjoin SMG from entering into this
Agreement or to set aside this Agreernent. Notwithstanding Section 11.3 above, such cost and expense
will not be paid fi'om funds in the Approved Budget.
I1.5 'Warrant)¡ and Indemnification Against Infringement.
SMG warrants that the materials, equipment, devices or processes (including, without
limitation, any software or components of any database system) provided by SMG are free from
trademark, copyright and patent infringements. SMG shall also indemni$r, hold hannless, protect and
defend the Indemnified Parties at SMG's sole cost and expense from and against all Claims arising
from all suits of law or actions of every nature for or on account of the infringement of any patents,
trademarks or copyrights by reason of the use of any proprietary materials, equipment, devices or
processes, originally incorporated, or provided and used, by SMG in the performance of the work or
the services provided under this Agreement.
11.6 Insurance.
SMG shall secure and deliver to the Owner prior to the commencement of the
Management Term hereunder and shall keep in force at all times during the Management Term and the
Renewal Term, if any, such insurance policies as are described in Exhibit "8" hereto.
12. Assignment;Subcontractors;Procurement.
12.1 Assisnment.
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 acknowled ge thaf 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
12.2 Subcontractors.
As of the Effective Date, with respect to futule agreements between Facility contractors
and SMG concerning the operations of the Facility (each a "Subcontract'), SMG shall not enter into a
Subcontract, without the City Manager's written consent, in which the total compensation under the
Subcontract to the subconÍactor is between $10,000 and $50,000. Additionally, SMG shall not enter
into a Subcontract, without the City Council's consent, in which the total compensation under the
Subcontract to the subcontractor is greater than $50,000. Subcontracts requiring such approvals shall
not include tempolary licenses to use the Facility for events, concerts, or conventions. Unless agreed
to by the City in writing prior to its execution, the term of any Subcontract executed after the Effective
1420355v1 I 14239.0004 20
Date shall be coterminous with this Agreement. Upon written notice to SMG by City, City and SMG
may jointþ negotiate concession and catering subcontracts.
12.3 Procuremenl
The parties acknowledge that in certain circumstances, it may be beneficial to enter into
a Subcontract using a formalized competitive purchasing process. The City has adopted procurement
procedur.es. Likewise, SMG uses its national and international resources to obtain the best prices for
goods and services. Therefore, in the event the Facility's General Manager desires to enter into a
Subcontract with a value greater than $10,000, he or she shall notify the City Manager to determine
whether or not such Subcontract should be subject to a competitive procurement. Accordingly, at the
request of the City Manager or City Council, each Subcontract shall be subject to the City's
competitive process provisions or SMG's leveraged purchase capabilities.
13. Termination.
13.1 Termination UPon Default.
Either paúy may terminate this Agreement upon a default by the other party hereunder.
A party shall be in default hereunder if (i) such parly fails to pay any sum payable hereunder within
thfuty (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 paty. In the event
that adefault (other than a default in the payment of money) is not reasonably susceptible to being
cur.ed 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.
13.2 Termination for Failure to Meet the Budget.
The City shall also have the right to terminate this Agreement by giving SMG ninety
(90) days written notice, if the actual Net Operating LossÆrofit for any Fiscal Year hereunder, as set
forth in the annual financial statements described in Section 6.1, is greater than (or less than, as the
case may be) the Net Operating LossÆrofit set forth in the Approved Budget for such year (the
"Termination Shorlfall"). In the event of such termination, the City shall continue to pay SMG the
Employee Benefrt Cost Payments over the Amortized Period, unconditionally and without set-off;
however, if the amount of the Termination Shortfall is greater than $100,000.00, then the City shall not
be obligated to pay to SMG (and SMG shall forfeit the right to receive) the next twelve (12) monthly
installments of the Employee Benefit Cost Payment following the effective date of such termination
hereunder. SMG shall not be considered to be in breach of this Agreement solely by reason of the
existence of a Termination Shortfall.
1420355v1 I 14239.00M 2l
13.3 Effect of Termination or Expiration.
(a) In the event this Agreement expires or is terminated, (i) all Operating Expenses
defined and approved by the City Council within the Approved Budget 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 5.2 andto the extent such funds are not suff,rcient, the Owner shall pay the balance of such
expenses; and (ii) Owner shall promptly pay SMG all fees earned to the date of expiration or
termination subject to rights of set off in the event of a breach of this Agreement by SMG (the fees
described in Section 4 (as applicable) being subject to proration).
(b) Upon termination or expiration, without any further action on the pafi of SMG
or the Owner, the Owner shall, or shall cause another management company retained by it to, accept
the assignment of SMG's rights, and assume and perform all of SMG's obligations, arising after the
date of expiration or termination of this Agreement, under any licenses, occuparicy agreements, rental
agreements, booking commitments, advertising agreements, concession agreements, and any other
contracts relating to the Facility which have been executed by SMG hereunder, except (A) to the extent
that any such license, agreemenl commitment or contract was executed by SMG in violation of any of
the restrictions applicable to SMG's right to execute such licenses, agreements, commitments or
contracts contained in this Agreement; and (B) for any such license, agreement, commitment or
contract to which the consent of the other party thereto is required for such assignment and assumption
unless such consent is obtained (in the case of any such consent, SMG will use comrnercially
reasonable efforts to obtain such consent and the City will cooperate in any reasonable manner with
SMG to obtain such consent), and all frlrther obligations of the parties hereunder shall terminate except
for the obligations that are expressly intended to survive the termination or expiration of this
Agreement, including, without limitation, Sections 5.4,10.3,13.2,13.3 and 13.4.
I3.4 Surrender of Premises.
Upon termination or expiration of this Agreement, SMG shall swrender and vacate the
Facility upon the effective date of such termination or expiration. The Facility and all equipment and
fuinishings shall be returned to Owner in good repair, reasonable wear and tear excepted, to the extent
funds were made available therefor by Owner. All reports, records, including financial records, and
documents maintained by SMG at the Facility relating to this Agreement other than materials
containing SMG's proprietary information or property shall be imrnediately surrendered to Owner by
SMG upon termination or expiration.
14. Miscellaneous.
l4.I Certain Representations and Wananties.
(a) Owner represents and warrants to SMG the following: (i) all required approvals
have been obtained, and Owner has full legal right, power and authority to enter into and perform its
obligations hereunder; (ii) this Agreement has been duly executed and delivered by Owner and
constitutes a valid and binding obligation of Owner, enforceable in accordance with its terms, except
1420355v1 I r4239.00M 22
as such enforceability may be limited by bankruptcy, insolvency, reorganizationol similar Laws
affecting creditors' rights generally or by general equitable principles; and (iii) the execution and
delivery of this Agreement will not violate or cause a breach (with or without notice or the passage of
time) under any agreement to which Owner is a party, including, without limitation, the City
Agreement.
14.2 Certain Other Provisions.
(a) Use by the Citv. City use of the Facility shall (i) be booked in advance upon
reasonable notice to SMG; (ii) not in conflict with dates previously booked by SMG for events; and
(iii) not consist of Normally Touring Attraitions (other than for occasional fund-raising events
coordinated in advance with SMG). The City shall provide SMG credit as Operating Revenue the
published rental rate for any City use of the Facility. SMG, however, shall invoice, and the City shall
promptly pay, SMG for direct out-oÊpocket expenses incurred in connection with the City's use of the
Facility. Such direct out-of-pocket expenses shall include, but not be limited to, employee time,
utilities, clean-up, food and beverage service, and linens. Upon request of City through the Contract
Administrator, SMG shall provide to City a list of available dates for City use of the Facility. To the
extent that SMG has an opportunity to book a revenue producing event on a date which is otherwise
reserved for use by City, SMG may propose alternative dates and other incentives for City to consider
in rescheduling its event, and City shall use reasonable commercial efforts to attempt to reschedule
such event; provided, that City shall not be obligated to reschedule its event. The City may fi'om time-
to-time direct SMG to book events at the Facility for organizations or entities unaffiliated with the
City. The City shall provide SMG with reasonable notice of such events and make, or cause to be
made, immediate payment for all expenses, including, but not limited to, rental charges and out-of-
pocket expenses, incured in connection with such use.
(b) Non-Competition. SMG agrees that it shall not, directly or indirectly,
participate in or encourage development of, own, manage or provide consulting, or other management,
marketing or promotion services, whether as a principal, partner, joint venture, member, consultant,
agent, independent contractor, or stockholder of any company or business with respect to the following
specific venues:
(Ð City of Fresno: Fresno State University's proposed hotel conference
center.
(ii) Indian Tribe Property: Tribal gaming centers and future facilities within
Kings, Madera and Fresno Counties.
(iiÐ City of Clovis: Clovis center/theater.
(iv) County of Fresno: Any convention center facility or other facility with
exhibition, meeting and banquet space (excluding for sake of clarity, the Savemart Center at
Fresno State University).
1420355v1 I 14239.0004 23
(c) CooperationÀdediation/Litigation. The parties desire to cooperate with each
other in the rnanagement and operation of the Facility pursuant to the terms hereof. In keeping with
this cooperative spirit and intent, any dispute arising hereunder will first be refened to the parties'
respective agents or representatives prior to either party initiating a legal suit, which will endeavor in
good faith to resolve any such disputes within the limits of their authority and within forty-frve (45)
days after the commencement of such discussions. If any dispute between the parties has not been
resolved pursuant to such a good faith resolution, the parties will endeavor to settle the dispute by
nonbinding mediation under the then current CPR International Institute for Conflict Prevention and
Resolution ("CPR") model procedure for mediation of business disputes or, if such model procedure
no longer exists, some other mutually agreeable procedure. The parties agree thatany mediation
proceeding (as well as any discussion pursuant to paragraph (a) above) will constitute settlement
negotiations for purposes of the federal and state rules of evidence and will be treated as non-
discoverable, confidential and privileged communication by the parties and the mediator. No
stenographic, visual or audio record will be made of any mediation proceedings or such discussions.
All conduct, statements, promises, offers and opinions made in the corilse of the mediation or such
discussion by any púy, its agents, employees, representatives or other invitees and by the mediator
will not be discoverable nor admissible for any purposes in any litigation or other proceeding involving
the parties and will not be disclosed to any third party. Participation in such nonbinding mediation
shall in no way waive a paúy's right to pursue any and all available judicial remedies.
(d) Independent Contractor. In the furnishing of the services provided for herein,
SMG is acting as an independent contractor. Neither SMG, nor any of its officers, associates, agents
or employees shall be deemed an employee, pafiner, joint venture or agent of Owner for any pulpose.
However, Owner shall retain the right to verifu that SMG is performing its respective obligations in
accordance with the terms hereof.
(e) Entire Asreemenl Amendments. This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof and supersedes all prior agreernents and
understandings with respect thereto. No other agreements, representations, warlanties or other matters,
whether oral or written, will be deerned to bind the parties hereto with respect to the subject matter
hereof. 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.
(Ð Force Majeure. No party will 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, lightning storms, earthquakes,
floods, storms, washouts, civil disturbances, explosions, acts of terrorism, breakage or accident to
machinery or lines of equipment, temporary failure of equipment,freezingof equipment and any other
cause whether of the kitrdç 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.
1420355v1 I 14239.0004 24
(g) Binding Upon Successors and Assigns. 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.
(h) Notices. Any notice, consent or other communication given pursuant to this
Agreement will be in writing and will 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 confirrnation therefor as long as such telecopy transmission is 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 Owner:
City of Fresno
Attention: Bruce Rudd, City Manager
2600 Fresno Street Room 2064
Fresno, California 93721
Telecopy: (559) 621-7776
To SMG:
SMG
Attention: John Bums, Senior Vice President
300 Conshohocken State Rd. Suite 450
West Conshohocken, Pennsylvania 19428
Attention: President
Telecopy: (610)729-1590
With a copy to:
Baker Manock & Jensen, PC
5260 North Palm Avenue, Fourth Floor
Fresno, California 93704
Attention: Kenneth J. Price, Esq.
Telecopy: (559)432-5620
(Ð Governins Law: Counterpafis. This Agreementwill be governed by and
construed in accordance with the internal Laws of the State of Califomia, without giving effect to
otherwise applicable principles of conflicts of law. Venue for purposes of the hling of any action
regarding the enforcement or interpretation of this Agreement and any rights and duties hereunder shall
be Fresno County, California. This Agreement may be executed in two or lnore counterparts, each of
1420355v1 1r423s.0004 25
which shall be deemed an original copy of this Agreement, and all of which, when taken together, shall
be deemed to constitute but one and the same agreement.
û) 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.
(k) Non-Waiver. A failule by either pafty to take any action with respect to any
default or violation by the other of any of the tems, 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.
(l) Attorney's Fees. If either party is required to cornmence any proceeding,
arbitration or legal action to enforce or interpret arry term, covenant or condition of this Agreement, the
prevailing par"ty in such proceeding or action shall be entitled to recover from the other party its
reasonable attorney's fees, costs and legal expenses.
(-) Govemmental Compliance. In providing the services required under this
Agreement, SMG shall at all times comply with all applicable Laws now in force and as they may be
enacted, issued, or amended during the term of this Agreement. However, SMG shall have no liabilþ
under this Agreement therefor, if such activity requires any Capital lmprovements or Capital
Equipment purchases, unless Owner provides funds for such Capital lmprovements and Capital
Equipment purchases. SMG will promptly provide notice to the City if SMG becomes aware of any
condition such non-compliance that requires Capital Implovements or Capital Equipment purchases to
remedy the same; provided, however, as soon as practicable after the date hereof (but no later than six
(6) months after the date hereof) and on such other basis thereafter as the parties may mutually agree,
SMG and the City will cooperate in, and mutually agreed upon, the plaruring and implementation of an
inspection of the Facility for any such non-compliance issues to be performed by a qualified thfud
party(ies) and/or qualified City employees or subcontractors (including without limitation a Phase I
environmental analysis of the Facility), the costs of which inspection shall be provided for in the
applicable Approved Budget.
ilt
t420355v1 / 14239.0004 26
(Ð Bond Counsel Approval. The terms of this Agreement shall be subject
to the Owner's bond counsel approval to ensure tax law and bond covenant compliance. Upon advice
from Owner's counsel, the parties agree to cooperate to revise the Agreement to make the terms
contained herein comply with tax law and bond covenants.
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto
as of the day and year first above written.
CITY OF FRESNO ("Owner")
By:t2.t8-(3
Name: R h Badhesha
Title:Deputy City Attorney
SMG
Ch¡ef Financial Offi¡nr
APPROVED AS TO FORM:
1420355v1 / 14239.00M 27
EXHIBIT *Ä''
Services
1. Without limiting the generality of Section 2.1 of this Agreement, SMG shall
have, without (except as otherwise expressly noted below) any prior approval by Owner, sole right and
authority to:
(a) Provide or cause to be provided, through itself and/or one or more of its
Affiliates and/or third pafry subcontractors, booking services, catering and concession services,
decorating services, maintenance services, and all other services in connection with the
management, promotion and operation of the Facility. Without limiting the generality of the
foregoing, SMG shall (A) conduct daily Facility' inspections by its on-site staff and "Mystery
Shopper Program" inspections at least twice in each Fiscal Year and shall provide the Contract
Administrator a copy of the Mystery Shopper report(s) within ten (10) days of its receipt by
SMG to allow the City to monitor how the Facility is managed and maintained; and (B) subject
to the approval of the Owner and the Owner's bond counsel, develop, implement and manage a
system for selling Commercial Rights at or in connection with the Facilþ, either itself or
through a subcontracted entity, provided that the Owner approves such subcontlactor in
advance (which consent will notbe unreasonably withheld). Any amounts due to a third party
selling the Cornmercial Rights shall be an Operating Expense.
(b) Negotiate, execute in its own name as an independent contractor, deliver
and administer any and all licenses, occupancy agreements, rental agreements, booking
commitments, advertising and sponsorship agreements, catering and concession agreements,
decorating agreements, supplier agreements, service contracts and all other contracts and
agreements in connection with the management, promotion and operation of the Facilþ,
subject to (1) the fact that if any such license, agreement, commitment or contract other than
those involving the license, lease or rental of any of the Facility (or any portion thereof) in the
ordinary cowse has aterm that extends beyond the remaining Management Term, such license,
agreement, commitment or contract shall be approved in advance by Owner (which approval
shall not be unreasonably witlrheld); and (2) the provisions of subsection (h) below. In
connection with any licenses, agreements, commitments or contracts for the Facility, SMG will
include in such documents the right of SMG to assign all of its rights and obligations under
such licenses, agreements, commitments and contracts to the Owner (or to any successor
management company retained by the Owner) upon the expiration or termination of this
Agreement, and upon such expiration or termination, such assignment and assumption shall
automatically occur as provided in Section 13.3(b) hereof.
(c) Establish and adjust prices, rates and rate schedules for the aforesaid
licenses, agreements and contracts and any other commitments relating to the Facility to be
negotiated by SMG in the course of its management, operation and prornotion of the Facility.
In determining such prices and rate schedules, SMG shall evaluate comparable charges for
similar goods and services at similar and/or competing facilities and shall consult with the
Owner about, and shall obtain the approval of the City Council with respect to, any adjustments
to the rate schedules at the Facility to be made by SMG;
1420355v1 I 142f9.00M
B # 846930 v.4
(d) To the extent that Operating Revenues or funds supplied by Owner are
made available therefor, (1) maintain the Facility in the condition received, reasonable wear
and tear. excepted; and (2) rent, lease or purchase all equipment and maintenance supplies
necessaly or appropriate for the operation and maintenance of the Facility provided that Owner
shall be responsible for undertaking all Capital Improvements and Capital Equipment
purchases as provided in Section 5.3;
(e) To the extent that Operating Revenues or funds supplied by Owner are
made available therefor, pay, when due all Operating Expenses from accounts established
pursuant to Sections 5.2 of this Agreement;
(Ð After consultation with and approval by the Contract Administrator and
the City Attomey, institute on behalf of the Facility and the City at the reasonable expense of
the City or as an Operating Expense, with counsel selected by SMG, such legal actions or
proceedings as SMG shall deem necessary or appropriate in connection with the operation of
ihe Facility, including, without limitation, to collect charges, rents or other revenues due to
SMG as manager of the Facility or to cancel, terminate or sue for damages under, any license,
use, adver-tisement or concession agreement for the breach thereof or default thereunder by any
licensee, user, advertiser, or concessionafte atthe Facility;
(g) 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;
(h) Work with the Fresno Convention and Visitor's Bureau in such manner
as requested by the Owner.
(Ð Operate or cause to be operated the Parking Alea for use as apay
parking lot for autornobiles and for no other use unless approved by the Owner. Parking fu'ea
rnAt U" operated and maintained as first class parking facilities open to public use, and with
established rates approved by the Owner and staffed by suffrcient personnel to ensure the
prompt and efficient movement ingress and egress of traffic. Overnight parking shall not be
permitted by SMG, except as specifically required to accommodate an event on a temporary
basis in the course of operations at the Facility;
2. SMG acknowledges that the Facility is financed in large part with the proceeds
of one or more series of City bonds ("Bonds"), the interest of which is intended to be excluded from
gross income for federal incorne tax purposes. In order to assist Owner in preserving the tax-exempt
nature of the Bonds, SMG acknowledges and agrees to that contained in this section.
(a) In determining whether to grant or withhold any approval of any contract
for which approval of Owner is required urder this Agreement, Owner may consider the effect
of such contract for federal tax purposes on the exclusion of interest on the Bonds for federal
income tax purposes.
(b) In addition to any other contracts requiring the approval of Owner, each
of the following described contracts must be approved by Owner before execution thereof by
SMG.
1420355v1 I 14239.0004
B # 846930 v.4
(i) Any contract relating to the Facility which grants a leasehold
intelest, term for years, or other real estate interest in the Facility (other than a
revocable license), or grants a long-term right to use the Facility on a basis different
from that of the general public.
(iÐ Any contract for the provision of services related to the Facility
must, to the extent applicable, comply with the provisions of Revenue Procedule 97-13
and the interpretations thereof.
(iiÐ Any contract for the use of the Facility for shows, programs,
conventions and other events, unless such contracts provide for use on a fixed fee basis
(excluding the sale of merchandise or concessions in respect thereto which may be on a
percentage of rnerchandise or concession revenues), determined on an event by event
basis and where the right of the user to the Facility are those of a transient occupant
rather than full legal possessory interest in the Facility as a lessee.
(c) If required by bond counsel to Owner or counsel to the underwriters,
SMG agrees to make modifications to this Agreernent so that the same is, in the opinion of such
counsel, a qualified management contract for purposes of Revenue Procedure 97-13
promulgated by the Internal Revenue Service. In the event such modifications shall materially
increase SMG's obligations hereunder or materially decrease SMG's right or economic benefits
hereunder, SMG and Owner will cooperate with each other in good faith for aperiod of thirty
(30) days in an effort to amend the Agreement and preserve the economic benefits of both
parties hereunder in a manner that is satisfactory to SMG, Owner and Owner's bond counsel,
each acting in their sole discretion. To the extent the parties do not amend this Agreement
within such 30 day period, SMG shall have the right to terminate this Agreement upon not less
than ninety (90) days prior written notice to Owner, which right may be exercised by SMG
providing such termination notice to Owner is within twenty (20) business days after expiration
of the 30 day negotiation period. If SMG timely exercises its right of termination under this
Paragraph2(c), SMG shall continue to perform its obligations hereunder thlough the date of
termination and Owner shall continue to pay SMG all of its management fees, on a prorated
basis for the then cun'ent Fiscal Year, through the date of termination in accordance with this
Agreement.
1420355v1 I 14239.0004
B # 846930 v.4
EXHIBIT "B'
Insurance
(a) Throughout the term of this Agreement, SMG shall acquile and maintain in full
force and effect all policies of insurance required hereunder with an insurance company(ies) either (i)
adrnitted by the California Insulance Commissioner to do business in the State of California and rated
not less than "A- VII' in Bests Insurance Rating Guide; or (ii) authorized by the Owner's Risk
Manager. The following policies of insurance are required:
(Ð COMMERCIAL GENERAL LIABILITY insulance which shall include
blanket contractual, independent contractor's liability, personal injury and advefiising liability,
products and completed opelations coverages, bodily i"ju.y and property damage liability
insurance with combined single limits of not less than $1,000,000 per occurrence. (This policy
shall include a broad form comprehensive general endorsement.)
(iÐ LIQUOR LIABILITY insulance of not less than $2,000,000 per
occuffence. (Contingent liquor liability is required of SMG and liquor legal liability shall be
required by SMG of any concessionaile, vendor, licensee or other host engaged in such activity
to which this coverage is applicable.)
(iiÐ UMBRELLA or EXCESS LIABILITY insurance of not less than
$5,000,000 per occurrence and aggregate.
(Ð COMMERCIAL AUTOMOBILE LIABILITY insurance, endorsed for
"any auto," with combined single limits of liability of not less than $1,000,000 per occurrence.
(v) PROFESSIONAL LIABILITY insurance (Errors and Omissions)
including employment practices, with a limit of liability of not less than $1,000,000 per claim.
(vÐ CRIME COVERAGE covering the activities of all of SMG's employees
from employee dishonesty, forgery, theft, robbery and safe burglary in an amount not less than
$1,000,000.
(viÐ WORKERS' COMPENSATION and EMPLOYER'S LIABILITY
insurance as required under the California Labor Code.
The above described policies ofinsurance shall be endorsed to provide an unrestricted
30 day written notice in favor of Owner of policy cancellation of coverage, except for the 'Workers'
Compensation policy which shall provide a 10 day written notice of such cancellation of coverage. In
the event any policies are due to expire during the Operating Term or any extension period of this
Agreement, SMG shall provide a new certificate evidencing renewal of such policy on or prior to the
expiration date of the expiring policy(ies). Upon issuance by the insurer, broker, or agent of a notice
of cancellation in coverage, SMG shall file with Owner a new certificate for such policy(ies).
(b) The Commercial General Liability policy, Automobile Liability insurance
policy, Liquor Liability policy, and Umbrella or Excess Liability policy shall be written on an
occuffence form and shall name Owner, its officers, officials, agents, employees and volunteers as an
additional insured. The Workers' Compensation policy shall contain a waiver of all rights of
1420355v1 I r4239.00M
subrogation against Owner. Such policy(ies) of insurance shall be endorsed so SMG's insurance shall
be primary and no conh'ibution shall be required of Owner.
(c) In the event claims made forms are used for any Professional Liability coverage,
either (i) the policy(ies) shall be endorsed to provide not less thana 3-year discovery period; or (ii) the
coverage shall be maintained for a minirnum of 3 years following the tennination or expiration of this
Agreement.
(d) SMG shall have fi¡rnished Owner with the certificate(s) and applicable
endorsements for all required insurance prior to Owner's execution of this Agreement. SMG shall
fumish Owner with copies of the acfual policies upon the request of Owner's Risk Manager at any
time during the life of the Agreement or any extension.
(e) SMG will be responsible for payment of any and all deductibles contained in
any insurance policies provided hereunder for Crime Coverage and Professional Liability, and SMG
will also be responsible for payment of any and all selÊinsured retentions regarding same; and such
deductibles and retentions will be at SMG's sole cost and expense and will not be paid from funds in
the Approved Budget. If there are changes in the insurance market after the execution and delivery of
this Agreement that cause adverse modifications to the shucture of deductibles and/or self-insured
retentions applicable to SMG's insurance policies existing as of the date of such execution arid
delivery, the parties shall meet to discuss such modifications and to mutually agreed upon reasonable
changes to the provisions of this subparagraph (e).
(Ð If at any time during the life of the Agreement, SMG fails to maintain the
required insurance in fulI force and effect, all work under this Agreement shall be discontinued
immediately, and all payments due or that become due to SMG shall be withheld until notice is
received by Owner that the required insurance has been restored to fuIl force and effect and that the
premiums therefore have been paid for a period satisfactory to Owner. Any failure to maintain the
required insurance shall be sufficient cause for Owner to terminate this Agreement.
(g) If SMG should subcontract all or any portion of the services to be performed
under this Agreement, SMG shall require each subcontractor to provide insurance protection in favor
of Owner, its off,rcers, officials, employees, agents and volunteers in accordance with the terms of this
Exhibit B, except that the subcontractors' certificates and endorsements shall be on file with SMG and
Owner prior to the comrnencernent of any work by the subcontractor.
(h) The Crime Coverage and Professional Liability insurance will be provided by
SMG at its sole cost and expense and will not be paid from funds in the Approved Budget.
1420355v1 114239.00M