management agreement between sedgwick county and smg

8/6/2019 Management Agreement between Sedgwick County and SMG

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MANAGEMENT AGREEMENTBETWEEN

SEDGWICK COUNTY, KANSASANDSM G

Dated as of August 1,2007


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MANAGEMENT AGREEMENTTHIS MANAGEMENT AGREEMENT (this "Agreement") dated as of the lS'

day of August, 2007, is entered into by and between Sedgwick County, Kansas, a municipalcorporation organized and existing pursuant to K.S.A. 19-101 (the "County" or the "Owner"),and SMG, a Pennsylvania general partnership, whose current address is 701 Market Street, 4thFloor, Philadelphia, PA, 19106 ("SMG").

BACKGROUNDThe County is (i) the owner and current operator and manager of the Kansas

Coliseum Complex located in Sedgwick County, Kansas, currently consisting of the Britt BrownArena (if the County elects to continue to use it as an event venue), three (3) Pavilion facilitieshousing an equestrian and livestock center and storage and utility buildings, and WiedemannPark (collectively, "Existing Facility"), and (ii) the owner of, and is currently developing andconstructing, a new arena with a seating capacity of 15,000 for basketball games and up to17,000 for certain concerts to be located in the City of Wichita, Kansas ("New Facility") (theNew Facility and Existing Facility are each individually and collectively (as the context mayrequire) referred to as the "Facility").

SMG is engaged, among other things, in the business of providing pre-openingconsulting services and management services, including operations and marketing services forpublic assembly facilities.

The County desires to engage SMG, and SMG desires to accept such engagement,to provide pre-opening consulting services and management services for the Facility on the termsand conditions set forth herein.

The County intends to work in mutual accord with SMG in order to ensureprovision of high quality management services, thereby enhancing the use and enjoyment of theFacility.

NOW, THEREFORE, in consideration of the mutual premises, covenants andagreements herein contained, the parties hereto, intending to be legally bound, hereby agree asfollows:1. Definitions

For purposes of this Agreement, the following terms have the meanings referredto in this Section 1

"ADA" - he Americans with Disabilities Act, 42 U.S.C. Sections 12101-12213as amended by the Civil Rights Act of 1991 (42 U.S.C. Section 1981(a)), as it now exists and asit may be amended in the future by statute or judicial interpretation.

"Affiliate" - a Person that directly or indirectly, through one or moreintermediaries, controls or is controlled by, or is under common control with, a specified Person.


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For purposes of this definition, "control" means owne rship of equity securities or otherownership interests which represent m ore than 40% of the voting power in the controlled Person."Approved Budget" - ny bud get submitted by SM G, as approved in w riting bythe County pursuant to Section 5 hereof."CERCLA" - he C omp rehensive Environmental Response, Com pensation andLiability Act, as amend ed by the Superfund Am endments and Reauthorization Act."Capital Equipment" - any and all furniture, fixtures, machinery or equipmen t,either additional or replacement, having a per item original cost of $5,000 o r more and anexpected useful life of m ore than o ne year."Capital Improvements" - any and all building additions, alterations, renovations,repairs or improvements that have an initial dollar cost of not less than $7,500 per project.Capital Improvements shall not include routine maintenance and repair projects w hich in theaggregate exceed $7,500."Consulting Period" - he period commencing as of August 1 ,2 00 7 and endingon the date which is immediately prior to the commencement of the Managem ent Term for theNew Facility (defined below)."Consulting Services" - s defined in Sec tion 2.5(a) hereof."Contract Administrator" -- the senio r administrative official of the County asfrom time to time ap pointed by the County M anager, or such individual person as may from timeto time be authorized in w riting by such administrative official to act for himiher with respect toany or all matters pertaining to this Agreement."County" - s defined in this first paragraph of this Agreement."Event Expenses" - ny and all expenses incurred or payments made by SMG inconnection with the occurr ence of eve nts at the Facility, including but not limited to costs forevent staffing including u shers, ticket takers, security and other ev ent staff, and costs relating tosetup and cleanup."Existing Facility" - he more detailed description of each of the facilitiescomprising the Kansas Coliseum com plex (i.e., B ritt Brown Arena (if the County e lects tocontinue to use it as an ev ent ven ue), all Pavilion facilities housing an equestrian and livestockcenter and storage and utility buildings, and Wiedemann Park), as set forth on Exhibit "F"

attached hereto."Facility" - s defined in the first paragraph of the B ackground section of thisAgreement."Fiscal Year" - a on e year period beginning January 1 and ending December 3 1.


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"Laws" - all federal, state, local and municipal regulations, ordinances, statutes,rules, laws and constitutional provisions.

"Losses" - any and all losses, liabilities, claims, damages and expenses (includingreasonable attorneys' fees).

"Management Term" - as defined in Section 3.2 hereof."Net Operating LossIProfit" -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 thecase of a loss, and the excess, if any, of Operating Revenues for such Fiscal Year over OperatingExpenses for such Fiscal Year, in the case of a profit.

"New Facility" - he new arena owned by the County to be located in the City ofWichita, Kansas (currently under construction and development) as more particularly describedin Exhibit "F" hereto.

"Operating Expenses" - any and all expenses and expenditures of whatever kindor nature incurred by SMG in promoting, operating, maintaining and managing each Facility,including, but not limited to: employee compensation and related expenses (e.g., base salaries,bonuses, severance and car allowances), employee benefits and related costs (e.g., relocation andother related expenses pursuant to SMG's relocation policy (a copy of which will be providedupon request), parking and other fringe benefits), supplies, material and parts costs, costs of anyinterns and independent contractors, advertising, marketing and public relations costs andcommissions, janitorial and cleaning expenses, data processing costs, dues, subscriptions andmembership costs, the costs of procuring, administering and maintaining the insurance referredto in Section 8 below, amounts expended to procure and maintain permits and licenses, charges,taxes, excises, penalties (excluding penalties incurred solely as a result of SMG's actions or ,inactions and/or any breach by SMG of this Agreement) and fees, professional fees, printing andstationery costs, Event Expenses, postage and freight costs, bank services charges, equipmentrental costs, computer equipment leases and line charges, copier/printer/facsimile equipmentlease charges, repairs and maintenance costs (e.g., elevators and HVAC), security expenses,utility and telephone charges, travel and entertainment expenses in accordance with SMG'spolicies, the cost of employee uniforms, safety and medical expenses, exterminator and wastedisposal costs, costs relating to the maintenance of signage inventory and systems, the cost ofannual independent audits of the Facility, the cost of compliance with laws and regulations, costsincurred under agreements, commitments, licenses and contracts executed in SMG's own nameas provided in Section 2.3(c) hereof, and reasonable attorneys' incurred by SMG in enforcingsuch agreements, commitments, licenses and contracts as provided in Section 2.3(h) hereof, allas determined in accordance with generally accepted accounting principles and recognized on afull accrual basis; provided that Operating Expenses shall not include (i) expenses orexpenditures in connection with Capital Improvements and Capital Equipment purchases, (ii) thefees payable pursuant to Section 4.3 below, (iii) the cost of property taxes for the Facility and thecost of insurance premiums incurred by the County to purchase property and hazard insurancerelating to the Facility and their respective premises for physical damage and insurance coveringbusiness interruption and extra expenses with regard to the operation of the Facility, (iv) anyexpenses associated with the naming rights sponsor for the Facility, including without limitation


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the annual costs of servicing such naming rights sponsor and any commissions paid toSuperlative or its replacement in connection with its efforts in securing such sponsor, and (v) anyexpenses 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 suchcorporate or regional personnel in connection with SMG's management of the Facility, whichcosts shall be Operating Expenses). In addition, for purposes of (A) calculating Net OperatingLossIProfit and SMG's fees and Net Operating Loss funding obligations hereunder and (B)identifying Operating Expenses which will be budgeted in the Approved Budget, OperatingExpenses shall exclude all extraordinary expenses and all interest, income tax, depreciation andamortization expenses.

"Operating Revenues" - any and all revenues of every kind or nature derivedfrom owning, operating, managing or promoting the Facility, including, but not limited to:license, lease and concession fees and rentals, revenues from merchandise sales, advertising andsponsorship sales and renewals, event sponsorship revenues, equipment rentals, utility revenues,box office revenues, ticket surcharges (if any), ticket service fees, parking revenues received forparking at the Facility, food service and concession revenues (however, if such revenues arecollected in the first instance by and retained by the concessionaire, the amount of such revenuesowed by the concessionaire to the Facility shall be included as Operating 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 suchsubcontractors, the amount of such revenues owed by such contractors to the Facility shall beincluded as Operating Revenues), miscellaneous operating revenues, revenues generated fromseparate agreements with SMG Affiliates pertaining to the Facility, and interest revenues, all asdetermined in accordance with generally accepted accounting principles and recognized on a fullaccrual basis. For the sake of clarity, the parties acknowledge that revenues from the sale oftickets for events at the Facility are not Operating Revenues, but are instead revenues of thepromoter and/or performer of each such event. To the extent that SMG collects such ticket salerevenue on behalf of such promoter andlor performer, such ticket sale revenue shall be the sourceof funds from which SMG collects the rental charges and other event reimbursements due bysuch promoter and/or performer for use of the Facility, which such charges and reimbursementsare Operating Revenues hereunder. Notwithstanding the foregoing, revenues from the sale bythe County of naming rights for the Facility shall be excluded from Operating Revenueshereunder, but certain elements from the sale of such rights will be credited to the calculation ofNet Operating ProfitLoss as provided in Section 4.3 hereof.

"Person" - any individual, general partnership, limited partnership, limitedliability partnership, partnership, corporation, joint venture, trust, business trust, limited liabilitycompany, cooperative, or association, and the successors and assigns of any of the foregoing and,unless the context otherwise requires,-the singular shall include the plural, and the masculinegender shall include the feminine and the neuter, and vice versa.

"Pre-existing Agreement" - each contract, license, agreement, option, lease andcommitment existing as of the date of the commencement of the Management Term (i) for theExisting Facility that grants any Person any right (A) to license, use, occupy or rent all or anyportion of the Existing Facility, or (B) to provide services to be used in the management,operation, use, possession, occupation, maintenance, promotion or marketing of all or any


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portion of the Existing Facility, and that will be listed by the County on Exhibit "A" hereto atleast thirty (30) days prior to the commencement of such Management Term and (ii) for the NewFacility the County's agreement with The Superlative Group, Inc. ("Superlative"), a copy ofwhich has been provided to SMG, and any sponsorship (including naming rights), advertisingand premium seating agreement entered into by the County based upon Superlative's effortsunder its agreement with the County that is or are listed by the County on Exhibit "A" hereto atleast thirty (30) days p~ioro the commencement of the Management Term for the New Facility.

"Pre-Opening Budget" - as defined in Section 2.5(g) hereof."Renewal Term" - he additional period for which this Agreement may be

renewed in accordance with Section 3.2 hereof beyond the Management Term."SMG - as defined in the first paragraph of this Agreement."Transition Period" - he period of time that begins forty-five (45) days prior to

the commencement of the Management Term for the Existing Facility and ends immediatelyprior to the commencement of such Management Term.2. Engagement of SMG; Scope of Services.

2.1 Engagement.(a) General Scope. The County hereby engages SMG to (i)provide theConsulting Services during the Consulting Period, and (ii) maintain, promote, operate and

manage the Facility during the Management Term and the Renewal Term, if any, upon the termsand conditions hereinafter set forth, and SMG hereby accepts such engagement.

(b) Manager of the Facility. Subject to the terms of this Agreement, SMGshall be the sole and exclusive manager of the Facility responsible for maintaining, managing,operating and promoting the Facility during the Management Term and the Renewal Term, ifany. In such capacity, SMG shall have exclusive authority over the day-to-day operation of theFacility and all activities therein; provided that SMG shall follow all policies and guidelines ofthe County hereafter established or modified by the County that the County notifies SMG inwriting are applicable to the Facility (including without limitation any methodology pertaining tothe allocation of any costs and expenses by the County to the Facility as permitted herein).

(c) Independent Contractor. SMG's engagement hereunder is of acontractual nature. Both parties assert and believe that SMG is acting as an independentcontractor in providing the services and performing the duties hereunder. SMG is at all timesacting as an independent contractor and not as an agent of the County. As an independentcontractor, SMG and employees of SMG will not be within the protection or coverage of theCounty's worker compensation insurance, nor shall SMG, and employees of SMG, be entitled toany current or future benefits provided to employees of the County. Further, the County shallnot be responsible for withholding social security, federal, and/or state income tax, orunemployment compensation from payments made by the County to SMG. SMG's performanceof those services required hereunder shall be in SMG's own name and subject to the limitationsof this Agreement.


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(d) Approval of the County. To the extent that the approval of the County isrequired under the terms of this Agreement, the written approval of the Contract Administratorshall constitute the approval of the County, except to the extent the approval of another party isexpressly required by the terms of this Agreement.

2.2 Scope of Services -Generally; Standard of CareSMG shall perform and furnish such management services and systems as are

appropriate or necessary to maintain, operate, manage and promote the Facility during theManagement Term and the Renewal Term, if any, in a manner consistent with SMG's policiesand procedures and the operations of other similar first-class facilities.

In providing services under this Agreement, SMG shall maintain the standard ofcare, diligence and professional competency as is customary in the industry. SMG shallcontractually require all of its consultants or contractors to provide services at the same standardof care, skill, diligence and professional competence required of SMG. SMG shall exercise allreasonable and customary precaution to prevent any harm or loss to all persons or propertyrelated to this Agreement.

2.3 Specific Services.Without limiting the generality of the foregoing, SMG shall perform the following

services, which SMG has the sole right and authority to perform without (except as otherwiseexpressly noted in this Agreement) any prior approval by the County:

(a) employ (subject to Section 7.2), supervise and direct employees andpersonnel consistent with the provisions of this Agreement;

(b) administer relationships with all subcontractors, concessionaires and allother contracting parties to the Pre-Existing Agreements, assume responsibility for any and allnegotiations, renewals and extensions (to the extent SMG deems any of the foregoing to benecessary or desirable) relating to such Pre-Existing Agreements, and enforce the Pre-ExistingAgreements;

(c) negotiate, execute in SMGYs wn name, deliver and administer any and alllicenses, occupancy agreements, rental agreements, booking commitments, advertisingagreements, concession agreements, supplier agreements, service contracts (including, withoutlimitation, contracts for cleaning, decorating and set-up, snow removal, general maintenance andmaintenance and inspection of HVAC systems, elevators, stage equipment, fire control panel andother safety equipment, staffing and personnel needs, including guards and ushers, and otherservices which are necessary or appropriate) and all other contracts and agreements inconnection with the maintenance, management, promotion and operation of the Facility,provided that (i) if any such license, agreement, commitment or contract other than thoseinvolving the license, lease or rental of the Facility in the ordinary course has a term that extendsbeyond the remaining Management Term or, if this Agreement has been renewed, the RenewalTerm, such license, agreement, commitment or contract must prior thereto be approved inwriting by the County (which approval shall be at the County's sole discretion, not to be


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unreasonably withheld), and (ii) SMG and the County will have joint approval rights (whichapproval right shall be at each party's sole discretion, not to be unreasonably withheld) for allmajor revenue streams that can impact the profitability of any Facility, including ticketing,sponsorships, food and beverage, and tenant leases with terms of one year or greater. Inconnection with any licenses, agreements, commitments or contracts for the Facility, SMG willuse best efforts to include in such documents (i) the right of SMG to assign all of its rights andobligations under such licenses, agreements, commitments and contracts to the County or to anysuccessor management company retained by the County upon the expiration or termination ofthis Agreement, and (ii) the right of the County to assign its rights and obligations under suchdocuments to any successor management company retained by the County thereafter. Upon theexpiration or termination of this Agreement, an assignment and assumption by and betweenSMG and the County or a successor management company retained by the County shall occur asprovided in Section 12.3(iv) hereof;

(d) maintain the Facility in the condition received, reasonable wear and tearexcepted, and in a clean, safe and sanitary manner; provided that the County shall be responsiblefor funding all Capital Improvements, Capital Equipment purchases and reasonable expensesrelated thereto as provided in Section 5.8;

(e) rent, lease or purchase all equipment and maintenance supplies necessaryor appropriate for the operation and maintenance of the Facility, provided that the County shallbe responsible for funding all Capital Improvements, Capital Equipment purchases andreasonable expenses related thereto pursuant to Section 5.8;

(0 establish and adjust prices, rates and rate schedules for the aforesaidlicenses, agreements and contracts and any other commitments relating to the Facility to benegotiated by SMG in the course of its maintenance, management, operation and promotion ofthe Facility, including without limitation the establishment of facility fees on the sales of tickets,for events at the New Facility without restriction by the County. In determining such prices andrate schedules, SMG shall evaluate comparable charges for similar goods and services at similarandlor competing facilities and shall consult with the Contract Administrator about anyadjustments to the rate schedules at the Facility to be made by SMG;

(g) pay, when due, all Operating Expenses from accounts established pursuantto Sections 5.6 and 5.7 of this Agreement;(h) after consultation with the Sedgwick County Counselor or his or herdesignee, institute, at the reasonable expense of SMG and with counsel mutually agreed upon by

SMG and the Sedgwick County Counselor, such legal actions or proceedings as SMG shall deemnecessary or appropriate in connection with the operation of the Facility, including, withoutlimitation, to collect charges, rents or other revenues due or to cancel, terminate or sue fordamages under, any license, use, advertisement or concession agreement for the breach thereofor default thereunder by any licensee, user, advertiser, or concessionaire at the Facility, with thelitigation costs and expenses therefor, including reasonable attorneys' fees, to be consideredOperating Expenses;


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(i) maintain a master set of all booking records and schedules for eachFacility. In connection with its booking activities hereunder, SMG shall use its relationship withLive Nation for this Facility to leverage the resources of both SMG and Live Nation to bringevents to the Facility;

(j) provide day-to-day administrative services in support of its managementactivities pursuant to the Approved Budget and annual plans described herein, including, but notlimited to, the acquisition of services, equipment, supplies and facilities; internal budgeting andaccounting; maintenance and property management; personnel management; record-keeping;collections and billing; and similar services. SMG shall keep separate records, budgets andaccounts for each Facility.

(k) engage in such advertising, solicitation, and promotional activities asSMG deems necessary or appropriate to develop the potential of the Facility and the cultivationof broad community support (including without limitation selling advertising inventory andsecuring product rights for the Facility). SMG shall work with the Greater Wichita Convention& Visitors Bureau to market the Facility. Additionally, SMG shall fully comply with and fulfillall advertising, sponsorship and premium seating contracts executed by the County (and/or itsagent, Superlative) prior to the New Facility's grand opening (collectively, the "InitialSponsorship Contracts"). With respect to the Initial Sponsorship Contracts, all payments owedto the County under such contracts shall be deemed to be Operating Revenues hereunder and tothe extent that SMG is requested to pay any commissions or other amounts due under suchcontracts prior the New Facility's grand opening, the parties will mutually agree upon amechanism for SMG to collect all sums paid under such contract(s) prior to such opening and topay such commissions and other amounts thereunder prior to such opening. Moreover, SMGwill be entitled to invoice, collect and count as Operating Revenues all payments owed to theCounty pursuant to all advertising, sponsorship and premium seating contracts executed by theCounty (and/or its agent, Superlative) after the New Facility's grand opening. SMG will beresponsible for all renewals or replacements of advertising sponsorship and premium seatingdeals upon expiration of the initial contract period thereunder. SMG will not impose any chargeor additional cost to the Facility for such renewal and replacement services. Notwithstanding theforegoing, the County will retain the sole authority and responsibility to narr,e any Facility ortheir respective components and will be entitled to invoice, collect and exclude from OperatingRevenues all payments owed to the County pursuant to such naming rights contracts (and allpayments due thereunder, including any commissions due thereunder) shall be excluded fromOperating Expenses hereunder), but certain elements from the sale of such rights will be creditedto the calculation of Net Operating Profit/Loss as provided in Section 4.3 hereof. In connectionwith its activities under this Agreement, including without limitation advertising relating to theFacility, SMG shall be permitted to use the terms "Kansas Coliseum", "Sedgwick CountyArena", or such other names and logos for such facilities (or for any building comprising theExisting Facility or the New Facility) approved by the County;

(1) maintain, manage and operate the Facility and its premises in compliancewith all Laws, including, but not limited to, the ADA, as provided in Section 11.2 hereof; and(m) exclusively provide food and beverage and catering services andmerchandising services for the Facility.


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2.4 Access to the Facility.Representatives of the Owner shall have the right to enter all portions of the

Facility at any time and for any proper purpose whatsoever, including to inspect same, to observethe 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 aboutthe premises, or to do any act or thing which the Owner may be obligated or have the right to dounder this Agreement or otherwise. In connection with the exercise of such rights, the Ownerwill endeavor to provide (but is not obligated to provide) advance notice to SMG for securitypurposes and to minimize any interference with or disruption of SMG's work under thisAgreement. Nothing contained in this Section (i) is intended or shall be construed to limit anyother rights of the Owner under this Agreement nor (ii) shall impose or be construed to imposeupon the Owner any independent obligation to construct or maintain or make repairs,replacements, alterations, additions or improvements or create any independent liability for anyfailure to do so.

2.5 Consulting Services.(a) During the Consulting Period, SMG will provide to the County withrespect to the New Facility (i) the pre-opening operational consulting and management services

described in Exhibit "B" hereto, (ii) the pre-opening design, development and constructionconsulting services described in Exhibit "C" hereto and (iii) as requested by the County, theconsulting services relating to furniture, fixtures and equipment described in Exhibit "D" hereto(collectively, the "Consulting Services"). Attached hereto as Exhibit " G s a time line of theConsulting Services prepared by SMG on June 4,2007, which reflects as of such date theanticipated time frames for the performance of such services. The parties acknowledge that as inany construction project, such time line is subject to change based upon the overall progress ofthe project.

(b) In rendering the Consulting Services, SMG will work with representatives,consultants and agents of the County as set forth in Exhibits "B", "C" and "D" hereto (including,without limitation, the architectural and engineering firm(s) selected by the County for the designand construction of the New Facility). SMC will make appropriate SMG personnel available tosuch finn(s) as necessary from time to time to consult with and provide periodic reportsregarding the performance of the Consulting Services.

(c) In rendering the Consulting Services, SMG expects to utilize its existingpersonnel; it is acknowledged that (unless SMG determines otherwise) no SMG personnel willbe located full-time at the project site; SMG personnel will from time to time visit the site andparticipate in meetings with other agents, representatives and consultants of the County asnecessary or appropriate in connection with the performance of the Consulting Services.

(d) As specified in Exhibit "B" hereto, SMG will, among other things, beauthorized to execute in its own name booking commitments, te nan th er agreements andlicenses for use of the New Facility following its opening to the public.


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(e) The County acknowledges that SMG is not an architect, an engineer, or alegal advisor, and its consulting services provided under this Agreement with respect to theFacility are based on its operational knowledge and should not be construed as a representationof architectural or engineering practices or a legal representation or interpretation of any Law,including, but not limited to, the ADA. Neither the County nor any of its respective agents,consultants or representatives will rely upon SMG as having architectural, engineering, or legalexpertise. Accordingly, notwithstanding anything to the contrary contained herein, SMG shallhave no liability to the County with respect to architectural, engineering, or legal matters relatingto the foregoing.

(f) SMG personnel assigned by SMG .to.perform he Consulting Servicesshall be available as necessary to perform the Consulting Services.(g) SMG has submitted to the County, for the County's approval, a pre-opening operating budget (the "Pre-Opening Budget"), a current draft of which is attached as

Exhibit " E . The County shall review such proposed Pre-Opening Budget and shall submit anycomments to SMG as promptly as possible so that the Pre-Opening Budget can be finalized,approved and funded by the County as soon as practical. SMG shall be entitled from time totime to request that the Pre-Opening Budget be revised and updated to reflect changedcircumstances, provided that any revised Pre-Opening Budget shall require the prior writtenapproval of the County, which approval shall be at the County's sole discretion, not to beunreasonably withheld. During the Consulting Period, SMG's aggregate expenditures (whentaken as a whole relative to the total Pre-Opening Budget and not on a per line item basis) shallnot exceed the aggregate Pre-Opening Budget, without the prior written consent of the County.SMG shall be solely responsible for all expenditures that exceed the Pre-Opening Budget or anyrevision thereto approved by the County, unless the County's prior written consent has beenobtained in connection therewith. Notwithstanding the foregoing, (i) SMG is not responsible forchanges in the expenditures during the Consulting Period caused by circumstances beyond .SMG's reasonable control (such as, caused by delays in the construction project) and (ii) the Pre-Opening Budget does not include, and SMG shall not be responsible for, the costs and expensesassociated with (A) the maintenance and operation of the New Facility prior to thecommencement of the Management Term for such facility and (B) the grand opening event at theNew Facility. During the Consulting Period, SMG will invoice the County on a monthly basisfor its expenses incurred during such period in accordance with the Pre-Operating Budget, andthe County will pay such invoices within thirty (30) days after receipt.

(a) Confidentialitv/Nondisclosure. The parties hereto agree that they shallkeep secret and confidential any and all proprietary information of the other party conspicuouslymarked as confidential or proprietary or otherwise indicating in writing as such, and each shallonly use such information of the other party for the performance of its respective obligationsunder this Agreement. A party will make such designation only as to that information that it ingood faith believes is confidential and/or proprietary. Neither party shall divulge any suchinformation, in whole or in part, to any third party without the prior written consent of the otherparty; provided, however, such information may be disclosed to the party's attorneys on a needto know basis or as may be required by applicable law, including the Kansas Open Records Act,


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K.S.A. 45-215, et seq. (the "Public Records Act"), or as directed by order of a court ofcompetent jurisdiction. The parties shall provide notice to the other party of any knownviolations of this Section 2.6. Further, the parties shall endeavor in good faith to provide noticeto the other party prior to any disclosure required by applicable law or order of a court ofcompetent jurisdiction (it being understood such notice may not be possible before disclosure isrequired). The restrictions upon confidentiality and use of the confidential information of eachparty set forth in this Section 2.6 do not apply to information which the other party candemonstrate was publicly available or lawfully in its possession at the time of its disclosure to itby the other party.

(i) To the extent that SMG has any confidential or proprietaryinformation that it reasonably believes is a privileged trade secret andlor should not be disclosedto a third party to protect the privileged, confidential and/or proprietary nature of suchinformation, and upon the approval of the Contract Administrator, which shall not beunreasonably withheld, SMG shall not be required hereunder to deliver such information to theCounty, but instead will afford the County an opportunity to review such information at theFacility during reasonable business hours and upon reasonable advance notice, or on ternsmutually agreed upon by the parties in order to protect the privileged, confidential and/orproprietary nature of such information.

(b) Specific Performance. Each party agrees that the provisions of thisSection 2.6 are reasonable and necessary to protect the interests of the other disclosing party andthat the disclosing party's remedies of law for a breach of any of the provisions of this Section2.6 will be inadequate and that, in connection with any such breach, the disclosing party will beentitled, in addition to any other remedies (whether at law or in equity), to temporary andpermanent injunctive relief without the necessity of proving actual damage or immediate orirreparable harm, or of the posting of a bond. Notwithstanding the foregoing, if a court ofcompetent jurisdiction shall determine any of the provisions of this Section 2.6 to beunreasonable, the disclosing party agrees to a reaffirmation of such provisions by such court toany limits which such court finds to be reasonable and the other party will not assert that suchprovision shall be eliminated in its entirety by such court.3. Term and Renewal.

3.1 Transition Period.During the Transition Period, SMG will provide consulting and transition services

to the County with respect to the Existing Facility and will work to effect an orderly transition ofthe management of the Existing Facility from the County to SMG.

3.2 Management Term and Renewal Term.(a) The Management Term for the Existing Facility shall commence on theearlier of (i) January 1,2009 or (ii) such date as the County designates to SMG on at least ninety

(90) days prior written notice to SMG and shall end at the end of the Management Term for theNew Facility described in Section 3.2(b) below, unless earlier terminated pursuant to theprovisions of this Agreement.


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(b) The Management Term for the New Facility shall commence when ithosts its first event that is open to the public (anticipated to be October 1, 2009) and willcontinue through December 3 1" of the fifth (sth) ull year thereafter, unless earlier terminatedpursuant to the provisions of this Agreement. The parties will confirm in writing thecommencement date of the Management Term promptly after its commencement.

(c) The parties may, in their sole discretion, mutually agree to extend the termof this Agreement for an additional five-year period commencing at the end of the ManagementTerm for the New Facility set forth in Section 3.2(b) above. Notwithstanding the foregoing, ifthe County receives more than One Million Seven Hundred Thousand Dollars ($1,700,000) inthe aggregate during the New Facility's Management Term pursuant to Section 4.3 hereof, thenthis Agreement shall automatically renew for such additional five (5) year period.4. SMG's Compensation.

4.1 Consulting Period.As total compensation to SMG for its services during the Consulting Period, theCounty shall (i) pay SMG the fixed fees described below, pro rated with respect to partial

months during the Consulting Period, and (ii) reimburse SMG for out-of-pocket expenses inaccordance with Section 2.5(g) hereof. The monthly fixed fees set forth below shall be payableprior to the end of each month in which they are due during the Consulting Period.

(a) From the beginning of the Consulting Period through December 31,2007,Five Thousand Five Hundred Dollars ($5,500.00) per month. In addition, in consideration of theConsulting Services provided by SMG from May 1,2007 through the date hereof (the "PriorServices"), SMG shall be entitled to be paid $5,500.00 for each month (or part thereof) duringsuch period and SMG shall invoice the County for the Prior Services following the date hereof.

(b) From January 1,2008 through December 31,2008, Seven ThousandDollars ($7,000.00) per month.(c) From January 1,2009 to the end of the Consulting Period, Eight ThousandDollars ($8,000.00) per month.

4.2 Fees With Respect to the Existing Facility.As compensation to SMG for providing the services herein specified for theExisting Facility during the Management Term and any Renewal Term, the County shall pay

SMG during the Management Term and the Renewal Term, if any, an annual fee equal to fivepercent (5%) of the Operating ~evenuesf the Existing Facility. Such fee shall be payable bythe twenty-fifth (25th) day of each month immediately following each month during theManagement Term and the Renewal Term, if any, and SMG shall be entitled to draw suchamounts from the account for the Existing Facility described in Section 5.6. All Net OperatingProfit from the operation of the Existing Facility shall be remitted to the County and the Countyshall be responsible for any Net Operating Losses with respect to the Existing Facility; provided,however, the County shall have no obligation to provide funds for the payment of Operating


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Expenses incurred or committed for in excess of funds that have been budgeted and appropriatedfor such purpose for the Existing Facility, as provided in Section 5.2.4.3 Fees With Respect to the New Facility.

(a) With respect to the operation of the New Facility during the ManagementTerm and the Renewal Term, if any, SMG will be solely responsible for any Net OperatingLosses incurred at the New Facility in any such Fiscal Year as provided herein. Ascompensation to SMG for providing the services herein specified for the New Facility during theManagement Term and any Renewal Term, during each such Fiscal Year (or portion thereof)SMG shall be entitled to the compensation described in subsections (ii) and (provided there issufficient Net Operating Profit) (v) below and the Net Operating Profit in each such Fiscal Year(or portion thereof) shall be distributed to the parties in the following order of priority:(i) First, to the extent that SMG has funded any Net Operating Lossesat the New Facility in any prior Fiscal Years as provided herein, Net Operating Profits shall bedistributed to SMG until SMG has fully recouped such funded losses.(ii) Second, the next (or first, if there is no distribution undersubsection (i) above) $450,000.00 of Net Operating Profit shall be retained by SMG.(iii) Third, the next $450,000.00 of Net Operating Profit shall beretained by the County.(iv) Fourth, to the extent that the County expends funds to pay forCapital Improvements andlor Capital Equipment purchases pursuant to Section 5.8 hereof in anyprior Fiscal Year in excess of Two Hundred Fifty Thousand Dollars ($250,000.00), NetOperating Profits shall be next distributed to the County to cover the amounts in excess of

$250,000.00 spent by the County on such improvements and equipment purchases.Notwithstanding anything to the contrary contained in this Agreement, the following items shallnot count as Capital Improvements andlor Capital Equipment purchases for purposes ofdetermining amounts expended by the County for which it may receive reimbursement pursuantto this subsection (iv): (A) any structural elements (e.g., the roof to the New Facility) andlor anymajor systems servicing the New Facility (e.g., HVAC and electrical), unless the cause for suchexpenditure is directly due to SMG's breach of its obligations under this Agreement, (B)expenditures that are covered under applicable manufacturer's warranties for any such item,except to the extent that recovery under such manufacturer's warranty is adversely affected bySMG's breach of its obligations under this Agreement, and/or (C) any such items that wereoriginally included in the capital budget for the construction of the New Facility, but were notpurchased in connection with the completion of the New Facility.

(v) Any Net Operating Profit in excess of the amounts covered insubsections (i) through (iv) above shall be allocated sixty percent (60%) to the County and fortypercent (40%) to SMG.(b) To the extent that policies or guidelines hereafter established or modifiedby the County as described in Section 2.l(b) hereof adversely affect revenues or expenses at the


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New Facility, then and in that event, the fee formula set forth in this Section 4.3 shall beappropriately adjusted so that it reflects the additional costs or reduced revenues resulting fromsuch established or modified policies or guidelines.

(c) The parties acknowledge that (i) in connection with the sale by or onbehalf of the County of naming rights to the New Facility, the rights granted to such namingrights sponsor may include rights beyond exterior signage on the building, such as interiorsignage at the New Facility and/or messaging rights on the New Facility's scoreboard, use of asuite at the New Facility and other advertising inventory at the New Facility (collectively, the"NR Sponsor's Other Rights"), and (ii) if such naming rights sponsor is granted NR Sponsor'sOther Rights, the value of'such rights will be credited in the calculation of Net OperatingProfit/Loss for purposes of this Section 4.3 and the application of its provisions. The value ofsuch rights will be based upon the average rates charged to other sponsors/purchasers of suchrights at the New Facility during the applicable Fiscal Year for comparable advertising inventoryor rights.

(d) The above compensation and Net Operating Loss funding responsibilitiesare based on the following facts:(i) There not being a material difference between the actual designcomponents of the New Facility and the description of the New Facility contained in Exhibit "F"

attached hereto, which difference materially adversely affects the Operating Revenues orOperating Expenses of the New Facility;

(ii) There not being in either Sedgwick County, Kansas or SumnerCounty, Kansas (A) a casino performance venue with a seating capacity of 2,500 or more or (B)an indoor public assembly facility with a seating capacity of 5,000 or more, in either case thatmaterially adversely affects the Operating Revenues of the New Facility. For sake of clarity, theparties agree that the indoor facility that is currently being planned by a private developer in thePark City, Kansas area with an expected seating capacity of 5,000 is not considered to becovered by clause (B ) above;

(iii) There not being any material adverse change in any of those majorassumptions contained in SMG's pro forma operating budget that are listed on Exhibit "H"attached hereto, which changes are outside of SMG's reasonable control; and

(iv) There not being a material increase of fifty percent (50%)orgreater in the total annual cost to insure the Facility as required by this Agreement from theprevious total annual cost for such insurance, outside of SMG's reasonable control.

If there is a change in any of the facts identified in (i), (ii), (iii) or (iv) above, theCounty and SMG will work together for sixty (60) days after notice by SMG of such change, tomake the necessary adjustments to the above compensation formula and/or the Net OperatingLoss funding obligation. If the Contract Administrator and SMG are able to reach an agreementon such necessary adjustments, the Contract Administrator will work promptly to obtain theapproval of the County Commissioners to such adjustments, if such approval is needed; providedthat such approval is obtained within sixty (60)days following the date of such agreement


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between the Contract Administrator and SMG. Notwithstanding such efforts, if the County andSMG are unable to agree upon such necessary adjustments within such initial sixty day period orif the County Commissioners' approval of such agreement is not obtained in the other sixty daytime period described above, SMG may elect to terminate this Agreement by giving notice to theCounty within fifteen (15) days after the expiration of the applicable sixty (60) day period. Suchnotice shall provide that such termination shall be effective within thirty (30) days after thegiving of such notice. If SMG fails to give such notice within such fifteen day period, then thisAgreement shall continue in effect without adjustment for such change in facts.

(e) Payment. The payment of the amounts to SMG and the County asprovided in this Section 4.'3 shall be made contemporaneous with the delivery to the County ofthe audited annual financial statements described in Section 6.1 hereof for the New Facility foreach Fiscal Year hereunder, SMG shall include with such financial statements a calculation ofthe amounts due to the parties pursuant to Section 4.3 above. The amounts due to SMG and theCounty under Section 4.3 shall be disbursed to each party, as the case may be, within thirty (30)days after the delivery of the above-described documents and information.5. Funding; Budget; Bank Accounts.

5.1 Operating Funds.Subject to Section 5.2, following the approval of the annual operating budget for a

Fiscal Year for the Existing Facility (including, without limitation, any annual operating budgetapplicable to the first Fiscal Year during the term hereof), to the extent that Operating Revenuesfor the Existing Facility during a calendar quarter period are insufficient, or expected to beinsufficient, to cover oPerating~xpensesor the Existing Facility ("Cash Flow Shortfall") forsuch period, the County shall advance funds to SMG as follows. Thirty (30) days prior to thebeginning of each calendar quarter during the Management Term and any Renewal Term, SMG,will submit to the County an invoice for the projected Cash Flow Shortfall for such quarter(which is offset by any cash flow surplus estimated by SMG for the then current calendarquarter, which estimate takes into account any such surplus for the first two months of suchquarter and SMG's reasonable estimate of any cash flow surplus for-the ast month of suchquarter), and the County will transfer such funds to SMG within five (5) business days after thestart of such calendar quarter. Such funds shall be deposited by SMG in the operating or payrollaccount(s) established pursuant to Section 5.6 and used to pay Operating Expenses.

5.2 Non-Funding.The County shall have no obligation to provide funds for the payment of

Operating Expenses incurred or committed for in excess of the funds that have been budgetedand appropriated for such purpose for the Existing Facility.5.3 Annual Budget.

(a) As part of the annual plan described in Section 6.2 herein, on or beforeninety (90)days prior to the end of each Fiscal Year during the Management Term and RenewalTerm, if any, SMG will prepare separate proposed annual operating budgets for the next Fiscal


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Year with respect to the Existing Facility and the New Facility to meet the scope of services andobjectives under this Agreement. For the Existing Facility, the initial proposed annual operatingbudget shall be delivered to the County sixty (60) days prior to January 1,2009, or thirty (30)days after notice from the County as provided in Section 3.2(a), depending on thecommencement date of the Management Term for the Existing Facility. Each such budget shallcontain appropriate line items for revenues and expenses and the projected Net Operating Profitor Loss.

(b) The annual budgets referred to in subsection (a) above pertaining to theExisting Facility shall be reviewed and are subject to adjustment and written approval by theCounty. On or before thir'ty (30) days prior to the end of each Fiscal Year (or thirty (30) daysafter the County's receipt of the initial annual budget for the Existing Facility), the County shallnotify SMG of any adjustments to the applicable annual operating budget for the ExistingFacility for the succeeding Fiscal Year proposed by SMG and with such adjustments, if any, asare required for approval by the County on or before thirty (30) days prior to the end of eachFiscal Year, such budget shall be the Approved Budget for the following Fiscal Year. AlthoughSMG shall provide the County with an annual budget for the New Facility, the County'sapproval of such budget is not required. Notwithstanding the foregoing, if any annual operatingbudget as proposed by SMG for the Existing Facility is adjusted by the County in a mannerwhich, in SMG's judgment, could materially interfere, impede or impair the ability of SMG tomanage, operate or promote the Existing Facility, SMG shall have the right, with one hundredeighty (180) days prior written notice to the County, to terminate this Agreement pursuant toSection 12.2 (with the effect set forth in Section 12.3); provided, however, that (i) in no eventmay SMG terminate this Agreement pursuant to this section if the adjustment required by theCounty in the budget for the Existing Facility results in a budgeted Net Operating Profit or Lossthat is less than five percent (5%) change from the budgeted Net Operating Profit or Loss in theprevious final annual Approved Budget for the Existing Facility, and (ii) if such approved annualoperating budget departs from the budget proposed by SMG, SMG shall not be construed to havebreached its obligations under this Agreement with respect to the Existing Facility if the allegedbreach has been caused by the limitations in the Fiscal Year's budget.

5.4 Budget Modifications Initiated by SMG.SMG may submit to the Contract Administrator at any time prior to the close of a

Fiscal Year a supplemental or revised annual operating budget for such Fiscal Year with respectto the Existing Facility. Upon the written approval of the County of such supplemental orrevised budget, the Approved Budget for such Fiscal Year for such facility shall be deemedamended to incorporate such supplemental or revised budget. The Approved Budget for theExisting Facility may only be amended as set forth in Section 5.5 below or in the precedingsentence.

5.5 Budget Modifications Initiated by the County.In the event that it appears reasonably likely, in any year during the Management

Term and Renewal Term, if any, that the actual Net Operating LossProfit for such Fiscal Yearwith respect to the Existing Facility will be, respectively, larger or smaller than projected in theannual operating budget for such Fiscal Year, SMG shall notify the County in writing of such


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likelihood as soon as it becomes evident and thereafter submit to the County for approval a planfor reduction of Operating Expenses to a level consistent with the budgeted Net OperatingLossIProfit amount for such Facility. SMG shall forthwith comply with any such expensereduction approved by the County (as may be adjusted by the County) and the approved budgetfor such Fiscal Year for such Facility shall be modified accordingly, provided that if the annualoperating 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 Existing Facility, SMGshall have the right, with one hundred eighty (180) days prior written notice to the County, toterminate this Agreement pursuant to Section 12.2 (with the effect set forth in Section 12.3) andprovided further that SMG shall not be construed to have breached its obligations under thisAgreement with respect to such Facility if such alleged breach has been caused by the limitationsin the Fiscal Year's budget.

5.6 Receipts and Disbursements.With respect to each of the Existing Facility and the New Facility, SMG shall

establish and maintain separate bank accounts in one or more depositories designated by theCounty for the promotion, operation and management of the Existing Facility and the NewFacility, respectively. The bank accounts shall be in the name of SMG and with signatureauthority on each bank account in those employees of SMG as SMG shall determine. Allrevenues collected by SMG from the operation of each respective Facility shall be deposited intosuch bank account(s) for that Facility and Operating Expenses for each respective Facility shallbe paid by SMG from the bank account(s) for that Facility. All revenues collected by SMGarising from operation of each Facility, including revenues from box office sales, facility orequipment rentals, utility rental agreements, food and beverage concessions, or any other source,are the sole property of the County, held in trust by SMG for the County for application asprovided herein. Any amounts remaining in such bank accounts upon termination of thisAgreement for any reason, after payment of all outstanding Operating Expenses and in the caseof the New Facility, also after payment of all amounts as provided in Section 4.3 hereof, shall bepromptly paid by SMG to the County. Funds attributable to the Existing Facility shall not becommingled with funds attributable to the New Facility, nor shall funds attributable to eitherFacility be used to pay for the Operating Expenses of the other Facility, unless otherwise directedin writing by the County.

5.7 Ticket Sales Revenues.With respect to each of the Existing Facility and the New Facility, SMG shall

hold in a separate interest-bearing account in a banking institution depository in the locale inwhich each Facility is located any ticket sale revenues which it receives with respect to an eventto be held at each Facility pending the completion of the event. Such monies are to be held forthe protection of ticket purchasers, the County and SMG, and to provide a source of funds, asrequired for such payments to performers and promoters and for such payments of EventExpenses and other Operating Expenses for each Facility in connection with the presentation ofevents as may be required to be paid contemporaneously with the event. Within ten (10)business days following the satisfactory completion of an event, SMG shall pay from the ticketaccount all amounts due to performers and promoters and Event Expenses, and thereafter depositinto the operating account established pursuant to Section 5.6 above for the Facility in which the


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event occurred the amount in such ticket account and shall pay from the operating account forsuch Facility Operating Expenses and such other amounts that are due. Interest which accrues onamounts deposited in the operating accounts referred to in Section 5.6 and the ticket accountsreferred to above shall be considered Operating Revenues for each Facility.5.8 Capital Improvements; Capital Equipment.

With respect to each of the Existing Facility and the New Facility, the obligationto pay for Capital Improvements and Capital Equipment purchases shall remain with the Countyand will not be considered Operating Expenses. The annual plan submitted pursuant to Section6.2 for each such Facility shall include SMG's recommendation for Capital Improvements andCapital Equipment purchases to be accomplished during the year and shall be accompanied by anestimate of the cost of all such items and projects and a request that the County budget fundstherefor. The County shall retain the discretion to determine whether and to what level to fundCapital Improvements and Capital Equipment purchases to each such Facility, except that withrespect to the New Facility, SMG and the County shall mutually agree upon the CapitalImprovements and Capital Equipment purchases to be funded by the County in any Fiscal Yearduring the Management Term and any Renewal Term for the New Facility (which agreementshall be at each party's sole discretion, not to be unreasonably withheld). If requested by theCounty, SMG, or others engaged on its behalf, shall perform, direct and supervise CapitalImprovements and Capital Equipment purchases which are authorized in writing by the Countyor included in any annual plan approved by the County pursuant to Section 6.2. Any reasonableexpenses incurred by SMG in performing, directing and supervising Capital Improvements andCapital Equipment purchases shall be billed by SMG to the County and paid by the Countywithin thirty (30)days thereafter.

5.9 Limitation of SMG Liability.SMG shall have no obligation to fund any cost, expense or liability with respect tothe performance of Consulting Services hereunder or the maintenance, operation, management orpromotion of the Facility except for SMG's:(i) obligations to fund Net Operating Losses at the New Facility as providedin Section4.3 hereof;(ii) express indemnification undertakings in Section S.l(a);(iii) express reimbursement undertakings in Section 6.1 (b);(iv) obligations to fund Operating Expenses incurred or committed for inexcess of the funds that have been budgeted for such purpose for the Existing Facility in Section5.2(a);(v) obligations to fund expenditures that exceed the Pre-Opening Budget orany revisions thereto approved by the County as provided in Section 2.5(g); and(vi) obligations to provide the initial operating funds for the New Facility uponcommencement of the Management Term for the New Facility, if necessary.


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Notwithstanding anything to the contrary set forth in this Agreement, the County recognizes andagrees that performance by SMG of its responsibilities under this Agreement with respect to theExisting Facility is in all respects subject to and conditioned upon the timely provision of fundsto SMG for such purposes as hereinafter provided.

5.10 Funds for Emergency Repairs.SMG shall have the right to act, with the consent of the County, in situations

which SMG reasonably determines to be an emergency with respect to the safety, welfare andprotection of the general public, including spending and committing funds held in the operatingaccount(s) of each ~aci l it y,ven if such expenses are not budgeted; provided, however, (i) withrespect to the Existing Facility, SMG shall have no obligation under any circumstance to spendor commit funds other than funds then available in the Existing Facility account(s) for any suchpurpose, and (ii) with respect to the New Facility, if such emergency expenses are for CapitalEquipment and/or Capital Improvements, SMG shall have no obligation under any circumstanceto spend or commit funds other than funds then available in the New Facility account(s) for anysuch purpose. Immediately following such action, SMG shall inform the County of the situationand the action(s) taken, and the County shall pay into the appropriate account(s) the amount offunds, if any, spent or committed by SMG pursuant to this Section 5.10 in excess of budgetedamounts for (i) the Existing Facility or (ii) Capital Equipment and/or Capital Improvements forthe New Facility.6. Records, Audits and Reports.

6.1 Records and Audits.(a) With respect to (i) the Existing Facility and (ii) the New Facility, SMGshall keep separate, full and accurate accounting records relating to its activities at each such

Facility in accordance with generally accepted United States accounting principles. SMG shallmaintain a system of bookkeeping adequate for its operations hereunder and for the use ofauditors. SMG shall give the County's authorized representatives access to such books andrecords maintained at each such Facility during reasonable business hours and upon reasonableadvance notice. SMG shall keep and preserve for at least three (3) years following thecompletion and/or termination of this Agreement hard copies of all attendance records, salesslips, rental agreements, purchase orders, sales books, credit card invoices, bank books orduplicate deposit slips, and other evidence of Operating Revenues and Operating Expenses forsuch period for each such Facility, except that if after three (3) years following any Fiscal YearSMG desires to destroy any such records, SMG shall first notify the County in writing of suchdesire and give the County thirty (30) days to elect to take such records from SMG. In addition,on or before ninety (90) days following each Fiscal Year for which SMG is managing theExisting Facility and the New Facility hereunder, SMG shall furnish to the County a balancesheet, a statement of profit or loss and a statement of cash flows for each of the Existing Facilityand the New Facility for the preceding Fiscal Year, prepared in accordance with generallyaccepted United States accounting principles and accompanied by an independent auditor'sreport of a nationally recognized, independent certified public accountant. The audit shallcontain an opinion expressed by the independent auditor of the accuracy of financial records keptby SMG and of amounts due to the County. Each such audit shall also provide a certification of


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Operating Revenues and Operating Expenses (as defined in this Agreement) for such FiscalYear. The audit shall be conducted by a reputable firm selected by SMG with County approval.The County shall not withhold or delay such consent or approval unreasonably. Notwithstandinganything to the contrary herein, the costs of such audit shall be deemed Operating Expenses. Ifan audit, litigation or other action involving such records begins before the end of the three yearperiod, the records shall be maintained for three years from the date that all issues arising out ofthe action are resolved or until the end of the three year retention period, whichever is later,unless prior to the end of such period of time, SMG notifies the County in writing of its desire todestroy such records and gives the County thirty (30) days to elect to take such records fromSMG. The provisions of this subsection shall survive termination of this Agreement.

(b) The County shall have the right at any time, and from time to time, toaudit and/or cause nationally recognized independent auditors to audit all of the books of SMGrelating to Operating Revenues and Operating Expenses for the Existing Facility and/or the NewFacility, including, without limitation, cash register tapes, credit card invoices, duplicate deposittapes, and invoices. No costs incurred by the County in conducting such audit shall beconsidered an Operating Expense. If any such audit demonstrates that the Operating Revenuesor Operating Expenses reflected in any financial statements prepared by SMG and audited asspecified in the foregoing subsection (a) are erroneous by more than two percent (2%), SMGshall pay to the County the reasonable cost of such audit and shall promptly remit to the Countyany portion of the fee paid to SMG for such Fiscal Year which is attributable to the error(s). TheCounty's right to have such an audit made with respect to any Fiscal Year and SMG's obligationto retain the above records shall expire three (3) years after termination of this Agreement. If anaudit, litigation or other action involving such records begins before the end of the three yearperiod, the records shall be maintained for three years from the date that all issues arising out ofthe action are resolved or until the end of the three year retention period, whichever is later,unless prior to the end of such period of time, SMG notifies the County in writing of its desire todestroy such records and gives the City thirty (30) days to elect to take such records from SMG.The retention provisions of this subsection shall survive termination of this Agreement.

6.2 Annual Plan.With respect to (i) the Existing Facility and (ii) the New Facility, SMG shall

provide to the County on or before ninety (90) days prior to the end of each Fiscal Year, anannual management plan, which shall include the annual operating budget described in Section5.3 for the next Fiscal Year. For the Existing Facility, the initial proposed annual plan shall bedelivered to the County sixty (60) days prior to January 1,2009, or thirty (30) days after noticefrom the County as provided in Section 3.2(a), depending on the commencement date of theManagement Term for the Existing Facility. The annual plan for each Facility shall includeinformation regarding SMG's anticipated operations for such Fiscal Year at the Existing Facilityand the New Facility, respectively, including planned operating maintenance activities by SMG,requested Capital Improvements and Capital Equipment purchases and an anticipated budgettherefor, anticipated events at such Facility, anticipated advertising and promotional activities,and planned equipment and furnishings purchases. The annual plan for the Existing Facilityshall be subject to review, revision and approval by the County. Although SMG shall providethe County with an annual plan for the New Facility, the County's approval of such plan is onlyrequired with respect to the proposed budget for Capital Improvements and Capital Equipment


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purchases. Following review and revision by the County, SMG shall have thirty (30)days toincorporate the County's revisions into each plan. Upon written approval by the County, suchplan shall constitute the operating program for SMG for the following Fiscal Year for theExisting Facility.

6.3 Monthly Reports.By the twenty-fifth day of each month, SMG shall provide to the County, with

respect to each of (i) the Existing Facility and (ii) the New Facility, a written monthly report in aform approved by the Cou,nty and similar to that used in other SMG-managed facilities settingout such Facility's anticipated activities for the upcoming month and reporting on the priormonth's activities and finances. SMG shall include in such report a balance sheet, incomestatement, and other financial reports (such as a departmental expense report and eventaccounting). Additionally, SMG shall on a monthly basis make available to the ContractAdministrator for inspection the flash settlement reports for events at the Facility.7. Employees.

7.1 SMG Employees.(a) Subject to Section 7.2, SMG shall select, train and employ at each Facilitysuch number of employees as SMG deems necessary or appropriate to satisfy its responsibilities

hereunder; SMG shall use its best efforts to recruit employees who will be proficient, productive,and courteous to patrons, and, subject to Section 7.2, SMG shall have authority to hire, terminateand discipline any and all personnel working at each Facility.

(b) SMG shall assign to the Facility a competent, full-time general managerwho shall have an office at the Facility for the duration of the Management Term and Renewal .Term, if any. Such general manager shall have no other duties other than the day-to-dayoperation and management of the Facility, unless approved in writing by the ContractAdministrator. From time to time, subject to prior written approval by the ContractAdministrator, the general manager may provide assistance in connection with the consultingand/or management services provided by SMG or any of its Affiliates at other facilitiesmanaged, owned or leased by SMG or any of its Affiliates, provided that (i) such assistance doesnot affect in any material respect the responsibilities and duties of the general manager to theFacility and (ii) the cost of the salary, benefits, travel and other expenses of the general managerfor the time spent in connection with providing such assistance shall be reimbursed by SMG tothe appropriate operating account(s) of the Facility. Prior to SMG's appointment of such generalmanager, SMG shall consult with the Contract Administrator with respect to the qualifications ofthe general manager proposed by SMG .

(c) SMG shall deliver to the County the names and resumes of the seniormanagement personnel SMG proposes to employ at the Facility (e.g., the general manager,assistant general manager and director-level employees).

(d) If a proposed general manager is not reasonably acceptable to the County,SMG shall submit names and resumes until the County reasonably accepts an employee forassignment to the general manager position.


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(e) At any time during the Management Term or the Renewal Term, if any,the County may notify SMG if it believes that there is a performance problem with the generalmanager or assistant general manager. Within fifteen (15) days of receipt of such notice, SMG'ssenior management will meet with the Contract Administrator to discuss the problem and topropose steps that may be appropriate to address such problem.

(f) SMG employees at the Facility shall not for any purpose be considered tobe employees of the County, and SMG shall be solely responsible for all personnel-relatedmatters, including their supervision and daily direction and control and for setting, and paying asan Operating Expense, their compensation (and federal and state income tax withholding) andany employee benefits. All costs related to their employment shall be an Operating Expense.

7.2 County Employees.(a) As of the date hereof, there are twenty-four (24) full-time and four (4)part-time County employees at the Existing Facility, all of whom are non-union employees (the

"Non-Union Employees") and none of whom are union employees (the "Union Employees").During the Transition Period, all such County employees who choose to remain at the ExistingFacility rather than to transfer to another County department or to otherwise cease working at theExisting Facility (collectively, the "Remaining County Employees") shall be entitled to continueworking at the Existing Facility. During the Transition Period, the Remaining CountyEmployees shall retain their status and benefits as County employees. During such period andwith respect to the Remaining County Employees, SMG shall oversee the activities of theRemaining County Employees.

(b) At or prior to the end of the Transition Period, SMG shall have the right,in its sole discretion, to offer employment to any Remaining County Employee, subject in thecase of the Union Employees to applicable terms and conditions under the applicable collectivebargaining agreements. Any such offer shall be on such terms as SMG, in its sole discretion,shall determine, subject in the case of the Union Employees to applicable terms and conditionsunder the applicable collective bargaining agreements. Any Remaining County Employee whochooses to accept any such offer of employment by SMG shall, upon the commencement of theManagement Term for the Existing Facility, cease to be an employee of the County, shallbecome an employee of SMG upon such terms and conditions as determined by SMG, and shallno longer be deemed a Remaining County Employee for purposes of subsection (a) above.

(c) At the end of the Transition Period, the County shall cause all RemainingCounty Employees in the applicable group who have not accepted an offer of employment bySMG to cease working at the Facility.

7.3 No Solicitation or Em~loyment y Countv.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 County will not,for any reason, solicit for employment, or hire, the general manager, director-level employeesand department heads employed at the Facility; provided, however, this provision shall not applyto SMG Employees who were previously employed by the County. In addition to any other


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remedies which SMG may have, specific performance in the form of injunctive relief shall be .available for the enforcement of this provision. The obligation of the County under this Section7.3 shall survive the termination of this Agreement.8. Indemnification and Insurance.

8.1 Indemnification.(a) SMG shall indemnify, defend and hold harmless the County, its officers,agents and employees from and against any and all Losses arising from the negligent acts, willful

misconduct, fraud or activities outside of the scope of authority granted hereunder of SMGand/or its officers, employees, representatives, contractors, subcontractors or agents, or anymaterial default or breach by SMG of its obligations specified herein; provided, however, thatthe foregoing indemnification shall not extend to Losses to the extent such Losses (i) arise fromany breach or default by the County of its obligations under Section 8.l(b) below, (ii) are of thetype that are or would normally be covered by commercial insurance covering (A) the Facilityand its premises for physical damage, and (B ) business interruption and extra expenses,irrespective of the decision of the County to carry or not to carry such insurance, or (iii) arecaused by or arise out of the services provided by the architects, engineers and other agentsretained by the County in connection with Capital Improvements or Capital Equipmentpurchases at the Facility.

(b) The County shall indemnify, defend and hold harmless SMG, its partners,officers, agents and employees from and against any and all Losses arising from (i) any materialdefault or breach by the County of its obligations specified herein, (ii) the fact that at any timeprior to, as of, or after the commencement of the Management Term hereunder the Facility, anyimprovements related thereto and its premises are not or have not been, in compliance with allLaws, including, but not limited to, the ADA, (iii) the fact that prior to, as of, or after thecommencement of the Management Term hereunder there is any condition on, above, beneath orarising from the premises occupied by the Facility which might, under any Law, give rise toliability or which would or may require any "response," "removal" or "remedial action" (as suchterms are defined under CERCLA), (iv) any structural defect or unsound operating conditionwith respect to the Facility or the premises occupied by the Facility prior to, as of or after thecommencement of the Management Term hereunder, (v) any obligation or liability under or inrespect of any contract, agreement or other instrument pertaining to the Existing Facility andexecuted by SMG as authorized herein, (vi) any obligation or liability for physical damage to anyreal property and personal property assets located at the Facility or intended to be incorporatedtherein, whether such assets are insured by the County or whether the County decides not toinsure for such damage and Losses (including without limitation damages or Losses fallingwithin any insurance deductible), (vii) any non-compliance with any Pre-Existing Agreement onor prior to the commencement of the Management Term, or (viii) any act or omission carried outby SMG at or pursuant to the written direction or instruction of the County, its agents oremployees; provided, however, that the foregoing indemnification under clauses (i), (ii), (iii),(iv), (v), (vi) or (vii) above shall not extend to Losses to the extent such Losses arise from (A)the negligent acts, willful misconduct, fraud or activities outside of the scope of authority grantedhereunder of SMG and/or its officers, employees, representatives, contractors, subcontractors or


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agents as set forth in Section 8.l(a) hereof, or (B) any material default or breach by SMG of itsobligations specified herein.(c) The provisions set forth in subsections (a) and (b) above shall survivetermination of this Agreement; provided, however, that except for indemnification based upon

Section 8.l(b) (ii), (iii), (iv), (v) or (vii) above, a claim for indemnification pursuant to Section8.1 shall be valid only if the party entitled to such indemnification provides written notice thereofto the other party prior to five (5) years following the date of termination of this Agreement.(d) The terms of all insurance referred to in Section 8, including withoutlimitation (i) the property insurance policies of the County, and (ii) the policies of anyindependent contractors retained by the County or hired by SMG (such as, emergency medicaltechnicians who are not employed by SMG), shall preclude subrogation claims against SMG, itspartners, the County and their respective officers, directors, employees and agents.(e) The foregoing indemnification rights shall be the exclusive remedies ofeach party hereto (other than any right to terminate this Agreement pursuant to Section 12 arisingfrom any breach of, default under or performance pursuant to this Agreement).(f ) IN NO EVENT SHALL EITHER PARTY BE LIABLE ORRESPONSIBLE FOR ANY PUNITIVE DAMAGES, WHETHER BASED UPON BREACHOF CONTRACT OR WARRANTY, NEGLIGENCE, STRICT TORT LIABILITY OROTHERWISE.

8.2 Liability Insurance.(a) SMG shall secure prior to the commencement of the Management Termhereunder and shall keep in force at all times during the term of this Agreement, sufficient

commercial liability insurance, including public liability and property damage, coveringpremises liability, and SMG operations hereunder and as long as SMG is providing food andbeverage concession and catering services hereunder, liquor liability, which insurance shall, at aminimum, be in the amount of One Million Dollars ($1,000,000) for bodily injury and OneMillion Dollars ($1,000,000) for property damage, including products and completed operations,and independent contractors.(b) SMG shall also maintain Comprehensive Automotive Bodily Injury andProperty 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 County, orotherwise, with a combined single limit of not less than One Million Dollars ($1,000,000) per

occurrence (including an extension of hired and non-owned coverage).(c) Commencing with the Management Term and continuing thereafter untilthis Agreement is terminated, SMG shall also maintain:

(i) professional liability insurance with coverage of at least OneMillion Dollars $1,000,000.00) for claims of negligent errors, acts or omissions by SMG; and


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(ii) employment practices liability insurance with coverage of at leastOne Million Dollars $1,000,000) for claims relating to the employment practices of SMG at theFacility pertaining to its employees.

(d) Commencing with the Management Term and continuing thereafter untilthis Agreement is terminated, SMG shall also maintain sufficient Umbrella liability insurance inthe amount of at least Five Million Dollars ($5,000,000) in excess of coverage provided byautomobile and commercial liability policies required in Sections 8.2(a) and 8.2(b).

(e) SMG shall be the named insured under all insurance required herein. TheCounty shall be an additional insured under the insurance described in Sections 8.2(a) and (b), asits interests may appear, and such insurance in Sections 8.2fa) and (b) shall include the broadestform of contractual liability coverage available. All insurance shall be from insurancecompanies licensed to do business in the State of Kansas with a minimum financial rating of "A"and shall be written in accordance with standard forms of insurance policies approved by theKansas Department of Insurance.

(f) Certificates evidencing the existence of the above insurance, as well as thepolicies of insurance required under Sections 8.3 and 8.4, shall be delivered to the ContractAdministrator no later than five (5)business days prior to the commencement of theManagement Term. Each such policy of insurance and certificate shall contain a valid provisionor endorsement that the insurer cannot cancel or terminate coverage without the insurer firstgiving thirty (30) days written notice to the County of such cancellation or termination. Exceptas otherwise agreed herein, the parties hereto acknowledge that the above insurance may containexclusions from coverage which are reasonable and customary for insurance of such type.

(g) With respect to insurance procured by it, SMG shall deliver to theContract Administrator satisfactory evidence of such renewal of such insurance within ten (10) 'days after such insurance's expiration date except for any insurance expiring on the terminationdate of this Agreement or thereafter.

(h) Except as provided in Section 8.5, all insurance procured by SMG inaccordance with the requirements of this Agreement shall be primary over any valid andcollectible insurance carried by the County and not require contribution by the County.

8.3 Workers Compensation Insurance.SMG shall at all times maintain worker's compensation insurance (including

occupational disease hazards) with an authorized insurance company or through the Kansas StateCompensation Insurance Fund or through an authorized self-insurance plan approved by theState of Kansas, insuring its employees at the Facility in amounts equal to or greater thanrequired under applicable Laws.

8.4 Fidelity Insurance.SMG shall maintain during the term of this Agreement Fidelity Insurance

covering all of SMG's personnel under this Agreement in the amount of Five Hundred Thousand


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Dollars ($500,000.00) for each loss, to reimburse the County for losses experienced due to thedishonest acts of SMG's employees.8.5 Certain Other Insurance.

If any of the Pre-Existing Agreements consist of agreements with independentcontractors to provide services in respect of the Facility, the County shall request that suchcontractors name SMG as an additional insured under any insurance maintained by suchcontractors pursuant to the terms of such Pre-Existing Agreements and in such event to deliver toSMG promptly after request therefor a certificate of such insurance evidencing the existence. thereof. In addition, if SMG enters into any agreements during the Management Term and anyRenewal Term with any independent contractors for the provision of services hereunder, SMGshall have the right to require such contractors to name SMG as an additional insured under anyinsurance required by SMG thereunder.9. Ownership of Assets.

9.1 Ownership.The ownership of buildings, improvements, and real estate, technical and officeequipment and facilities, furniture, displays, fixtures, vehicles and similar tangible propertylocated at the Facility shall remain with the County. The County shall further retain exclusiveownership of all intangible property related to the Facility and the tangible property located atthe Facility, including unexpired warranties and guaranties, keys, plans, and specifications.Ownership of and title to all intellectual property rights of whatsoever value, held in theCounty's name shall remain in the name of the County. The ownership of consumable assets(such as office supplies and cleaning materials) purchased with Operating Revenues or Countyfunds shall remain with the County, but such assets may be utilized and consumed by SMG in

the performance of services under this Agreement. The ownership of data processing programsand software owned by the County, including programs and software purchased by SMG withfunds provided by the County andfor Operating Revenues for the Facility, shall remain with theCounty, and the ownership of data processing programs and software owned by SMG shallremain with SMG. SMG shall not take or use, for its own purposes, customer or exhibitor listsor similar materials developed by the County for the use of the Facility, unless written consent isgranted by the County. Ownership of equipment, furnishings, materials, or fixtures notconsidered to be real property and other personal property purchased by SMG with County fundsfor use at and for the Facility shall vest solely in the County automatically and immediately uponpurchase or acquisition. Except as otherwise provided in this Agreement, the assets of theCounty as described herein shall not be pledged, liened, encumbered or otherwise alienated orassigned by SMG without the prior written approval of the County.

9.2 County Obligations.Except as herein otherwise set forth, throughout the term of this Agreement, theCounty will maintain full beneficial use and ownership of the Facility and will pay, keep,observe and perform all payments, terms, covenants, conditions and obligations under any bonds,


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debentures or other security agreements or contracts relating to the Facility to which the Countymay 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.Notwithstanding the foregoing, SMG may assign all or any part of its rights hereunder to anAffiliate, provided that (i) such Affiliate possesses substantially the same degree of expertise,quality of personnel and credit worthiness as originally provided under this Agreement, and (ii)such assignment shall be at no increased cost to the County. For sake of clarity, the partiesacknowledge that the foregoing does not preclude the assignment by SMG of its rights to receiveits management and incentive fees hereunder to its lender(s) as collateral security for SMGYsobligations under any credit facilities provided to it by such lender(s), provided that suchcollateral assignment shall not in any event cover SMG's rights to manage, promote or operatethe Facility hereunder.

10.2 SMG Transactions With Affiliates.(a) In connection with its management responsibilities hereunder relating tothe purchase andfor procurement of equipment, materials, supplies, inventories, and services

management agreement between sedgwick county and smg

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