SUMMARY OF PROPOSED MANAGEMENT AGREEMENT

Transcription

1 SUMMARY OF PROPOSED MANAGEMENT AGREEMENT Following is a plain language summary of key matters addressed in the Management Agreement (MA). The Board recommends that you also read the MA and amended By- Laws. Commencement and Term If approved by the required majority of members, the Management Agreement will commence on 1 February It will have an initial term of 5 years, and the Manager can decide to extend the Management Agreement for a further 4 x 5 year terms. This (potentially) long-term agreement is necessary to enable the Manager to make a return on the contribution that has been, and will be, made in the Club. That contribution includes the: Subscriptions paid by Rich Sea International to the Club under the Holding Member arrangement ($3.1m); Amount retained by the Club (under the proposed MA) from members subscriptions (equal to the unpaid Holding Member subscription of $352k); Investment needed to implement the Club s business plans over the term of the agreement. The Club is protected throughout the term of the agreement by termination provisions, they are summarised later in this document. Financials The Club will retain $352,500 from members subscriptions accrued for the period 1 February 30 June The remainder of those subscriptions will be included in the management fee calculation. The $352,500 has been calculated as the amount of the unpaid Holding Member subscription for the period 1 October 2015 to 31 January In addition, the Club will retain: 1

2 1. A usage fee 1 of $5 per round played in a members competition, as a participant in a corporate group or as a guest of a corporate member, or a round for which green fees are paid. We estimate 2 the usage fee will be about $80k-100k per annum. The $5 usage fee is adjusted for CPI each year, and it should grow over time with the successful implementation of the Club s plans; and 2. Members competition fees (used to fund prizes, trophies and pennants teams expenses); and 3. Interest income on its term deposits (including the deposit relating to the Mirvac settlement) and bank accounts (other than the MA operating account established and maintained by the Club from 1 February 2016). This arrangement produces an increasing and ongoing income stream for the Club. The Club will pay to the Manager, from the MA operating account a management fee calculated as: Member Subscriptions + Joining Fees + Club Magenta License Fees + Proceeds from the sale of equipment that is not applied to leasing replacement equipment + Interest income on the MA operating account LESS expenses reasonably incurred by the Club (e.g. for audited accounts, directors and officers insurance, board meetings, administration of bank accounts, etc.). Member Subscriptions, including the amount paid by the Developer for its Holding membership (30 successor members may be nominated), will continue to be received directly by the Club once per year (an annual amount is paid by members). Only 1/12 of that annual amount will be included in the monthly management fee paid to the Manager. The Manager receives green fees and sales proceeds from the golf shop directly upon receipt. Rent received by the Club (e.g. for the Telstra Tower) will be paid to the Manager. Golf shop stock and course maintenance consumables become the property of the Manager from 1 February There is no usage fee on members social rounds. The usage fee is not recoverable from members rounds whether in competition or social golf. 2 This estimate is based on an analysis of rounds played over the past 5 weeks. 2

3 All expenses and outgoings of management for the Golf Complex (i.e. amounts associated with the Club s golf course, buildings, land, and equipment) will be borne by the Manager. This includes contributions to sinking funds and capital expenditure to implement the Club s business plan. Note that the type of business plan capital expenditure envisaged does not include, for example, capital needed to build (say) a new multi-story car park. If the Manager does not pay the appropriate expenses and outgoings, in a timely manner, the Club may do so and may deduct the amount(s) from the next management fee. Club Membership The Manager will use its best endeavours to increase the membership of the club in line with the targets and categories set in the agreed Strategic Plan and Business Plan. The Manager will report to the Board each month on its actions and progress towards achieving the membership targets. The Club may replace member attrition with successor members. If the Manager fails to achieve the new membership targets by 50 or less over two successive years, the Club may fill that shortfall over the next two years. The Club will cease advertising that there is no joining fee - on and off the course. The annual Business Plan will propose member subscription fees and cart use fees, and the Board s approval is required for increases in excess of CPI. There will be no charge for range balls during members competition times. The Club will offer Platinum membership (20 year memberships) and Lifestyle Plus membership (5 year memberships) for a one-time upfront payment that will be released to the Manager over the duration of the membership. The amount released will be determined with reference to the annual subscription for ordinary individual membership and Lifestyle membership (as appropriate) and 1/12 of that annual amount will be included in the monthly management fee calculation. These arrangements provide for membership growth in the membership categories set out and agreed in the Club s plans. They also ensure that membership subscriptions remain at a reasonable and predictable price for members. 3

4 Governance The Manager must manage the Golf Complex in compliance with the Constitution and By-laws of the Club. If there is any inconsistency between the Management Agreement or its operation and the terms or operation of the Constitution or By-laws, the Constitution and By-laws and their operation have priority. Members may elect the majority of directors (up to 5 directors). The Hotel will continue to appoint one director, and the Manager (a wholly owned subsidiary of the Developer) will appoint two directors. It is important to have the Developer s decision-makers participate in Board meetings, hence the Developer s directors must be either Howard Cao and Yuan Zhao, or another person who has a controlling interest in the Developer. The Manager will manage the Golf Complex and will ensure that in doing so the Club meets its obligations under Club Magenta Licence and Hotel Agreement. The Manager will maintain a positive relationship with, and coordinate with, the Hotel to promote the reputation of Magenta Shores (as a destination), the Club and the Hotel. The Board will consult with the Manager in its review of the Club s Strategic Plan. The Board and Manager will agree the annual Business Plan and there is a dispute resolution process should one be needed. The Club s 2015/16 Business Plan and its 2015/19 Strategic Plan are agreed. The Strategic Plan will be reviewed at least every five years. The Board continues to be responsible for approving members, and for disciplinary matters arising under its Constitution or By-Laws. These arrangements ensure that: the Board retains control of the Club, and the Club s constructive and mutually beneficial relationship with the Hotel develops, while allowing the Manger to manage and operate the Golf Complex. 4

5 Staff All of the Club s staff will be offered employment with the Manager on the same terms and conditions as they currently have with the Club. The Manager will comply with, and will secure the Club s compliance with, the Magenta Shores Golf & Country Club Ltd Enterprise Agreement 2014 approved by the Fair Work Commission on 30 September The Manager will employ and deploy all employees necessary for the effective management of the Golf Complex. The Board s approval is required before any material section of employees agreements can be changed. The Manager will procure the services of a PGA Professional to the extent needed to meet the demand for lessons from members. The Board must approve the appointment and dismissal of senior staff (GM, Course Superintendent, Deputy Course Superintendent, and PGA Pro). The Club will continue to make Staff Membership of MSGCC available to staff employed by the Manager solely in the operation or management of the Golf Complex. Golf Complex and Course Use The Manager will manage the Golf Complex to the expected standard. That is for the: o Course Design: the integrity of the Ross Watson design will be maintained. The course will continue to provide an enjoyable challenge to golfers at a scratch or better handicap while providing an equally enjoyable challenge to golfers at mid and high handicaps, with a balance of risk and reward, and that the allocation of space to fairways, rough and hazards and the level of their maintenance be continued in a manner which provides that level of challenge; 5

6 o Maintenance and presentation of the course its standard of presentation remains at least equal to the presentation of the 30th course in the Golf Australia magazine annual list of Australia s top 100 courses; o Rest of the Golf Complex having regard to the standard of the Golf Complex at the date of the agreement, will be provided to members at the level to be expected of a premier private golf course. The course will be set up for member competitions in consultation with the Match Committee. The Match Committee will continue to have responsibility for the conduct of members competitions. A person nominated by the Board and the General Manager (or another person nominated by the Manager) will together inspect the course weekly to agree maintenance issues. The Manager must have consideration for the importance members place on ready casual access to tee times in its management of course bookings. There will be no material change to the golf course without the approval of members. Guarantee The three entities that own the undeveloped land at Magenta Shores as tenants in common have agreed, jointly and severally, to guarantee to the Club performance of the obligations of the Manager and the Developer under the MA on the terms set out in the MA. The inclusion of 1/12 of member subscriptions (including the subscription paid by the Holding member) in the monthly payment of the management fee significantly reduces the financial risk of the Management Agreement for the Club. Termination The Manager can terminate the MA if the: 1. Golf course is damaged or destroyed and as a result is practically beyond repair; 6

7 2. Golf Complex is compulsorily acquired by a competent authority and the Club does not appeal that acquisition or loses such an appeal; 3. Club doesn t pay the management fee to the Manager and fails to do so within the specified timeframe; 4. Club s Constitution or By-Laws are amended, without the Manager s agreement, and such amendment(s) are inconsistent with the approved Strategic Plan or Business Plan and adversely affect the Manager s management of the Golf Complex; or 5. In certain circumstances if Club comes under external administration in accordance with Chapter 5 of the Corporations Act. The Club can terminate the MA if: 1. In certain circumstances the Manager, Developer or a Guarantor come under external administration in accordance with Chapter 5 of the Corporations Act; 2. Ownership or control of the Manager, Developer or a Guarantor change; 3. Manager fails to pay staff, superannuation in respect of staff, the Commissioner of Taxation, rates, taxes, other statutory payments, or creditors, and does not remedy that failure within the time frame specified; 4. Manager does not comply with workplace health and safety obligations or other statutory obligations and fails to comply within the specified timeframe; or 5. Manager does not comply with the provisions of the MA and fails to remedy that failure within the specified timeframe. The Club retains control (as either owner or lessee) of the Golf Complex (including golf equipment) and makes the complex available to the Manager throughout the term of the MA. This arrangement ensures a practical transition back to self-management in the event of termination. In addition, if the Manager provides alternative sources (to the current sources) for water or energy supply to the Golf Complex, those utilities will continue to be available to the Club in the event of termination in appropriate quantities, and at a reasonable price. 7