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DRAFT Last Updated: 2/8/2001 CARLSK-129390v10 MU125-33 ARTICLE III: COMPENSATION The compensation and benefits set out in this Article represent the total compensation to be paid to Hammerschmidt for performance of this Agreement. A. Base Salary. The City will pay Hammerschmidt a base salary of $__________ per year in 2001, including the City’s standard contributions toward the Minnesota Public Employees Retirement Fund, Social Security, Medicare, and health insurance. In future years, Hammerschmidt's base salary will increase by the same percentage increase granted to City administrative personnel. B. Incentive Pay. Hammerschmidt will be eligible for incentive pay (as defined and calculated in this Article) based on performance of The Bridges and the total personnel costs at The Bridges. C. Compensation Limitations. Hammerschmidt’s total compensation shall not to exceed 95% of the City Clerk-Administrator's maximum salary, shall not exceed any limits established by Minnesota Statutes, and shall be established in such a manner so as to maintain the City's compliance with the State of Minnesota's pay equity statutory requirements. In addition, the total of all incentive pay shall not exceed 54% of Hammerschmidt's base compensation. D. Incentive Pay Calculation. Hammerschmidt's final incentive pay will be calculated annually based on audited financial statements from the Golf Course and established by separate resolution adopted by the City Council in an amount up to 5% of the gross revenues at The Bridges, subject to the following conditions: Total compensation for all City employees at The Bridges, including incentive pay established by the City Council, shall not exceed 48% of gross revenues at The Bridges. Total personnel costs shall include all salaries, including incentive pay, and the associated employer's share of benefits including but not limited to retirement, payroll taxes, proportional percent of workers' compensation, health insurance and unemployment. Personnel costs shall exclude the personnel costs associated with lessons. Gross revenues shall include all revenues derived from activities conducted at The Bridges, excluding billboard lease revenues, hard goods as set forth in Exhibit A, and less general sales taxes and sales taxes imposed on the sale of alcoholic beverages. Prepaid fees will not be considered revenues until such time as The Bridges has provided the goods or services necessary to earn such fees. Discounts will be considered a reduction of gross revenues. Revenues from lessons, interest earnings and the proceeds from the sale of non-merchandise items will be excluded from gross revenues. All sales revenues derived from merchandise sales, which shall include food, beverages, apparel, memorabilia, golf equipment and supplies and similar items, as well as net sales on items specifically identified as hard goods as set forth in Exhibit A to this Agreement, shall be included in gross revenues. The average markup on merchandise sales, which shall include food, beverages,