EXHIBIT 10.4
AGREEMENT CONCERNING MODIFICATION AND
TERMINATION OF MANAGEMENT AGREEMENT
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THIS AGREEMENT CONCERNING MODIFICATION AND TERMINATION OF MANAGEMENT
AGREEMENT (this "Agreement") is made and entered into to be effective for all
purposes as of November 1, 1996 (the "Effective Date") by and between PUERTO
RICO HOTEL OPCO, LP SE, a Delaware limited partnership ("Owner") and SJPR, INC.,
a Texas corporation ("Operator").
RECITALS:
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1. Of even date herewith, Southmark San Xxxx, Inc., a Delaware
corporation ("Seller") and Owner have entered into that certain Agreement of
Sale and Purchase (the "Contract") under which Contract Seller has agreed to
sell and Owner has agreed to purchase that certain hotel (the "Hotel") situated
in the City of San Xxxx, Municipality of Carolina, Commonwealth of Puerto Rico
and all related improvements and amenities.
2. In consideration of the payment of the Termination Fee (hereinafter
defined) by Owner to Operator, Owner and Operator have agreed to modify the
Management Agreement (hereinafter defined) to provide (i) that the Management
Agreement may be terminated by Owner upon at least fifteen (15) days prior
written notice to Operator, which notice shall specify the date of termination
(the "Termination Date"), (ii) that if such notice is not given the Management
Agreement shall, in any event, be terminated and the Termination Date shall
occur on or prior to the date which is two hundred seventy (270) calendar days
after the Closing (hereinafter defined) and (iii) that Operator shall waive all
past, present and future "Incentive Compensation" (as defined in the Management
Agreement) otherwise payable to Operator.
3. As used herein, the term "Management Agreement" shall mean that
certain Management Agreement dated as of September 15, 1987 by and between
Seller and Operator with respect to the management and operation of the hotel
and casino located in Carolina, Puerto Rico known as The Sands Hotel & Casino,
as such Management Agreement has been amended by (i) that certain First
Amendment of Management Agreement dated as of October 12, 1987 by and between
Seller and Operator; (ii) that certain Second Amendment of Management Agreement
dated as of October 21, 1987 by and between Seller and Operator; and (iii) that
certain Third Amendment to Management Agreement dated as of December 1, 1992 by
and between Owner and Operator.
CONSIDERATION:
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In consideration of the foregoing recitals and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged and
confessed by Owner and Operator, Owner and Operator have agreed to enter into
this Agreement upon and in accordance with the following terms and conditions:
AGREEMENTS:
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1. Notwithstanding the terms and provisions of Section 1.01 of the
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Management Agreement, Owner and Operator hereby agree that from and after the
closing of the acquisition of the Hotel by Owner (the "Closing"), the Management
Agreement may be terminated by Owner upon at least fifteen (15) days prior
written notice to Operator, specifying the Termination Date.
2. Owner and Operator further agree that if the Management Agreement
shall not be terminated pursuant to Paragraph 1 above, the Management Agreement
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shall be terminated and the Termination Date shall occur on or prior to the date
which is two hundred seventy (270) calendar days after the Closing.
3. Contemporaneously with the Closing, Owner shall pay to Operator the
sum of One Million Four Hundred Seventy-Five Thousand and No/100th Dollars
($1,475,000,00) as a termination fee (the "Termination Fee") in consideration of
Operator's agreement to permit the termination of the Management Agreement by
Owner and Operator's agreement to waive any and all past, present and future
Incentive Compensation described in Section 5.02 of the Management Agreement.
------------
4. During the period of time commencing upon the Closing and ending
upon the Termination Date (the "Interim Period"), Operator shall continue to
operate and manage the Hotel under the terms and provisions of the Management
Agreement and Owner shall pay to Operator the Percentage Management Fee set
forth in Section 5.01 of the Management Agreement. Notwithstanding any of the
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terms and provisions of the Management Agreement to the contrary, during the
Interim Period, Owner shall have no obligation to pay the Incentive Compensation
described in Section 5.02 of the Management Agreement to Operator. In addition,
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Operator hereby releases Owner from any liability to pay any accrued and unpaid
Incentive Compensation due and owing to Operator as of the Termination Date.
5. Owner hereby acknowledges that certain consents and approvals (the
"Consents and Approvals") with respect to the operations conducted by Operator
must be obtained prior to the Termination Date in order to enable Owner to
operate the Hotel and the casino at the Hotel including, without limitation,
approval from the appropriate governmental authorities of the issuance of a new
gaming license to Owner or its designee. Owner shall have a period of time
commencing upon the Closing and ending upon the Termination Date in order to use
its good faith diligent efforts to obtain all requisite Consents and Approvals.
Operator hereby agrees that it shall cooperate with Owner in attempting to
obtain the Consents and Approvals. If the Consents and Approvals have not been
obtained by Owner on or prior to the date which is two hundred seventy (270)
calendar days after the Closing, the Termination Date shall nevertheless occur.
6. Operator hereby agrees that, on the Termination Date Operator shall
deliver to Owner such documents as Owner may reasonably request acknowledging
that the Management Agreement has been terminated effective as of the
Termination Date, including but not limited to a Termination of Management
Agreement in substantially the form attached hereto as Exhibit A and made a part
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hereof, but failure to deliver such Agreement shall not detract from the
effectiveness of such termination.
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7. Pursuant to the terms of that certain Sub-License Agreement by and
between Xxxxx Hotel Corporation and Operator dated February 3, 1989 (the
"License Agreement"), Operator was granted the limited right to utilize the
"Sands" xxxx, name and certain derivatives, along with associated logos, art
work and other designs associated therewith (the "Trademark") for the duration
of the term of the Management Agreement. Owner has requested that Operator
continue to utilize the Trademark under the terms and provisions of the License
Agreement for a period of time commencing upon the Closing and ending upon the
later to occur of (i) March 31, 1997 or (ii) the date upon which the License
Agreement is terminated, or such earlier date as may be requested by Owner.
Operator hereby agrees to continue to utilize the Trademark for the benefit of
the Hotel during such period of time and Owner acknowledges that Operator may
cease utilizing the Trademark prior to the Termination Date if the Termination
Date is after the later to occur of (i) March 31, 1997 or (ii) the date upon
which the License Agreement is terminated.
8. Any notice or communication required or permitted hereunder shall be
given in writing, sent by (i) personal delivery if an actual written receipt
therefore is signed by a duly authorized officer or representative of the party
to whom notice is being given, or (ii) telecopier or fax machine provided
written confirmation of transmission and receipt is obtained by the sender, in
either case addressed as follows:
If to Owner, to: PUERTO RICO HOTEL OPCO, LP SE
--------------- c/x Xxxxxxxxx, Lufkin & Xxxxxxxx
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
FAX No.: (000) 000-0000
with a copy mailed to: KRAMER, LEVIN, NAFTALIS & XXXXXXX
--------------------- 000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxxx, Esq.
FAX No.: (000) 000-0000
to Operator to: SJPR, INC.
-------------- Two Xxxxxxxx Xxxxx, Xxxxx 0000
00000 Xxxx Xxxx, XX 48
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Fax No. (000) 000-0000
or to such other address or to the attention of such other person as hereafter
shall be designated in written notice given by the applicable party in
accordance herewith.
9. This Agreement contains and reflects the complete and entire
understanding among the parties hereto and supersedes any and all prior
understandings and agreements relating to the subject matter hereof. There are
no subsisting agreements, understandings, or other arrangements, either
-3-
oral or written, between or among the parties hereto which are not fully
expressed or integrated herein.
10. This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Texas.
11. This Agreement may be amended in whole or in part only by the
written consent of all parties hereto. Such amendment shall be effective as of
the date then determined by said parties and shall supersede any provision
herein contained which are in conflict therewith.
12. This Agreement shall be binding upon and shall inure to the benefit
of the successors and assigns of each of the parties hereto.
IN WITNESS WHEREOF, Owner and Operator have executed this Agreement to be
effective for all purposes as of the Effective Date.
OWNER:
PUERTO RICO HOTEL OPCO, LP SE,
a Delaware limited partnership
By: /s/ Xxxxxx Xxxxxx
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Name: Xxxxxx Xxxxxx
---------------------------------
Title: Vice President
--------------------------------
OPERATOR:
SJPR, INC.,
a Texas corporation
By: /s/ Xxxxxxx X. Xxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxx
---------------------------------
Title: Vice President
--------------------------------
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EXHIBIT A
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TERMINATION OF MANAGEMENT AGREEMENT
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THIS TERMINATION OF MANAGEMENT AGREEMENT (this "Termination") is made and
entered into to be effective for all purposes as of ____________, 1996 (the
"Effective Date") by and between PUERTO RICO HOTEL OPCO, LP SE, a Delaware
limited partnership ("Owner") and SJPR, INC., a Texas corporation ("Operator").
RECITAL:
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Owner and Operator have heretofore entered into that certain Agreement
Concerning Termination of Management Agreement dated effective as of
_____________, 1996 (the "Agreement") under which Owner was granted the right to
terminate the Management Agreement (hereinafter defined) upon the payment to
Operator of the Termination Fee (as defined in the Agreement) and Operator
agreed to, upon receipt of the Termination Fee, terminate the Management
Agreement. As used herein, "Management Agreement" shall mean that certain
Management Agreement dated as of September 15, 1987 by and between Owner and
Operator with respect to the management and operation of the hotel and casino
located in Carolina, Puerto Rico known as The Sands Hotel & Casino, as such
Management Agreement has been amended by (i) that certain First Amendment of
Management Agreement dated as of October 12, 1987 by and between Owner and
Operator; (ii) that certain Second Amendment of Management Agreement dated as of
October 21, 1987 by and between Owner and Operator; and (iii) that certain Third
Amendment to Management Agreement dated as of December 1, 1992 by and between
Owner and Operator.
CONSIDERATION:
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In consideration of the foregoing recital, the payment of the Termination
Fee by Owner to Operator and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged and confessed by Owner and
Operator, Owner and Operator have agreed to enter into this Termination upon and
in accordance with the following terms and conditions:
AGREEMENTS:
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1. Operator acknowledges receipt of the Termination Fee and hereby
confirms as follows:
(i) the Management Agreement has been terminated effective as of
________________, 19___;
(ii) Owner has fully and completely performed its obligations under
the terms of the Management Agreement which were to be performed prior to
or contemporaneously with the date hereof; and
(iii) Owner shall have no further duties and obligations under
the Management Agreement except the duties and obligations set forth in
the Management Agreement which survive the termination of the Management
Agreement.
EXHIBIT A - PAGE 1 OF 3 PAGES
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2. Any notice or communication required or permitted hereunder shall be
given in writing, sent by (i) personal delivery if an actual written receipt
therefore is signed by a duly authorized officer or representative of the party
to whom notice is being given, or (ii) telecopier or fax machine provided
written confirmation of transmission and receipt is obtained by the sender, in
either case addressed as follows:
If to Owner, to: PUERTO RICO HOTEL OPCO, LP SE
--------------- c/x Xxxxxxxxx, Xxxxxx & Xxxxxxxx
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
FAX No.: (000) 000-0000
with a copy mailed to: KRAMER, LEVIN, NAFTALIS & XXXXXXX
--------------------- 000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxxx, Esq.
FAX No.: (000) 000-0000
to Operator to: SJPR, INC.
-------------- Two Xxxxxxxx Xxxxx, Xxxxx 0000
00000 Xxxx Xxxx, XX 48
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Fax No. (000) 000-0000
or to such other address or to the attention of such other person as hereafter
shall be designated in written notice given by the applicable party in
accordance herewith.
3. This Termination contains and reflects the complete and entire
understanding among the parties hereto and supersedes any and all prior
understandings and agreements relating to the subject matter hereof. There are
no subsisting agreements, understandings, or other arrangements, either oral or
written, between or among the parties hereto which are not fully expressed or
integrated herein.
4. This Termination shall be governed by and construed and enforced in
accordance with the laws of the State of Texas.
5. This Termination may be amended in whole or in part only by the
written consent of all parties hereto. Such amendment shall be effective as of
the date then determined by said parties and shall supersede any provision
herein contained which are in conflict therewith.
6. This Termination shall be binding upon and shall inure to the
benefit of the successors and assigns of each of the parties hereto.
EXHIBIT A - PAGE 2 OF 3 PAGES
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IN WITNESS WHEREOF, Owner and Operator have executed this Termination to be
effective for all purposes as of the Effective Date.
OWNER:
PUERTO RICO HOTEL OPCO, LP SE,
a Delaware limited partnership
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
OPERATOR:
SJPR, INC.,
a Texas corporation
By: /s/ Xxxxxxx X. Xxxxx
-----------------------------------
Name: Xxxxxxx X. Xxxxx
---------------------------------
Title: Vice President
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EXHIBIT A - PAGE 3 OF 3 PAGES
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