Exhibit 10.1
AMENDED AND RESTATED
GENERAL PARTNER COMPENSATION AGREEMENT
THIS AMENDED AND RESTATED GENERAL PARTNER COMPENSATION AGREEMENT (this
"Agreement") is made by and among JUSTICE INVESTORS, a California limited
partnership ("Justice"), XXXX CORPORATION, a California corporation ("Xxxx"
or "Managing General Partner"), and PORTSMOUTH SQUARE, INC., a California
corporation ("Portsmouth") and is dated as of the 23rd day of February, 2006
(the "New Effective Date").
RECITALS
X. Xxxx and Portsmouth are the general partners (collectively, the
"General Partners") of Justice. Xxxx was formerly known as Xxxx Garage
Corporation, a California corporation.
B. Justice is the owner of that certain real property located at 000
Xxxxxx Xxxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx, on which a hotel (the "Hotel"), a
spa (the "Spa") and a garage (the "Garage") are located.
X. Xxxx is the Managing General Partner of Justice and Portsmouth is a
General Partner of Justice. The duties and responsibilities of Xxxx and
Portsmouth are further delineated in the Amended Limited Partnership
Agreement dated as of January 1, 1979, and in the Amended Certificate of
Limited Partnership dated as of September 19, 1983.
X. Xxxx and Portsmouth receive compensation from Justice for acting as
its General Partners and assuming the responsibilities and performing their
respective duties as set forth in the Amended Limited Partnership Agreement,
Xxxx is also the lessee of the Garage pursuant to that certain Garage Lease
dated as of November 16, 1967, as modified by that certain Agreement to
Extend Lease dated as of October 12, 1994.
E. The Hotel is managed by The Dow Hotel Company, LLC ("Dow") pursuant
to that certain Management Agreement dated as of May 19, 2004, by and between
Justice and Dow (the "Dow Management Agreement"). A third party operates the
Spa pursuant to a lease (the "Spa Lease").
F. Pursuant to that certain Compensation Agreement dated as of January
1, 2001, between Xxxx and Portsmouth, the General Partners agreed that
Justice is to pay compensation to them at the rate of three percent (3.0%) of
the first $10,000,000.00 of annual gross rents received by Justice. The
Compensation Agreement further provides that eighty percent (80 %) of the
first $150,000.00 in compensation payable to the General Partners is payable
to Xxxx as the Managing General Partner and twenty percent (20 %) thereof is
payable to Portsmouth for its services as a General Partner. Compensation
earned by the General Partners in excess of $150,000.00 is payable in equal
shares to each of the General Partners. If annual gross rents exceed
$10,000,000.00, the General Partners agreed to review their compensation to
determine whether additional compensation should be paid.
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G. The Compensation Agreement also provides for the payment of monthly
advances against compensation earned during any single year in the sum of
$13,000.00 to Xxxx and $7,000.00 to Portsmouth to be adjusted depending upon
the level of annual gross rents.
H. Paragraph 10 of the Amended Limited Partnership Agreement of Justice
dated as of January 1, 1979, as amended from time to time, provides that Xxxx
and Portsmouth may agree to adjust the compensation of the General Partners.
I. Justice is in the process of repositioning and making major changes
in the operations of the Hotel and to renovate the Hotel (the "Renovation").
In order to plan, implement and administer the repositioning and major
changes, it will be necessary for Xxxx, as Managing General Partner, to
devote substantial time, expertise and effort in the Renovation and in
managing Justice's assets, and for Portsmouth, as a general partner, to
devote substantial time, expertise and efforts in the Renovation and in
overseeing and assisting in the management of those assets.. The General
Partners desire to change the method of compensation so as to provide
adequate compensation to Xxxx and to Portsmouth and to provide incentives to
the General Partners to encourage excellence in the performance of their
responsibilities, but only on the terms and conditions set forth in this
General Partner Compensation Agreement.
X. Xxxx and Justice previously executed that certain General Partner
Compensation Agreement that became effective as of May 31, 2004. The parties
desire to amend and restate that certain General Partner Compensation
Agreement pursuant to the terms and conditions of this Agreement and to make
such changes effective as of the New Effective Date. Upon the execution
hereof, that certain General Partner Compensation Agreement shall be deemed
to have had no force or effect from and after the New Effective Date and to
have been superceded by this Agreement.
NOW, THEREFORE, for in consideration of the mutual covenants herein
contained, the parties agree as follows:
AGREEMENT
1. Definitions. The capitalized words set forth below shall have the
meanings ascribed thereto as used in this Agreement.
a. Annual CPI. The term Annual CPI shall mean the Consumer Price
Index - All Urban Consumers, All Items, Not Seasonably Adjusted, for San
Francisco-Oakland-San Jose, California, for each calendar year, published
annually by the United States Department of Labor, Bureau of Labor
Statistics.
b. CPI Base. The term CPI Base shall mean the Annual CPI for 2004.
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c. CPI Percentage Adjustment. The term CPI Percentage Adjustment
shall be the percentage change between the CPI Base and the CPI for any given
calendar year after 2004. The CPI Percentage Adjustment is to be calculated
for a given calendar year as follows: (i) calculate the difference between
the Annual CPI for that calendar year and the CPI Base; (ii) divide the
result by the CPI Base; and (iii) multiply the result by one hundred (100) in
order to express the result as a percentage. For example, assume that the
Annual CPI for a year in question is 200.0, and the CPI Base is 198.3.
First, subtract the CPI Base of 198.3 from 200.0, which results in a
difference of 1.7, which when divided by 198.3 results in 0.00857287, which
when multiplied by 100 produces the CPI Percentage Adjustment of 0.857287 %.
d. New Effective Date. The Parties hereto hereby agree that the
effective date of this Amended and Restated Agreement is the New Effective
Date, which is February 23, 2006.
x. Xxxxx Revenue. Gross Revenue shall mean all of the revenue
received by Justice in any given calendar year on account of the Hotel, the
Garage Lease and the Spa Lease, net of hotel tax, parking tax and similar
taxes and fees on gross revenue; provided, however, that the revenue received
by Justice on account of the Garage Lease shall be excluded through the
earlier of: (i) the termination of the Garage Lease; or (ii) November 30,
2010.
f. Maximum Annual Base Compensation. Maximum Annual Base
Compensation shall be the product of: (i) one and one-half percent (1.5 %) of
$40,000,000.00; and (ii) the sum of one (1) plus the CPI Percentage
Adjustment. For example, if the CPI Percentage Adjustment was 0.857287%, one
(1) plus 0.857287% results in 1.00857287, which when multiplied by one-half
percent (1.5 %) of $40,000,000.00 produces a Maximum Annual Base Compensation
of $605,143.72.
g. Minimum Annual Base Compensation. Minimum Annual Base
Compensation shall be the product of: (i) $262,500.00; and (ii) the sum of
one (1) plus the CPI Percentage Adjustment. For example, if the CPI
Percentage Adjustment was 0.857287%, one (1) plus 0.857287% results in
1.00857287, which when multiplied by $252,500 produces a Minimum Annual Base
Compensation of $264,750.38.
2. Repositioning Fee and Payment of Expenses Incurred. The General
Partners shall be paid a Repositioning Fee in the sum of $755,000.00 (the
"Repositioning Fee") by Justice as compensation for services rendered to
Justice with respect to repositioning the Hotel and restructuring its
business and management structure. The Repositioning Fee shall be payable to
Xxxx in the sum of $377,500.00, and to Portsmouth in the sum of $377,500.00.
The Repositioning Fee shall be payable by Justice in six installments to each
of Xxxx and Portsmouth as follows:
a. The first installment in the sum of $68,750.00 each was paid by
Justice to each of Xxxx and Portsmouth, receipt of which is hereby
acknowledged by each of Xxxx and Portsmouth.
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b. The second installment in the sum of $68,750.00 each shall be
payable by Justice to each of Xxxx and Portsmouth at the time that the
Renovation is determined in the reasonable discretion of the General Partners
to have been substantially completed.
c. The third installment in the sum of $50,000.00 each shall be
payable by Justice to each of Xxxx and Portsmouth at the time that the
construction loans for the Renovation of the Hotel have closed and all of the
permits for the Renovation have been issued.
d. The fourth installment in the sum of $100,000.00 each shall be
payable by Justice to each of Xxxx and Portsmouth within ten (10) days after
the Hotel has reopened for business after the substantial completion of the
Renovation.
e. The fifth installment in the sum of $40,000.00 each shall be
payable by Justice to each of Xxxx and Portsmouth within ten (10) days after
a cash distribution to partners of Justice has been made after the
substantial completion of the Renovation.
f. The sixth installment in the sum of $50,000.00 each shall be
payable by Justice to each of Xxxx and Portsmouth within ten (10) days after
the date on which, in the reasonable discretion of the General Partners, the
operations of the Hotel shall have achieved the profit projected in the
budget adopted by Justice.
Notwithstanding anything to contrary herein, the General Partners, in their
reasonable discretion, may delay the making of any portion or all of any
installment of the Repositioning Fee in equal amounts as to both General
Partners if the General Partners determine that, based upon the cash then
available to Justice, the payment thereof cannot be made in a fiscally
responsible manner.
3. Compensation. Justice shall pay to the General Partners each calendar
year during the Term of this Agreement, as defined below, Base Compensation,
which is designed to provide sufficient cash so that the General Partners can
operate and provide essential asset management services to Justice, and
Incentive Compensation, which is designed to create an incentive for the
General Partners to continue to improve the performance of the hotel, the
garage, the spa and other assets for the benefit of Justice and its partners.
4. Special Provisions for Base Compensation During 2004. For the year
2004, commencing on the Effective Date and continuing through and including
December 31, 2004. Base Compensation shall be paid in the sum of
$153,125.00; and shall be divided between Xxxx and Portsmouth as follows:
eighty percent (80.0 %), or $122,500.00, shall be paid to Xxxx for its
services as Managing General Partner; and twenty percent (20.0 %), or
$30,625.00, shall be paid to Portsmouth for its services as General Partner.
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5. Base Compensation After 2004. During each calendar year after 2004,
Justice shall pay Base Compensation to the General Partners in a sum equal to
one and one-half percent (1.5 %) of Gross Revenue; provided, however, that in
no calendar year shall Base Compensation be less than the Minimum Annual Base
Compensation nor shall Base Compensation be greater than the Maximum Annual
Base Compensation.
a. First Level of Division of Base Compensation After 2004. The
Minimum Annual Base Compensation paid to the General Partners in each
calendar year after 2004 shall be divided between Xxxx and Portsmouth as
follows: (i) eighty percent (80.0 %) shall be paid to Xxxx for its services
as Managing General Partner; and (ii) twenty percent (20.0 %) shall be paid
to Portsmouth for its services as General Partner.
b. Second Level of Division of Base Compensation After 2004. Base
Compensation earned by the General Partners in each calendar year after 2004
that is in excess of the Minimum Annual Base Compensation shall be payable in
equal fifty percent (50.0 %) shares to Xxxx and to Portsmouth.
6. Payments of Base Compensation. The Minimum Annual Base Compensation
shall be payable on a prorated basis to the General Partners by Justice in
twelve (12) equal monthly installments. Base Compensation in sums greater
than the Minimum Annual Base Compensation shall be payable on a prorated
basis to the General Partners by Justice in installments to be determined by
the General Partners in their reasonable discretion based upon (i) the cash
available to Justice to make such payments in a fiscally responsible manner;
and (ii) a reasonable estimate made by the General Partners of the total
amount of Base Compensation that will be earned by each General Partner
during the calendar year ("Estimated Installments"). Within ninety (90) days
after the end of each calendar year, Justice shall pay to the General
Partners all Base Compensation that was earned by the General Partners during
the previous calendar year that has not then been paid.
7. Repayment of Excess Estimated Installments of Base Compensation.
In the event that either or both of the General Partners receives Estimated
Installments of Base Compensation that are in excess of the Base Compensation
actually earned during the calendar year, such excess shall be repaid to
Justice by the General Partner that received the excess within thirty (30)
days of demand therefor by the other General Partner.
8. Incentive Compensation. Justice shall pay Incentive Compensation
to the General Partners in a sum equal to five percent (5.0 %) of the annual
Net Operating Income of Justice, as that term is defined in the Dow
Management Agreement, that is in excess of $7,000,000.00. Incentive
Compensation shall be made payable in equal fifty percent (50.0%) shares to
Xxxx and to Portsmouth.
9. Incentive Compensation. Incentive Compensation earned during a
given calendar year shall be paid by Justice in one or more installments to
the General Partners from time to time at the reasonable discretion of the
General Partners, and in any event, no later than ninety (90) days after the
end of such calendar year.
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10. Term The Term of this Agreement shall continue in effect until
the earlier of : (i) the date on which either party ceases to be a General
Partner of Justice; (ii) the date on which Justice no longer is the owner of
the Property; or (iii) is otherwise terminated by the agreement of the
General Partners.
11. Counterpart; Facsimile. This Agreement may be executed in
counterparts, each of which when executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument. A facsimile or other electronically transmitted copy of
this Agreement shall have the same force and effect as an original hereof
personally delivered to the intended recipient.
12. Further Assurances. The General Partners each agree to execute
and deliver such agreements, documents and instruments, and do such further
acts as may reasonably be necessary or appropriate to create, preserve,
perfect or evidence the actions contemplated by this Agreement.
13. Recitals. The Recitals are true and correct and are incorporated
herein by reference.
14. Notices. Any notice which either party may be required or may
desire to give to the other party under any provision of this Agreement shall
be in writing and given by personal delivery, by facsimile or by overnight
delivery, such as FedEx, to the parties at the addresses set forth next to
their respective signatures below. Any notice, request or other
communication sent by overnight delivery shall be effective when received by
the addressee thereof. Any notice sent by facsimile shall be effective as of
the time that a printed confirmation sheet shows a communication has been
completed. The parties hereto may change the addresses to which all notices,
requests and other communications are to be sent by giving notice of which
change in address to the other parties in conformity with the preceding
section.
15. Arbitration. If a dispute, controversy or claim: (i) occurs, in
law or in equity; (ii) involves any party to this Agreement (the "Parties");
and (iii) arises under, out of, in connection with, or in relation to this
Agreement and any amendments to this Agreement or a breach of this Agreement,
any Party may submit the dispute to JAMS arbitration in San Francisco,
California, before a retired Superior Court judge. Such arbitration shall be
conducted pursuant to the JAMS Streamlined Arbitration Rules & Procedures as
modified to provide that a final determination shall be made by the
arbitrator no later than thirty (30) days after the matter is submitted to
arbitration by a Party.
16. Confidentiality. Each Party shall maintain confidentiality with
respect to all documents, data and other information derived with respect to
the Agreement. Notwithstanding the foregoing, the Parties may disclose the
existence and contents of this Agreement to potential lenders to the Parties
and as may be required by law.
17. Choice of Law. The validity, construction and effect of this
Agreement shall be governed by the laws of the State of California.
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18. Modification. This Agreement can be modified only by a writing
signed by the parties.
19. Time. Time is of the essence in this Agreement.
20. Successors and Assigns. All rights of each party hereunder inure
to the benefit of their respective successors and assigns and shall be valid
and fully enforceable.
21. Integration. This Agreement is intended by the parties as a final
expression of their agreement and is intended as a complete and exclusive
statement of the terms and conditions thereof. Acceptance of or acquiescence
in a course of performance rendered under this Agreement shall not be
relevant in determining the meaning of this Agreement, even though the
accepting or acquiescing party had knowledge of the nature of the performance
and opportunity for objection.
22. Captions. The captions in this Agreement are for convenience of
reference only and shall not modify or alter the operative provisions hereof.
23. Attorneys' Fees and Other Fees. In the event of litigation or
arbitration between or among the parties hereto, the prevailing party shall
be entitled to recover his or its reasonable attorneys' fees in the manner
provided by law.
IN WITNESS WHEREOF, the parties each have caused this Agreement to be
executed on their behalf and date it as of the New Effective Date first set
forth above.
[Signatures begin on page 8]
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"JUSTICE"
JUSTICE INVESTORS,
a California limited partnership
By its General Partner:
XXXX CORPORATION
a California corporation
By: /s/ Xxxxxxx X. Xxxxx. Jr.
-------------------------
XXXXXXX X. XXXXX, XX.,
Chairman, Board of Directors
By: /s/ Xxxxxxxx X. Xxxxxxx
-------------------------
XXXXXXXX X. XXXXXXX,
President
By its General Partner:
PORTSMOUTH SQUARE, INC.
a California corporation
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------
XXXXXXX X. XXXXXX
Vice President and Secretary
Address for Notice:
Justice Investors
c/o Xx. Xxxxxxxx X. Xxxxxxx, President of Xxxx
000 Xxxxxx Xxxxxx, Xxxx 000
Xxx Xxxxxxxxx, XX 00000
Facsimile (000) 000-0000
With copy to:
Justice Investors
c/o President of Portsmouth Square, Inc.
X.X. Xxx 000000
Xxx Xxxxx, XX 00000-0000
Facsimile: (000) 000-0000
[Signatures Continued on Page 9]
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[Signatures Continued from Page 8]
"XXXX"
XXXX CORPORATION
a California corporation
By: /s/ Xxxxxxx X. Xxxxx. Jr.
-------------------------
XXXXXXX X. XXXXX, XX.,
Chairman, Board of Directors
By: /s/ Xxxxxxxx X. Xxxxxxx
-------------------------
XXXXXXXX X. XXXXXXX,
President
Address for Notice:
c/o Xx. Xxxxxxxx X. Xxxxxxx, President of Xxxx
000 Xxxxxx Xxxxxx, Xxxx 000
Xxx Xxxxxxxxx, XX 00000
Facsimile (000) 000-0000
"PORTSMOUTH"
PORTSMOUTH SQUARE, INC.
a California corporation
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------
XXXXXXX X. XXXXXX
Vice President and Secretary
Address for Notice:
x/x Xxxxxxxxx xx Xxxxxxxxxx Xxxxxx, Inc.
X.X. Xxx 000000
Xxx Xxxxx, XX 00000-0000
Facsimile: (000) 000-0000
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