EXHIBIT 10(c)(iii)
AMENDMENT AGREEMENT TO
MANAGEMENT CONTRACT
THIS AMENDING AGREEMENT TO MANAGEMENT CONTRACT ("Amendment Agreement") is made
this 28th day of April, 1998.
BETWEEN:
SHERATON OVERSEAS MANAGEMENT CORPORATION, a Delaware Corporation having its
principal offices at 00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx, 00000,
XXX ("Sheraton"); and
HUAYANG INTERNATIONAL (SHENYANG) CO. LTD (formerly known as Huasheng Hotel
International (Shenyang) Co., Ltd) ("Huayang International"), CHANGHUA
(SHENYANG) BUSINESS CO., LTD. ("Changyuan") (collectively jointly and severally
referred to as "Owner") and HUAYANG INDUSTRY (SHENYANG) GROUP CO., LTD.
("Huayang Industry") organised and registered legal entities existing under the
laws of the People's Republic of Ching and having their legal address at 386
Qingnian Street, Heping District, Shenyanbg, Liaoning Province, People's
Republic of China.
WHEREAS:
1. A Management Contract was entered into on 15 September 1995 (the
"Management Contract") between Huasheng Hotel International (Shenyang) Co.,
Ltd. and Sheraton Overseas Management Corporation.
2. Owner presently has the building ownership certificates with Huayang
International having the building ownership certificate to the hotel tower,
Changhua having the building ownership certificate to the podium and
Changyuan having the building certificate to the car park being the
requisite ownership rights for the Building and Appurtenances and Owner is
entitled to erect and operate a hotel and related facilities on the portion
of the site as marked in red on the Schedule attached hereto.
3. The hotel tower, podium and car park all comprise the Hotel, as referred to
in this Amendment Agreement.
4. Owner is desirous of assuming all the rights and obligations stated to be
held by the previous Owner under the Management Contract, and the parties
hereto are desirous of amending, ratifying and confirming the Management
Contract in the manner hereinafter contained.
NOW THEREFORE, Sheraton, Owners and Huayang Industry covenant and agree as
follows:
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1. In this Amendment Agreement, reference to an Article and a Section are to
the Article and Section of the Management Contract unless the context
unless the context otherwise requires. Terms used but not defined herein
shall have the same meaning as provided in the management Contract.
2. Section 1.06 of Article I is amended by deleting the existing Section 1.06
and replacing it with the following:
"1.06 Available Rooms means the number of Hotel rooms that are available
for sale to guests which do not include house or in-house use or
commercial rooms or, for purposes only of calculating reservation
fees, rooms let out to guests staying in excess of one month at any
one time, but includes rooms which are not of order (provided such
rooms are not out of order for more than 30 days) and complimentary
rooms."
3. Section 1.17 of Article I is amended by deleting the existing Section 1.17
and replacing it with the following:
"1.17 Estimated Partial Opening Date means June 1, 1999 or such other date
as Owners and Operator may agree in writing as the date on which they
estimate the Hotel will be ready for partial operations in accordance
with section 4.05."
4. Section 1.23 of Article I is amending by deleting the existing Section 1.23
and replacing it with the following:
"1.23 Full Opening Date means the date on which Operator fully opens the
Hotel to the public in accordance with section 4.05 and shall, unless
otherwise agreed by Owner and Operator be 1 September 1999."
5. Section 1.30 of Article I is amended by deleting the existing Section 1.30
and replacing it with the following:
"1.30 Independent Auditor means one of the major six international
accountancy firms or a certified public accounting registered in the
Country working as a correspondent of such firm which is registered in
the Country and experienced in hotel accounting and auditing, as
nominated by Owner and reasonably approved by Operator and failing
nomination by Owner shall mean Xxxxxx Xxxxxxxx & Co."
6. Section 2.02 of Article II is amended by deleting the first sentence and
replacement it with the following:
"During the Term, the Hotel shall be known as "Sheraton Shenyang Lido
Hotel" in English and "___________________ " in Chinese."
7. Section 2.03(i) of Article II is amended by deleting the existing Section
2.03(i) and replacing it with the following:
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"(i) Owner shall, strictly in accordance with the Approved Final Plans and
Sheraton Standards and in conformity with all applicable rules and
regulations now or hereafter in force (governmental, municipal or
otherwise), laws and ordinances of the Country, at its own expense and
with all reasonable diligence design, construct, furnish and equip on
the Site of international five star hotel containing approximately 900
bays comprising rooms, apartments and studios, function space,
restaurants, lounges, 24-hour room service and coffee shop, business
centre, swimming pool and recreation facilities. Owner shall deliver
to Operator for management and operation of the Hotel fully
constructed, furnished and equipped in accordance with the Approved
Final Plans and Sheraton Standards.
8. Section 2.03(ii)(a) of Article II is amended by deleting the words "by 1st
October 1995" and replacing them with the words "at the time of executing
this Amendment Agreement."
9. Section 2.03(ii)(b) of Article II is amended by deleting the words "by 1st
November 1995" and replacing them with the words "30 days after execution
of this Amendment Agreement."
10. Section 2.03(ii)(c) of Article II is amended by deleting the words "by 1st
December 1995" and replacing them with the words "60 days after execution
of this Amendment Agreement."
11. Section 2.03(ii)(d) of Article II is amended by deleting the words "by 1st
November 1995" and replacing them with the words "60 days after execution
of this Amendment Agreement."
12. Section 2.3(ii)(e) of Article II is amended by deleting the words "by 1st
November 1994" and replacement them with the words "60 days after execution
of this Amendment Agreement."
13. Section 4.02 of Article IV is amended by deleting the existing second
sentence and by replacing it with the following:
"The Pre-Opening Budget shall be prepared by Operator within 45 days of the
Effective Date. The Pre-Opening Budget shall then be submitted to Owner for
its approval, such approval not to be unreasonably withheld. It is agreed
it is estimated that the amount of the Pre-Opening Budget will be a minimum
sum of USD$4 million or its equivalent in local currency. The approved
Pre-Opening Budget may be revised higher by Operator from time to time, in
consultation with Owner, to reflect to then current cost projections, delay
in particular opening beyond the Estimated Partial Opening Date and
unforeseen circumstances."
14. Section 403(i) of Article IV is amended by deleting the existing Section
4.03(i) and replacing it with the following:
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Owner shall deposit in the Pre-Opening Agency Account, the sum of
$US500,000 within 30 days of the approval of the Pre-Opening Budget by
Owner. Thereafter, on a monthly basis, 30 days prior to the scheduled
expenditure as indicated in the approved Pre-Opening Budget, Owner will pay
into the Pre-Opening Account the amount scheduled for expenditure within
the next month. If for any reason, the Pre-Opening Budget has not been
approved by July 1, 1998, the amount of $US500,000 must be deposited into
the Pre-Opening Agency Account on or before August 1, 1998."
15. Section 4.05(i)(b) of Article IV is amended by deleting the existing
Section 4.05(i)(b) and replacing it with the following:
"(b) at least 200 of the Hotel's guest room floors, all public areas,
facilities, restaurants, ballroom, and all landscaping, and all
requisite life safety and fire requirements of the Hotel, are fully
constructed, furnished and equipped in accordance with the Approved
Final Plans and Sheraton Standards and such portion of the Hotel to be
partially opened is, in Operator's opinion, otherwise suitable for
guest use and occupancy and all necessary Operating Supplies, foods
and beverages have been obtained;"
16. Section 5.02 of Article V is amended by deleting the existing Section 5.02
and replacing it with the following:
"5.02 Operating Plan
(i) Not later than ninety (90) days prior to the commencement of each
Fiscal Year, Operator shall provide to Owner, an annual operating plan
for the operation of the Hotel for the forthcoming Fiscal Year
containing a detailed financial budget, a market promotion plan and a
capital expenditure plan. Within a period of 20 days of receipt of the
draft operating plan prepared by Operator, Owner shall advise Operator
whether it approves such operating plan or whether the operating plan
or certain items within the plan are not approved by it. In review the
operating plan, Owner must not unreasonably withhold or delay the
giving of its approval and the Owner's approval cannot be withheld
with regard to any item in the operating plan necessary to enable the
Hotel to meet and comply with Sheraton Xxxxxxxxx.Xx the event that
Owner has not advised Operator by the expiration of 20 days of receipt
by Owner of the draft operating plan, of its approval or disapproval,
the draft operating plan shall be the agreed and approved operating
plan for the forthcoming Fiscal year. In the event that Owner advises
Operator that it does not approve of the draft operating plan or of
any line item within it, the parties agree to further review, explain
and discuss such operating plan as submitted and Operator agrees to
use reasonable endeavors to take into account Owner's reasonable
opinions and recommendations and to incorporate and amend the draft
operating plan. If agreement cannot be reached prior to 30 days before
the commencement of the relevant Fiscal Year in respect of each budget
line, the figures set out in the operating plan in respect of such
budget line not agreed for the immediately preceding Fiscal Year shall
apply and all expenditure amounts set out therein shall be increased
by an amount equal to the percentage rate of
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inflation in the Country for the relevant Fiscal Year as published and
recognised by the Government or relevant authorities of the Country.
Total Revenue as forecast in the draft operating plan, if not
approved, shall be revised from the total Revenue specified in the
operating plan for the preceding Fiscal Year, adjusted to have regard
to prevailing market conditions. In the event of Operator and Owner
failing to agree to the appropriate adjustment, the matter in dispute
relating to Total Revenue shall be submitted for determination by the
Independent Auditor who shall act as an expert and not as an
arbitrator and whose decision shall be final and binding.
(ii) Operator will use its reasonable endeavours to comply with the
approved operating plan but the parties acknowledge that it is a
reasonable estimate of expenditures and income only and of an intended
market promotion plan and capital expenditure plan, and Operator shall
not be deemed to have given any guarantee, warranty or representation
whatsoever in connection with any of the operating plans. For the
avoidance of doubt, any failure to comply with any operating plan
shall not give rise to rights of termination pursuant to Section
23.01."
17. Article V is amended by the addition of the following two Sections,
Sections 5.05 and 5.06.
"5.05 Owner's Representative
Owner shall appoint a representative and advise Operator of the name and
title of such representative. Owner's representative shall be its
representative to exercise the powers and to undertake the functions and
duties given and assigned to Owner under this Contract and to discuss and
communicate with Operator on all matters arising in connection with this
Contract. In addition, Owner's representative shall have the right, at
reasonable times and on prior notice to the General Manager of the Hotel,
to access, examine and make copies of all books of account and records of
and relating to the Hotel which are maintained by Operator under this
Contract.
5.06 Meetings
In addition to any other meetings held hereunder, Operator shall at the
request of Owner hold a meeting with Owner (as may be represented by
Owner's representative and all other persons designated by Owner) at least
once per month during the Operating Term at which Operator and Owner shall
review and discuss the previous and future month's operating statements,
marketing plans, cash flows, budget reviews, capital expenditure, important
personnel moves and general concerns for Owner and Operator relating to the
Hotel. Except to the extent otherwise mutually agreed upon by Owner and
Operator, all such meetings shall be held at the Hotel.
18. Article VII is amended by deleting the existing Article VII and replacing
it with the following:
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"Article VII - FEES
7.01 Basic Fee
(i) Calculation
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Commencing from the Partial Opening Date, during each Fiscal Year of the
Term (and proportionately for a fraction of a Fiscal Year), Owner shall,
subject as provided in paragraph (ii), pay to Operator on a monthly basis
the Basic Fee for services rendered under this Contract in relation to the
management and operation of the Hotel as follows:
(a) Where Gross Operating Profit in a Fiscal Year is between 0 to
25,000,000 Ren Min Bi, a fee of 4% of Gross Operating Profit for that
Fiscal Year;
(b) where in any Fiscal Year, Gross Operating Profit is 25,000,000 Ren Min
Bi or greater, a fee equal to 8% of Gross Operating Profit in that
Fiscal Year.
After calculation of the Basic Fee, there shall be deducted from the amount
calculated the amount of the License Fee paid under the License Contract.
(ii) Inter-relationship of Basic Fee and License Fee
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For further clarity, it is agreed and understood that if in any year, the
Basic Fee calculated in accordance with section 7.01(i) above is greater
that the License Fee payable pursuant to the License Contract, the License
Fee determined in accordance with the License Contract is paid to the
Licensor and the difference between the Basic Fee, as calculated in section
7.01 above is less than the amount calculated as License Fee, pursuant to
the License Contract, then the License Fee calculated in accordance with
the License Contract is payable to the Licensor and no amount is payable to
Operator as a Basic Fee.
(iii) Partial Operations
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During the period of partial operations of the Hotel commencing on the
Partial Opening Date and ending on the Full Opening Date, Owner shall pay a
License Fee/Basic Fee to Licensor/Operator calculated in the above
described manner.
7.02 Payment Method
(i) Commencing from the Partial Opening Date, on or before the fifth day
of each Fiscal Month during the Term, Licensor/Operator shall be paid
out of the Agency Account its License Fee and Basic Fee for the
preceding Fiscal Months during
(ii) At the end of each Fiscal Year and following receipt by Owner of the
annual audit report, an adjustment will be made based on such audit
report, if necessary, so that Licensor/Operator shall have received
its proper License Fee and Basic Fee respectively as specified above
for such Fiscal Year. Within 30 days of receipt by Owner of such audit
report, Operator will either:
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(a) place in the Agency Accounts or remit to Owner, as appropriate, any
excess in the amounts it has received as fees, in respect of such
Fiscal Year; or
(b) be paid out of the Agency Accounts or by Owner, if working capital is
insufficient, as appropriate, any deficiency in the amounts it has
received as fees,
as the case may be.
(iii) In the event there is an operating loss which results in a negative
Gross Operating Profit in any Fiscal Year, it will be borne
exclusively by Owner and the amount thereof will not be applied
against Gross Operating Profit of any other Fiscal Year.
19. Section 10.01 of Article X is amended by deleting the second sentence and
by replacing the second sentence with the following:
"The Agency Account shall have authorized signatories of both Operator and
Owner. In respect of any payment in less than US$50,000 (or the equivalent
in local currency calculated in accordance with the provisions of clause
16.02), and in respect of payment of the 'Basic Fee and License Fee, only
Operator's designated signatories shall be authorised to operate and draw
from the Agency Account. In respect of any payment for any one item in
excess of USD$50,000 (or its equivalent in local currency in accordance
with the provisions of clause 16.02), both Operator's authorised designees
and Owner's authorised designees shall be authorised to operate and draw
from the Agency Account jointly. Owner shall nominate its authorised
designee for purposes of operating and drawing from the Agency Account to
Operator and the bank with an authorised alternate each in the City of
Shenyang to ensure no delays are occasioned to the operation of the Hotel
and in meeting the liabilities of the Hotel. In particular, Owner warrants
to Operator that all payroll payments shall be made when due and Owner
acknowledges payments in respect of employment contracts entered into which
are a liability of the Hotel shall be met in accordance with their terms of
payment. Operator shall promptly notify Owner of any payment of Basic Fee
and/or License Fee with supporting Computation.
20. Section 10.02 of Article 10 is amended by deleting the existing Section
10.02 and by replacing it with the following:
"10.02 Owner shall deposit monies into the Agency Account for initial
working capital as follows:
(i) no later than 120 days prior to the Estimated Partial Opening Date, an
amount of US$250,000 (or its equivalent in local currency);
(ii) thirty (30) days prior to the Estimated Partial Opening Date, an
amount equal to three months worth of working capital, as showing the
forecast
for the first year's operations, part of the approved Pre-Opening
Budget shall be deposited;
(iii) Thereafter, amounts will be deposited into the Agency Account in
accordance with the forecasts contained in the Operating Plan
representing three months working capital requirements to be paid
each month but so that at no time will the balance in the Agency
Account be less than US$500,000, (or the equivalent in local
currency);
(iv) It is estimated this amount for initial working capital will not be
less than US$750,000.
21. Section 11.01(i) of Article XI is amended by deleting existing Section
11.01(i) and replacing it with the following:
"11.01(i) Commencing from the Partial Opening Date, there shall be deducted
in monthly installments during each Fiscal Year of the Term, the
following amounts:
(a) for the first Fiscal Year of the Term, an amount equal to 2%
of Total Revenue based on the Operating Plan for that year;
(b) for the second Fiscal Year of the Term, an amount equal to
3% of Total Revenue for the preceding Fiscal Year; and
(c) for the third Fiscal Year of the Term, an amount equal to 3%
of Total Revenue for the preceding Fiscal Year; and
22. Section 20.01(i) of Article XX is amended by deleting the first sentence
and replacing it with the following:
"During the Term, Owner shall not commercially use or refer to the word
"Sheraton" in any manner whatsoever other than in connection with the Hotel
or any factual statement that the Hotel is managed by Operator in
accordance with the terms of this Contract."
23. Section 25.02(b) of Article XXV is amended by deleting the reference to
"the Chairman of the Singapore Chamber of Commence" where it appears and by
replacing this phrase with the words "the Chairman of the Hong Kong Chamber
of Commerce."
24. Section 25.02(d) of Article XXV is amended by deleting existing Section
25.02(d) and replacing it with the following:
"25.02(d) The arbitration shall take place in Hong Kong. This Contract
shall be governed by the laws of Hong Kong."
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25. Section 25.03 of Article XXV is amended by deleting the reference where it
appears to "the courts of Singapore" and by replacing this phrase with the
words "the courts of Hong Kong."
26. Section 26.01 of Article XXVI is amended by adding a second address for the
Owner as follows:
"Owner: c/x Xxxxxx Kong (Holdings) Ltd.
China Hotels Division
00/X Xxxxx Xxxxxxxx
00 Xxxxx'x Xxxx Xxxxxxx
XXXX XXXX
Fax: 000 0000 0000"
27. Section 28.08 of Article XXVIII is amended by deleting the reference to
"Xx. Xxx Wanjun" and by replacing this reference with the following words
"Owner's representative from time to time."
28. References to "Owner" in the Management Contract shall after the execution
of this Amendment Agreement be to Huayang International hereby release
Huayang Industry and Huayang Industry hereby releases Operator and Huayang
International from all the duties and obligations stated to be held by the
other parties under the Management Contract.
29. The Management Contract is amended only as expressly provided herein.
Except as provided herein, the provisions of the Management Contract shall
remain unchanged and in full force and effect and is hereby ratified by
each of the Huayang International, Changhua and Changyuan as being binding
and enforceable as between Sheraton and Owner and as against third parties.
IN WITNESS WHEREOF Operator, Owner and Huayang Industry have duly executed this
amendment to the Management Contract on the date above written.
Sheraton Overseas Management Corporation
By: Witness By:
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Name: Name:
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Huayang International (Shenyang) Co., Ltd.
By: Witness By:
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Name: Name:
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Changhua (Shenyang) Business Co., Ltd.
By: Witness By:
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Name: Name:
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Changhuan (Shenyang) Park Co., Ltd.
By: Witness By:
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Name: Name:
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Huayang Industry (Shenyang) Group Co., Ltd.
By: Witness By:
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Name: Name:
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