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
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
-----------
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/- 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:
-------------------------- ----------------------
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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