SECOND AMENDMENT TO the ameNded and restated MASTER DEVELOPMENT AGREEMENT
Exhibit 10.5
CERTAIN PORTIONS OF THE EXHIBIT THAT ARE NOT MATERIAL AND IS THE TYPE OF INFORMATION THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL HAVE BEEN REDACTED PURSUANT TO ITEM 601(b)(10)(iv) OF REGULATION S-K. [****] INDICATES THAT INFORMATION HAS BEEN REDACTED.
SECOND AMENDMENT TO the ameNded and restated MASTER DEVELOPMENT AGREEMENT
This Second Amendment (the “Amendment”) to the Amended and Restated Master Development Agreement, the HK Amended and Restated Company Franchise Agreement and the PRC Amended and Restated Company Franchise Agreement is made on June 28, 2024 by and amongst (1) Tim Hortons Restaurants International GmbH, a private limited liability company (Gesellschaft mit beschränkter Haftung) organized under the laws of Switzerland (“THRI”), (2) TH Hong Kong International Limited, a company organized under the laws of Hong Kong (the “Master Franchisee”), (3) TH International Limited, a company organized under the laws of Cayman Islands (“Xxxx China”), and (4) each of Tim Hortons (Shanghai) Food and Beverage Management Co. Ltd., Tim Hortons (China) Holdings Co. Ltd., Tim Hortons (Beijing) Food and Beverage Service Co., Ltd., Xxxx Coffee (Shenzen) Co., Ltd., and Tim Hortons (Shenzhen) Good and Beverage Co. Ltd., each a company organized under the laws of the People’s Republic of China (individually, a “Franchisee” and together, the “Franchisees”).
For the purposes of this Amendment, each party above shall be individually referred to as a “Party” and collectively as the “Parties”. Capitalized terms used but not defined herein have the meanings set forth in the Agreement (as defined below).
WHEREAS
| A. | THRI, Master Franchisee and Xxxx China are parties to an Amended and Restated Master Development Agreement dated August 13, 2021 (the “Agreement”), under which Master Franchisee was granted the exclusive right to develop, open and operate (through itself and the Approved Subsidiaries), Tim Hortons Restaurants in the Territory, subject to the terms and conditions set forth in the Agreement. |
| B. | (i) THRI and Master Franchisee are parties to the HK Amended and Restated Company Franchise Agreement, dated August 13, 2021, and (ii) THRI, Master Franchisee and the Franchisees are parties to the PRC Amended and Restated Company Franchise Agreement, dated August 13, 2021 (each a “CFA” and together, the “CFAs”), relating to the operation of Tim Hortons Restaurants in the Territory. |
| C. | The Parties have decided to amend the Agreement and the CFAs, effective as of the date hereof, by deleting
the stricken text (indicated as: |
1
CERTAIN PORTIONS OF THE EXHIBIT THAT ARE NOT MATERIAL AND IS THE TYPE OF INFORMATION THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL HAVE BEEN REDACTED PURSUANT TO ITEM 601(b)(10)(iv) OF REGULATION S-K. [****] INDICATES THAT INFORMATION HAS BEEN REDACTED.
From and after the date of this Amendment, the Parties agree as follows:
| 1. | Amendment to Clause 1.1 (Definitions) of the Agreement |
| (a) | The definitions below are amended as follows: |
“Development
Cure Period” means, for any Shortfall Year [****],
a six (6) month period commencing on January September
1st of the Development Year immediately following such Shortfall Year. [***].
“Development
Year” or “Year” means, with respect to the first
sixth Development Year, the period beginning on the Original
Commencement Date September 1, 2023 and ending on December
31, 2024 August 31, 2019, and with respect
to each subsequent Development Year shall be a calendar year (i.e., beginning
on January September 1st and ending
on December August 31st)
of the following year.
“Xxxx Go” means,
subject to Clause 6.4A of this Agreement, a Restaurant that meets the Xxxx Go Minimum Criteria
situated in a unit which is either (a) a small (less than 80 sqm), open-fronted hut or cubicle
or (b) an open-fronted hut or cubicle situated in a location with restrictions on building a full kitchen, in each case, from which beverage-focused
Approved Products are sold and meeting such minimum criteria as determined by THRI and/or its Affiliates, in its sole discretion, for
the Territory from time to time.
“Tim Hortons Restaurants” and “Restaurants” means restaurants operating under the Xxx Hortons System and utilizing the Tim Hortons Marks in a format approved by THRI and/or its Affiliates, in their sole discretion. A Xxxx Go and Xxxx Express will constitute a Tim Hortons Restaurant or Restaurant for all purposes hereunder; provided that a Xxxx Express [***] shall not be included for purposes of determining Master Franchisee’s compliance with the Targets set forth in the Development Schedule. A “Tim Hortons Restaurant” or “Restaurant” means any of them. Tim Hortons Restaurants include Direct-Owned Restaurants and Franchised Restaurants.
| (b) | The following definition is deleted from Clause 1.1. |
“Investment
Agreement” means the Joint Venture and Investment Agreement dated April 27, 2018 by and among THRI, the Investor and Cartesian.
| (c) | The following new definitions are added to Clause 1.1: |
“Express Criteria Notification Date” has the meaning set out in Clause 6.4A.
“Fee Incentive Conditions” mean the satisfaction of the following conditions:
there having been no uncured defaults (including payment defaults) by Xxxx China, Master Franchisee and the Approved Subsidiaries in respect of the Transaction Agreements at all relevant times, including from the date the Direct-Owned Restaurant Unti Fee and/or Franchise Restaurant Unit Fee (as applicable) is due until the date it is fully paid; and
2
CERTAIN PORTIONS OF THE EXHIBIT THAT ARE NOT MATERIAL AND IS THE TYPE OF INFORMATION THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL HAVE BEEN REDACTED PURSUANT TO ITEM 601(b)(10)(iv) OF REGULATION S-K. [****] INDICATES THAT INFORMATION HAS BEEN REDACTED.
| (i) | the applicable Xxxx Go or Xxxx Express in the Territory being in full compliance with the Xxxx Go Minimum Criteria or Xxxx Express Minimum Criteria (as applicable). |
“Minimum Criteria” means the Xxxx Express Minimum Criteria and/or the Xxxx Go Minimum Criteria.
“Xxxx Express” means, subject to Clause 6.4A of this Agreement, a Restaurant that meets the Xxxx Express Minimum Criteria.
“Xxxx Express Minimum Criteria” means the minimum criteria (as determined by THRI from time to time (acting in its sole discretion)) applicable to a Restaurant operating or to be operated under the “Xxxx Express” name, including but not limited to the Standards, format, equipment, image, finish, décor, menu and creditworthiness and size of proposed Franchisee.
[****]
“Xxxx Express Pipeline Units” mean the units either under construction or irrevocably contracted for construction, in each case, which are set forth in Schedule 8 hereto and which may not be substituted without the prior written consent of THRI (which consent may be withheld in its sole discretion).
“Xxxx Go Minimum Criteria” means the minimum criteria (as determined by THRI from time to time (acting in its sole discretion)) applicable to a Restaurant operating or to be operated under the “Xxxx Go” name, including but not limited to the Standards, format, equipment, image, finish, décor, menu, made-to-order menu, and creditworthiness and size of proposed Franchisee.
| 2. | Amendment to Clause 5.1 of the Agreement |
The first sentence of Clause 5.1 of the Agreement is hereby amended as follows:
The initial term of this Agreement shall
be for a period of twenty (20) years commencing on the Original Commencement Date and
expiring on December 31, 2038, subject to earlier termination in accordance with the terms of this Agreement (the “Initial
Term”).
3
CERTAIN PORTIONS OF THE EXHIBIT THAT ARE NOT MATERIAL AND IS THE TYPE OF INFORMATION THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL HAVE BEEN REDACTED PURSUANT TO ITEM 601(b)(10)(iv) OF REGULATION S-K. [****] INDICATES THAT INFORMATION HAS BEEN REDACTED.
| 3. | Amendment to Clause 6.1 of the Agreement |
Clause 6.1 of the Agreement is hereby amended as follows:
Master
Franchisee shall (a) develop and open for business (and keep open to the extent required hereby), and (b) license Franchisees to develop
and open for business (and keep open to the extent required hereby) a minimum number of new Tim Hortons Restaurants within the Territory
in strict compliance with the Development Schedule, and such new Restaurants may be either Direct-Owned Restaurants or Franchised Restaurants;
provided, however, that for each Development Year, the aggregate number of Direct-Owned Restaurants shall
be at least sixty percent (60%) of the total number of Tim Hortons Restaurants open and operating in the Territory on a cumulative basis
(rounded up to the nearest whole number), as determined on the last Day of such Development Year. Notwithstanding the foregoing:
| (a) | [****]; |
| (b) | [****]; and |
| (c) | commencing from Development Year 8, the percentage of Direct-Owned Restaurant net restaurant growth (i.e., the net change in Direct-Owned Restaurants during such Development Year) shall be at least sixty percent (60%) of the total net restaurant growth (i.e., the net change in the total number of Tim Hortons Restaurants during such Development Year). |
| 4. | Insertion of new Clause 6.4A to the Agreement |
A new Clause 6.4A shall be inserted at the end of Clause 6.4.
| (a) | Excluding the Xxxx Express Pipeline Units, the Master Franchisee and Approved Subsidiaries shall not open a Xxxx Express (or license to Franchisees the right to open any new Xxxx Express or convert any existing Restaurants to a Xxxx Express) until such time as THRI notifies the Xxxx Express Minimum Criteria to the Master Franchisee in writing (such date, the “Express Criteria Notification Date”). |
| (b) | From and after the Express Criteria Notification Date, Master Franchisee and Approved Subsidiaries may open (or license to Franchisees the right to open) up to [****] new Xxxx Express (in addition to the Xxxx Express Pipeline Units) in Development Year 6; provided that, prior to the opening of each such new Xxxx Express, Master Franchisee shall have obtained THRI’s confirmation in writing that such proposed Xxxx Express satisfies the Xxxx Express Minimum Criteria. For the avoidance of doubt, THRI agrees that the minimum criteria currently applicable to Xxxx Express Pipeline Units is set forth in Schedule 9 hereto; provided that it is understood that the Xxxx Express Minimum Criteria is in the process of material revision, and THRI shall notify Master Franchisee on the Express Criteria Notification Date of the revised Xxxx Express Minimum Criteria, which Master Franchisee acknowledges shall be different (including in terms of scope and level of detail) to the criteria set forth in Schedule 9. |
4
CERTAIN PORTIONS OF THE EXHIBIT THAT ARE NOT MATERIAL AND IS THE TYPE OF INFORMATION THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL HAVE BEEN REDACTED PURSUANT TO ITEM 601(b)(10)(iv) OF REGULATION S-K. [****] INDICATES THAT INFORMATION HAS BEEN REDACTED.
| (c) | Commencing from Development Year 7, the Master Franchisee and Approved Subsidiaries shall not open nor license to Franchisees the right to open any new Xxxx Express or convert any existing Restaurants to a Xxxx Express without the prior written consent of THRI which may be withheld in its sole discretion. |
| (d) | Master Franchisee and Approved Subsidiaries shall ensure that each Xxxx Go and Xxxx Express is operated and maintained in accordance with the requirements of the Company Franchise Agreement and Franchise Agreements, as applicable. A failure to operate or maintain any Xxxx Go or Xxxx Express in accordance with the Company Franchise Agreement and Franchise Agreements, as applicable, shall entitle THRI and and/or Approved Subsidiary to terminate the applicable Unit Addendum or Franchise Agreement in accordance with the Unit Addendum or Franchise Agreement (as applicable). |
| (e) | [****]. For the avoidance of doubt, nothing in this clause 6.4A(e) or otherwise in this Agreement shall be deemed to supersede or modify any obligations of Master Franchisee or any of its Affiliates or any Franchisee under any Unit Addendum or Franchise Agreement, as applicable, including any obligation to comply with the Standards and remodel requirements as more explicitly set forth therein. |
| 5. | Amendment to Clause 6.8 of the Agreement |
Clause 6.8 of the Agreement is hereby amended as follows:
[****]
Master Franchisee will have until the expiration of the Development Cure Period to achieve the Target for the Shortfall Year.
If Master Franchisee fails to achieve the Target (a “Development Default”) [****] for
any Development Year [****], the Shortfall Year by
the expiration of the Development Cure Period, then, in addition to any other legal rights and remedies available to THRI set
out in this Agreement or at Law, THRI may, in its sole discretion, terminate the Development Rights or terminate this Agreement in its
entirety. THRI will not be required to provide any notice (whether oral or written) to Master Franchisee of a Development Default or,
if applicable, the commencement of the Development Cure Period. For the avoidance of doubt,
if a Restaurant is counted for purposes of determining Master Franchisee’s compliance with the applicable Annual
Opening Target or Extension Period Target for a Shortfall Year, it will
not be counted for purposes of determining compliance with the applicable Annual Opening
Target or Extension Period Target for the Development Year in which the Restaurant actually
opened.
5
CERTAIN PORTIONS OF THE EXHIBIT THAT ARE NOT MATERIAL AND IS THE TYPE OF INFORMATION THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL HAVE BEEN REDACTED PURSUANT TO ITEM 601(b)(10)(iv) OF REGULATION S-K. [****] INDICATES THAT INFORMATION HAS BEEN REDACTED.
| 6. | Amendment to Clause 8.5 of the Agreement |
Clause 8.5 is hereby amended as follows:
During the Term, Master Franchisee will
pay the following fee to THRI or its designee for the opening of each Direct-Owned Restaurant: [****] for each Direct-Owned Restaurant
opened any time after January 1, 2021 in Development Year 3 and at any time thereafter (the “Direct-Owned Restaurant Unit Fee”),
each for a twenty (20) year term (which amount will be prorated if the term of the applicable Unit Addendum is less than twenty (20) years);
provided that, subject to satisfaction of the Fee Incentive Conditions, the Direct-Owned Restaurant
Unit Fee for (a) a Direct-Owned Restaurant that is a Xxxx Go will be [****] and (b) a Direct-Owned Restaurant
that is a Xxxx Express will be [****], for any such Restaurant opened between January 1, 2021
and August 31, 2022 and [***] for any such Restaurant opened after August 31, 2022, in each case for a twenty (20) year
term (which amount will be prorated if the term of the applicable Unit Addendum is less than twenty (20) years).
| 7. | Amendment to Clause 9.4.1 of the Agreement |
Clause 9.4.1 is hereby amended as follows:
During the Term, Master Franchisee will pay to THRI or its designee US$[****]for each Franchised Restaurant opened any time after January 1, 2021 in Development Year 3 and at any time thereafter (the “Franchised Restaurant Unit Fee”), each for a twenty (20) year term (which amount will be prorated if the term of the applicable Franchise Agreement is less than twenty (20) years), provided that, subject to satisfaction of the Fee Incentive Conditions, the Franchised Restaurant Unit Fee for (a) a Franchised Restaurant that is a Xxxx Go will be US$[****] and (b) a Franchised Restaurant that is a Xxxx Express will be US$[****], in each case for a twenty (20) year term (which amount will be prorated if the term of the applicable Unit Addendum is less than twenty (20) years). The Franchised Restaurant Unit Fee shall be payable to THRI whether or not Master Franchisee actually charges or collects a franchise fee for such Franchised Restaurant.
| 8. | Amendment to Clause 12.1.6 of the Agreement |
The second sentence of Clause 12.1.6 is hereby amended as follows:
THRI will make the User Data available
at no additional charge to the Person or Persons who (or which) acquire Master Franchisee or the business of Master Franchisee in the
Territory in accordance with the terms of the Investment Agreement, provided that such
Person or Persons is permitted to use and receive, and does use and receive, the User Data in compliance with applicable Law.
6
CERTAIN PORTIONS OF THE EXHIBIT THAT ARE NOT MATERIAL AND IS THE TYPE OF INFORMATION THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL HAVE BEEN REDACTED PURSUANT TO ITEM 601(b)(10)(iv) OF REGULATION S-K. [****] INDICATES THAT INFORMATION HAS BEEN REDACTED.
| 9. | Amendment to Clause 18.1.1 of the Agreement |
Clause 18.1.2 is hereby amended as follows:
| 18.1.1 | if Master Franchisee (or any Approved Subsidiary) fails to pay to THRI
(or its designee) when due any amounts payable to THRI and/or its Affiliates (whether under
the Transaction Agreements or otherwise (including amounts owed in respect of supply chain purchases))
|
| 10. | Amendment to Clause 18.1.2 of the Agreement |
Clause 18.1.2 is hereby amended as follows:
| 18.1.2 | if Master Franchisee fails to achieve the applicable Target for [****]
any Development Year [****] by the expiration of the Development Cure Period; |
| 11. | Amendment to Clause 29 of the Agreement |
Clause 29.2, 29.3 and the first sentence of Clause 29.4 are hereby amended as follows:
| 29.2 | If any dispute, controversy or Claim, in law or equity, arises
out of or in connection with this Agreement or the business relationship created thereby, including the breach, termination or invalidity
of this Agreement or any non-contractual obligations or liabilities arising out of, or in connection with, this Agreement (“Dispute”),
any Party may but shall not be obligated to |
| 29.3 | Intentionally omitted.
|
| 29.4 |
7
CERTAIN PORTIONS OF THE EXHIBIT THAT ARE NOT MATERIAL AND IS THE TYPE OF INFORMATION THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL HAVE BEEN REDACTED PURSUANT TO ITEM 601(b)(10)(iv) OF REGULATION S-K. [****] INDICATES THAT INFORMATION HAS BEEN REDACTED.
| 12. | Amendments to Schedule 1 (Development Schedule) |
| (a) | The table below is hereby amended as follows: |
| Development Year | Cumulative Opening Targets |
|
[****] | |
| 6 (from September 1, 2023 to December | |
| 7 (from January | |
| 8 (from January | |
| 9 (from January | |
| 10 (from January | |
| TOTAL | 1,700 |
| (b) | Paragraph (c) of Schedule 1 is hereby amended as follows: |
“General. The Targets set forth in this Development Schedule are expressed net of closures. Xxxx Express shall not be included for purposes of determining Master Franchisee’s compliance with the Targets set forth in the Development Schedule; ****.”
Development
Year 1 will begin on the Commencement Date and end on August 31, 2019 and each successive Development Year will begin on September 1st
and end on August 31st.”
| 13. | Amendment to Schedule 1A (Retail Right) |
Clause (c) of Schedule 1A (Extension Option) is hereby deleted in its entirety.
| 14. | Insertion of New Schedules to the Agreement |
New Schedules 7 and 8 (as annexed hereto) are hereby added.
| 15. | Conforming Amendment to the CFAs |
| (a) | The amendments effected in clause 1 of this Amendment to the definitions of “Tim Hortons Restaurants” and “Xxxx Go” shall be deemed to have been made to the same definitions in Clause 1.1 of the CFAs. |
8
CERTAIN PORTIONS OF THE EXHIBIT THAT ARE NOT MATERIAL AND IS THE TYPE OF INFORMATION THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL HAVE BEEN REDACTED PURSUANT TO ITEM 601(b)(10)(iv) OF REGULATION S-K. [****] INDICATES THAT INFORMATION HAS BEEN REDACTED.
| (b) | The new defined terms “Fee Incentive Conditions”, “Xxxx Express”, “Xxxx Express Minimum Criteria” and “Xxxx Go Minimum Criteria” effected in clause 1 of this Amendment shall be deemed to have been added to the definitions in Clause 1.1. of the CFAs. |
| (c) | The amendments effected in clause 6 of this Amendment shall be deemed to have been made to paragraph “Franchise Fees” in Schedule A of the CFAs. |
| (d) | The amendments effected in clause 11 of this Amendment shall be deemed to have been made to Clauses 18.2(b), (c) and (d) of the CFAs. |
| 16. | Amendment to Clause 15.1(a) of the CFAs |
Clause 15.1(a) of the CFAs are hereby amended as follows:
15.1(a) Franchisee fails to maintain or operate the Franchised Restaurant in accordance with the requirements of the Xxx Hortons System (including the Standards), including the Confidential Operating Manual and all other operating standards and specifications established from time to time by FRANCHISOR or its Affiliates as to service, cleanliness, health and sanitation. Franchisee shall have ten (10) days after notice from FRANCHISOR to Franchisee to cure the default contemplated by this Clause 15.1(a).
| 17. | Representations and Warranties. |
Each Party represents and warrants to the other Parties that this Amendment has been duly executed by an authorized officer of such Party and constitutes a valid and binding obligation of such Party, enforceable against it in accordance with the terms hereof. No consent, approval, filing or authorization from any Authority is necessary or shall be obtained for the signature and performance by such Party of this Amendment. The Parties further represent and undertake to complete any and all corporate actions necessary to give effect to and reflect this Amendment.
| 18. | General Release |
For and in consideration of THRI entering into this Amendment, and other good and valuable consideration received, the receipt of which is hereby acknowledged, each of Xxxx China, Master Franchisee and the Franchisees, on behalf of themselves and each of their respective Affiliates (individually and collectively, the “Master Franchisee Releasing Parties”), hereby remise, release, acquit, satisfy, and forever discharge THRI, its Affiliates and their respective officers, directors, agents, employees, subsidiaries, parent corporation, and all of their assignees (individually and together the "THRI Released Parties"), of and from all manner of action and actions, cause and causes of action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, executions, claims, and demands whatsoever, in law or in equity, which Master Franchisee Releasing Parties ever had, now has, or which any successor or assign of Master Franchisee Releasing Parties hereafter can, shall, or may have under the Transaction Agreements, whether known or unknown, against the THRI Released Parties, or any of them, for, upon, or by reason of any matter, cause, or thing whatsoever, from the beginning of the world to the date of this Amendment.
| 19. | Effect of Amendment; Conflict. |
All provisions of the Agreement and the CFAs not modified by this Amendment will remain in full force and effect. In the event of a conflict between the terms and conditions of this Amendment and the Agreement or the CFAs, the terms and conditions of this Amendment shall control.
| 20. | Miscellaneous |
Clauses 24, 25, 26, 27, 28, 29.1 and 30, 32 and 34 of the Agreement shall apply to this Amendment mutatis mutandis, as if a reference to “this Agreement” were a reference to “this Amendment”. Any dispute or controversy arising under or in connection with this Amendment shall be resolved pursuant to Clause 29.4 of the Agreement as if it were a Dispute thereunder.
9
CERTAIN PORTIONS OF THE EXHIBIT THAT ARE NOT MATERIAL AND IS THE TYPE OF INFORMATION THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL HAVE BEEN REDACTED PURSUANT TO ITEM 601(b)(10)(iv) OF REGULATION S-K. [****] INDICATES THAT INFORMATION HAS BEEN REDACTED.
This Amendment is executed by the Parties as of the day and year set forth above.
| SIGNED by | |
| Authorized Director | |
| For and on behalf of | |
| Xxx Hortons Restaurants International GmbH | |
| SIGNED by | |
| For and on behalf of | |
| TH Hong Kong International Limited | |
| SIGNED by | |
| For and on behalf of | |
| TH International Limited | |
| SIGNED by | |
| For and on behalf of | |
| Xxx Xxxxxxx (Shanghai) Food and Beverage Management Co. Ltd. | |
| SIGNED by | |
| For and on behalf of | |
| Tim Hortons (China) Holdings Co. Ltd. | |
| SIGNED by | |
| For and on behalf of | |
| Tim Hortons (Beijing) Food and Beverage Service Co., Ltd. | |
| SIGNED by | |
| For and on behalf of | |
| Xxxx Coffee (Shenzen) Co., Ltd. | |
| SIGNED by | |
| For and on behalf of | |
| Tim Hortons (Shenzhen) Good and Beverage Co. Ltd. |
