Document:

Exhibit 10.5

 

FRANCHISE AGREEMENT (“Agreement”) dated June 15, 2012 (“Commencement Date”).

 

BETWEEN

 

BK ASIAPAC PTE. LTD., a company organized under the laws of Singapore and having a principal place of business at 101 Thomson Road, #13-03/04 United Square, Singapore 307591 (“FRANCHISOR”), and BURGER KING (SHANGHAI) RESTAURANT COMPANY LTD., a company organized under the laws of the People’s Republic of China and having a principal place of business at Room 704-708, Finance Square, No. 333 Jiujiang Road, Shanghai 200001, PRC (“BK Shanghai”), BK (Beijing) Restaurant Management Co., Ltd., a company organized under the laws of the People’s Republic of China and having a principal place of business at 5th Floor, Zhongfang Building, No. 19 Jianguomennei Street, Beijing 100005, PRC (“BK Beijing”), and BK Foods (Shenzhen) Co., Ltd., a company organized under the laws of the People’s Republic of China and having a principal place of business at Room 1803, International Chamber of Commerce Tower, Fuhua 3rd Road, Shenzhen 518048, PRC (“BK Shenzhen”) (individually and collectively, the “Franchisee”).

 

together referred to as the “parties”, and separately as a “party”.

 

INTRODUCTION

 

A.                                    FRANCHISOR or Affiliates has acquired the exclusive right to use the unique Burger King System and the Burger King Marks for the development and operation of quick service restaurants known as Burger King Restaurants throughout the Region.

 

B.                                    FRANCHISOR is engaged in the business of developing, operating and granting franchises to operate Burger King Restaurants throughout the Region using the Burger King System and the Burger King Marks and such other marks as FRANCHISOR may authorize from time to time for use in connection with Burger King Restaurants.

 

C.                                    FRANCHISOR has established a reputation and image with the public as to the quality of products and services available at Burger King Restaurants, which reputation and image have been and continue to be unique benefits to FRANCHISOR and its franchisees.

 

D.                                    Franchisee recognizes the benefits to be derived from being identified with and licensed by FRANCHISOR and being able to utilize the Burger King System including the Burger King Marks that FRANCHISOR makes available to its franchisees.

 

E.                                     Franchisee has requested FRANCHISOR to grant Franchisee a license to operate a Burger King Restaurant at the Locations.

 

F.                                      Franchisee desires to acquire a franchise to operate Burger King Restaurants at the Locations for the Terms specified in this Agreement.  Franchisee acknowledges that Franchisee has had a full and adequate opportunity to be thoroughly advised of the terms and conditions of this Agreement by financial and legal counsel of Franchisee’s own choosing and is entering into this Agreement after having made an independent investigation of FRANCHISOR’s operations and not upon any representation as to the profits and/or sales volume which Franchisee might be expected to realize, nor upon any representations or promises by FRANCHISOR which are not contained in this Agreement or the MFDA.

 

G.                                    Each Franchised Restaurant will be opened and operated in accordance with this Agreement and an individual Unit License Addendum (“Unit Addendum”) to be entered into between FRANCHISOR and Franchisee, the form of which is attached as Schedule B, and which will identify the location for the Franchised Restaurant.  Each reference in this Agreement to a Unit Addendum shall include a Renewal Unit Addendum, to the extent applicable.

 

H.                                   On or about the date of this Agreement, Franchisee entered into a Master Franchise and 

 

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Development Agreement with FRANCHISOR (the “MFDA”), which agreement provides for, among other things, the development of Burger King Restaurants in the Territory pursuant to the terms and conditions of the MFDA.

 

In consideration of the fees and other sums payable by Franchisee under this Agreement and the mutual covenants made in this Agreement, the parties agree as follows:

 

AGREEMENT

 

1.                          Definitions

 

1.1                           Definitions.

 

In this Agreement the following terms, phrases and expressions shall have the following meanings:

 

	
“Acceptance Notice”
    	
 
    	
has the meaning set forth in clause sub-clause   14.3(e).
    
	
 
    	
 
    	
 
    
	
“Ad Fund”
    	
 
    	
means the advertising fund formed by FRANCHISOR by   combining the Advertising Contribution with advertising contributions paid in   respect of all Burger King Restaurants in the Territory, and managed by   Franchisee until the occurrence of an MFDA Termination Event or until   FRANCHSOR terminates Franchisee’s right to manage the Ad Fund under clause   10(7) of the MFDA.
    
	
 
    	
 
    	
 
    
	
“Administrative Expenses”
    	
 
    	
means all general and administrative expenses and   overhead associated with managing, administering and maintaining the Ad Fund,   including, without limitation, salaries of relevant FRANCHISOR employees or   employees of FRANCHISOR’s Affiliates. All direct Administrative Expenses   shall be paid from the Ad Fund Account; provided, however, that   Administrative Expenses shall not exceed 15% of the Ad Fund Account in any   Year.
    
	
 
    	
 
    	
 
    
	
“Advertising Contribution”
    	
 
    	
means the monthly amount payable under clause 8.2   calculated by multiplying the Gross Sales for the previous month by the   Advertising Percentage.
    
	
 
    	
 
    	
 
    
	
“Advertising Percentage”
    	
 
    	
means the percentage specified as such in Schedule A.
    
	
 
    	
 
    	
 
    
	
“Affiliate”
    	
 
    	
means any Person which directly or indirectly   Controls, is Controlled by, or is under common Control with another Person.
    
	
 
    	
 
    	
 
    
	
“Agreement Term”
    	
 
    	
means the term commencing on the Commencement Date   and expiring on the date on which all Unit Addenda executed in connection   herewith have expired or terminated, unless earlier terminated in accordance   with the terms of this Agreement.
    
	
 
    	
 
    	
 
    
	
“Anti-Corruption Laws”
    	
 
    	
means the FCPA and all other anti-corruption, fraud,   kickback, anti-money laundering, anti-boycott laws, regulations or orders,   and all similar laws, or regulations or orders in the Territory and any other   relevant jurisdictions.
    
	
 
    	
 
    	
 
    
	
“Approved Products”
    	
 
    	
means the food and beverage items and any   merchandise or promotional products, and the types, brands and ranges of   ingredients, packaging, merchandise or materials of menu items and products   and any other products, materials or services specified and as approved in   the MOD Manual or otherwise approved by FRANCHISOR from time to time.
    

 

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“Approved Supplier”
    	
 
    	
means a supplier or distributor who has been   approved by FRANCHISOR or any of its Affiliates to supply the Approved   Products and any other goods or services for Burger King Restaurants in   the country in which the Franchised Restaurant is located.
    
	
 
    	
 
    	
 
    
	
“Assets”
    	
 
    	
has the meaning set forth in sub-clause 14.3(a).
    
	
 
    	
 
    	
 
    
	
“Authority”
    	
 
    	
means any federal, state, municipal, local or other   governmental department, commission, board, bureau, agency or   instrumentality, or any administrative, judicial or arbitration court or   panel, with jurisdiction over the applicable matter.
    
	
 
    	
 
    	
 
    
	
“Burger King Domain Names”
    	
 
    	
has the meaning set forth in clause 1(1) of the   MFDA.
    
	
 
    	
 
    	
 
    
	
“Burger King Intellectual  Property Rights”
    	
 
    	
has the meaning set forth in clause 1(1) of the   MFDA.
    
	
 
    	
 
    	
 
    
	
“Burger King Logo”
    	
 
    	
means the principal logo used by FRANCHISOR from   time to time in respect of the Burger King System.
    
	
 
    	
 
    	
 
    
	
“Burger King Marks”
    	
 
    	
means the trademarks, service marks, trade names,   trade dress, logos (including but not limited to the Burger King Logo),   slogans, designs and other commercial symbols and source-identifying indicia   (and the goodwill associated therewith) used in the operation of Burger King   Restaurants and the Burger King System, whether registered, applied for or   unregistered.
    
	
 
    	
 
    	
 
    
	
“Burger King Restaurant”
    	
 
    	
means a quick service or fast food restaurant   operating under the Burger King System and utilizing the   Burger King Marks.
    
	
 
    	
 
    	
 
    
	
“Burger King System”
    	
 
    	
means the unique restaurant format and operating   system developed by FRANCHISOR and/or its Affiliates for the development and   operation of quick service or fast food restaurants, and to which FRANCHISOR   has the right to license, including proprietary designs and color schemes for   restaurant buildings, equipment, layout and décor, proprietary menu and food   preparation and service formats, uniform product and quality specifications,   training programs, restaurant operations manuals, bookkeeping and report   formats, marketing and advertising formats, promotional marketing items and   procedures for inventory and management control. The term “Burger King   System” also includes the Current Image, the Burger King Marks, Burger   King Domain Names, Burger King Intellectual Property Rights, and all   Confidential Information, other proprietary information, copyrights and other   intellectual property rights relating to the system, and any modifications,   amendments, improvements and/or other changes FRANCHISOR and/or any of its   Affiliates may make to the system from time to time, in their sole   discretion.
    
	
 
    	
 
    	
 
    
	
“Business Day”
    	
 
    	
means a day other than a Saturday, Sunday, or a   public holiday in Hong Kong, on which banks are open in Hong Kong for general   commercial business.
    
	
 
    	
 
    	
 
    
	
“Commencement Date”
    	
 
    	
means the date on which this Agreement is deemed to   be effective, which shall be the date set forth in the heading of this   Agreement.
    
	
 
    	
 
    	
 
    
	
“Competitor”
    	
 
    	
means any Person who owns, operates, or licenses   another Person to 
    

 

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operate a Quick Service Restaurant and/or any   Affiliate of such Person. For the purposes of this definition, the term   “Competitor” shall also include (i) any director or officer of such   Person or Affiliate of such Person, (ii) any entity Controlled by such   Person or Affiliate, either through the direct or indirect ownership of   equity interests, a contractual arrangement with one or more equity holders   or otherwise, (iii) any entity by means of which, upon such entity   becoming a shareholder of the JVC, such Person or Affiliate would have the   right to receive Confidential Information of the JVC, or a right to audit the   books and records of the JVC, and (iv) any immediate family member of   such Person (or any Affiliate of any of the foregoing).
    
	
 
    	
 
    	
 
    
	
“Confidential Information”
    	
 
    	
has the meaning set forth in clause 11.3.
    
	
 
    	
 
    	
 
    
	
“Control” or “Controlled”
    	
 
    	
means the ownership, whether by ownership of   securities, contract, proxy or otherwise, of shareholding or contractual   rights of a Person that assures (i) the majority of the votes in the resolutions   of such Person, or (ii) the power to appoint the majority of the   managers or directors of such Person, or (iii) the power to direct or   cause the direction of the management or policies of such Person, and the   related terms “Controlled by,” “Controlling” or “under common Control with”   shall be read accordingly.
    
	
 
    	
 
    	
 
    
	
“Current Image”
    	
 
    	
means the internal and external physical appearance   of new or remodeled Burger King Restaurants including, without   limitation, as it relates to signage, fascia, color schemes, menu boards,   lighting, furniture, finishes, décor, materials, equipment and other matters   generally applicable to FRANCHISOR’s operations in the country in which the   Franchised Restaurant is located as may be changed from time to time by   FRANCHISOR, in its sole discretion.
    
	
 
    	
 
    	
 
    
	
“Damages”
    	
 
    	
has the meaning set forth in sub-clause 15.6(b).
    
	
 
    	
 
    	
 
    
	
“days”
    	
 
    	
means calendar days or day unless otherwise   expressly provided.
    
	
 
    	
 
    	
 
    
	
“Development Rights”
    	
 
    	
means those rights granted to Franchisee under   clause 4(1) of the MFDA.
    
	
 
    	
 
    	
 
    
	
“Dispute”
    	
 
    	
has the meaning set forth in sub-clause 18.2(b).
    
	
 
    	
 
    	
 
    
	
“Early Closure Restaurant”
    	
 
    	
has the meaning set forth in clause 6(4) of the   MFDA.
    
	
 
    	
 
    	
 
    
	
“Existing PRC Company
    	
 
    	
 
    
	
Restaurants”
    	
 
    	
has the meaning set forth in clause 1(1) of the   MFDA.
    
	
 
    	
 
    	
 
    
	
“Expired Restaurant”
    	
 
    	
has the meaning set forth in clause 15.2.
    
	
 
    	
 
    	
 
    
	
“FCPA”
    	
 
    	
means the U.S. Foreign Corrupt Practices Act of   1977, as amended.
    
	
 
    	
 
    	
 
    
	
“Final Judgment”
    	
 
    	
has the meaning set forth in sub-clause 12.5(d).
    
	
 
    	
 
    	
 
    
	
“Franchise Fee”
    	
 
    	
means the applicable amount set forth in this   Agreement and Schedule A, and specified in Schedule B.
    
	
 
    	
 
    	
 
    
	
“Franchised Restaurant”
    	
 
    	
means the land, building and improvements at each   Location used or associated with the use of the premises as a   Burger King Restaurant, 
    

 

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and the Burger King Restaurant business carried   on by Franchisee at each Location for which Franchisee has executed a Unit   Addendum.
    
	
 
    	
 
    	
 
    
	
“FRANCHISOR Indemnified Parties”
    	
 
    	
means FRANCHISOR, its Affiliates and their   respective directors, officers, employees, shareholders, and agents.
    
	
 
    	
 
    	
 
    
	
“Gross Sales”
    	
 
    	
includes all sums charged or received in cash or by   credit (and regardless of collection in the case of credit) for goods or   merchandise sold or otherwise disposed of, or services provided or performed   at or from a Franchised Restaurant, and all other revenue and income of every   kind and nature related to the Franchised Restaurant. The sale of   Burger King products away from the Franchised Restaurant is not   authorized; however, should any such sales occur or be approved in the   future, they will be included within the definition of Gross Sales. Gross   Sales excludes any federal, state, county or city tax, excise tax, or other   similar taxes collected by Franchisee from customers based upon sales and   cash received as payment in credit transactions where the extension of credit   itself has already been included in the figure upon which the Royalty and   Advertising Contribution is calculated.
    
	
 
    	
 
    	
 
    
	
“Interest”
    	
 
    	
has the meaning set forth in sub-clause 14.1(f).
    
	
 
    	
 
    	
 
    
	
“Internet”
    	
 
    	
has the meaning set forth in clause 1(1) of the   MFDA.
    
	
 
    	
 
    	
 
    
	
“Investment Agreement” or “JVIA”
    	
 
    	
means the Joint Venture and Investment Agreement, by   and between BKAP and Investor dated as of May 11, 2012.
    
	
 
    	
 
    	
 
    
	
“Investor”
    	
 
    	
means Pangaea Foods, SPC for the account of Pangaea   Foods (China), SP.
    
	
 
    	
 
    	
 
    
	
“IP Transferee”
    	
 
    	
has the meaning set forth in sub-clause 18.7(b).
    
	
 
    	
 
    	
 
    
	
“JVC”
    	
 
    	
means Pangaea Foods (China) Holdings, Ltd, a company   incorporated under the laws of the Cayman Islands.
    
	
 
    	
 
    	
 
    
	
“Law”
    	
 
    	
means any laws, rules, statutes, decrees,   regulations, circulars, ordinances or orders, including all applicable   public, environmental, and competition laws and regulations; and any   administrative decisions, judgments and other pronouncements enacted, issued,   promulgated, enforced or entered by any Authority.
    
	
 
    	
 
    	
 
    
	
“Legal Order”
    	
 
    	
has the meaning set forth in clause 11.4.
    
	
 
    	
 
    	
 
    
	
“Location” or “Locations”
    	
 
    	
means all of the land and any buildings and other   improvements located from time to time at the address specified in the Unit   Addendum for each Franchised Restaurant operated pursuant to this Franchise   Agreement.
    
	
 
    	
 
    	
 
    
	
“Losses”
    	
 
    	
means any actions, suits, hearings, proceedings,   investigations, charges, complaints, claims, demands, injunctions, judgments,   orders, decrees, rulings, losses, amounts paid in settlement, penalties,   fines, damages (including punitive, special and consequential damages), lost   profits, liabilities, costs and expenses (including reasonable attorneys’   fees and expenses incurred in 
    

 

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investigating, preparing or defending any claims   covered hereby).
    
	
 
    	
 
    	
 
    
	
“Managing Owner”
    	
 
    	
means the person referred to in clause 4.3 and   specified as such in Schedule A.
    
	
 
    	
 
    	
 
    
	
“Metropolitan Urban Area”
    	
 
    	
means any area that is designated as an “urban area”   by a competent Authority in a municipality or prefecture-level city within   the Territory.
    
	
 
    	
 
    	
 
    
	
“MFDA”
    	
 
    	
has the meaning set forth in Recital H.
    
	
 
    	
 
    	
 
    
	
“MFDA Termination Event”
    	
 
    	
means either that the Development Rights have been terminated   or the MFDA has been terminated in its entirety.
    
	
 
    	
 
    	
 
    
	
“MOD Manual”
    	
 
    	
means the manual of operating data (whether in one   or more volumes, in electronic or hard copy format, and as updated by   FRANCHISOR from time to time in its sole discretion), including all   translations and copies, setting out FRANCHISOR’s mandatory restaurant   operating, equipment and product standards, specifications and procedures as   issued and amended from time to time by FRANCHISOR or any of its Affiliates   and includes any requirements of FRANCHISOR relating to such matters, whether   or not physically incorporated into the manual. The MOD Manual currently   includes the Burger King Operations Manual, the Restaurant Equipment   Manual, the Approved Brands and Distributors List, the Brand Standards Guide,   the Ops Emphasis Guide, alerts and amendments thereto, and applicable   policies established by FRANCHISOR or its Affiliates from time to time, in   FRANCHISOR’s sole discretion.
    
	
 
    	
 
    	
 
    
	
“New Restaurant”
    	
 
    	
has the meaning set forth in clause 2.3.
    
	
 
    	
 
    	
 
    
	
“Notice of Dispute”
    	
 
    	
has the meaning set forth in sub-clause 18.2(b).
    
	
 
    	
 
    	
 
    
	
“Offer”
    	
 
    	
has the meaning set forth in sub-clause 14.3(a).
    
	
 
    	
 
    	
 
    
	
“Offer Notice”
    	
 
    	
has the meaning set forth in sub-clause 14.3(a).
    
	
 
    	
 
    	
 
    
	
“Offer Period”
    	
 
    	
has the meaning set forth in sub-clause 14.3(d).
    
	
 
    	
 
    	
 
    
	
“Opening Date”
    	
 
    	
means the date specified as such in each Unit   Addendum, being the date on which Franchisee is to commence operations of   such Franchised Restaurant under this Agreement.
    
	
 
    	
 
    	
 
    
	
“Operations Director”
    	
 
    	
means the person referred to in clause 4.4 and   specified as such in Unit Addendum.
    
	
 
    	
 
    	
 
    
	
“Payment Restriction”
    	
 
    	
has the meaning set forth in sub-clause 8.8(b).
    
	
 
    	
 
    	
 
    
	
“Permitted Transfer”
    	
 
    	
has the meaning set forth in sub-clause 14.1(a).
    
	
 
    	
 
    	
 
    
	
“Person”
    	
 
    	
means any natural person, corporation, limited   liability company, trust, joint venture, association, company, partnership,   Authority or other entity.
    
	
 
    	
 
    	
 
    
	
“Poll or Polling”
    	
 
    	
means any process acceptable to FRANCHISOR by which   information or data about the Franchised Restaurant may be transmitted to or   from a POS System or other system operated by 
    

 

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Franchisee or its agents into a computer or system   operated by FRANCHISOR or its agents.
    
	
 
    	
 
    	
 
    
	
“POS System”
    	
 
    	
means a point of sale computerized system consisting   of electronic hardware and software technology, which captures, records and   transmits sales, taxes on sales, number, date and time of transactions,   products and combinations of products sold and employees using the system and   such other related information as may be required by FRANCHISOR from time to   time, in its sole discretion.
    
	
 
    	
 
    	
 
    
	
“PRC”
    	
 
    	
means the People’s Republic of China, which for the   purpose of this Agreement excludes Taiwan and the Special Administrative   Regions of Hong Kong and Macau.
    
	
 
    	
 
    	
 
    
	
“Public Company”
    	
 
    	
means a company that has issued securities through   an offering which are now traded on at least one stock exchange or   over-the-counter market.
    
	
 
    	
 
    	
 
    
	
“Quick Service Restaurant”
    	
 
    	
means any restaurant which does not offer table   service as the principal method of ordering or food delivery.
    
	
 
    	
 
    	
 
    
	
“Radius Restrictions”
    	
 
    	
has the meaning set forth in clause 2.3.
    
	
 
    	
 
    	
 
    
	
“Reference Rate”
    	
 
    	
has the meaning set forth in sub-clause 8.8(a).
    
	
 
    	
 
    	
 
    
	
“Region”
    	
 
    	
means the Asia Pacific region, which is comprised of   the following countries: Australia, Bangladesh, Bhutan, Brunei,   Burma/Myanmar, Cambodia, Fiji, Guam, Hong Kong, India, Indonesia,   Japan, Kiribati, Laos, Macao, Malaysia, Maldives, Marshall Islands,   Micronesia, Mongolia, Nauru, Nepal, New Zealand, North Korea, Pakistan,   Palau, Papua New Guinea, the Philippines, the PRC, Republic of China (Taiwan),   Samoa, Singapore, Solomon Islands, South Korea, Sri Lanka, Thailand,   Timor-Leste, Tonga, Tuvalu, Vanuatu and Vietnam.
    
	
 
    	
 
    	
 
    
	
“Registered User Agreement”
    	
 
    	
has the meaning set forth in clause 11.7.
    
	
 
    	
 
    	
 
    
	
“Renewal Notice”
    	
 
    	
has the meaning set forth in sub-clause 2.5.1(a).
    
	
 
    	
 
    	
 
    
	
“Renewal Unit Addendum”
    	
 
    	
has the meaning set forth in sub-clause 2.5.1.
    
	
 
    	
 
    	
 
    
	
“Required Country”
    	
 
    	
has the meaning set forth in sub-clause 8.8(a).
    
	
 
    	
 
    	
 
    
	
“Required Currency”
    	
 
    	
has the meaning set forth in sub-clause 8.8(a).
    
	
 
    	
 
    	
 
    
	
“Restaurant Manager”
    	
 
    	
means the person referred to in clause 4.5 of this   Agreement.
    
	
 
    	
 
    	
 
    
	
“Royalty”
    	
 
    	
means the monthly amount payable under   clause 8.1 calculated by multiplying the Gross Sales for the previous   month by the applicable Royalty Percentage.
    
	
 
    	
 
    	
 
    
	
“Royalty Percentages”
    	
 
    	
means the applicable percentages set forth in Schedule A   and specified in Schedule B.
    
	
 
    	
 
    	
 
    
	
“Sales Transfer Study”
    	
 
    	
means a study conducted by an independent vendor   selected by FRANCHISOR to determine the amount by which a Franchised   Restaurant’s sales may transfer to a New Restaurant.
    

 

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“Standards”
    	
 
    	
means the standards, specifications and procedures   for Burger King Restaurants issued, directed and amended by FRANCHISOR and/or   its Affiliates from time to time in their sole discretion, including those   contained from time to time in the MOD Manual, Image Manual, Signage   Manual, Equipment Manual and Brand Standards Guide, Domain Name Registration   Guide, General Terms and Conditions of Supply and Distribution and Quality   Assurance Standards (and such superseding or additional documents as may be   issued by FRANCHISOR and/or its Affiliates from time to time).
    
	
 
    	
 
    	
 
    
	
“Suburban Area”
    	
 
    	
means any area that is not a Metropolitan Urban Area   within the Territory.
    
	
 
    	
 
    	
 
    
	
“Term”
    	
 
    	
means, with respect to each Unit Addendum, the   period specified as such in each Unit Addendum, commencing on the Opening   Date.
    
	
 
    	
 
    	
 
    
	
“Terminated Restaurant”
    	
 
    	
has the meaning set forth in sub-clause 15.1(A).
    
	
 
    	
 
    	
 
    
	
“Termination Notice”
    	
 
    	
has the meaning set forth in sub-clause 15.8(a).
    
	
 
    	
 
    	
 
    
	
“Termination Period”
    	
 
    	
has the meaning set forth in clause 15.8.
    
	
 
    	
 
    	
 
    
	
“Territory”
    	
 
    	
means the de jure boundaries of the PRC.
    
	
 
    	
 
    	
 
    
	
“Transaction Agreements”
    	
 
    	
means this Agreement, the MFDA and the Investment   Agreement.
    
	
 
    	
 
    	
 
    
	
“Transfer” or “Transferred”
    	
 
    	
means to sell, convey, assign, license, lease,   charge, pledge, mortgage, encumber or otherwise dispose of in whole or in   part. For purposes of clause 14.1, a Transfer shall include the issuance of   equity interests by Franchisee.
    
	
 
    	
 
    	
 
    
	
“Transfer Date”
    	
 
    	
means the effective date that an Interest is   Transferred pursuant to clause 14.1.
    
	
 
    	
 
    	
 
    
	
“Transfer Fee”
    	
 
    	
means the amount payable under sub-clause 14.2(l).
    
	
 
    	
 
    	
 
    
	
“Transferee”
    	
 
    	
means the prospective recipient of a Transfer.
    
	
 
    	
 
    	
 
    
	
“Unit Addendum”
    	
 
    	
means the Unit License Addendum set forth in Schedule   B to this Agreement, which will identify, among other things, the   Location of each Franchised Restaurant. The term “Unit Addendum” shall   include any Renewal Unit Addendum.
    
	
 
    	
 
    	
 
    
	
“Unregistered Marks”
    	
 
    	
has the meaning set forth in clause 11.7.
    
	
 
    	
 
    	
 
    
	
“VAT”
    	
 
    	
means value added tax payable under the legislation   of the Territory.
    

 

2.                          Franchise Grant; Franchise Fee

 

2.1                   Franchise Grant.

 

At the request of Franchisee and in reliance on the application and information furnished by Franchisee, subject to clause 2.3 below, FRANCHISOR grants to Franchisee a non-exclusive license to use the Burger King System, including the Burger King Marks, solely in connection with the 

 

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operation of a Burger King Restaurant at the Locations for the Terms on the terms and conditions set forth in this Agreement and each Unit Addendum.  Franchisee accepts this license with the full and complete understanding that the license contains no promise or assurance of renewal or the granting of a new license at the expiration of the applicable Term, except as set forth in clause 2.5.

 

2.2                   Franchise Fee.

 

On the Commencement Date, each Franchisee will enter into a Unit Addendum with respect to each of its Existing PRC Company Restaurants and deliver it to FRANCHISOR.  On the Commencement Date, in accordance with clause 4(4) of the MFDA, Franchisee will pay FRANCHISOR a total of (This material has been omitted pursuant to a request for confidential treatment, and such material has been filed separately with the Commission.) in Franchise Fees in connection with the issuance of a Unit Addendum for the Existing PRC Company Restaurants.

 

Except as set forth in the previous paragraph, Franchisee must pay the applicable Franchise Fee as set forth in Schedule A to FRANCHISOR upon execution of the applicable Unit Addendum at least seven (7) days prior to the Opening Date.  A total of (This material has been omitted pursuant to a request for confidential treatment, and such material has been filed separately with the Commission.) will be due and payable in connection with the issuance of the Unit Addendum for the first six (6) Franchised Restaurants opened after the Commencement Date.

 

Each such Franchise Fee shall be non-refundable and deemed fully earned by FRANCHISOR upon execution of the applicable Unit Addendum.  The Franchise Fee and the Royalty payable under clause 8.1 are in consideration solely for the grant of rights in clause 2.1 with respect to each Unit Addendum and are not for FRANCHISOR’s performance of any specific obligations or services.

 

2.3                   No Exclusivity.

 

Franchisee acknowledges and agrees that the license conferred under this Agreement is for the operation of a Burger King Restaurant for the applicable Terms at the Locations only, and that subject to the second paragraph below,  Franchisee has no right to any exclusive territory, market or trade area or to object to the development or location of any additional franchised or company operated Burger King Restaurants, or other food outlets operating under a trade or service mark or system owned or licensed by FRANCHISOR or any of its Affiliates under this Agreement.  FRANCHISOR (and its Affiliates, if applicable) may in its sole business judgment develop, operate, license or franchise additional Burger King Restaurants or other food outlets operating under a trade or service mark or system owned or licensed by FRANCHISOR or any of its Affiliates anywhere, including sites in the immediate proximity of the Franchised Restaurant and/or in the same territory, market or trade area of the Franchised Restaurant. Franchisee hereby waives any right it has, may have, or might in the future have, to oppose the development or location of other Burger King Restaurants, and any claim for compensation from FRANCHISOR or any of its Affiliates in respect of any and all detriment or loss suffered by it as a result of the development and location of additional Burger King Restaurants.

 

Notwithstanding the foregoing, neither FRANCHISOR nor its Affiliates may develop or grant another Person the right to develop a Burger King Restaurant in the Territory (a “New Restaurant”), (i) in the same terminal as a Franchised Restaurant situated in any airport location or in the same building as a Franchised Restaurant situated in any train station, or (ii) within 700 meters of a Franchised Restaurant that is situated in a Suburban Area or within 300 meters of a Franchised Restaurant that is situated in a Metropolitan Urban Area (other than airport or train station locations) (the “Radius Restrictions”).  If FRANCHISOR or its Affiliate wishes to develop or grant another Person the right to develop a New Restaurant within the Radius Restrictions, it will engage an independent valuation expert selected by FRANCHISOR to perform a Sales Transfer Study.  FRANCHISOR will be responsible for the cost of the Sales Transfer Study.  If the results of the Sales Transfer Study show a projected impact on the Franchised Restaurant of twelve percent (12%) or more, FRANCHISOR or its Affiliate, as applicable, shall not develop or approve the development of the New Restaurant.  If the results of the Sales Transfer Study show a projected impact on the Franchised Restaurant of less than twelve percent (12%), FRANCHISOR or its Affiliate may develop or grant another Person the right to develop the New Restaurant.

 

The foregoing provisions of this clause 2.3 shall not apply during such time as the Development Rights 

 

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are in effect.

 

2.4                  Expiration.

 

The license granted pursuant to each Unit Addendum shall expire at the end of the applicable Term unless sooner terminated in accordance with the terms and conditions set forth in this Agreement with respect to such Location.  After the applicable Term, Franchisee will have no further right to operate the applicable Burger King Restaurant to which such Unit Addendum relates, except as set forth in clause 2.5.  For the avoidance of doubt, the terms of each Unit Addendum will survive in their totality after any expiration or earlier termination of this Agreement in accordance with its terms, and the applicable terms and conditions of this Agreement will continue to govern the parties’ relationship until the expiration or earlier termination of each respective Unit Addendum, and the rights and obligations of the parties, with respect to operation of each Franchised Restaurant under each Unit Addendum that remains in effect.

 

2.5      Option to Obtain Renewal Unit Addendum.

 

2.5.1         Franchisee shall have, exercisable on the expiration date of the Term of the applicable Unit Addendum for each Franchised Restaurant, an option to obtain a renewal  of the initial Unit Addendum for that Franchised Restaurant (“Renewal Unit Addendum”) for a term equal to the term of years of the initial Unit Addendum for such Franchised Restaurant, provided that:

 

(a)                                       Franchisee has given FRANCHISOR written notice (“Renewal Notice”) of its intention to exercise its option to obtain a Renewal Unit Addendum at least three (3) months prior to the expiration of the Term of the Unit Addendum.

 

(b)                                       Franchisee, at the time of the Renewal Notice and at the time of the expiration of the Term of the Unit Addendum, is not in breach in any material respect of this Agreement (and the Unit Addendum) with respect to the following: (i) Franchisee has operated the Franchised Restaurant in accordance with the terms and conditions of this Agreement, including, but not limited to, substantial compliance with the Standards; (ii) Franchisee has satisfied, in a timely fashion, all material financial obligations in accordance with the terms and conditions of this Agreement; (iii) Franchisee has maintained, improved, altered, replaced and remodeled the Franchised Restaurant, including, without limitation, the Location, signs and equipment throughout the Term in accordance with the terms and conditions of this Agreement; and (iv) Franchisee shall have completed, not more than five (5) years prior to the expiration of the Term, the improvements, alterations, remodeling or rebuilding of the interior and exterior of the Franchised Restaurant so as to reflect the then Current Image of Burger King Restaurants, pursuant to such plans and specifications as FRANCHISOR reasonably approves.

 

(c)                                        Within thirty (30) days of receipt of the Renewal Notice, FRANCHISOR shall advise Franchisee in writing if Franchisee is not eligible to obtain a Renewal Unit Addendum for the Franchised Restaurant, specifying the reasons for such ineligibility, and identifying whether such deficiencies are capable of cure.  If such deficiencies are capable of cure, Franchisee must cure the deficiencies by no later than ten (10) days prior to the expiration of the Term of the Unit Addendum. For the avoidance of doubt, if, between the date of the Renewal Notice and the expiration date of the Term, any act, circumstance or omission causes Franchisee to become ineligible to obtain a Renewal Unit Addendum then FRANCHISOR must advise Franchisee in writing thereof, specifying the deficiency and identifying a cure period, if applicable.

 

(d)                                       Franchisee has the right to remain in possession of the Location, whether through a lease or ownership of the premises, for the term of the Renewal Unit Addendum.

 

(e)                                        If the Development Rights are no longer in effect, Franchisee must meet all then current financial ratios FRANCHISOR uses to evaluate new franchisees for financial approval.

 

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(f)                                         Franchisee executes (i) the applicable form of the then current Renewal Unit Addendum, which may differ from this Agreement as to royalty, advertising contributions and ownership requirements, as well as other terms and conditions; and (ii) a general release of FRANCHISOR and its Affiliates in a form satisfactory to FRANCHISOR.  Franchisee shall, upon execution of the Renewal Unit Addendum, pay to FRANCHISOR the then current franchise fee.  Notwithstanding the preceding two sentences, unless an MFDA Termination Event has occurred prior to the time Franchisee elects to exercise its renewal option, the then form of Franchise Agreement and Unit Addendum shall be in the form of this Franchise Agreement and attached Unit Addendum, subject to any changes in the amount of the Franchise Fee and the rate of Royalties and Advertising Contributions to be paid after twenty (20) years from the Commencement Date.

 

2.5.2         While the Development Rights are in effect, Franchisee shall have, exercisable on the expiration date of the Term of the Renewal Unit Addendum for a Franchised Restaurant, an option to obtain successive additional Renewal Unit Addenda for that Franchised Restaurant for a term equal to the term of years of the then expiring Renewal Unit Addendum, subject to a maximum cumulative term (for a Unit Addendum and all Renewal Unit Addenda) for each Franchised Restaurant of forty (40) years, and provided that the requirements set forth in sub-clauses 2.5.1 (a) through 2.5.1(f), inclusive, are satisfied.

 

2.5.3.      For the avoidance of doubt, while the Franchisee has the renewal rights set forth above under each Unit Addendum, Franchisee has no right to, and FRANCHISOR has no obligation to, grant a renewal or execute a new Unit Addendum for any new Location following the expiration or early termination of this Agreement.

 

3.                          Continuous Operation

 

3.1                   Operate Throughout Term.

 

Franchisee must commence to operate each Franchised Restaurant on the Opening Date and, subject to clause 3.2, must operate each Franchised Restaurant in accordance with this Agreement continuously throughout the Term of the Unit Addendum.  Franchisee expressly agrees that any failure to do so shall constitute a material act of default under this Agreement and the applicable Unit Addendum with respect to such Franchised Restaurant, and FRANCHISOR shall be entitled to collect all actual and consequential damages (including lost profits) incurred as a result of any failure to so operate continuously for the full Term of the Unit Addendum.

 

3.2                   Exceptions.

 

Franchisee may cease operations to the extent necessary to comply with the requirements of FRANCHISOR or any Authority with jurisdiction over a Franchised Restaurant that it (a) repair, clean, remodel, or refurbish the Location; (b) complete repairs at the Location, subject to FRANCHISOR’s prior approval; or (c) resolve an emergency situation which would endanger the public or Franchisee’s employees so long as Franchisee takes all actions reasonably necessary to resume operations in light of the circumstances presented.  FRANCHISOR must grant or deny the approval required under this clause 3.2 within five (5) Business Days of receiving the request for approval from Franchisee.  Failure by FRANCHISOR to grant or deny the approval within the allotted time period shall constitute an approval of the request.

 

4.                          Organization of Franchisee

 

4.1                   Sole Purpose Entity.

 

Franchisee covenants that the sole purpose and business activity of Franchisee is, and will remain throughout the Agreement Term, to (i) develop, establish and operate Burger King Restaurants, and (ii) perform all rights and obligations of Master Franchisee (as defined in the MFDA) under the MFDA and related agreements in all material respects. Franchisee further covenants that, to the extent permissible by Law and except as expressly permitted in any of the Transaction Agreements, its governing documents will at all times during the Agreement Term and the Term of any Unit Addenda restrict its purpose and business activity to (i) developing, establishing and operating Burger King 

 

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Restaurants, and (ii) performing all rights and obligations of Master Franchisee under the MFDA and related agreements.  In addition, the governing documents will, at all times during the Term, mandate the designation of a Managing Owner and describe the Managing Owner’s authority to bind the Franchisee and to direct any actions necessary to ensure compliance with this Agreement and any other agreements related to the Franchised Restaurants.

 

4.2                   Principals.

 

Franchisee agrees to furnish to FRANCHISOR upon FRANCHISOR’s request from time to time a list of all shareholders or ownership interests in all classes of shares or ownership interests in Franchisee. This clause 4.2 shall not apply if Franchisee (or any relevant Affiliate) is a Public Company or if the Investment Agreement is then in effect (so long as FRANCHISOR is then a party).

 

4.3                  Managing Owner.

 

(a)               Franchisee must at all times during the Agreement Term and the Term of any Unit Addenda employ a Managing Owner who must be a natural Person and who shall be the Chief Executive Officer, Chief Financial Officer, Chief Operations Officer or any other officer of Franchisee with equivalent responsibilities, and such officer shall take steps consistent with his or her role as such corporate officer to direct and oversee Franchisee’s compliance with this Agreement and other agreements relating to the Franchised Restaurants.

 

(b)               No change in the Managing Owner may be made without the prior approval of FRANCHISOR. For the avoidance of doubt, FRANCHISOR’s failure to provide any response regarding the request for approval within sixty (60) days of receiving the request from Franchisee shall constitute an approval of the request.   If for any reason the person approved by FRANCHISOR as the Managing Owner ceases to hold that position in Franchisee, as soon as practicable, and in any event no later than ninety (90) days after such cessation, Franchisee must appoint a new Managing Owner that is approved in advance by FRANCHISOR in its reasonable discretion.  This sub-clause 4.3(b) shall not apply if the Investment Agreement is then in effect (so long as FRANCHISOR is then a party and has the right to appoint at least one (1) member of the Board of Directors of the JVC).

 

(c)                If a person other than the Managing Owner is approved by FRANCHISOR to act as the Operations Director pursuant to clause 4.4, the Managing Owner shall nevertheless devote substantial time and attention to the management and oversight of the Franchised Restaurants, and shall be available for meetings as requested by FRANCHISOR.  This sub-clause 4.3(c) shall not apply if the Investment Agreement is then in effect (so long as FRANCHISOR is then a party and has the right to appoint at least one (1) member of the Board of Directors of the JVC).

 

4.4             Operations Director.

 

(a)               Franchisee must appoint, employ and authorize an Operations Director who must either be the Managing Owner or any other natural person approved in advance by FRANCHISOR in FRANCHISOR’s reasonable discretion. For the avoidance of doubt, FRANCHISOR’s failure to provide any response regarding the request for approval within sixty (60) days of receiving the request from Franchisee shall constitute an approval of the request.  The Operations Director at the date of this Agreement is the person specified as such for the Franchised Restaurant in each Unit Addendum.

 

(b)               The Operations Director shall devote his or her full time and reasonable efforts to the overall supervision and day-to-day operations of the Franchised Restaurants (and any other Burger King Restaurants in respect of which he or she is approved by FRANCHISOR as the Operations Director).   Franchisee covenants that the Operations Director will at all times have the authority to direct any action necessary to ensure that the day-to-day operation of the Franchised Restaurants is in compliance with the Standards.

 

(c)                The Operations Director must live in the vicinity of the business office of the Franchisee in the Territory, as the term “vicinity” is defined for Operations Directors by FRANCHISOR from time to time, in its reasonable discretion.

 

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(d)               If the approved Operations Director ceases to hold that position in Franchisee, Franchisee shall, as soon as practicable, and in any event no later than ninety (90) days after such cessation, appoint a replacement who, subject to clause 4.4(a), must be approved in advance by FRANCHISOR in its reasonable discretion. For the avoidance of doubt, FRANCHISOR’s failure to provide any response regarding the request for approval within sixty (60) days of receiving the request from Franchisee shall constitute an approval of the request.

 

(e)                If Franchisee seeks FRANCHISOR’s approval of a Person other than the Managing Owner to act as the initial or replacement Operations Director, Franchisee understands that in deciding whether to approve such Person, FRANCHISOR may consider the reasons for having different persons in such roles, the respective levels of financial commitment (such as percentage of ownership, if applicable) of the individuals, the number of Franchised Restaurants operated by Franchisee, the management structure and quality of Franchisee’s operations, whether the Managing Owner will also commit to devote full time and attention and reasonable efforts to the operation of Franchised Restaurants and such other factors as FRANCHISOR may deem appropriate for consideration.

 

4.5                   Restaurant Manager.

 

At all times during the Term of each Unit Addendum, Franchisee must appoint and employ at least one (1) Restaurant Manager for each Franchised Restaurant who shall be responsible for the direct, personal day-to-day supervision of the Franchised Restaurant.

 

4.6                   Employees.

 

Franchisee shall hire all employees of the Franchised Restaurants and shall be solely responsible for the terms of their employment and compensation.  Franchisee shall comply in all material respects, with all mandatory governmental programs, legislation and requirements related to employees, including without limitation, employment insurance, workers compensation, labor and other employee benefit programs.

 

4.7                   No Change in Organization.

 

Franchisee must notify FRANCHISOR of any changes to, and at FRANCHISOR’s request provide copies of, any organizational or other governing documents of Franchisee.  No amendments or revisions to such governing documents may be made or adopted without the approval of the FRNACHISOR if such amendment or revisions would: (a) change the description of Franchisee’s sole purpose or authorized activities as contemplated under clause 4.1 above; (b) change the designation of, or the procedures for designating, the Managing Owner; (c) change the authority delegated to the Managing Owner or the Operations Director; or (d) materially alter promises or representations contained in Franchisee’s applications or distribution plans submitted to and approved by FRANCHISOR. This paragraph shall not apply if the Investment Agreement is then in effect (so long as FRANCHISOR is then a party to the Investment Agreement and has the right to appoint at least one (1) member of the Board of Directors of the JVC).

 

Franchisee may not take any action, whether directly or indirectly, without the approval of the FRANCHISOR, to avoid the authority requirements for the Managing Owner and the Operations Director, respectively.  Franchisee must provide FRANCHISOR with such evidence as FRANCHISOR may in its reasonable discretion request from time to time with a prior notice to assure FRANCHISOR that the activities and purpose of Franchisee, and the authority of the Managing Owner and Operations Director, respectively, remain as required by this Agreement.

 

4.8                   Licenses and Permits

 

Subject to clause 2.3 of the MFDA, Franchisee shall obtain, secure and maintain in force all material licenses, permits and certificates required in the operation of the Franchised Restaurants in accordance with all applicable Laws, pay promptly or ensure payment of all taxes and assessments when due (save for any amount which is subject to a good faith dispute), and operate the Franchised Restaurants in substantial compliance with all applicable Laws, including, without limitation, those relating to occupational hazards, health, safety, employment, workers’ compensation insurance (if any), unemployment insurance, payment of taxes owed to any Authority and the Anti-Corruption Laws.

 

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During the period set forth in clause 2(3) of the MFDA, Franchisee shall not be deemed in breach of the foregoing paragraph with respect to any non-compliance that exists with respect to Existing PRC Company Restaurants.

 

5.                          Standards and Uniformity

 

Franchisee agrees to comply at all times with all elements of the Burger King System, which it acknowledges is a necessary and reasonable requirement in the interests of Franchisee and others operating under the Burger King System.  Franchisee shall use the Burger King System and all rights granted under this Agreement in compliance with the quality standards used or adopted by FRANCHISOR from time to time.  FRANCHISOR shall at all times have the right (but shall not be under an obligation) to monitor Franchisee’s use of the Burger King System to control the quality of goods sold and services rendered by Franchisee at Franchised Restaurants and to enforce Franchisee’s compliance with the relevant Standards.  Franchisee shall at all times comply fully with any requests, demands or suggestions of FRANCHISOR regarding compliance with the Standards.  Notwithstanding anything to the contrary in this Agreement, without limitation and subject to the preceding provisions of this clause 5, Franchisee must at all times comply with the following covenants:

 

5.1                   Operations Standards.

 

(a)               Franchisee must substantially comply with the MOD Manual.  A copy of the MOD Manual must be kept at each Franchised Restaurant at all times and all changes or additions to it must be inserted upon receipt.  In the event of any conflict between the MOD Manual kept at a Franchised Restaurant and the master copy maintained by FRANCHISOR or its Affiliates in Miami, Florida (or such other place as may be designated by FRANCHISOR’s Affiliate), the master copy shall govern.

 

(b)               Franchisee agrees that changes in the Standards may become necessary or desirable from time to time and Franchisee must accept and comply with such modifications, revisions and additions to the MOD Manual as FRANCHISOR in its sole discretion believes to be necessary or desirable on the condition that such modifications, revisions and additions are communicated to the Franchisee.

 

(c)                The Standards and any changes to them made from time to time and communicated to Franchisee shall be and shall be deemed to be part of this Agreement.

 

5.2                  Building and Premises.

 

(a)               Exclusive Use.  The Locations must be used exclusively during the applicable Term for the purpose of operating a Burger King Restaurant in accordance with this Agreement and the Standards.

 

(b)               Construction.  The Franchised Restaurants must be constructed and improved in the manner authorized and approved by FRANCHISOR, and must not thereafter be altered unless in accordance with the Standards.  The Franchised Restaurants must be decorated, furnished, and equipped with equipment, signage, furnishings, and fixtures which meet FRANCHISOR’s specifications and the Current Image applicable at the time each Franchised Restaurant is constructed or improved.

 

(c)                Maintenance and Repairs.  Franchisee must, at its own expense, continuously throughout the applicable Term, maintain (whether by repairs or replacement) the Locations and each Franchised Restaurant in good condition and repair in accordance with FRANCHISOR’s then current standards relating to the repair, maintenance, condition and appearance of Burger King Restaurants.  Without limiting the foregoing, Franchisee must make all repairs, improvements and alterations as may be reasonably determined by FRANCHISOR to be necessary to maintain the Current Image which Franchisee was last required to meet.  Franchisee must substantially comply with FRANCHISOR’s requirements in this regard within such time as FRANCHISOR reasonably requires.

 

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(d)               Current Image.  In addition to and without limiting any other obligations specified in this Agreement, during the year that is halfway between the Opening Date and the expiration date of the Term of a Franchised Restaurant (e.g., in the 10th year of a 20-year term), Franchisee shall remodel, renovate, replace, upgrade, improve and modernize the Franchised Restaurant including, without limitation, all improvements at the Location, and all furnishings, fixtures, equipment, signage and décor, to conform with the Current Image in effect as of the beginning of such year, including any necessary structural work, in accordance with FRANCHISOR’s Standards and pursuant to plans and specifications approved in advance by FRANCHISOR.

 

5.3                   Signage.

 

Franchisee must: (a) display the Burger King Marks only in the form, manner, locations and positions authorized by FRANCHISOR; (b) maintain and display at the Locations signage conforming to the Current Image and current specifications that are manufactured from Approved Suppliers; (c) not place additional signage or posters anywhere at the Locations without the prior written consent of FRANCHISOR; and (d) immediately discontinue the use of and destroy unapproved, obsolete or unsuitable signage.  Such signs are fundamental to the Burger King System and Franchisee hereby grants to FRANCHISOR the right to enter the Locations during normal business hours and the Franchised Restaurants to remove and destroy unapproved or obsolete signs at Franchisee’s expense in the event that Franchisee has failed to do so within thirty (30) days after the written request of FRANCHISOR.

 

5.4                   Equipment.

 

Franchisee must: (a) purchase, install and use only equipment and equipment layouts in accordance with the requirements set forth in the Standards; (b) maintain all equipment in a condition that substantially complies with the operational standards specified in the Standards; (c) remove and replace equipment which becomes obsolete or inoperable with equipment approved for installation in new Burger King Restaurants at the time of the replacement; and (d)  install within such time as FRANCHISOR may reasonably specify in the Standards, such additional, new or substitute equipment as FRANCHISOR determines is needed in any part of the Location due to a change in menu or method of preparation and service, because of health, safety or regulatory considerations, or other business reasons.  FRANCHISOR has the right, but not the obligation, to establish requirements and criteria for POS Systems and communications equipment and systems to be used by Franchisee.  Prior to mandating the use of a new piece of equipment, FRANCHISOR or its Affiliate will use reasonable efforts to field test the proposed new equipment.  Franchisee acknowledges that the obligations in this clause 5.4 are in addition to its obligations under clause 5.2.

 

5.5                   Vending Machines, ATMs, etc.

 

Franchisee must not install public telephones, newspaper racks, juke boxes, automatic teller machines, lottery ticket terminals, cigarette, gum, candy or any other type of vending machines, video games, rides or any other type of machines normally found in amusement arcades, televisions, consumer computers or internet appliances, fireplaces or any other types of machines or equipment at any Location without the prior approval of FRANCHISOR, but must install such machines or equipment at the Location as soon as practicable upon request from FRANCHISOR.  In the event any such items are installed at a Franchised Restaurant, then all sums received by Franchisee in connection with these items shall be included within Gross Sales and Franchisee shall comply with any conditions and mandatory standards, specification and provisions as to the use of such items.

 

5.6                   Conduct of Business.

 

Franchisee must: (a) use its reasonable efforts to promote and maximize the sale of Approved Products at the Franchised Restaurants and to this end shall, in its reasonable discretion, employ adequate personnel and maintain sufficient supplies of Approved Products, including food and packaging products and merchandise and promotional products; (b) conduct its business at the Franchised Restaurants in a manner which protects and enhances the reputation and goodwill of the Burger King System; and (c) adhere to high standards of integrity and ethical conduct in dealings with customers, suppliers, distributors, public officials, all other persons who conduct business with Franchisee, and FRANCHISOR and its Affiliates.

 

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Franchisee must in all material respects abide by applicable Laws regarding consumer protection. Franchisee must use its reasonable efforts to appropriately deal with consumers’ complaints. Where consumers’ legitimate interests are impaired by Franchisee, Franchisee shall take responsive measures in a timely fashion, as are reasonably appropriate.

 

5.7                   Payments to Suppliers and Others.

 

Franchisee must use its reasonable efforts to fulfill in a timely and responsible manner all material financial obligations relating to the Franchised Restaurants.  Such material financial obligations include, but are not limited to, (a) payment of supplier and distributor invoices for the purchase of goods and services used in connection with the Franchised Restaurants; (b) monthly rent and other charges due to lessors of the Locations; and (c) debt service and other payments to Franchisee’s lenders.  All such payments are Franchisee’s sole responsibility and under no circumstance shall FRANCHISOR have any duty or obligation to pay any such financial obligations of Franchisee.

 

5.8                   Menu, Service and Hygiene.

 

(a)               Any changes to the Standards shall be made by FRANCHISOR, in its sole discretion.

 

(b)               Franchisee must sell all menu items, merchandise and promotional products, and other products,  materials or services specified in the MOD Manual or as otherwise specified by FRANCHISOR in accordance with the Standards. Franchisee must not serve, sell, or offer for sale any items which are not Approved Products.

 

(c)                Franchisee must adhere to all specifications contained in the MOD Manual or as otherwise prescribed in writing by FRANCHISOR from time to time as to ingredients, product groupings, storage, and handling, method of preparation and service, weight and dimensions of products served, and standards of cleanliness, health, and sanitation in accordance with the Standards.

 

(d)               Franchisee must only sell and serve food, beverages, and other items in packaging and other paper products that meet FRANCHISOR’s specifications in accordance with the Standards.

 

(e)                FRANCHISOR may at any time, add a product or ingredient to, or remove any product or ingredient from, menu items or other Approved Products.  If FRANCHISOR makes any such changes, FRANCHISOR will provide reasonable advance notice to Franchisee and Franchisee must change the menu within the period specified by FRANCHISOR in  such notice.

 

(f)                 FRANCHISOR may at any time, by written notice to Franchisee, change the menu by introducing new menu items or new Approved Products, changing the recipes for Approved Products,  removing existing menu items or other Approved Products that Franchisee must prepare at the Franchised Restaurants, or changing the types, brands or mix of pre-manufactured products that may be utilized with menu items or other Approved Products.  If FRANCHISOR makes any such changes, FRANCHISOR will provide reasonable advance notice to Franchisee and Franchisee must change the menu within the period specified by FRANCHISOR in such notice.

 

(g)                FRANCHISOR may at any time require Franchisee to cease using any ingredients or withdraw from supply in any of the Franchised Restaurants, any Approved Product or any other food, beverage, product or service, which in FRANCHISOR’s sole discretion: (i) does not conform or no longer conforms with the Standards for food, beverages, products or services to be supplied in accordance with the Burger King System; (ii) does not conform or no longer conforms with the range or type of food, beverages, products or services to be supplied in accordance with the Burger King System; or (iii) is, or may be, a health or safety risk or may adversely impact the Burger King System.  Franchisee must, in the event of (i) or (ii) above,  timely cease using any ingredients or withdraw any food, beverages or products from sale or supply when required to do so by FRANCHISOR, and in the event of (iii) above, promptly cease using any ingredients or withdraw any food, beverages or products from sale or supply when required to do so by FRANCHISOR.

 

(h)               Franchisee shall sell the Approved Products only at retail to consumers at the Franchised Restaurants and shall not sell such items for redistribution or resale.

 

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(i)                   Franchisee must, upon request of FRANCHISOR and as soon as practicable, provide FRANCHISOR with copies of all health inspection reports or violations issued by Authorities.

 

5.9                   Sources of Supply.

 

Only goods and services that meet FRANCHISOR’s then current Standards and are purchased from Approved Suppliers shall be used in the development, improvement or operation of the Franchised Restaurants.  Such goods include the Approved Products, including, without limitation, food and supplies, packaging and paper products, furnishings, fixtures, signage, equipment, uniforms and premiums.  Subject to clause 9(10) of the MFDA, the decision to approve or disapprove proposed suppliers or distributors shall be made by FRANCHISOR in its sole discretion.  FRANCHISOR may consider any factors it deems relevant in establishing specifications and standards and in approving suppliers and/or distributors and is not obligated to approve multiple suppliers and/or distributors of any good or service.

 

5.10            Hours of Operation.

 

Each Franchised Restaurant must be open for business daily for such hours and days as FRANCHISOR may from time to time specify in the MOD Manual or otherwise, unless and to the extent otherwise prohibited by applicable Law.

 

5.11            Uniforms.

 

All employees in each Franchised Restaurant must wear uniforms approved by FRANCHISOR that meet the design, color and specification from time to time prescribed by FRANCHISOR in its sole discretion.

 

5.12            Advertising and Promotional Materials.

 

Franchisee must not use, publish, display, sell or distribute any advertising or promotional material or slogans, or material on which any Burger King Marks appear, without the prior approval of FRANCHISOR.  All material on which Burger King Marks are used must bear such notice of registration or license legend as FRANCHISOR may specify.  Franchisee must  adhere to all applicable Laws relating to advertising, and must comply with all advertising, promotional and public relations standards, guidelines and policies established by FRANCHISOR from time to time.  Franchisee must, promptly upon receipt of written notice from FRANCHISOR, remove or discontinue the use, publication, display, sale and distribution of any advertising or promotional material, slogans, and any material on which the Burger King Marks appear, which FRANCHISOR has not approved.

 

5.13    Compliance with Laws.

 

Franchisee must comply with and at all times conduct its business substantially in accordance with all requirements of the Law, any competent Authority, the MOD Manual and otherwise as prescribed by FRANCHISOR.  In the event of conflicting standards, Franchisee must comply with the strictest standard. Franchisee will as soon as practicable notify FRANCHISOR, and provide any details reasonably requested by FRANCHISOR, of any legal action taken, or circumstances which could in the opinion of Franchisee reasonably lead to legal action being taken against Franchisee, FRANCHISOR or its Affiliates, including by a customer or any regulatory Authority, and of any likely adverse publicity in relation to Franchisee or the Franchised Restaurants.

 

5.14    Participation in Inspection/Evaluation/Rating Programs.

 

Franchisee must participate, at its cost, in all standard inspection, evaluation and rating programs, including self-audits, product, equipment, facility, crew or service evaluation programs and customer satisfaction programs as required by FRANCHISOR from time to time and any other similar or replacement programs as may be implemented by FRANCHISOR during the applicable Term.  Franchisee understands and agrees that FRANCHISOR may receive a copy of a report or summary showing the findings of the inspection, evaluation or rating program.  FRANCHISOR may charge Franchisee or require Franchisee to pay a third party vendor for reasonable costs related to inspections, evaluations or ratings of optional equipment installed at the Franchised Restaurants.

 

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5.15    Right of Entry; Inspection.

 

FRANCHISOR or any employee, agent or designee of FRANCHISOR shall have the unrestricted right to enter the Franchised Restaurants to conduct such reasonable inspections and other activities as it deems necessary to ascertain or ensure compliance with this Agreement.  The inspections and other activities may be conducted without prior notice during normal business hours.  FRANCHISOR or any employee, agent or designee of FRANCHISOR shall use reasonable efforts to ensure that the inspections and other activities are performed in a manner which minimizes interference with the operation of the Franchised Restaurants.

 

5.16    Interference with Employment Relations of Others.

 

FRANCHISOR and Franchisee must not employ or seek to employ any person who at the time is employed by the other party,  any of the other party’s Affiliates, or another franchisee of FRANCHISOR or its Affiliates or otherwise directly or indirectly, entice or induce such person to leave such employment. This obligation shall not be breached if the person that Franchisee or FRANCHISOR employs or seeks to employ has not been employed by the other party, the other party’s Affiliate, or by another franchisee for a period of more than three (3) months or if the party has obtained the prior written consent of such person’s employer or if the such person responds to a general public advertisement.

 

6.                          Services Available to Franchisee

 

The content of and manner by which the following services are to be delivered by FRANCHISOR shall be within FRANCHISOR’s sole discretion.  FRANCHISOR will consult with Franchisee from time to time in connection with the operation of the Franchised Restaurant and shall provide to Franchisee:

 

(a)               A pre-opening training program conducted at training facilities and/or Burger King Restaurants locations  in the Territory determined by FRANCHISOR.

 

(b)               Pre-opening and opening assistance at each Franchised Restaurant for such period of time as FRANCHISOR, in its discretion, deems appropriate under the circumstances.  FRANCHISOR may, in its reasonable discretion, consider the following factors: the experience of the operator, the type of facility being operated, whether the assistance is for a new opening or the reopening after a transfer of ownership of an already operating Burger King Restaurant, the prior Burger King System experience of Franchisee’s management, the projected volume of the Burger King Restaurant as estimated by Franchisee, and any other factors that FRANCHISOR deems appropriate for consideration.

 

(c)                A copy of MOD Manual, on loan to Franchisee for each Franchised Location, until the last day of the applicable Term (as it may be renewed in accordance with this Agreement and the applicable Unit Addendum).  The loaned copies of the MOD Manual, the other Standards which set out additional specifications, standards and operating procedures furnished by FRANCHISOR will be written in English.  FRANCHISOR will provide Franchisee with any translations into Chinese that FRANCHISOR has prepared with respect to the MOD Manual and authorizes Franchisee to translate the MOD Manual and the other Standards into Chinese at its sole cost and expense for use in connection with the Franchised Restaurants; provided, however, that Franchisee shall not use such translation without first obtaining FRANCHISOR’s prior written consent.  Any copyright or other proprietary rights in the translated version of the MOD Manual and the other Standards (including all copies of such version) shall be the exclusive property of FRANCHISOR.

 

(d)               Such marketing and advertising research data and advice as may be developed from time to time by FRANCHISOR and deemed by it to be helpful in the operation of a Burger King Restaurant.

 

(e)                Communication of new developments, techniques and improvements in food preparation, equipment, food products, packaging, service and restaurant management which are relevant to the operation of a Burger King Restaurant.

 

(f)                 Such other ongoing information as FRANCHISOR considers reasonably necessary to continue to communicate and advise Franchisee as to the Burger King System, including the operation of the Franchised Restaurants.

 

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The foregoing sections (a) and (b) of this clause 6 shall not apply if the Development Rights are in effect.

 

7.                          Training

 

7.1                   A Franchised Restaurant must not open unless the Operations Director, Restaurant Manager, and such other members of Franchisee’s staff charged with the responsibility for the day-to-day operation of such Franchised Restaurant as FRANCHISOR may determine, have successfully completed FRANCHISOR’s pre-opening training program at such location(s) as determined by FRANCHISOR.

 

7.2                   Any new Operations Director, any new Restaurant Manager, and any other new member of Franchisee’s staff as FRANCHISOR may determine must successfully complete the training program referred to in clause 7.1 before assuming their position.

 

7.3                   The Operations Director and such other members of Franchisee’s staff as FRANCHISOR may reasonably determine shall undertake and complete continuing training programs from time to time as directed by FRANCHISOR in order to implement FRANCHISOR’s current operational standards. Such training programs shall be at times and locations specified by FRANCHISOR on reasonable advance notice to Franchisee.

 

7.4                   Franchisee shall be responsible for the cost of FRANCHISOR providing any ongoing training programs requested by Franchisee or required by FRANCHISOR to be undertaken by Franchisee, the Operations Director, the Restaurant Manager or any of Franchisee’s employees (including the cost of training any new or replacement Operations Director, Restaurant Manager or any new employees of Franchisee). Franchisee shall also be responsible for the cost of all FRANCHISOR training materials such as workbooks, all travel and living expenses, all compensation of and workers compensation insurance for Franchisee’s employees while enrolled in the training program, any other personal expenses incurred and materials provided to such employee, and training facility charges and training staff charges, if any.

 

7.5                   Franchisee must, at its cost, implement a training program for each Franchised Restaurant’s employees in accordance with training standards and procedures prescribed by FRANCHISOR.

 

7.6                   Franchisee must use its reasonable efforts to staff the Franchised Restaurants at all times during the Term with a sufficient number of trained employees including the minimum number of managers required by FRANCHISOR who have completed FRANCHISOR’s training program at an accredited location to ensure that FRANCHISOR’s operational standards are met.

 

7.7                   This clause 7 shall not apply while the Development Rights are in effect. Until the expiration  of the MFDA or the occurrence of an MFDA Termination Event, Franchisee shall provide training for its employees sufficient to ensure that its employees comply with the Standards.

 

8.                          Royalty, Advertising Contribution and Other Payments

 

The Royalty and Advertising Contribution with respect to each Franchised Restaurant are due and payable at the times and places, in the manner, and with the frequency and due dates specified herein.  Unless otherwise specified by FRANCHISOR, the Royalty and Advertising Contribution shall be due and payable in accordance with clauses 8.1 and 8.2 below.

 

Notwithstanding anything to the contrary in this Agreement, until the occurrence of an MFDA Termination Event or until FRANCHISOR has terminated Franchisee’s right to manage the Ad Fund in accordance with clause 10(7) of the MFDA: (a) Franchisee will manage the Ad Fund as provided in clause 10 of the MFDA; (b) the Advertising Contributions paid with respect to the Franchised Restaurants shall be aggregated with all advertising contributions paid by Franchisee into a single fund and managed in accordance with clause 10 of the MFDA; and (c) the rights of FRANCHISOR set forth in clause 8.2 shall be deemed to be rights of the Franchisee consistent with clause 10 of the MFDA.

 

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8.1                   Royalty.

 

In further consideration of the grant in clause 2.1, Franchisee must pay the Royalty to FRANCHISOR, or its designee, by no later than the 20th day of each month based on Gross Sales for the preceding month; provided, however, that if the tax clearance and bank remittance procedures applicable to Franchisee so allow, then, upon written request from FRANCHISOR, Franchisee shall pay the Royalty to FRANCHISOR or its designee by no later than the 10th day of each month.

 

8.2                  Advertising Contribution.

 

(a)               By no later than the 20th day of each month, Franchisee must pay the Advertising Contribution to FRANCHISOR or its designee based upon Franchisee’s Gross Sales for the preceding month; provided, however, that if the tax clearance and bank remittance procedures applicable to Franchisee so allow, then, upon written request from FRANCHISOR, Franchisee shall pay the Advertising Contribution to FRANCHISOR or its designee by no later than the 10th day of each month.  All Advertising Contributions will, upon payment, be the property of FRANCHISOR and may be used at its discretion for the purposes set forth in this Agreement.  FRANCHISOR shall not  be subject to any fiduciary or other implied duties, and no express or implied trust shall be created, in respect of any Advertising Contributions.

 

(b)                All Advertising Contributions paid by Franchisee under this Agreement, less direct Administrative Expenses and any applicable taxes, will, if applicable, be combined with the advertising contributions of other franchisees in the Territory  in an Ad Fund and used for (i) conducting customer satisfaction surveys and market research expenditures directly related to the development and evaluation of the effectiveness of advertising and sales promotions; (ii) creative, production, clearance and other costs incurred in connection with the development of advertising, sales promotions and public relations, and (iii) various methods of delivering the advertising or promotional message, including, without limitation, television, radio, outdoor, print, electronic and digital media. All expenditures from the Ad Fund shall be made by FRANCHISOR in its sole discretion for the benefit of Burger King Restaurants in the Territory.  The allocation of the Advertising Contribution among national, regional and local expenditures shall also be made by FRANCHISOR in its sole discretion and can be modified by FRANCHISOR from time to time in its sole discretion.

 

(c)                 Franchisee acknowledges and agrees that FRANCHISOR is not required to spend the total contributions to the Ad Fund in the fiscal year of FRANCHISOR in which such contributions are received, and FRANCHISOR may accumulate such reserves as it deems appropriate.  Franchisee further acknowledges and agrees that FRANCHISOR is not required to spend any specific proportion of the Ad Fund in any particular location or in respect of any particular Burger King Restaurant, provided that such expenditures do not disfavour any particular Franchised Restaurant.   Franchisee acknowledges that it is not entitled to a refund of any monies held in the Ad Fund upon expiration or termination of this Agreement.

 

(d)                All Administrative Expenses shall be paid from the Ad Fund.  If requested by Franchisee, FRANCHISOR will, within 120 days following such request, prepare and deliver to Franchisee a statement of the Ad Fund’s receipts and expenses for the most recent fiscal year of the Ad Fund.

 

(e)                If FRANCHISOR or its designee makes commitments for advertising, public relations, customer satisfaction programs, market research or sales promotion activities prior to the opening of a Franchised Restaurant for which payment is required before Franchisee’s Advertising Contributions are due, Franchisee shall upon request make an advance payment with FRANCHISOR or its designee in an amount not to exceed the result of applying the Advertising Percentage to Franchisee’s estimate of the Gross Sales for the first six (6) months of operation of the Franchised Restaurant.  Any such advance payment will be credited towards Franchisee’s Advertising Contributions payable under this Agreement.

 

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(f)                 FRANCHISOR may, in its sole discretion, permit Franchisee to self-administer the Ad Fund made up of all advertising contributions payable to FRANCHISOR in respect of the Burger King Restaurants operated by Franchisee and its Affiliates.  In such event, subparagraph (b) of this clause 8.2 will continue to apply, but subparagraphs (a), (c), (d) and (e) of this clause 8.2 will not apply.  Notwithstanding the foregoing, FRANCHISOR may withdraw this permission at any time in its sole discretion upon prior written notice to Franchisee, in which case Franchisee will no longer have the right to self-administer the Ad Fund commencing on the first day of FRANCHISOR’s next succeeding fiscal quarter, and any amounts held by Franchisee in respect of Advertising Contributions for itself and its Affiliates must be promptly remitted to FRANCHISOR.  Franchisee must at all times comply with FRANCHISOR’s policies on self-administered advertising funds as provided to Franchisee and updated from time to time.

 

8.3      No Set Off; Method of Payment.

 

The Royalty and the Advertising Contribution must be paid in full free of any deductions or set-off whatsoever (except withholding tax if required to be withheld from the relevant payment by the Laws of the country in which the Franchised Restaurant is located) and by such method (including direct debit in accordance with clause 8.5) as FRANCHISOR or its designee may from time to time stipulate.  If required by FRANCHISOR, Franchisee must submit to FRANCHISOR or its designee a recipient-created tax invoice or a remittance statement in a form prescribed by FRANCHISOR at the same time as the payment is made.

 

8.4      Interest.

 

Franchisee must pay to FRANCHISOR or its designee interest on any sum overdue under this Agreement, in the currency in which the overdue sum was required to be paid, calculated on a daily basis from the due date until payment in full at the highest interest rate allowable by applicable Law.  Entitlement to such interest shall be in addition to any other remedies FRANCHISOR may have.

 

8.5      Direct Debit Method of Payment.

 

FRANCHISOR may, at its option, require payment of the Royalty and/or Advertising Contribution and any other amount payable under this Agreement by making direct monthly withdrawals in the form of an electronic, wire, automated transfer or other similar electronic funds transfer in the appropriate amount(s) from Franchisee’s bank or other financial institution account.  If FRANCHISOR exercises this option, Franchisee will: (a) execute and deliver to its financial institution and to FRANCHISOR those documents necessary to authorize such withdrawals and to make payment or deposit as directed by FRANCHISOR; (b) not thereafter terminate such authorization so long as this Agreement is in effect without the prior written approval of FRANCHISOR; (c) not close such account without prior notice to FRANCHISOR and the establishment of a substitute account permitting such withdrawals; and (d) take all reasonable and necessary steps to establish an account at a financial institution which has a direct electronic funds transfer or other withdrawal program if such a program is not available at Franchisee’s financial institution.

 

8.6      Franchisee Must Not Withhold Payment.

 

Franchisee must not for any reason withhold payment of any amount due to FRANCHISOR.  This applies even if Franchisee alleges that FRANCHISOR has not performed or is not performing an obligation imposed upon it under this Agreement or any other agreement with FRANCHISOR.  FRANCHISOR may accept any partial payment without prejudice to its right to recover the balance due or pursue any other remedy.

 

8.7      Application of Payments.

 

FRANCHISOR, in its sole discretion, may apply any payment received from Franchisee or from any other Person on behalf of Franchisee against any past due indebtedness of Franchisee as FRANCHISOR may see fit, notwithstanding any contrary instruction or designation given by Franchisee or any other Person as to the application or imputation of any such payment.

 

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8.8      Currency.

 

(a)                     All payments to FRANCHISOR required under this Agreement shall be made in United States Dollars (or such other currency as FRANCHISOR may by notice require) (the “Required Currency”) into such bank account in Singapore or elsewhere as FRANCHISOR shall designate (the “Required Country”).  Each conversion from local currency to the Required Currency shall be made at the reference rate determined in accordance with Schedule A (“Reference Rate”), as of the last bank trading day of the month on which the payment is based.

 

(b)                     As and when any consent is required under any applicable Law for the remittance of royalties and other payments to FRANCHISOR or to an Affiliate of FRANCHISOR nominated by FRANCHISOR, Franchisee will at its own expense make all necessary and appropriate applications to such governmental and other Authorities as may be requested by FRANCHISOR or as may be required for transmittal and payment of the Required Currency to FRANCHISOR in accordance with the timescales laid down herein.  If at any time there exists an exchange control or any Law which prohibits the payment to FRANCHISOR of the amounts due to FRANCHISOR under this Agreement and/or any Unit Addendum in the Required Currency and the Required Country (“Payment Restriction”),  FRANCHISOR and Franchisee shall follow the procedures set forth in clause 18(4) of the MFDA. Notwithstanding anything to the contrary in clause 18(4) of the MFDA, FRANCHISOR may not  terminate this Agreement or any Unit Addendum if the Payment Restriction remains in effect for a period of more than three (3) years.

 

(c)                      All payments made under this Agreement shall be made in full, free of any deduction or set off whatsoever, except withholding or similar taxes as required by the Law of the Territory.

 

(d)                     It is understood and agreed by the Franchisee that Franchisee will be responsible for any VAT due in the Territory and any and all other tax liabilities arising out of this Agreement will be paid by the party owing such taxes.  Notwithstanding the foregoing, in the event that Franchisee is required to withhold an amount in respect of withholding tax liability of a payee as a result of any of the payments set out in this Agreement made by or on behalf of Franchisee, it shall be the responsibility and obligation of Franchisee to withhold from such payments (or such other payments) such withholding taxes as are required by law.  Franchisee shall provide FRANCHISOR with corresponding receipts from the relevant taxing Authorities to evidence such payments or amounts withheld.

 

9.                          Records; Reporting Obligations and Audits; Release of Information; Polling

 

9.1                   Records.

 

Franchisee must keep true, accurate and complete records of its business relating to the Franchised Restaurants and retain all such records and reports including sales records and records of all expenditures and amounts received from suppliers and distributors for a period of at least twenty-four (24) months or such longer period as is required by the relevant tax Authorities.

 

9.2                   Report of Gross Sales.

 

By the 1st day of each month, Franchisee must deliver to FRANCHISOR a report of Gross Sales for the previous month in the form and manner required by FRANCHISOR.

 

9.3                   Sales and Other Reports, Financial Statements and Statement Verifying Sales.

 

Franchisee must submit to FRANCHISOR, at such times as FRANCHISOR designates, the following by hard copy or electronic format prescribed by or otherwise acceptable to FRANCHISOR:

 

(a)               (i) daily, weekly and monthly total restaurant sales, ticket count and comparative sales reports; (ii) monthly product volume mix data; and (iii) monthly information obtained from evaluation and rating programs in which Franchisee is required to participate from time to time, including self-audits, product, facility, crew or service evaluation programs and customer satisfaction programs, 

 

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all of the foregoing for the Franchised Restaurants;

 

(b)               monthly, quarterly and fiscal year-to-date profit and loss statements prepared in accordance with generally accepted accounting principles in the country where the Franchised Restaurant is located for the Franchised Restaurant and the total operations of Franchisee including, without limitation, all Burger King Restaurants operated by Franchisee (which for the avoidance of doubt includes the main office function and any distribution function);

 

(c)                (i) a full disclosure of all equity owners in Franchisee and any other person with any interest in the Franchised Restaurant, unless the Franchisee is a Public Company; (ii) complete audited annual financial statements prepared in accordance with generally accepted accounting principles in the country where the Franchised Restaurant is located for the Franchised Restaurant and the total operations of Franchisee; and (iii) a statement verifying total monthly restaurant sales and ticket counts for the previous twelve (12) months for each Franchised Restaurant and separately for all Burger King Restaurants operated by Franchisee, certified by a Certified Public Accountant or the equivalent (and in the absence of an equivalent, then by such body with membership and constitution in the country in which the Franchised Restaurant is located as is designated by FRANCHISOR from time to time);

 

(d)               copies of tax returns and remittances relating to the Franchised Restaurants; and

 

(e)                such other information and records of any kind as FRANCHISOR may reasonably require from time to time, including, without limitation, quarterly balance sheets and income statements and copies of any other documentation provided to the taxing Authorities relating to the Franchised Restaurants.

 

To the extent that any of the foregoing reports and financial statements are required to be provided to FRANCHISOR’s Affiliate pursuant to the Investment Agreement or the MFDA, FRANCHISOR shall not require Franchisee to provide such reports or financial statements hereunder, it being the intention of the parties not to require Franchisee to provide duplicative reports and financial statements.

 

9.4             Inspections and Audits.

 

(a)                     FRANCHISOR or its representatives, at FRANCHISOR’s expense, may, at all reasonable times  examine or audit, in whole or in part, written or electronic books, accounts, tax returns and other records and reports relating to Franchisee and/or each Franchised Restaurant, and, for this purpose, Franchisee must produce to FRANCHISOR all such books, accounts, tax returns, records and reports relating to Franchisee and/or each Franchised Restaurant and separately for all Burger King Restaurants operated by Franchisee. In conducting such examinations or audits, FRANCHISOR and its representatives shall exercise commercially reasonable efforts to minimize disruption to the normal operation of the business,

 

(b)                     If a discrepancy is found between the reported Gross Sales and actual Gross Sales for any period, Franchisee shall pay to FRANCHISOR, within ten (10) days of receipt of an invoice, the difference between the amounts paid in respect of Royalties and Advertising Contributions and the Royalties and Advertising Contributions payable under this Agreement had Gross Sales been reported accurately, with interest in accordance with clause 8.4 calculated from the date such amounts were to have been paid had Gross Sales been reported accurately.     If it is found that Franchisee has paid Royalties and Advertising Contributions in excess of amounts due, FRANCHISOR will promptly credit Franchisee’s account.

 

(c)                      Where clause 8.2(f) applies, any shortfall in the amount required to be deposited or remitted under clause 8.2(f), due other than to a discrepancy between actual and reported Gross Sales recoverable under clause 9.4(b), shall be recoverable by FRANCHISOR as deemed Royalty and shall bear interest in accordance with clause 8.4 calculated from the end of the month in which the deposit or remittance should have been made, which interest, FRANCHISOR shall, when paid, add to any Ad Fund to which Franchisee is required to contribute.

 

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9.5                   Audit Costs.

 

Franchisee must, within fifteen (15) days of receipt of a demand from FRANCHISOR, reimburse FRANCHISOR for all costs of the audit including travel, lodging and wages of employed personnel and charges by contractors, if: (a) the discrepancy in any month between reported Gross Sales and actual Gross Sales exceeds 3% of reported Gross Sales; or (b) FRANCHISOR conducted the audit because Franchisee failed to deliver to FRANCHISOR a report of Gross Sales for the relevant month as required under clause 9.2 after being given notice by FRANCHISOR and seven (7) days to cure such failure.

 

9.6                   Polling and POS.

 

Franchisee must, at its sole cost and expense: (a) at all times operate at the Franchised Restaurants POS Systems approved by FRANCHISOR; (b) upgrade or replace in whole or in part any POS Systems as FRANCHISOR may reasonably deem necessary or desirable in the interest of proper administration of Burger King Restaurants throughout the Burger King System, within such reasonable time as may be specified by FRANCHISOR; (c) use the approved POS Systems at all times to record and process such information as FRANCHISOR may from time to time require, including information regarding any other business carried on in or from any Burger King Restaurant with the consent of FRANCHISOR, keep such information available for access by FRANCHISOR on the POS System, for such minimum period as FRANCHISOR may require, and maintain and provide to FRANCHISOR such information in the format, and using such data exchange standards and protocols, as FRANCHISOR may require; (d) effect the Polling operation at such time or times as may be required by FRANCHISOR, but FRANCHISOR may itself initiate Polling whenever it deems appropriate; (e) permit FRANCHISOR or its agents to Poll any information contained in the POS System at any time; (f) permit FRANCHISOR or its agent to obtain all of the information referenced in this clause 9.6 that may be in the possession of any third party vendor from whom Franchisee obtained an approved POS System; and (g) if required by FRANCHISOR, download the information into machine readable information compatible with the system operated by FRANCHISOR or its agents and to deliver that information to FRANCHISOR by such method and within such timescale as FRANCHISOR reasonably requires if for any reason Polling is not practicable.

 

10.                   Taxes, Duties and Other Charges

 

10.1            Franchisee shall pay when due all taxes, charges, duties, government imposts or levies (including any fines or penalties) arising by reason of Franchisee’s possession, ownership or operation of the Franchised Restaurants, or items loaned to Franchisee by FRANCHISOR, or the entering into of this Agreement including, without limitation, any stamp taxes, sales, use, value added, goods and services or other tax, (other than any tax that is measured by or related to the net income of FRANCHISOR).  In the event of any bona fide dispute as to the liability for a tax assessed against it, Franchisee may contest the validity or the amount of the tax in accordance with the procedures of the taxing Authority; provided, however, that Franchisee shall not permit a tax sale or seizure against the Franchised Restaurants, Locations or equipment used in the Franchised Restaurants.

 

10.2            Franchisee shall withhold from Royalties and other payments made to FRANCHISOR under this Agreement such withholding taxes as are required to be withheld by the laws of the jurisdiction in which each  Franchised Restaurant is located and pay the withholding taxes to the relevant taxing Authorities.  Franchisee shall provide FRANCHISOR with corresponding receipts from the relevant taxing Authorities to evidence such payments or amounts withheld.

 

10.3            Where the Law permits an election regarding the treatment of any supply or deemed supply under this Agreement for the purposes of any value added or other tax chargeable thereon, Franchisee shall make or join in any such election as FRANCHISOR may from time to time require.

 

10.4            If any Laws are changed or new Laws are introduced or courts or any relevant Authority interpret Laws differently which results in FRANCHISOR having to pay a tax, duty, excise or levy on amounts received from Franchisee under this Agreement (other than income tax) or on goods or services supplied by FRANCHISOR under this Agreement, Franchisee must pay to FRANCHISOR an additional amount so that after FRANCHISOR has paid such tax, duty, excise or levy FRANCHISOR’s 

 

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yield under this Agreement is unchanged. Any payments to FRANCHISOR shall be net of any tax benefits to FRANCHISOR so that FRANCHISOR’s yield under this Agreement, after taking into account any deductions, credits or other adjustments does not increase FRANCHISOR’S yield to an amount greater than specified in this Agreement.  For the avoidance of doubt, in the event Franchisee is required by Law to  deduct and pay to the appropriate government Authority, on behalf of FRANCHISOR, any taxes (other than income tax) that may be owed by FRANCHISOR under the laws of the Territory and that Franchisee is obligated by law to withhold (“Withholding Taxes”), Franchisee shall provide FRANCHISOR with official receipts or other evidence of payment from such taxing Authorities sufficient to enable FRANCHISOR to support a claim for credit against FRANCHISOR’s Singapore  (or other country’s) income taxes with respect to the taxes withheld and paid by Franchisee.  If FRANCHISOR is unable to claim a credit against its Singapore (or other country’s) income taxes with respect to any Withholding Taxes, FRANCHISOR may invoice Franchisee for the additional amount necessary to ensure that, after deducting Withholding Taxes, the net amount actually received by FRANCHISOR equals the applicable Royalty specified in clause 8.1 and Schedule A.

 

11.                   Protection of the Burger King System

 

11.1           Ownership.

 

Franchisee acknowledges that ownership of all right, title and interest in and to all elements of the Burger King System, including the Burger King Marks, and the design, décor and image of Burger King Restaurants is and shall remain vested solely in FRANCHISOR or an Affiliate of FRANCHISOR and that Franchisee has and will acquire no proprietary or other rights or claims in or to any element of the Burger King System or the Burger King Marks other than the license granted by this Agreement.  Franchisee disclaims any other right or interest in and to the Burger King System and the Burger King Marks and in the goodwill derived therefrom and will promptly if requested by FRANCHISOR assign free of any charge to FRANCHISOR any right or interest Franchisee may acquire or be deemed to acquire therein.  Franchisee acknowledges and agrees that all uses of the Burger King Marks and any element of the Burger King System shall inure to the benefit of FRANCHISOR.

 

11.2           Improvements.

 

Franchisee shall notify FRANCHISOR of any potential improvements or new features which it identifies as capable of benefiting the Burger King System.  Franchisee agrees that all right, title and interest in and to such potential improvements or new features are hereby transferred to, vest in and remain the exclusive property of FRANCHISOR on and from their creation, without payment by FRANCHISOR, and FRANCHISOR and/or its Affiliates may evaluate, modify and introduce any such potential improvements or new features into the Burger King System for the benefit of FRANCHISOR and other franchisees.  Franchisee shall do all things and sign all documents necessary to give effect to this clause 11.2.  FRANCHISOR shall have no obligation to use the improvements or new features.  Franchisee shall not use potential improvements or new features at any of the Franchised Restaurants unless and until first approved by FRANCHISOR.

 

11.3            Confidential Information.

 

The term “Confidential Information” as used in this Agreement means all confidential and proprietary information of FRANCHISOR or any of its Affiliates, including without limitation, FRANCHISOR’s operations manuals, including the MOD Manual, and other Standards, training material, marketing and business information, marketing strategy and marketing programs, plans and methods, food specifications, details of suppliers and distributors, and sources of supply and distribution, sales, contractual and financial arrangements of FRANCHISOR and its Affiliates and service providers, and all other written information and knowledge relating to the methods of operating and the functional know-how applicable to Burger King Restaurants and the Burger King System revealed by FRANCHISOR or any of its Affiliates to Franchisee.

 

Franchisee acknowledges the uniqueness of the Burger King System and that FRANCHISOR is making the Confidential Information available to Franchisee for the purpose of operating the Franchised Restaurant.  Franchisee agrees that it would be an unfair method of competition for 

 

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Franchisee to use or duplicate or to allow others to use or duplicate any of the Confidential Information.  Franchisee, therefore, must:

 

(a)               at all times, both during the Agreement Term and following its termination or expiration, maintain the Confidential Information in strict confidence;

 

(b)               use the Confidential Information only in or for the purposes of the operation of the Franchised Restaurants;

 

(c)                not disclose the Confidential Information to any person except those officers, employees and professional advisers of Franchisee who have a specific need to have access to it for the operation of the Franchised Restaurants, who have been made aware of the terms on which it has been disclosed to Franchisee, and who agree to maintain its confidentiality.  Franchisee is responsible for any unauthorized disclosure of the Confidential Information by persons to whom Franchisee has disclosed.

 

(d)               use its reasonable efforts not permit anyone to reproduce, copy or exhibit any portion of the MOD Manual or any other Confidential Information received from FRANCHISOR;

 

(e)                if none of this Agreement, the MFDA or any Unit Addenda are no longer in effect, at the option of the Franchisee return, delete or destroy the Confidential Information received from FRANCHISOR immediately upon receipt of a written request from FRANCHISOR to do so; and

 

(f)                 at FRANCHISOR’s written request, require the Managing Owner and the Operations Director to execute an agreement similar in substance to this clause in a form acceptable to FRANCHISOR and naming FRANCHISOR as a third party beneficiary with the independent right to enforce such agreement.

 

11.4           Required Disclosure.

 

Any disclosure by Franchisee of any Confidential Information required by a valid order issued by an Authority of competent jurisdiction (a “Legal Order”) shall be subject to the terms of this clause 11.4. Prior to making any such disclosure, the Franchisee shall provide FRANCHISOR with: (a) prompt written notice of such requirement so that FRANCHISOR may seek a protective order or other remedy; and (b) reasonable assistance in opposing such disclosure or seeking a protective order or other limitations on disclosure. If, after providing such notice and assistance as required herein, the Franchisee remains subject to a Legal Order to disclose any Confidential Information, Franchisee  shall disclose no more than that portion of the Confidential Information which, on the advice of the Franchisee’s legal counsel, such Legal Order specifically requires Franchisee to disclose and shall use commercially reasonable efforts to obtain assurances from the applicable Authority that such Confidential Information will be afforded confidential treatment.

 

11.5           No Dilution.

 

Franchisee must not directly or indirectly, at any time during the Agreement Term or after the expiration of the Agreement Term, do or cause to be done any act or thing disputing, attacking or in any way diluting or tending to dilute the validity of and FRANCHISOR’s right, title or interest in and to the Burger King System, including the Burger King Marks, and the goodwill associated therewith.

 

11.6           Infringement.

 

Franchisee must immediately notify FRANCHISOR of all infringements or imitations of the Burger King System, including the Burger King Marks, which come to Franchisee’s attention, or challenges to Franchisee’s use of any of the Burger King Marks, and FRANCHISOR may exercise absolute discretion in deciding what action, if any, should be taken.  Franchisee must co-operate in the prosecution of any action to prevent the infringement, imitation, illegal use or misuse of the Burger King Marks or the Burger King System and agrees to be named as a party in any such action if so requested by FRANCHISOR.  FRANCHISOR will bear the reasonable legal expenses and costs incidental to Franchisee’s participation in such action, except for the cost and expenses of Franchisee’s separate legal counsel (if Franchisee elects to be represented by counsel of Franchisee’s own choosing).  Franchisee must not institute any legal action or other kind of proceeding based on the Burger King Marks or the Burger King System without the prior approval of FRANCHISOR. Upon 

 

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becoming aware of any infringement of a Burger King Mark or the Burger King System, FRANCHISOR shall either (i) commence proceedings in respect of such infringement within sixty (60) days of such cause of action arising; or (ii) take all such actions as are reasonably necessary to give Franchisee the right to bring such proceedings.  If FRANCHISOR elects, in its discretion, to commence proceedings itself, then it shall conduct those proceedings in a timely manner and with reasonable diligence.  For the avoidance of doubt, Franchisee is not itself entitled to commence or conduct such proceedings unless expressly given the right to do so under this clause.

 

11.7            Burger King Marks, Registered Users.

 

FRANCHISOR represents that the marks specified in Schedule C are registered or applied for as stated in Schedule C but makes no express or implied warranty with respect to the validity of any of the Burger King Marks.  Franchisee accepts that Franchisee may conduct business utilizing some Burger King Marks which have not been registered, that registration may not be granted for the unregistered marks and that some of the Burger King Marks may be subject to use by third parties unauthorized by FRANCHISOR (collectively “Unregistered Marks”). If Franchisee is required by FRANCHISOR to use any Unregistered Mark, FRANCHISOR shall indemnify and hold harmless Franchisee from and against any Losses incurred by Franchisee as a result of any third party claim alleging that Franchisee’s use of the Unregistered Mark infringes upon or violates the intellectual property rights of such third party.  Franchisee shall, upon request and at no expense to Franchisee, assist FRANCHISOR in perfecting and obtaining registration of any unregistered Burger King Marks.

 

Whenever requested by FRANCHISOR, Franchisee must enter into one or more agreements authorizing and permitting the use of the Burger King Marks or any of them (“Registered User Agreements”), and Franchisee agrees to comply with all the terms and conditions contained in such Registered User Agreements and to sign and execute any documents and/or do such things to assist FRANCHISOR in making application on Franchisee’s behalf for registration of all necessary Registered User Agreements.  The provisions of any Registered User Agreements shall be consistent with the provisions of this Agreement.  Franchisee shall not attempt to register itself as a user of any of the Burger King Marks except in connection with an application filed by FRANCHISOR.  Nothing in any Registered User Agreement shall be construed as giving Franchisee the right to transfer, sub-license or otherwise dispose of Franchisee’s right to use the Burger King Marks without FRANCHISOR’s prior written consent.

 

11.8            Franchisee Name.

 

In the adoption of a trade, corporate, partnership, fictitious or domain name, Franchisee must not use any of the Burger King Marks or any variations or abbreviations or any words confusingly similar to any of the Burger King Marks.  Notwithstanding the foregoing, FRANCHISOR hereby grants Franchisee a license to use “Burger King” in the name of Franchisee.  As soon as reasonably practicable after expiration or termination of this Agreement and in any event within three (3) months thereafter, Franchisee shall procure that the name of Franchisee which consists of or incorporates the words “Burger King” shall be changed to a name which does not include such words or any name which, in the reasonable opinion of FRANCHISOR, is substantially or confusingly similar.

 

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11.9            Conduct of Business on the Internet.

 

Franchisee must not conduct business or advertise for business on the Internet without the prior written consent of FRANCHISOR except in accordance with and as permitted by the MFDA.  Until the occurrence of an MFDA Termination Event, no other Person, including FRANCHISOR (subject to the rights reserved to FRANCHISOR pursuant to clause 4(10) of the MFDA), shall have the right to do business and/or advertise for business under or using the Burger King name or Burger King Marks on the Internet in the Territory. Upon the occurrence of an MFDA Termination Event, Franchisee must not conduct business or advertise for business on the Internet without the prior written consent of FRANCHISOR.

 

11.10     Use of the Internet.

 

Subject to the provisions of clause 4(10) of the MFDA, Franchisee must: (a) obtain FRANCHISOR’s prior written approval to any email address it uses in connection with the Franchised Restaurant (other than “[        .com]”) and, if necessary, change the email address; (b) acknowledge at all times that ownership and control of FRANCHISOR’s websites and domain names remain with FRANCHISOR or an Affiliate of FRANCHISOR; (c) not alter or allow to be altered the structure or layout of any of the websites used by FRANCHISOR or any Affiliate of FRANCHISOR under license from FRANCHISOR; (d) not publish the Burger King Marks or any information or material on the Internet or World Wide Web concerning the MOD Manual, Current Image or any other Confidential Information of FRANCHISOR or its Affiliates without the prior written consent of FRANCHISOR; and (e) not interfere in the use of any of the websites used by FRANCHISOR or any Affiliate under license from FRANCHISOR and comply in all material respects with all policies and procedures regarding websites and use of the Internet that FRANCHISOR publishes from time to time.

 

11.11     Independent Contractor.

 

For purposes of this Agreement, Franchisee is an independent contractor and under this Agreement is not an agent, partner, joint venturer or employee of FRANCHISOR, and no express or implied fiduciary relationship exists between the parties under this Agreement.  Franchisee must not, nor attempt to, bind or obligate FRANCHISOR in any way nor represent that Franchisee has any right to do so.  By virtue of this Agreement, FRANCHISOR has and will have no control over the terms and conditions of employment of Franchisee’s employees.

 

11.12     Public Notice of Independence.

 

Notwithstanding that FRANCHISOR is a party to the JVIA, in all public records and in Franchisee’s relationship with other persons, on stationery, business forms and checks, Franchisee must indicate the independent ownership of the Franchised Restaurant and that Franchisee is a franchisee of FRANCHISOR.  Franchisee must exhibit at the Franchised Restaurant in such places as may be designated by FRANCHISOR, a notification that the Franchised Restaurant is operated by an independent operator under license from FRANCHISOR.  FRANCHISOR may prescribe the form of the indication and notification required by this clause 11.12.

 

11.13     Registration of Agreement.

 

If local Law requires the registration or recordation of this Agreement with any local government agency, administrative board or banking agency, Franchisee must give prior notice of such registration or recordation to FRANCHISOR.

 

12.                   Insurance; Indemnity

 

12.1           Insurance Required.

 

Prior to the Opening Date of each Franchised Restaurant, Franchisee must procure and maintain in full force and effect during the Agreement Term insurance policies meeting the requirements set forth in Schedule D hereto with respect to such Location.

 

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12.2            Policy Requirements

 

Each policy required under clause 12.1 must, subject to Schedule D  (a) name FRANCHISOR and its Affiliates as additional insureds or its equivalent, (b) be written by an insurance company or companies reasonably as specified by FRANCHISOR from time to time in the MOD Manual and on terms and conditions that are acceptable to FRANCHISOR (including the amount of the deductible under each insurance policy), (c) include such coverages, policy limits and endorsements as may be specified from time to time by FRANCHISOR in the MOD Manual or otherwise in writing, (d) provide that the insurers shall not have rights of subrogation or recourse against any additional insured or its equivalent, (e) provide that the policy cannot be cancelled without thirty (30) days prior written notice to FRANCHISOR, (f) insure the contractual liability of Franchisee under clause 12.5, and (g) include a cross liability provision enabling one insured person to claim against the insurer even if the party making the claim against that party is itself insured under that policy, and even where another insured would have been entitled to claim but is precluded for any reason, including by reason of being in breach of the policy.

 

12.3    Evidence of Insurance

 

Prior to the Opening Date of each Franchised Restaurant and when requested by FRANCHISOR during the Agreement Term, Franchisee must furnish to FRANCHISOR certificates of insurance or its equivalent evidencing that the required insurance coverage is in effect pursuant to the terms of this Agreement.  The addition of FRANCHISOR and its Affiliates as additional insureds or its equivalent shall be effectuated through an endorsement to Franchisee’s insurance policies, without any language of limitation affecting coverage, and a copy of the endorsement must be provided to FRANCHISOR or its designated agent.  All policies must be renewed, and a renewal certificate of insurance must be provided to FRANCHISOR or its designated agent, prior to the expiration date of the policies.

 

12.4    Other Insurance Requirements

 

Franchisee must neither do nor omit to do any act which renders or may render any of the insurance policies void or voidable.  If FRANCHISOR determines that a particular insurer is unacceptable to FRANCHISOR and so notifies Franchisee, Franchisee will use its reasonable efforts to obtain alternative or additional insurance from an insurer acceptable to FRANCHISOR prior to the expiration  of the relevant policy and furnish to FRANCHISOR certificates of insurance evidencing that such alternative or additional insurance coverage is in effect.  The insurance afforded by the policy or policies required under this Agreement shall be primary and not contributory with FRANCHISOR’s insurance and shall not be limited in any way by reason of any insurance which may be maintained by FRANCHISOR.  The amount of insurance as required by Schedule D or as contained in any of the policies shall not be construed to be a limitation of liability on the part of Franchisee.  The obligation of Franchisee to maintain insurance is separate and distinct from its obligation to indemnify FRANCHISOR under the provisions of clause 12.5.

 

12.5            Indemnity

 

(a)                     Franchisee is responsible for all Losses arising out of or in connection with the possession, ownership or operation of the Franchised Restaurants and the Locations.

 

(b)                     Franchisee shall defend, indemnify and hold harmless the FRANCHISOR Indemnified Parties, with counsel fully acceptable to FRANCHISOR, against and in respect of all Losses sustained or incurred by the FRANCHISOR Indemnified Parties, or any one or more of them, based upon, arising out of or relating to: (i) the possession, ownership or operation of the Franchised Restaurants and the Locations, including, without limitation, any claim, action or demand for damages to property or for injury, illness or death of persons directly or indirectly resulting therefrom, (ii) any breach by Franchisee or failure to perform any of its  representations, warranties, covenants, obligations or agreements set forth herein, (iii) the 

 

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sale of securities of Franchisee or any Affiliate of Franchisee, including, without limitation, Losses related to any alleged violation of any securities laws, (iv) any deceptive or fraudulent activities, corporate malfeasance, negligence or wilful misconduct of the Franchisee in connection with the operation of Franchisee’s business; (v) taxes, charges, duties, government imposts or levies (including any fines or penalties) arising by reason of Franchisee’s possession, ownership or operation of the Franchised Restaurants, and (vi) any claim, action or demand of any kind or nature whatsoever brought by any employee, agent, subcontractor or independent contractor of Franchisee or any employee of any agent, subcontractor or independent contractor of Franchisee.

 

(c)                      Franchisee’s indemnification obligations hereunder shall be in effect from the Commencement Date and survive the termination of this Agreement and continue for as long as the statute of limitations applicable to any such claim, action or demand remains in effect.

 

(d)                     Notwithstanding the foregoing, Franchisee’s obligation to indemnify and defend the FRANCHISOR Indemnified Parties shall not apply in the event of negligence or willful misconduct by any FRANCHISOR Indemnified Party as determined  by a final arbitral award rendered in accordance with clause 18.2 or, in connection with a third party clam, by a court of competent jurisdiction pursuant to an enforceable judgment (“Final Judgment”), provided that (i) if FRANCHISOR assumes the conduct of any third party claim covered by sub-clause  12.5(b) above, Franchisee shall upon request pay to FRANCHISOR all costs and expenses reasonably incurred or sustained by FRANCHISOR or any FRANCHISOR Indemnified Party (including reasonable attorneys’ fees and expenses) in connection with Losses arising out of such claim as such costs and expenses are incurred until such time as there is Final Judgment; and (ii) if the Final Judgment determines that any FRANCHISOR Indemnified Party has contributed to the Losses through its own contributory negligence or willful misconduct, FRANCHISOR shall or shall cause such FRANCHISOR Indemnified Party to, repay to Franchisee a part of the amount received pursuant to (i) above in proportion to the degree of contributory negligence of such FRANCHISOR Indemnified Party, as determined in such Final Judgment.

 

(e)                      The right to indemnity hereunder shall exist notwithstanding that joint and several liability may be imposed upon the FRANCHISOR Indemnified Parties by applicable Law. Franchisee’s obligation to defend and indemnify the FRANCHISOR Indemnified Parties is separate and  distinct from its obligation to maintain insurance, and is not limited by the amount of insurance required by FRANCHISOR under this Agreement and the MFDA. Notwithstanding anything to the contrary in this clause 12.5, any sum recovered by the relevant FRANCHISOR Indemnified Party through Franchisee’s insurance or otherwise (less any reasonable out-of-pocket expenses incurred by such FRANCHISOR Indemnified Party in recovering the sum and any tax attributable to or suffered in respect of the sum recovered) will reduce the amount of the Losses in respect of which a claim can be made under sub-clause 12.5(b) by an equivalent amount.

 

(f)                       FRANCHISOR agrees to advise Franchisee if it receives notice that a claim has been or will be filed with respect to a matter covered by this indemnity and provide Franchisee with such information as Franchisee may reasonably require to assume the defense of the matter.  Subject to subparagraph (h) below, Franchisee shall be given the opportunity to assume the defense thereof with counsel reasonably acceptable to FRANCHISOR, and FRANCHISOR shall have the right to participate in the defense of any claim or action against it which is assumed by Franchisee at FRANCHISOR’s own cost and expense.

 

(g)                      Franchisee shall not, without the written consent of the applicable FRANCHISOR Indemnified Parties, settle or compromise any such claim, action or demand unless the terms of such settlement provide for (i) a full and unqualified release of the FRANCHISOR Indemnified Parties, (ii) no admission of liability, fault or violation of law or contract and (iii) no relief other

 

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than payments of monetary damages that are not to be paid by the FRANCHISOR Indemnified Parties.

 

(h)                     Notwithstanding the foregoing, if (i) Franchisee elects not to defend the FRANCHISOR Indemnified Parties by failing to notify such parties in writing that Franchisee will indemnify them from and against the entirety of any Losses that they may sustain or incur, based upon or arising out of the indemnifiable claims within five (5) days after FRANCHISOR Indemnified Parties have given notice to Franchisee of such indemnifiable claims, (ii) a conflict of interest exists between Franchisee on the one hand and the FRANCHISOR Indemnified Parties or the Burger King System on the other hand, as reasonably determined by FRANCHISOR, (iii) the indemnifiable claim relates to the matters described in subparagraphs (b)(iii) or (iv) of this clause 12.5, (iv) settlement of, or an adverse judgment with respect to, the indemnifiable claims is, in the good faith judgment of FRANCHISOR, likely to establish a precedential custom or practice adverse to the continuing business interests or the reputation of FRANCHISOR or the Burger King System, or (v) the indemnifiable claim involves multiple franchisees and FRANCHISOR reasonably determines that consolidation of all such claims would be in the best interests of FRANCHISOR and the affected franchisees, including Franchisee (in which case any liability of Franchisee hereunder would be on a pro rata basis), the FRANCHISOR Indemnified Parties shall have the right to defend the claim, action or demand by appropriate proceedings with sole power to direct and control such defense with respect to themselves, and Franchisee shall pay to the FRANCHISOR Indemnified Parties all reasonable costs, including reasonable attorneys’ fees, incurred by such parties in effecting such defense and any subsequent legal appeal, in addition to any sums which FRANCHISOR may pay by reason of any settlement or judgment against the FRANCHISOR Indemnified Parties.

 

13.                   [Intentionally deleted.]

 

14.                   Transfer Restrictions

 

14.1            No Transfer or Change in Franchisee Without Consent.

 

(a)           Except as permitted by the Investment Agreement, or with respect to assignment or transfer to a wholly-owned subsidiary of Franchisee, or parent company that owns all of the interests in Franchisee (which subsidiary or parent company, as applicable, must be, and remain during the Agreement Term, (i) a wholly-owned subsidiary of Franchisee or parent company that owns all of the interests in Franchisee; and (ii) a single-purpose entity, the business of which is limited to the development, operation and servicing of Burger King Restaurants and any activities ancillary thereto or acting as the Master Franchisee under the MFDA and related agreements) (“Permitted Transfers”), except with the prior written consent of FRANCHISOR, Franchisee must not, directly or indirectly (and must not permit an Affiliate of Franchisee to), Transfer (i) this Agreement or any of its rights or obligations in or under this Agreement; (ii) any of the Franchised Restaurants, the Locations or the real estate relating to the Franchised Restaurants including, without limitation, substantially all of the assets of any or all of the Franchised Restaurants; or (iii) any  part of or beneficial interest in any of the above, and must not permit any such matter to arise by operation of Law or otherwise.

 

(b)           Notwithstanding the foregoing, until the occurrence of an MFDA Termination Event, if Franchisee (or any Affiliate) wishes to Transfer a Franchised Restaurant to a third party, then Franchisee shall be permitted to Transfer the Franchised Restaurant without FRANCHISOR’s consent, subject to compliance with clause 14.1(c) below. In such event, Franchisee and the new franchisee must enter into a new franchise agreement for the Location and comply with all other requirements of the MFDA pertaining to such Transfer.  Upon the occurrence of an MFDA Termination Event, any such Transfer shall be subject to clause 14.1, FRANCHISOR will have the rights to consent set forth in clause 14.2 and the third party must enter into FRANCHISOR’s then current form of franchise agreement.

 

(c)            Any Transfer hereunder may only be effected: (i) if such transaction is not with (1) a Competitor 

 

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or any Affiliate thereof; (2) a Person which, directly or indirectly, provides marketing, advertising, training, monitoring, development, reporting and collection services to a Competitor or any Affiliate thereof; and/or (3) a Person which acts as a master franchisee for any Competitor or Affiliate thereof, and (ii) upon completion of a background check with respect to such proposed Transferee which results reveal (x) no prior or current criminal activity or inclusion on an international sanctions list, or (y) that the Transferee or any principal thereof has not (A) been accused by a competent regulator in a final decision or order of violating any of the Anti-Corruption Laws, (B) voluntarily disclosed or admitted to violating or attempting to violate any of the Anti-Corruption Laws, aiding or abetting another party to violate such laws, or conspiring to violate such laws, or (C) otherwise been found by a court of competent jurisdiction in a final decision or order to have violated, attempted to violate, aided or abetted another party to violate, or conspired to violate, any of the Anti-Corruption Laws.

 

(d)           Any direct or indirect Transfer of equity interests in Franchisee must comply with the requirements of the Investment Agreement while FRANCHISOR is a party thereto, and thereafter any such Transfer must comply with the requirements set forth in sub-clause 14.1(c).

 

(e)            In any Transfer of equity interests of Franchisee, Franchisee’s sale materials shall include such legends and disclaimers reasonably requested by FRANCHISOR.  Franchisee shall give FRANCHISOR the reasonable opportunity to review any such sale materials prior to their filing or use.

 

(f)             Franchisee shall give FRANCHISOR prior written notice of any proposed Transfer of an interest referred to in this clause 14.1 (hereinafter, “Interest”) before the proposed Transfer is to take place.

 

(g)            Any Transfer described in this clause 14.1 attempted without compliance with the terms hereof shall be void and of no effect and shall constitute a material act of default hereunder and good cause for termination of this Agreement.

 

(h)           Any and all restrictions on Transfer referenced in this clause 14.1, clause 14.2 or clause 14.3, or elsewhere in this Agreement, other than clause 14.1(b) shall not apply to (i) a public offering of Franchisee or any Affiliate thereof or following such time as the Franchisee or any relevant Affiliate becomes a Public Company, (ii) any Transfer permitted by the Investment Agreement and (iii) Permitted Transfers.

 

14.2                       Conditions for Consent.

 

Except to the extent any Transfer is permitted pursuant to clause 14.1 above, in determining whether or not to grant approval to a proposed Transfer of any Interest referred to in clause 14.1 for which consent of FRANCHISOR is required to be obtained, FRANCHISOR may consider any  relevant matter in its sole discretion, including, without limitation, the protection of the Burger King System, the protection of FRANCHISOR and its Affiliates, and the orderly and proper operation and development of other Burger King Restaurants in the market which may be directly or indirectly impacted by the proposed Transfer.  Without limiting the generality of the foregoing, FRANCHISOR may impose or consider the following conditions for granting its consent to the proposed Transfer, as FRANCHISOR may deem appropriate in its sole discretion:

 

(a)                     all material obligations of Franchisee that are due but not yet fulfilled to FRANCHISOR and its Affiliates, whether arising under this Agreement or otherwise (including, without limitation, all monetary obligations and all repair, maintenance, refurbishment and upgrade obligations) must be satisfied on or before the Transfer Date;

 

(b)                     all material obligations of Franchisee that are due but not yet fulfilled to third parties arising out of the conduct of the Franchised Restaurant including, but not limited to, obligations owed to suppliers and distributors must be satisfied on or before the Transfer Date;

 

(c)                      Franchisee and its Affiliates are not in default of any material provisions of this Agreement or the MFDA;

 

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(d)                     the Transferee (or, if applicable, such owners of the Transferee as FRANCHISOR may request), in FRANCHISOR’s reasonable judgment, satisfies all of FRANCHISOR’s business standards and requirements; has the aptitude and ability to operate the Franchised Restaurant; has adequate financial resources and capital to do so; and must complete and be approved through FRANCHISOR’s standard franchisee application and selection process including satisfactorily demonstrating to FRANCHISOR that it meets the financial, character, organizational, managerial, credit, operational, and legal criteria and such other criteria and conditions as FRANCHISOR shall then be applying in considering applications for new franchises.  The Transferee must meet with representatives of FRANCHISOR at its corporate offices or such other location as may be reasonably requested by FRANCHISOR.  Without limiting the grounds on which it will be reasonable for FRANCHISOR to withhold its consent to any Transfer, FRANCHISOR may withhold its consent to any proposed Transfer where (i) the Transferee or any Affiliate of the Transferee carries on activities of a kind described in clause 17 (Restrictive Covenant), or (ii) in the reasonable judgment of FRANCHISOR, the Transfer would result in the Transferee having a disproportionately large ownership of Burger King Restaurants compared to its financial capability;

 

(e)                Without prejudice to transfers permitted under clause 14.1(a) above, transfers to existing franchisees in the Burger King System may be subject to conditions materially different from or in addition to conditions with respect to other Transfers.  FRANCHISOR reserves the right to disapprove a Transfer based upon (without limitation) any of the following considerations, in FRANCHISOR’s reasonable discretion: (i) the current geographic scope and proximity of the prospective Transferee’s operations; (ii) the physical and operational condition, opportunities and obligations present in the prospective Transferee’s existing market(s) and Burger King Restaurants; (iii) the penetration level of Burger King Restaurants in the prospective Transferee’s existing market(s); and (iv) the period of time since the prospective Transferee last acquired Burger King Restaurants and the extent to which the prospective Transferee properly integrated those Burger King Restaurants into its organization and resolved material issues arising from or related to such previous acquisition;

 

(f)                 the form, material terms and conditions in the Transfer agreement must be reasonably acceptable to FRANCHISOR;

 

(g)                the Transferee must execute FRANCHISOR’s then current form of franchise agreement for a term equal to the remainder of the Term, except that no further franchise fee will be payable, and the timing for required remodeling shall be as under this Agreement or as otherwise agreed;

 

(h)               the Transferee and such owners of the corporate Transferee, as FRANCHISOR may request, must execute a guarantee of the Transferee’s obligations to FRANCHISOR and its Affiliates.  For the purposes of determining compliance, FRANCHISOR shall have the right to examine and approve the form and content of all relevant governing documents of the corporate Transferee;

 

(i)                   Franchisee must execute all documents necessary to cancel the entries of Franchisee as a registered user of the Burger King Marks and shall co-operate with FRANCHISOR in effecting the cancellation of entries of Franchisee as a registered user with the relevant registry;

 

(j)                  the Transferee must enter into any registered user agreements required by FRANCHISOR authorizing and permitting the use of the Burger King Marks;

 

(k)               the Transferee’s Managing Owner and Operations Director and/or such other relevant persons as determined by FRANCHISOR must have satisfactorily completed, at their expense, FRANCHISOR’s training program for new franchisees on or before the Transfer Date unless the persons in those roles are the same persons who occupied those roles for Franchisee prior to the Transfer Date;

 

(l)                   Franchisee must pay a transfer fee in the amount of $10,000.00 with respect to the first Franchised Restaurant Transferred, and $500.00 with respect to each additional Franchised Restaurant Transferred in the same transaction (the “Transfer Fee”) to FRANCHISOR before the Transfer Date.  The Transfer Fee is payable in respect of any Transfer by Franchisee;

 

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(m)           FRANCHISOR is satisfied, in its reasonable business judgment, that the Franchised Restaurants and the consummation of the contemplated transaction(s) will create sufficient cash flow after payment of debt service and other amounts necessary for reinvestment in the business for repairs or remodeling the Franchised Restaurant and Location, to permit the prospective Transferee to meet its financial commitments generally as well as the prospective transferee’s obligations under this Agreement;

 

(n)               If Franchisee or any Affiliate proposes to Transfer only the real estate at the Franchised Restaurant, FRANCHISOR is satisfied, in its reasonable business judgment, that Franchisee and its Affiliates, on a consolidated basis, will meet the financial ratios and standards FRANCHISOR applies to newly developed Burger King Restaurants.

 

(o)               such legal documentation as is required by FRANCHISOR must be executed, including a general release executed by Franchisee, in a form satisfactory to FRANCHISOR, of any and all claims against FRANCHISOR, its Affiliates, and their respective officers, directors, agents and employees; and

 

FRANCHISOR will use reasonable efforts to provide a response to a proposed Transfer within sixty (60) days of receipt by FRANCHISOR of Franchisee’s notice of the proposed Transfer and the furnishing of all reasonably requested information and documentation.

 

14.3                       Right of First Refusal.

 

(a)                     If Franchisee receives an acceptable bona fide offer from a third party (“Offer”) to directly or indirectly purchase the Franchised Restaurant, any portion thereof or interest therein, any asset material to the operation of the Franchised Restaurant, or any equity interest in Franchisee (individually and collectively, the “Assets”), Franchisee must give FRANCHISOR written notice (“Offer Notice”) offering to sell the Assets to FRANCHISOR or its assignee at the same purchase price and otherwise on substantially the same terms and conditions and setting out the name and address of the prospective purchaser, the price and other terms of the Offer, a copy of the proposed sale agreement for the Assets executed by both Franchisee and purchaser, together with such other information and documentation as FRANCHISOR may reasonably request in order to evaluate the Offer, including, but not limited to, all material exhibits, copies of real estate purchase agreements, proposed security agreements and related promissory notes, assignment documents, leases, deeds, surveys, title insurance commitments and policies and copies of all title exceptions and any other material information FRANCHISOR may request, a franchise application completed by the prospective purchaser, references, and the opportunity to interview the prospective purchaser and/or its officers.

 

(b)                     If the consideration offered by the third party is not in cash, Franchisee must offer to sell the Assets to FRANCHISOR at the fair market value, which, failing agreement between FRANCHISOR and Franchisee, will be determined by an independent expert mutually agreed to by the parties, and the offer will be deemed to have been made on the date the fair market value is agreed or determined.

 

(c)                      A bona fide offer from a third party includes any Transfer, consolidation, merger or any other transaction in which legal or beneficial ownership of the franchise granted by this Agreement or any equity interests held by a principal under clause 4.2, is vested in any person other than Franchisee or that principal but excludes any Transfer between the shareholders who directly and indirectly hold any interest  in the Franchisee as of the date of this Agreement or any consolidation, merger or any other transaction between the Franchisee and the Affiliates or subsidiary of the Franchisee or such principal.

 

(d)                     FRANCHISOR or its assignee has the right and the option, exercisable within thirty (30) days from receipt of an Offer Notice, and all other requested documentation and information required under clause 14.3(a) (“Offer Period”), to accept the Offer.  Silence on the part of FRANCHISOR shall constitute rejection of the Offer.

 

(e)                      FRANCHISOR or its assignee may accept the offer contained in the Offer Notice by giving notice of acceptance to Franchisee before the expiration of the Offer Period (“Acceptance Notice”).

 

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(f)                       The Acceptance Notice may contain terms which vary from the terms of the Offer Notice if the terms upon which FRANCHISOR or its assignee agrees to buy the Assets are not commercially less favorable to Franchisee than those contained in the Offer Notice.  Further, the Acceptance Notice may reject any provision or condition that is inconsistent with Franchisee’s material obligations under this Agreement or the effect of which would be to materially increase the cost to, or otherwise change in any material respects the economic terms imposed on, FRANCHISOR or its assignee, as a result of the substitution of FRANCHISOR or its assignee (as applicable) for the prospective purchaser.  Any such provision or condition is void and unenforceable against FRANCHISOR.

 

(g)                      If Franchisee receives the Acceptance Notice during the Offer Period, Franchisee must sell and FRANCHISOR or its assignee must purchase the Assets upon the terms and conditions contained in the Offer Notice, as such terms may be varied by the Acceptance Notice.

 

(h)                     Acceptance will constitute a binding contract and FRANCHISOR or its assignee and Franchisee shall complete the sale and purchase with all reasonable speed, subject to (i) all of the closing conditions set forth in the proposed sale agreement;  (ii) obtaining any necessary consents and estoppels from landlords or others which Franchisee must use reasonable efforts to obtain, and (iii)  satisfaction with the results of a due diligence investigation of the Assets, as conducted by FRANCHISOR or its assignee over a period of not less than sixty (60) days, commencing on the date of the Acceptance Notice.  Franchisee will use reasonable efforts to assist FRANCHISOR in obtaining any necessary consents and estoppels from landlords or others and conducting a due diligence investigation of the Assets.

 

(i)                         If FRANCHISOR rejects Franchisee’s offer to sell the Assets or any portion thereof, as the case may be, Franchisee may conclude the sale to the relevant purchaser named in the Offer Notice on terms not more favorable to the purchaser than those offered to FRANCHISOR, subject to obtaining the prior written consent of FRANCHISOR as required under this Agreement.

 

(j)                        If the sale to the purchaser has not been completed within ninety (90) days of obtaining FRANCHISOR’s consent, or such longer time as may be reasonably required to obtain the consent of any landlord or other person or Authority, FRANCHISOR may at any time thereafter withdraw its consent to the Transfer by giving written notice to Franchisee. If Franchisee thereafter wishes to proceed with the sale of the Assets on the same commercial terms to the same prospective purchaser, Franchisee is not required comply with this clause 14.3 (right of first refusal) but must obtain FRANCHISOR’s prior consent to the Transfer.

 

(k)                     The election by FRANCHISOR not to exercise its right of first refusal as to any Offer will not affect its right of first refusal as to any subsequent Offer.

 

(l)                         If the proposed sale of the Assets includes material assets of Franchisee not related to the operation of Burger King Restaurants, FRANCHISOR or its assignee may, at its option, elect to purchase only the assets related to the operation of Burger King Restaurants and an equitable purchase price will be allocated to each asset included in the proposed sale.

 

(m)                 Any Transfer or attempted Transfer of the interests described in this clause 14.3 without first giving FRANCHISOR the right of first refusal as described above shall be void and of no force and effect, and shall constitute a material act of default hereunder and deemed good cause for termination of this Agreement.

 

(n)                     The right of first refusal in this clause 14.3 shall not apply if the Development Rights are in effect.

 

14.4    No Waiver.

 

FRANCHISOR’s consent to a Transfer shall not constitute a waiver of any claims it may have against Franchisee, nor shall it be deemed a waiver of FRANCHISOR’s right to demand exact compliance with any of the terms of this Agreement by Franchisee or Transferee.

 

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15.                   Default and Termination

 

15.1                       If an act of default hereunder is committed by Franchisee related to a Franchised Restaurant or Franchisee’s performance under this Agreement, and Franchisee fails to cure the default after any required written notice and within the applicable cure period, then, without prejudice to any other rights and remedies FRANCHISOR may have under this Agreement, any other agreement, at law or in equity, FRANCHISOR may, at any time after the occurrence of any of the acts described below and expiration of the cure period (if applicable), by giving written notice to Franchisee,

 

(A)                                      if any act of default referred to in sub-clauses 15.1(a) to 15.1(n)  has occurred, terminate the Unit Addendum for the Franchised Restaurant in relation to which the act of default has occurred and has not been cured (“Terminated Restaurant”); and/or

 

(B)                                      if any act of default referred to in sub-clauses 15.1(o) to 15.1(y) has occurred, terminate this Agreement unilaterally in its entirety prior to expiration of the Agreement Term (even if an act of default has occurred in relation to only one of the Franchised Restaurants).

 

The applicable cure period is described below, but if a cure period is not specifically mentioned, it shall be forty-five (45) days.  In some instances, as identified below, no cure period is allowed.  If any applicable Law or rule requires a longer cure period than that provided herein, then the period required under the Law or rule shall be substituted for the requirements herein.  All the acts of default set out in sub-clauses 15.1(a) to 15.1(y) below are material acts of default and are good cause for the termination of a Unit Addendum for a Franchised Restaurant or this Agreement, as the case may be, as described in sub-paragraphs (A) and (B) above:

 

(a)                                        Franchisee fails to maintain or operate the Franchised Restaurant in accordance with the requirements of the Burger King System, including the MOD 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.

 

(b)                                        Franchisee’s default under the previous clause is deemed by FRANCHISOR, in its commercially reasonable judgment, to be of a nature so serious as to threaten the immediate safety or health of customers or employees of Franchisee or the general public. In such case, Franchisee will, after written notice from FRANCHISOR to Franchisee, immediately cease operation of the Franchised Restaurant until such time as the serious health or safety violation is rectified to FRANCHISOR’s satisfaction.  Failure to close the Franchised Restaurant under these circumstances shall be an additional act of default.  If this act of default occurs, Franchisee shall have no opportunity to cure.

 

(c)                                         Franchisee sells any product which does not conform to FRANCHISOR’s specifications or is not approved by FRANCHISOR.  Franchisee shall have ten (10) days after notice from FRANCHISOR to Franchisee to cure the default.

 

(d)                                        Franchisee fails to sell any product designated by FRANCHISOR as required to be sold in the Franchised Restaurant pursuant to this Agreement.  Franchisee shall have fifteen (15) days after written notice from FRANCHISOR to Franchisee to cure the default; provided, however, if for reasons beyond the control of Franchisee, Franchisee is unable to obtain such products within the cure period, the cure period shall be extended for a reasonable period of time determined by FRANCHISOR and communicated to Franchisee in writing, provided Franchisee initiates and actively pursues substantial and continuing action within the cure period to cure such default.

 

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(e)                                         Franchisee fails to install and use equipment or décor required by FRANCHISOR pursuant to this Agreement or the Standards or uses equipment, uniforms or décor not approved by FRANCHISOR where such approval is required pursuant to this Agreement.

 

(f)                                          Franchisee fails to maintain the Franchised Restaurant in good condition and repair, or fails in any material respect to make all improvements, alterations or remodeling as may be determined by FRANCHISOR to be reasonably necessary to reflect the Current Image required pursuant to this Agreement.

 

(g)                                         Franchisee fails to pay to FRANCHISOR or its Affiliates when due Royalties or any other amount required to be paid in respect of any Franchised Restaurant. Franchisee shall have ten (10) Business Days after notice from FRANCHISOR to Franchisee to cure the default.

 

(h)                                        Franchisee denies FRANCHISOR the right to inspect a Franchised Restaurant or to examine its books and records or to audit the sales and accounting records of a Franchised Restaurant, in each case when and as required hereunder. Franchisee shall have five (5) days after notice from FRANCHISOR to Franchisee to cure the default and if FRANCHISOR does not attempt to re-inspect the relevant Franchised Restaurant during that cure period, the cure period shall be extended until such time as FRANCHISOR has attempted to re-inspect the relevant Franchised Restaurant.

 

(i)                                            Franchisee ceases to occupy the Location, except as permitted under clause 3.2.  Franchisee shall have ten (10) days after notice from FRANCHISOR to Franchisee to cure the default.  If the loss of possession is attributable to the proper exercise of governmental powers, Franchisee may, with FRANCHISOR’s consent and subject to availability, relocate to other premises in the same trade area for the balance of the Term.

 

(j)                                           Franchisee abandons the Franchised Restaurant without the prior consent of FRANCHISOR.  Franchisee shall have ten (10) days after notice from FRANCHISOR to Franchisee to cure the default.  Franchisee shall be deemed to have abandoned the franchise relationship if the Franchised Restaurant ceases to operate for more than ten (10) days, except as permitted under clause 3.2, whether the Franchised Restaurant remains closed, vacant or is converted to another use.

 

(k)                                        Franchisee fails to conduct the business of the Franchised Restaurant in compliance with all material Laws and regulations in all material respects as required under clause 3.2 of this Agreement.

 

(l)                                            A levy of execution is made upon any material property used in any Franchised Restaurant or any Location, and the levy is not discharged within thirty (30) days.

 

(m)                                    Franchisee fails to remedy any other material breach of any material term of this Agreement with respect to a Franchised Restaurant within thirty (30) days’ notice given to Franchisee by FRANCHISOR specifying the breach to be remedied, telling Franchisee what FRANCHISOR requires to be done to remedy the breach.

 

(n)                                        Franchisee for more than three (3) times in any 12-month period during the Agreement Term breaches any obligation under this Agreement in relation to the same Franchised Restaurant.  Franchisee shall have no possibility to cure such breach.

 

(o)                                        Franchisee is insolvent, files a petition or application seeking any type of relief under any bankruptcy code or any state insolvency or similar law affecting the rights of creditors or is unable to pay its debts as they fall due, (or someone files a petition to have the Franchisee adjudicated a bankrupt and such application or petition is not removed within 

 

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90 days after it is filed) or makes an arrangement with its creditors or if any distress or execution is levied on Franchisee’s material goods or if an administrator, liquidator, trustee or receiver is appointed over the whole or substantial part of Franchisee’s undertaking or application is made for any such appointment to be made, or if any other steps are taken under any insolvency, bankruptcy, receivership, or moratorium laws from time to time in force, including any moratorium or if Franchisee takes any action to liquidate or wind up its operations.

 

(p)                                        A final and non-appealable judgment against Franchisee  (including a final and non-appealable judgment in favor of FRANCHISOR or any of its Affiliates) that is (i) more than US$20,000 and pertains to a single Franchised Restaurant, or (ii) more than US$100,000 and pertains to multiple Franchised Restaurants or the operation of Franchisee’s business  remains unsatisfied for thirty (30) days or for a longer period of time if permitted under the applicable Law, or a levy of execution is made upon the License granted by this Agreement and the levy is not discharged within thirty (30) days.

 

(q)                                        Franchisee or the Managing Owner is convicted by a final and non-appealable judgment of an offense punishable by a term of imprisonment in excess of one year, or an offense, regardless of how punishable, for which a material element is fraud, dishonesty or moral turpitude, and the Managing Owner is not removed from his or her position as Managing Owner within sixty (60) days after such conviction.  If this act of default occurs, Franchisee shall have no opportunity to cure.

 

(r)                                           Franchisee fails to pay when due and payable any material undisputed bills, invoices or statements from suppliers of goods or services to any Franchised Restaurant and lenders, landlords or other vendors of the Franchisee and such delay could reasonably be expected to have a material adverse effect on the reputation of the FRANCHISOR, Franchisee or any of their Affiliates, or the Burger King System (in whole or in part) in the Territory.

 

(s)                                          Franchisee acts in any fraudulent manner in connection with the operation of a Franchised Restaurant, including if Franchisee knowingly made any materially false statement in connection with any report of Gross Sales or in any other report, account or financial statement required under this Agreement, or if Franchisee knowingly made false or misleading statements in order to obtain execution of this Agreement by FRANCHISOR.  If this act of default occurs, Franchisee shall have no opportunity to cure.

 

(t)                                           Franchisee challenges the validity or ownership of the Burger King Trademarks or the Confidential Information or FRANCHISOR’s rights in the Burger King System. If this act of default occurs, Franchisee shall have no opportunity to cure.

 

(u)                                        if any Transfer or other event occurs which is in violation of clause 14 (Transfer Restrictions).  If this act of default occurs, Franchisee shall have no opportunity to cure.

 

(v)                                        Franchisee uses or duplicates the Burger King System or engages in unfair competition or acquires an interest in a Competitor in violation of clause 17 of this Agreement or discloses any Confidential Information or trade secrets of FRANCHISOR in violation of clause 11.3 of this Agreement.  If this act of default occurs, Franchisee shall have no opportunity to cure.

 

(w)                                      if it is determined by an Authority that Franchisee, the Managing Owner or any other senior officer of Franchisee has violated any Anti-Corruption Laws and in the event that the Managing Owner and/or such other senior officer of Franchisee is involved, the Managing Owner and/or other senior officer of Franchisee is not removed from his or her position as Managing Owner or senior officer, as applicable, within sixty (60) days after 

 

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such determination.  If this act of default occurs, Franchisee shall have no opportunity to cure.

 

(x)                                        Franchisee, without the prior consent of FRANCHISOR, enters into a management agreement or consulting arrangement to manage the operations of any one or more of the Franchised Restaurants.

 

(y)                                        Franchisee fails to remedy any other material breach of any material term of this Agreement within thirty (30) days’ notice and opportunity to cure given to Franchisee by FRANCHISOR specifying the breach to be remedied, telling Franchisee what FRANCHISOR requires to be done to remedy the breach.

 

15.2            Effect of Franchise Ending.

 

Upon expiration or termination of this Agreement for any reason, all rights of Franchisee to use any of FRANCHISOR’s intellectual property (including the Burger King System, the Burger King Trademarks and the Confidential Information) at all Locations will terminate and the provisions of clause 15.4 will apply.  Upon expiration of the Term of any Unit Addendum (“Expired Restaurant”) or termination of a Unit Addendum with respect to any Franchised Restaurant, all rights of Franchisee to use any of FRANCHISOR’s intellectual property (including the Burger King System, the Burger King Trademarks and the Confidential Information) at the Location of the Expired Restaurant or Terminated Restaurant will terminate and the provisions of clause 15.3 will apply.

 

15.3    Action on Termination of a Unit Addendum for a Franchised Restaurant.

 

Upon expiration or termination for any reason of a Unit Addendum for any Franchised Restaurant, all monies owed by Franchisee to FRANCHISOR and any FRANCHISOR Affiliate relating to the Expired Restaurant or Terminated Restaurant, as applicable, shall be immediately due and payable within thirty (30) days of such expiration or termination of the relevant Unit Addendum.  Franchisee shall not be entitled to any goodwill or other compensation or refund of fees for any reason. In addition, Franchisee must:

 

(a)               promptly cease using the Burger King System including the Burger King Trademarks or any mark confusingly similar to the Burger King Trademarks and the Confidential Information at the Expired Restaurant or Terminated Restaurant, as applicable;

 

(b)               not thereafter identify itself as or hold itself out as a Burger King franchisee at the relevant Location or as having any connection or relationship with FRANCHISOR or the Burger King System at the relevant Location;

 

(c)                de-identify the Expired Restaurant or Terminated Restaurant, as applicable, in accordance with FRANCHISOR’s instructions, and in the event Franchisee fails to de-identify any such Franchised Restaurant, Franchisee consents to FRANCHISOR entering that Franchised Restaurant to make the changes at Franchisee’s expense;

 

(d)               pay all trade creditors relating to the Expired Restaurant or Terminated Restaurant, as applicable, including Approved Suppliers; and

 

(e)                permit FRANCHISOR to enter the Expired Restaurant or Terminated Restaurant, as applicable, at any time without prior notice to verify that Franchisee has done all things required of it by this clause 15.3, and take whatever actions FRANCHISOR considers reasonably necessary to fulfill any of Franchisee’s obligations under this clause 15.3 which Franchisee fails to fulfill, and Franchisee must pay the reasonable cost of such actions within the time specified in any invoice issued by FRANCHISOR for those costs.

 

The foregoing shall be in addition to any other rights or remedies of FRANCHISOR that exist under applicable Law.

 

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15.4            Action on Termination of the Agreement

 

Upon expiration or termination of this Agreement for any reason, all monies owed by Franchisee to FRANCHISOR and any FRANCHISOR Affiliate relating to the Franchised Restaurants shall be immediately due and payable. Franchisee shall not be entitled to any goodwill or other compensation or refund of fees for any reason. In addition, Franchisee must:

 

(a) without prejudice to clause 11.8, promptly cease using the Burger King System, the Burger King Trademarks or any mark confusingly similar to the Burger King Trademarks and the Confidential Information at the Franchised Restaurants;

 

(b) not thereafter identify itself as or hold itself out as a Burger King franchisee or as having any connection or relationship with FRANCHISOR or the Burger King System at any Location;

 

(c) in the event of the termination or expiration of the MFDA promptly delete, destroy or return to FRANCHISOR all Confidential Information including the MOD Manual and all other materials in its possession or control relating to the Burger King System;

 

(d) in the event of the termination or expiration of the MFDA  destroy or deliver to FRANCHISOR as soon as practicable, at FRANCHISOR’s option, all materials bearing the Burger King Trademarks or in which FRANCHISOR owns copyright or any other intellectual property rights that are otherwise identifiable with the Burger King System, and all proprietary supplies, including all branded goods and such goods made to FRANCHISOR’s formulations as FRANCHISOR determines (which obligation shall be satisfied by the Franchisee using all commercially reasonable efforts in the case of Confidential Information held in an electronic format);

 

(e) de-identify the Franchised Restaurants in accordance with FRANCHISOR’s instructions, and in the event Franchisee fails to de-identify the Franchised Restaurants, Franchisee consents to FRANCHISOR entering the Franchised Restaurants to make the changes at Franchisee’s expense;

 

(f) pay all trade creditors relating to the Franchised Restaurants, including Approved Suppliers; and

 

(g) permit FRANCHISOR to enter the Franchised Restaurants at any time without prior notice to verify that Franchisee has done all things required of it by this clause 15.4, and take whatever actions FRANCHISOR considers reasonably necessary to fulfill any of Franchisee’s obligations under this clause 15.4 which Franchisee fails to fulfill, and Franchisee must pay the cost (to the extent reasonably incurred) of such actions within the time specified in any invoice issued by FRANCHISOR for those costs.

 

The foregoing shall be in addition to any other rights or remedies of FRANCHISOR that exist under applicable Law.

 

15.5            Set Off.

 

FRANCHISOR may set off any monies owing to FRANCHISOR or any of its Affiliates in respect of Royalties, Advertising Contributions, or any other amounts due hereunder against any amount payable by FRANCHISOR to Franchisee on any account. Franchisee may not set off any liability of FRANCHISOR to Franchisee whether under this Agreement or otherwise, against any amount payable by Franchisee to FRANCHISOR under this Agreement or otherwise.

 

15.6            Additional Rights of FRANCHISOR on Default; Damages.

 

(a)               If Franchisee ceases or fails to operate a Franchised Restaurant (other than an Early Closure Restaurant) for the periods set forth in clause 15.1 during such Franchised Restaurant’s Term for any reason other than the reasons set forth in clause 3.2, or in the event FRANCHISOR

 

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terminates a Unit Addendum or this Agreement in accordance with clause 15.1 hereto, then, in addition to FRANCHISOR’s rights and remedies set out in this clause 15, Franchisee acknowledges that: (i) FRANCHISOR will suffer loss and damage; (ii) the loss and damage will be impossible, complex or expensive to quantify accurately in financial terms and cannot be precisely calculated or proved; and (iii) Franchisee will be liable to FRANCHISOR for actual direct damages and loss of profits (calculated solely as described in clause 15.6(b)) incurred by FRANCHISOR as a result of Franchisee’s failure to continue to operate the Franchised Restaurant for the remainder of the applicable Term of the Unit Addendum for the Franchised Restaurant by paying the damages specified in this clause 15.6.

 

(b)               For the purpose of clause 15.6(a), “actual direct damages and loss of profits” are calculated as an amount equal to the lesser of (i) the total of Royalties that would have been payable by Franchisee under this Agreement if Franchisee had continued to operate the Franchised Restaurant for the remainder of the applicable Term of the Unit Addendum for the Franchised Restaurant; or (ii) (A) in the event the Development Rights are in effect, the total of Royalties that would have been payable by Franchisee under this Agreement if Franchisee had continued to operate the Franchised Restaurant for an additional period of twenty-four (24) months or (B) in the event of an MFDA Termination Event, the total of Royalties that would have been payable by Franchisee under this Agreement if Franchisee had continued to operate the Franchised Restaurant for an additional period of thirty-six (36) months, based (in each of (i) and (ii)) on the average Gross Sales over the 36-month period (or shorter period if the applicable Franchised Restaurant has been open for less than 36 months) immediately preceding the date on which Franchisee ceased to operate the Franchised Restaurant (“Damages”).

 

(c)                The relevant amount of Damages must be paid within sixty (60) days of FRANCHISOR’s written demand.

 

(d)               The Damages payable by Franchisee under this clause 15.6 are recoverable as a debt due to FRANCHISOR and shall be secured by a lien in favor of FRANCHISOR against the personal property, machinery, fixtures and equipment owned by Franchisee and on the Location at the time of the default.

 

(e)                If any default under clause 15.1 occurs, in addition and without prejudice to its rights under this clause 15.6 or any other rights, FRANCHISOR has the right but not the obligation to take whatever actions it considers necessary to remedy the default, at Franchisee’s sole risk and cost (including administrative costs and staff time) and without compensation to Franchisee, including by entering the Franchised Restaurant with prior notice to the Franchisee and after the normal business hours to remove and destroy unapproved or obsolete signs, advertising or promotional material, slogans or material on which Burger King Marks appear.

 

15.7            Specific Performance.

 

Franchisee acknowledges that FRANCHISOR may seek an injunction or similar remedy for any breach or threatened breach of this Agreement for which damages may not be adequate compensation.

 

15.8            Termination by Franchisee

 

Franchisee, may, pursuant to Article 12 of the Commercial Franchise Administration Regulation promulgated by the State Council of China and effective as of May 1, 2007, terminate this Agreement within SEVEN (7) DAYS after the signing date of this Agreement (“Termination Period”).  Franchisee further acknowledges that the foregoing seven-day Termination Period has been agreed to by FRANCHISOR and Franchisee based on their negotiations and reflects a truthful allocation of risks and liabilities after taking into account all of the relevant factors in entering into this Agreement.  In the event that Franchisee elects to terminate this Agreement pursuant to this clause 15.8:

 

(a)               Franchisee shall, within the foregoing Termination Period, send the original copy of a written notice to terminate this Agreement (“Termination Notice”) to FRANCHISOR by hand-delivery 

 

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or registered air mail, postage fully prepaid.  Franchisee shall clearly state its decision to terminate this Agreement in such Termination Notice, which shall be signed by the legal representative of Franchisee and affixed with the corporate seal of Franchisee.  This Agreement may be terminated pursuant to this clause 15.8 only after FRANCHISOR actually receives the original copy of the Termination Notice that meets the foregoing requirements.  For the avoidance of doubt, if FRANCHISOR does not receive the Termination Notice that meets all of the foregoing requirements, this Agreement shall not be terminated and shall continue in full force and effect and be binding upon FRANCHISOR and Franchisee.

 

(b)               If this Agreement is terminated pursuant to this clause 15.8, Franchisee shall comply with all relevant responsibilities herein upon termination of this Agreement.

 

16.                   Right of Entry

 

Franchisee will execute all documents required by FRANCHISOR in connection with FRANCHISOR’s entry into the Franchised Restaurants, Locations or other premises for purposes of, and when permitted under, this Agreement and will use its reasonable efforts to procure any consent required from any third party in connection with FRANCHISOR’s entry into the Franchised Restaurants, Locations or other premises.  Franchisee hereby waives and releases FRANCHISOR from all rights, actions or claims which Franchisee may at any time have against FRANCHISOR in connection with FRANCHISOR’s entry into the Franchised Restaurants, Locations or other premises for purposes of, and when permitted under, this Agreement except to the extent that such rights, action or claims arise directly from a failure by FRANCHISOR to use reasonable care in exercising its right of entry.

 

17.                   Restrictive Covenant

 

17.1            Franchisee will not, during the Agreement Term or after its expiration or termination, directly or indirectly engage in the operation of any restaurant, except as licensed by FRANCHISOR, which utilizes or duplicates the whole or any part of the Burger King System or any Confidential Information.  This obligation shall not extend (after the expiration or other termination of this Agreement) to any know-how which has entered the public domain without fault on Franchisee’s part.

 

17.2            Franchisee will not, directly or indirectly, during the Agreement Term and for one (1) year after the assignment, expiration or termination of this Agreement (or such longer or shorter period as may be prescribed by Law):

 

(a)               own, operate or make any investment in any Person that is a Competitor;

 

(b)               control any Person which owns or operates a Competitor;

 

(c)                provide marketing, advertising, training, monitoring, development, reporting and collection services to any Person which owns or operates a Competitor; and/or

 

(d)               act as a master franchisee for any Competitor.

 

17.3            Franchisee agrees that the restrictions in this clause 17 are reasonable and necessary to avoid any real or potential conflict of interest and to protect the Burger King System and the Confidential Information and other proprietary information of FRANCHISOR and the legitimate business interests of FRANCHISOR and its franchisees, and in order for Franchisee to focus its resources and energies on the successful operation of the Franchised Restaurants.

 

18.                   Miscellaneous; General Conditions

 

18.1               Non-Waiver.

 

The failure or delay on the part of FRANCHISOR to exercise any right or option given to it under this Agreement, or to insist on strict compliance by Franchisee with the terms of this Agreement, shall not constitute a waiver of any terms or conditions of this Agreement with respect to any other or subsequent breach, nor a waiver by FRANCHISOR of its right at any time thereafter to require exact and strict compliance with all the terms of this Agreement.  The rights or remedies set out in this Agreement are in addition to any other rights or remedies which may be granted by law.

 

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18.2           Governing Law & Arbitration; Language.

 

(a)                                 This Agreement and any non-contractual obligations arising out of or in connection with this Agreement shall be governed by, and interpreted in accordance with, Hong Kong law. The United Nations Convention Contracts for the International Sale of Goods of 11 April 1980 is hereby waived and excluded from application to this Agreement.

 

(b)                                 If any dispute, controversy or claim arises out of or in connection with this Agreement, including the breach, termination or invalidity thereof (“Dispute”), any party may serve formal written notice on the other party that a Dispute has arisen (“Notice of Dispute”).

 

(c)                                  The parties shall use all reasonable efforts for a period of thirty (30) days from the date on which the Notice of Dispute is served by one party on the other party (or such longer period as may be agreed in writing between the parties) to resolve the Dispute on an amicable basis.

 

(d)                                 If the parties are unable to resolve the Dispute by amicable negotiation within the time period referred to in clause 18.2(c), the Dispute shall be referred to the respective Chief Executives of FRANCHISOR and Franchisee who shall attempt, for a period of thirty (30) days from the expiry of the time period referred to in clause 18.2(c) to resolve the Dispute.  If the respective Chief Executives of FRANCHISOR and Franchisee are unable to resolve the Dispute within the stated time period (or such longer period as may be agreed in writing between the parties), the Dispute shall be resolved in accordance with clause 18.2(e) below.

 

(e)                                  Subject to clauses 18.2(a) to 18.2(c), the Dispute shall be referred to and finally resolved by arbitration under the Rules of Arbitration of the International Chamber of Commerce in effect on the date of commencement of the arbitration.  Three arbitrators shall be appointed in accordance with the said Rules. The place of arbitration shall be Hong Kong and the language to be used in the arbitral proceedings shall be English, save that all documents filed in the arbitration do not have to be translated from their original language unless expressly ordered by the tribunal in consultation with the parties.  All pleadings and correspondence shall be submitted in English. The parties shall have the right to seek interim relief from a court of competent jurisdiction, at any time before and after the arbitrator has been appointed, up until the arbitrator has made his final award.

 

(f)                                   Each party to this Agreement agrees that it shall be joined as an additional party to any arbitration involving a dispute, controversy or claim arising out of or in connection with any of the Transaction Documents, if requested by any party to the arbitration to do so.

 

(g)                                  If more than one arbitration is commenced under the Transaction Agreements in which any party to this Agreement is also a party, and any party to the two or more arbitrations contends that the arbitrations should be consolidated into a single arbitration on the basis that the arbitrations raise similar issues of fact or law, each party to this Agreement agrees to consolidation of the arbitrations, if an order for consolidation is subsequently made.  Where two or more arbitrations are consolidated, each party to this Agreement agrees that they shall be consolidated into the arbitration that commenced first.

 

18.3            Severability.

 

FRANCHISOR and Franchisee agree that if any provisions of this Agreement may be construed in more than one way, one or more of which would render the provision illegal or otherwise voidable or unenforceable, and one of which would render the provision valid and enforceable, such provision shall have the meaning which renders it valid and enforceable.  The language of all provisions of this Agreement shall be construed according to its fair meaning and not strictly against any party. It is the intent of the parties that the provisions of this Agreement be enforced to the fullest extent and should any court or other public agency determine that any provision herein is not enforceable as written in this Agreement, the parties shall use their best endeavors to amend it so that it is enforceable to the 

 

43

 

fullest extent permissible under the laws and public policies of the jurisdiction in which the enforcement is sought.  The provisions of this Agreement are severable and this Agreement shall be interpreted and enforced as if all completely invalid or unenforceable provisions were not contained in the Agreement, and partially valid and enforceable provisions shall be enforced to the extent that they are valid and enforceable.

 

18.4            Consent.

 

In all cases where Franchisee is required to obtain FRANCHISOR’s prior consent, authorization or approval, except as otherwise indicated herein such consent, authorization or approval shall be granted or withheld in FRANCHISOR’s sole and absolute discretion and unless otherwise indicated, any such consent, authorization or approval must be in a writing signed by a duly authorized officer of FRANCHISOR.

 

18.5            Notices.

 

Any notice, demand, request, consent, approval, authorization, designation, specification or other communication given or made to or by a party to this Agreement:

 

(a)               must be in writing and in English, addressed:

 

(i) if to FRANCHISOR:                BK AsiaPac, Pte. Ltd

101 Thomson Road

#13-03/04 United Square

Singapore 307591

 

with copy to:

 

Burger King Corporation

5505 Blue Lagoon Drive

Miami, FL  33126

Facsimile:  +1 305 378 7868

Attention: General Counsel

 

(ii) if to Franchisee:                       the address specified in Schedule A as Franchisee’s address or Franchisee’s last known mailing address

 

or as specified to the sender by any party by notice.

 

(b)               is regarded as being given by the sender and received by the addressee: (i) if by delivery in person (including by courier), when delivered to the addressee; and (ii) if by mail, on the earlier of actual receipt or the 15th day after being deposited in the mail.

 

18.6           Modification.

 

This Agreement may only be modified or amended by a document signed by all the parties to this Agreement except as otherwise provided in this Agreement.

 

18.7    Assignment by FRANCHISOR.

 

(a) FRANCHISOR may Transfer this Agreement, and all of the rights and obligations of FRANCHISOR hereunder, to (i) an Affiliate; or (ii) an IP Transferee (as defined in sub-clause 18.7(b) below) and such Transfer shall inure to the benefit of the successors and assigns of  FRANCHISOR.  In the case of any such Transfer, Franchisee hereby grants its prior and irrevocable consent to such assignment and waives any requirement of prior notice.  FRANCHISOR will provide Franchisee with notice of the Transfer within fifteen (15) days following its completion. If required by FRANCHISOR, Franchisee shall take all actions as FRANCHISOR shall reasonably require or as required by applicable Law to effect such Transfer, including executing any deed, agreement or notice of assignment acknowledging and agreeing to the assignment by FRANCHISOR.

 

44

 

(b) For purposes of this clause 18.7, an “IP Transferee” means any Person to which FRANCHISOR Transfers the rights to the Burger King Marks, the Burger King Domain Names and the Burger King Intellectual Property Rights licensed by FRANCHISOR to Franchisee hereunder in respect of all of the Region or a portion of the Region.

 

(c)  In any Transfer to an IP Transferee, FRANCHISOR shall assign this Agreement, and all of the rights and obligations of FRANCHISOR hereunder, to such IP Transferee, in which case the IP Transferee shall license such Burger King Intellectual Property Rights to Franchisee as contemplated in this Agreement, and Franchisee’s rights and obligations hereunder shall remain in full force and effect.

 

18.8            Binding Effect.

 

This Agreement shall be binding upon the parties and their respective successors or assigns.

 

18.9    Survival.

 

Any provisions of this Agreement, including but not limited to the insurance and indemnification provisions of this Agreement, which impose an obligation after termination or expiration of this Agreement shall survive the termination or expiration of this Agreement and remain binding on the parties.

 

18.10 Agency.

 

FRANCHISOR may subcontract or delegate to an Affiliate or any other entity the performance of any obligation or the right to exercise any right, power, authority or discretion under this Agreement, such that anything that may or must be done by FRANCHISOR under this Agreement may be done instead by or in conjunction with such subcontractor or delegate.  If directed by FRANCHISOR, and to the extent directed by FRANCHISOR, Franchisee must deal with any such subcontractor or delegate as if they were FRANCHISOR.  FRANCHISOR shall remain responsible for the performance of the obligation.

 

18.11  Attorney’s Fees.

 

In any litigation or arbitration to enforce the terms of this Agreement, all costs and all attorney’s fees, including those incurred on appeal, incurred as a result of the legal action shall be paid to the prevailing party by the other party.

 

18.12     Execution of Counterparts.

 

This Agreement may be executed in any number of counterparts.  Each counterpart is an original but the counterparts together are one and the same agreement.

 

18.13  Time of the Essence.

 

Time is of the essence of this Agreement.  If the parties agree to vary a time requirement the time requirement so varied is of the essence of this Agreement.

 

18.14  Entire Agreement.

 

This Agreement, together with the Transaction Agreements, and any Unit Addendum executed in connection herewith, and all other transaction documents executed and delivered by the parties, constitute the entire agreement of the parties and supersede all prior negotiations, commitments, representations, warranties, and undertakings of the parties (if any) with respect to the subject matter of this Agreement and the Franchised Restaurants, whether written or oral.

 

45

 

18.15     Interpretation.

 

In this Agreement, unless otherwise specified (a) singular words include the plural and plural words include the singular; (b) words importing any gender include the other gender; (c) references to any law include all applicable rules, regulations and orders adopted or made thereunder and all statutes or other laws amending, consolidating or replacing the statute or law referred to; (d) references to any agreement or other document, including this Agreement, include all subsequent amendments, modifications or supplements to such agreement or document made in accordance with the terms hereof and thereof; (e) references to sections, clauses and Schedules are to the sections, clauses and Schedules of this Agreement; (f) numberings and headings of sections, clauses and Schedules are inserted as a matter of convenience and shall not affect the construction of this Agreement; (g) the term “including” as used herein means “including but not limited to”; and (h) all Schedules to this Agreement are incorporated herein by this reference thereto as if fully set forth herein, and all references herein to this Agreement shall be deemed to include all such incorporated Schedules.

 

References to a party shall include such party’s permitted successors and assigns.

 

The headings as to contents of particular clauses are inserted only for convenience and reference and are in no way to be construed as part of this Agreement or as a limitation on the scope of any of the terms or provisions of this Agreement.

 

A writing includes any mode of representing or reproducing words in tangible and permanently visible forms, and includes a facsimile transmission.

 

18.16 Changes in Laws.

 

The parties agree that if any Laws are changed or introduced or any relevant Authority publishes or issues any statement, rules, code or requirement which in the reasonable opinion of FRANCHISOR renders or is likely to render all or part of this Agreement unenforceable, illegal or void, the parties will immediately amend this Agreement and do all things (including executing documents) necessary or desirable to ensure that this Agreement is not unenforceable, illegal or void.

 

ACKNOWLEDGEMENT BY FRANCHISEE

 

Franchisee represents to FRANCHISOR that before signing this Agreement, they have:

 

1.                                      been advised by FRANCHISOR or its agents to take independent professional advice on all aspects of this Agreement and the Burger King System and they have taken such independent advice as they deem necessary and have independently satisfied themselves on all relevant matters, including, without limitation, the suitability of the Location for the conduct of the Franchised Restaurant and any estimates or projections relating to profit or return on investment provided by FRANCHISOR or its agents;

 

2.                                      carefully read and understood the provisions of this Agreement and any disclosure document provided to Franchisee (receipt of which Franchisee acknowledges);

 

3.                                      not relied on any statement, representation or warranty made by FRANCHISOR or its employees or agents other than as set out in this Agreement, the MFDA or any of the Transaction Agreements or in any other documents executed and delivered by the parties in connection with the transactions contemplated hereby and thereby or in any disclosure document provided to Franchisee; and

 

4.                                      understood that FRANCHISOR does not guarantee to provide a rate of return on investment or profit to Franchisee, and that the amount of any profit or return on investment depends on their own effort and investment.

 

46

 

Executed as an agreement:

 

SIGNED FOR AND ON BEHALF OF

BK ASIAPAC PTE. LTD.

 

	
By:
    	
/s/ Elias Diaz Sese
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Print Name:
    	
Elias   Diaz Sese
    	
 
    	
 
    
	
Title:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Attest:
    	
/s/ Amelia Lim
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Print Name:
    	
Amelia Lim
    	
 
    	
 
    

Title:

 

 

Executed by

BURGER KING (SHANGHAI) RESTAURANT COMPANY LTD.

in accordance with its

Constitution in the presence of:

 

	
/s/ Elias Diaz Sese
    	
 
    
	
Signature of Director
    	
 
    
	
 
    	
 
    
	
Elias Diaz Sese
    	
 
    
	
Name of Director   (print)
    	
 
    
	
 
    	
 
    
	
/s/ Paul Lacy-Smith
    	
 
    
	
Signature of   Secretary/Director
    	
 
    
	
 
    	
 
    
	
Paul Lacy-Smith
    	
 
    
	
Name of   Secretary/Director (print)
    	
 
    

 

Executed by

BK (BEIJING) RESTAURANT MANAGEMENT CO., LTD.

in accordance with its

Constitution in the presence of:

 

	
/s/ Elias Diaz Sese
    	
 
    
	
Signature of Director
    	
 
    
	
 
    	
 
    
	
Elias Diaz Sese
    	
 
    
	
Name of Director   (print)
    	
 
    
	
 
    	
 
    
	
/s/ Paul Lacy-Smith
    	
 
    
	
Signature of   Secretary/Director
    	
 
    
	
 
    	
 
    
	
Paul Lacy-Smith
    	
 
    
	
Name of   Secretary/Director (print)
    	
 
    

 

47

 

Executed by

BK FOODS (SHENZHEN) CO., LTD.

in accordance with its

Constitution in the presence of:

 

	
/s/ Elias Diaz Sese
    	
 
    
	
Signature of Director
    	
 
    
	
 
    	
 
    
	
Elias Diaz Sese
    	
 
    
	
Name of Director   (print)
    	
 
    
	
 
    	
 
    
	
/s/ Paul Lacy-Smith
    	
 
    
	
Signature of   Secretary/Director
    	
 
    
	
 
    	
 
    
	
Paul Lacy-Smith
    	
 
    
	
Name of   Secretary/Director (print)
    	
 
    

 

48

 

Schedule A

 

	
Franchisee:
    	
BURGER KING (SHANGHAI) RESTAURANT COMPANY   LTD., a company organized under the laws of the People’s Republic of China   and having a principal place of business at Room 704-708, Finance Square,   No. 333 Jiujiang Road, Shanghai 200001, PRC.
    
	
 
    	
 
    
	
 
    	
BK (BEIJING) RESTAURANT MANAGEMENT   CO., LTD., a company organized under the laws of the People’s Republic   of China and having a principal place of business at 5th Floor, Zhongfang   Building, No. 19 Jianguomennei Street, Beijing 100005, PRC.
    
	
 
    	
 
    
	
 
    	
BK FOODS (SHENZHEN)   CO., LTD., a company organized under the laws of the People’s   Republic of China and having a principal place of business at Room   1803, International Chamber of Commerce Tower, Fuhua 3rd Road, Shenzhen   518048, the PRC.
    
	
 
    	
 
    
	
Franchise Fee:
    	
Except as set forth in   clause 2.2, Franchisee shall pay FRANCHISOR or its designee for the opening   of each Franchised Restaurant and the issuance of a Unit Addendum (and for   any Renewal Unit Addendum) the amount of US $50,000 for a 20-year term (which   amount will be prorated if the term of the applicable Unit Addendum or   Renewal Unit Addendum is less than 20 years), subject to clauses   8(4) and 8(5) of the MFDA.
    
	
 
    	
 
    
	
Term:
    	
Up to 20 years, subject   to evidence of property control.
    
	
 
    	
 
    
	
Royalty Percentage:
    	
(a) Franchisee shall pay to FRANCHISOR   or its designee monthly Royalties equal to the following:
    
	
 
    	
 
    
	
 
    	
(This material has been omitted pursuant to a   request for confidential treatment, and such material has been filed   separately with the Commission.)
    
	
 
    	
 
    
	
 
    	
(b)  Franchisee shall pay to FRANCHISOR or its designee monthly   Royalties for each Existing PRC Company Restaurant as follows:  (This material has been   omitted pursuant to a request for confidential treatment and such material   has been filed separately with the Commission.).
    
	
 
    	
 
    
	
Advertising Percentage:
    	
5% of Gross Sales at   the Franchised Restaurant or the Existing PRC Company Restaurant, as   applicable.
    
	
 
    	
 
    
	
Reference Rate:
    	
the exchange rate announced by the People’s Bank of China as the   exchange rate between RMB and U.S. dollars.
    
	
 
    	
 
    
	
Managing Owner:
    	
 
    

 

49

 

SCHEDULE B

UNIT LICENSE ADDENDUM

 

This Unit License Addendum (“Unit Addendum”) is made and entered into as of                         , 20        (“Effective Date”), by and between BK ASIAPAC PTE. LTD. (“Franchisor”) and [BURGER KING (SHANGHAI) RESTAURANT COMPANY LTD, BK (BEIJING) RESTAURANT MANAGEMENT CO., LTD,  or  BK FOODS (SHENZHEN) CO., LTD.]  (“Franchisee”) with reference to the following facts:

 

A.                                    FRANCHISOR and Franchisee have entered into a Franchise Agreement (“Franchise Agreement”) pursuant to which FRANCHISOR granted Franchisee rights to operate Burger King Restaurants in the Territory.

 

B.                                    FRANCHISEE now desires to locate and operate one Restaurant, under the Franchise Agreement, at the Location listed below, and FRANCHISOR has agreed to grant Franchisee a license for such Restaurant.

 

NOW THEREFORE, the parties agree as follows:

 

1.                                      Incorporation by Reference.  It is agreed that, with the exception of those specific items set forth below, all of the terms, conditions and provisions of the Franchise Agreement (including all defined terms) are incorporated in this Unit Addendum as if fully and completely set forth in this Unit Addendum.  The incorporation of the applicable terms and provisions of the Franchise Agreement into this Unit Addendum will continue in effect so long as this Unit Addendum remains in effect, notwithstanding the termination or expiration of the Franchise Agreement.  Unless otherwise indicated, all capitalized terms used in this Unit Addendum have the meanings set forth in the Franchise Agreement.

 

2.                                      Grant.  Subject to the terms and conditions of the Franchise Agreement and Franchisee’s continuing faithful performance thereunder, Franchisor hereby grants to Franchisee the right and license (“Unit License”) to operate a Franchised Restaurant under the Burger King System and the Burger King Marks (“Unit”) to be located at:

 

 

 

(“Location”)

 

3.                                      Initial Term.  This Unit Addendum will commence on the Opening Date and continue until [INSERT EXPIRATION DATE] unless terminated earlier as provided in the Franchise Agreement.  Termination of this Unit Addendum will not, in and of itself, effect a termination of the Franchise Agreement.  Franchisee will have the right to obtain a Renewal Unit Addendum in accordance with the terms and conditions of clause 2.5 of the Franchise Agreement.

 

4.                                      Termination by Franchisee.  Franchisee, may, pursuant to Article 12 of the Commercial Franchise Administration Regulation promulgated by the State Council of China and effective as of May 1, 2007, terminate this Unit Addendum within SEVEN (7) DAYS after the signing date of this Unit Addendum (“Termination Period”).  Franchisee further acknowledges that the foregoing seven-day Termination Period has been agreed to by Franchisor and Franchisee based on their negotiations and reflects a truthful allocation of risks and liabilities after taking into account all of the relevant factors in entering into this Unit Addendum.  In the event that Franchisee elects to terminate this Unit Addendum pursuant to this clause 4:

 

(a)                                 Franchisee shall, within the foregoing Termination Period, send the original copy of a written notice to terminate this Unit Addendum (“Termination Notice”) to FRANCHISOR by hand-delivery or registered air mail, postage fully prepaid.  Franchisee shall clearly state its decision to terminate this Unit Addendum in such Termination Notice, which shall

 

50

 

be signed by the legal representative of Franchisee and affixed with the corporate seal of Franchisee.  This Unit Addendum may be terminated pursuant to this clause 4 only after FRANCHISOR actually receives the original copy of the Termination Notice that meets the foregoing requirements.  For the avoidance of doubt, if FRANCHISOR does not receive the Termination Notice that meets all of the foregoing requirements, this Unit Addendum shall not be terminated and shall continue in full force and effect and be binding upon FRANCHISOR and Franchisee.

 

(b)                                 If this Unit Addendum is terminated pursuant to this clause 4, Franchisee shall comply with all relevant responsibilities under the Franchise Agreement upon termination of this Unit Addendum.

 

5.             BK Number.  The Franchised Restaurant to be operated at the Location shall be referred to as “BK#     .”

 

6.             The Franchise Fee for the Franchised Restaurant shall be:           .

 

7.             The Operations Director for the Franchised Restaurant shall be                     .

 

8.             The Royalty Percentage for the Franchised Restaurant shall be                    .

 

9.             The Advertising Percentage for the Franchised Restaurant shall be                    .

 

IN WITNESS WHEREOF, the parties have executed this Unit License Addendum on the date first written above.

 

	
FRANCHISEE
    	
 
    	
BK ASIAPAC PTE. LTD.
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
By:
    	
 
    
	
Name:
    	
 
    	
 
    	
Name:
    	
 
    
	
Title:
    	
 
    	
 
    	
Title:
    	
 
    

 

51

 

Schedule C

 

List of Registered Marks

 

	
Trademark
    	
 
    	
Class
    	
 
    	
Registration
   Number
    
	
BIG KING
    	
 
    	
30 Int.
    	
 
    	
1273856
    
	
BK & Flaming Crescent Design
    	
 
    	
29 Int.
    	
 
    	
6970164
    
	
BK & Flaming Crescent Design
    	
 
    	
30 Int.
    	
 
    	
6970163
    
	
BK & Flaming Crescent Design
    	
 
    	
43 Int.
    	
 
    	
6970162
    
	
BK CHICK’N CRISP
    	
 
    	
30 Int.
    	
 
    	
7364418
    
	
BK CHICK’N CRISP
    	
 
    	
29 Int.
    	
 
    	
7364428
    
	
BK CHICK’N CRISP
    	
 
    	
43 Int.
    	
 
    	
7364791
    
	
BK FLAME DESIGN
    	
 
    	
43 Int.
    	
 
    	
7358362
    
	
BK FLAME DESIGN
    	
 
    	
32 Int.
    	
 
    	
7358363
    
	
BK FLAME DESIGN
    	
 
    	
31 Int.
    	
 
    	
7358364
    
	
BK FLAME DESIGN
    	
 
    	
30 Int.
    	
 
    	
7358365
    
	
BK FLAME DESIGN
    	
 
    	
29 Int.
    	
 
    	
7358366
    
	
BK FLAME DESIGN
    	
 
    	
28 Int.
    	
 
    	
7358367
    
	
BK FLAME DESIGN
    	
 
    	
25 Int.
    	
 
    	
7358368
    
	
BK FLAME DESIGN
    	
 
    	
16 Int.
    	
 
    	
7358369
    
	
BK WRAPPER
    	
 
    	
30 Int.
    	
 
    	
6856947
    
	
BK Wrapper in Chinese
    	
 
    	
30 Int.
    	
 
    	
6856944
    
	
BURGER KING
    	
 
    	
29 Int.
    	
 
    	
260169
    
	
BURGER KING
    	
 
    	
30 Int.
    	
 
    	
254320
    
	
BURGER KING
    	
 
    	
32 Int.
    	
 
    	
382684
    
	
BURGER KING & Crescent Design
    	
 
    	
42 Int.
    	
 
    	
1418784
    
	
BURGER KING & Crescent Design
    	
 
    	
43 Int.
    	
 
    	
5049571
    
	
BURGER KING & Crescent Design (Color)
    	
 
    	
28 Int.
    	
 
    	
4156785
    
	
BURGER KING & Crescent Design (Color)
    	
 
    	
29 Int.
    	
 
    	
4156784
    
	
BURGER KING & Crescent Design (Color)
    	
 
    	
30 Int.
    	
 
    	
4156632
    
	
BURGER KING & Crescent Design (Color)
    	
 
    	
31 Int.
    	
 
    	
4156631
    
	
BURGER KING & Crescent Design (Color)
    	
 
    	
32 Int.
    	
 
    	
4156630
    
	
BURGER KING & Crescent Design and   Simplified Chinese Characters (Horizontal) (Color)
    	
 
    	
28 Int.
    	
 
    	
4156791
    
	
BURGER KING & Crescent Design and   Simplified Chinese Characters (Horizontal) (Color)
    	
 
    	
29 Int.
    	
 
    	
4156790
    
	
BURGER KING & Crescent Design and   Simplified Chinese Characters (Horizontal) (Color)
    	
 
    	
30 Int.
    	
 
    	
4156789
    

 

52

 

	
BURGER KING & Crescent Design and   Simplified Chinese Characters (Horizontal) (Color)
    	
 
    	
31 Int.
    	
 
    	
4156788
    
	
BURGER KING & Crescent Design and   Simplified Chinese Characters (Horizontal) (Color)
    	
 
    	
32 Int.
    	
 
    	
4156787
    
	
BURGER KING & Crescent Design and   Simplified Chinese Characters (Horizontal) (Color)
    	
 
    	
43 Int.
    	
 
    	
4156786
    
	
BURGER KING & Crescent Design and   Simplified Chinese Characters (Vertical) (Color)
    	
 
    	
28 Int.
    	
 
    	
4156777
    
	
BURGER KING & Crescent Design and   Simplified Chinese Characters (Vertical) (Color)
    	
 
    	
29 Int.
    	
 
    	
4156776
    
	
BURGER KING & Crescent Design and   Simplified Chinese Characters (Vertical) (Color)
    	
 
    	
30 Int.
    	
 
    	
4156775
    
	
BURGER KING & Crescent Design and   Simplified Chinese Characters (Vertical) (Color)
    	
 
    	
31 Int.
    	
 
    	
4156774
    
	
BURGER KING & Crescent Design and   Simplified Chinese Characters (Vertical) (Color)
    	
 
    	
32 Int.
    	
 
    	
4156793
    
	
BURGER KING & Crescent Design and   Simplified Chinese Characters (Vertical) (Color)
    	
 
    	
43 Int.
    	
 
    	
4156792
    
	
BURGER KING & Hamburger Design
    	
 
    	
29 Int.
    	
 
    	
260168
    
	
BURGER KING & Hamburger Design
    	
 
    	
30 Int.
    	
 
    	
254319
    
	
BURGER KING & Hamburger Design
    	
 
    	
32 Int.
    	
 
    	
382685
    
	
BURGER KING & Hamburger Design
    	
 
    	
42 Int.
    	
 
    	
760294
    
	
BURGER KING(Han Bao Wang)(Simplified Chinese   Characters)(Color)
    	
 
    	
28 Int.
    	
 
    	
4156783
    
	
BURGER KING(Han Bao Wang)(Simplified Chinese   Characters)(Color)
    	
 
    	
30 Int.
    	
 
    	
4156781
    
	
BURGER KING(Han Bao Wang)(Simplified Chinese   Characters)(Color)
    	
 
    	
31 Int.
    	
 
    	
4156780
    
	
BURGER KING(Han Bao Wang)(Simplified Chinese   Characters)(Color)
    	
 
    	
32 Int.
    	
 
    	
4156779
    
	
BURGER KING(Han Bao Wang)(Simplified Chinese   Characters)(Color)
    	
 
    	
43 Int.
    	
 
    	
4156778
    
	
BURGER KING (Chinese Characters)
    	
 
    	
30 Int.
    	
 
    	
254293
    
	
BURGER KING (Chinese Characters)
    	
 
    	
32 Int.
    	
 
    	
382683
    
	
BURGER KING (Han Bao Bao Wang) (Chinese characters)
    	
 
    	
29 Int.
    	
 
    	
267381
    
	
BURGER KING (Simplified Chinese Characters)(Color)
    	
 
    	
29 Int.
    	
 
    	
4156782
    
	
BURGER KING (Stylized)
    	
 
    	
29 Int.
    	
 
    	
162334
    

 

53

 

	
BURGER KING (Stylized)
    	
 
    	
30 Int.
    	
 
    	
162335
    
	
BURGER KING (Stylized)
    	
 
    	
42 Int.
    	
 
    	
760293
    
	
BURGER KING (Stylized, Downward Slant)
    	
 
    	
32 Int.
    	
 
    	
380352
    
	
HOME OF THE WHOPPER
    	
 
    	
29 Int.
    	
 
    	
260170
    
	
HOME OF THE WHOPPER
    	
 
    	
30 Int.
    	
 
    	
254325
    
	
HOME OF THE WHOPPER
    	
 
    	
32 Int.
    	
 
    	
382682
    
	
WHOPPER
    	
 
    	
29 Int.
    	
 
    	
260171
    
	
WHOPPER
    	
 
    	
30 Int.
    	
 
    	
6410138
    
	
WHOPPER(Chinese Characters in color)
    	
 
    	
29 Int.
    	
 
    	
5802858
    
	
WO XUAN WO WEI(HAVE IT YOUR WAY in simplified   Chinese)
    	
 
    	
43 Int.
    	
 
    	
5062250
    
	
BUN & CRESCENT (IN COLOR)
    	
 
    	
43 Int.
    	
 
    	
7302757
    
	
HAVE IT YOUR WAY & WO XUAN WO WEI(CHINESE   CHARACTERS)
    	
 
    	
43 Int.
    	
 
    	
7388539
    
	
HAVE IT YOUR WAY & WO XUAN WO WEI(CHINESE   CHARACTERS)
    	
 
    	
29 Int.
    	
 
    	
8068625
    
	
HAVE IT YOUR WAY (WO XUAN WO WEI)(SIMPLIFIED CHINESE   CHARACTERS)
    	
 
    	
29 Int.
    	
 
    	
5926506
    
	
WHOPPER(HUANGBAO) (SIMPLIFIED CHINESE CHARACTERS)
    	
 
    	
30 Int.
    	
 
    	
5802779
    
	
WHOPPER(HUANGBAO) (SIMPLIFIED CHINESE CHARACTERS)
    	
 
    	
30 Int.
    	
 
    	
7416368
    
	
 
    	
 
    	
 
    	
 
    	
 
    
	
KING DELIGHT
    	
 
    	
16, 25, 28, 29, 30, 31, 32, 43 Int.
    	
 
    	
WO Reg No.
   867317*
    
	
BURGER KING & CRESCENT DESIGN
    	
 
    	
16 Int.
    	
 
    	
8814657
    

 

*This is an international registration with extension of protection to China

 

54

 

Schedule D

 

Required Insurance

 

1.                                     Comprehensive general liability insurance (including risks required to be covered by local law, and including products liability and broad form contractual liability):

·                  US$250,000 per Restaurant per occurrence for bodily injury;

·                  US$100,000 per Restaurant per occurrence for property;

·                  US$1,000,000 per Restaurant per occurrence (umbrella); and

·                  When the number of Restaurants is 50 or more, $50 million in umbrella coverage.

 

2.                                     Automotive liability insurance, including bodily injury and property damage for all owned, non-owned and hired vehicles: no minimum requirement.

 

3.                                     All risks property insurance for the full replacement value of each Franchised Restaurants which is sufficient to satisfy any co-insurance clause contained in the policy.

 

4.                                     Business interruption insurance to insure Franchisee for losses incurred as a result of a business interruption, such as fire, storm or other natural or man-made disaster, which causes the Franchised Restaurant to be closed for a period of time.  Such business interruption insurance policy will, at a minimum, provide a level of coverage to Franchisee sufficient for Franchisee to be able to pay to FRANCHISOR, on a monthly basis, the estimated Royalties and Advertising Contributions that Franchisee would have been obligated to pay had the business interruption not occurred.

 

The foregoing amount shall be calculated by taking the average monthly Gross Sales of the Franchised Restaurant over the 12 months immediately preceding the date of the business interruption (or in the case where the Franchised Restaurant has not been open for 12 months, Franchisee’s estimate of the average monthly Gross Sales) and multiplying such number first by the Royalty Percentage and then by the Advertising Percentage, and adding the two results together.

 

5.                                     Workers compensation insurance and employer’s liability insurance, as well as insurance covering disability benefits: as required by law.

 

6.                                     Any other insurance policies FRANCHISOR may reasonably require from time to time.

 

55Exhibit 10.6

 

Execution Version

 

PANGAEA FOODS, SPC FOR THE ACCOUNT OF

PANGAEA FOODS (CHINA), SP 

 

BK ASIAPAC, PTE. LTD.

 

AND

 

THE OTHER PARTIES SIGNATORY HERETO

 

 

JOINT VENTURE AND 

INVESTMENT AGREEMENT

 

relating to the Burger King business in China

 

 

May 11, 2012

 

 

 

CONTENTS

 

	
Clause
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
1.
    	
JVC AND EQUITY   CONTRIBUTIONS
    	
1
    
	
2.
    	
INVESTOR CASH   CONTRIBUTIONS
    	
3
    
	
3.
    	
CONDITIONS TO CLOSING
    	
5
    
	
4.
    	
CLOSING
    	
7
    
	
5.
    	
INSURANCE
    	
7
    
	
6.
    	
REPRESENTATIONS AND   WARRANTIES
    	
8
    
	
7.
    	
CONDUCT OF BUSINESS   BETWEEN SIGNING AND CLOSING
    	
14
    
	
8.
    	
GUARANTEES
    	
15
    
	
9.
    	
GUARANTORS’ OBLIGATIONS
    	
16
    
	
10.
    	
BUSINESS OF THE JVC   GROUP
    	
19
    
	
11.
    	
SHAREHOLDERS, DIRECTORS   AND MANAGEMENT
    	
20
    
	
12.
    	
RESERVED MATTERS
    	
23
    
	
13.
    	
ANTI-CORRUPTION LAWS   AND COMPLIANCE
    	
25
    
	
14.
    	
FINANCIAL MATTERS
    	
27
    
	
15.
    	
CHANGE OF CONTROL;   LISTING OF THE INVESTOR
    	
28
    
	
16.
    	
WARRANT; OPTION TO   PURCHASE
    	
28
    
	
17.
    	
LISTING
    	
29
    
	
18.
    	
CONFIDENTIALITY
    	
30
    
	
19.
    	
TAX MATTERS
    	
32
    
	
20.
    	
NON-COMPETITION;   OUTSIDE ACTIVITIES
    	
33
    
	
21.
    	
REGULATORY MATTERS
    	
34
    
	
22.
    	
TRANSFERS OF SHARES
    	
34
    
	
23.
    	
RIGHT OF FIRST REFUSAL
    	
37
    
	
24.
    	
TAG ALONG RIGHT
    	
39
    
	
25.
    	
DEED OF ADHERENCE
    	
40
    
	
26.
    	
TERMINATION
    	
41
    
	
27.
    	
WINDING UP
    	
41
    
	
28.
    	
FURTHER ASSURANCES
    	
42
    
	
29.
    	
CLAIMS BY JVC AGAINST   SHAREHOLDERS
    	
42
    
	
30.
    	
INDEPENDENCE OF   OBLIGATIONS
    	
43
    
	
31.
    	
NON-ASSIGNMENT
    	
43
    
	
32.
    	
WAIVER OF RIGHTS
    	
43
    
	
33.
    	
AMENDMENTS
    	
43
    
	
34.
    	
INVALIDITY
    	
43
    
	
35.
    	
NO PARTNERSHIP OR   AGENCY
    	
43
    
	
36.
    	
ANNOUNCEMENTS
    	
44
    
	
37.
    	
COSTS
    	
44
    
	
38.
    	
WHOLE AGREEMENT
    	
44
    

 

2

 

	
39.
    	
CONFLICT WITH ARTICLES
    	
45
    
	
40.
    	
NOTICES
    	
45
    
	
41.
    	
SETTLEMENT OF DISPUTES   AND ARBITRATION
    	
45
    
	
42.
    	
COUNTERPARTS
    	
46
    
	
43.
    	
NO THIRD PARTY   ENFORCEMENT RIGHTS
    	
46
    
	
44.
    	
GOVERNING LAW
    	
46
    
	
SCHEDULE   1 - A BK CHINA BUSINESS
    	
45
    
	
SCHEDULE   1 — B WARRANTIES ON BK CHINA BUSINESS
    	
48
    
	
SCHEDULE   2 MASTER FRANCHISE AND DEVELOPMENT AGREEMENT
    	
55
    
	
SCHEDULE   3 INITIAL DIRECTORS
    	
56
    
	
SCHEDULE   4 DEVELOPMENT AND FRANCHISE AGREEMENTS
    	
57
    
	
SCHEDULE   5 CLOSING ARRANGEMENTS
    	
60
    
	
SCHEDULE   6 JVC SHAREHOLDINGS
    	
63
    
	
SCHEDULE   7 DEED OF ADHERENCE
    	
64
    
	
SCHEDULE   8 NOTICE ADDRESSES
    	
68
    
	
SCHEDULE   9 TRANSFER TERMS
    	
69
    
	
SCHEDULE   10 FAIR PRICE VALUATION
    	
71
    
	
SCHEDULE   11 DEFINITIONS AND INTERPRETATION
    	
73
    

 

3

 

AGREEMENT

 

dated May 11, 2012

 

PARTIES:

 

1.                                      Pangaea Foods, SPC for the account of Pangaea Foods (China), SP (the Investor);

 

2.                                      BK AsiaPac, Pte. Ltd (BKAP);

 

3.                                      Pangaea Two, LP (PT) and Pangaea Two Parallel, LP (PTP and together with PT, Cartesian); and

 

4.                                      KRD Kurdoğlu Gıda Sanayi ve Ticaret A.Ş (KRD Kurdoğlu, and together with Cartesian, the Guarantors). 

 

(collectively the Parties and each a Party).

 

WHEREAS:

 

(A)                               BKAP is the exclusive licensee of the Burger King Marks and the Burger King System for the Asia Pacific Region and through certain companies incorporated in Hong Kong and the PRC as set out in Part A of Schedule 1-A, BKAP currently operates, directly and through franchisees, the Burger King Restaurants identified on Part B of Schedule 1-A throughout the PRC.

 

(B)                               The Parties now intend to form a joint venture to which, on the terms and conditions of this Agreement, BKAP contributes the existing BK China Business (including its equity stake in BK Guangzhou) in and the Investor contributes an aggregate amount of US$150 million in cash, payable in three installments, to fund the further growth and expansion of the Burger King Restaurants in the PRC.

 

(C)                               Now, therefore, the Parties are entering into this Agreement in order to set out the terms and conditions governing their relationship as joint venture partners as follows:

 

IT IS AGREED:

 

1.                                      JVC AND EQUITY CONTRIBUTIONS

 

1.1                               The Parties agree to establish JVC as their joint venture vehicle in accordance with the provisions of this Agreement.

 

1.2                               As soon as practicable after the date of this Agreement and in any event before Closing, the Investor will establish JVC as a company duly incorporated under the laws of the Cayman Islands. JVC shall not trade or carry on any business in any manner before Closing, except the formation of a 100% owned subsidiary of JVC incorporated in the Cayman Islands.

 

 

1.3                               The Investor shall procure that, on or prior to Closing, the JVC shall enter into the JVC Deed of Adherence in the form set out in Part A of Schedule 7.

 

1.4                               As soon as practicable after the date hereof and in any event before Closing, BKAP shall contribute and transfer to HK Development the entire issued share capital of BKHK and any outstanding shareholder loan owed by BKHK against the issue of such number of HK Development Shares to BKAP as shall be agreed between BKAP and HK Development (the BKHK Transfer). Pending the stamping of the transfer documentation in respect of the BKHK Transfer by the Stamp Office of Hong Kong and the updating of BKHK’s register of members to give effect to the BKHK Transfer, BKAP shall exercise all rights in connection with the BKHK Shares as HK Development (or, after Closing, JVC) may direct.

 

1.5                               At Closing, (i) BKAP shall contribute and transfer to JVC (or, if so directed by JVC, a 100% owned subsidiary of JVC)  the entire issued share capital of HK Development and any outstanding shareholder loan owed by HK Development on Closing (the HK Development Transfer), and (ii) in consideration for the contribution of such HK Development Shares, JVC shall issue to BKAP, with effect from Closing, credited as fully paid, 825 Ordinary Shares (the BKAP Consideration Shares), in each case pursuant to Part A of Schedule 5. After Closing and until the stamping of the transfer documentation in respect of the HK Development Transfer by the Stamp Office of Hong Kong and the updating of HK Development’s register of members to give effect to the HK Development Transfer, BKAP shall exercise all rights in connection with the HK Development Shares as JVC may direct.

 

1.6                               BKAP represents and warrants to the Investor that all of the Mainstreets Equity Interests have been acquired by HK Development or its Affiliate prior to the date hereof and BKAP has contributed to HK Development such cash amounts as were required to pay the consideration payable by HK Development or its Affiliates to the sellers or any other party under the ETAs on Completion of such Equity Transfer and any and all stamp duties, costs and expenses, including attorney fees, that are paid or payable by HK Development in connection with the negotiation, execution and Completion of such Equity Transfers (and BKAP hereby agrees to indemnify and hold the JVC and its Subsidiaries harmless against any and all such amounts to the extent such representation is not true and correct). HK Development is under no obligation to repay any amounts to BKAP in respect of the acquisition of the Mainstreets Equity Interests.

 

1.7                               Schedule 1 to the Master Franchise and Development Agreement sets out the development plan of new Burger King Restaurants to be established in the Territory (the Development Schedule).

 

1.8                               At Closing, pursuant to Part A of Schedule 5:

 

(a)                                 BKAP and BK Shanghai shall enter into a Master Franchise and Development Agreement in the form attached hereto as Schedule 2; and

 

(b)                                 BKAP, BK Shanghai, BK Beijing and BK Shenzhen shall enter into the PRC Company Franchise Agreement in the form attached as Exhibit G to the Master Franchise and Development Agreement.

 

1.9                               Prior to the Closing Date and to the extent permitted under applicable merger control Laws, each of the Parties (i) shall execute and deliver, or shall cause to be executed and delivered, such documents and other papers and shall take, or shall cause to be taken, such further actions as may be reasonably required to carry out the provisions of this Agreement and give effect to the Transaction, (ii) shall refrain from willfully taking any actions that would reasonably be expected to impair, delay or impede the Closing Date and (iii) without

 

2

 

limiting the foregoing, shall use its commercially reasonable efforts to cause all of the conditions to the obligations of the other party to consummate the Transaction to be met on or prior to the Longstop Date.

 

1.10                        BKAP shall ensure that the agreements set out in Schedule 4, to which the PRC Joint Venture to which such Equity Transfer relates is a party, are terminated without cost or further liability to the Investor, JVC or its Subsidiaries.

 

1.11                        Each Party agrees to waive any specific right it may have to specific performance of this clause 1 until all of the Closing Conditions have been satisfied or waived in accordance with this Agreement (other than any condition which by its nature is intended to be satisfied at Closing).

 

2.                                      INVESTOR CASH CONTRIBUTIONS

 

2.1                               At the Closing, pursuant to Part A of Schedule 5, the Investor shall subscribe unconditionally for and the JVC shall issue and allot to the Investor, an aggregate of 2,175 Ordinary Shares (of which 1,450 shall be Redeemable Shares) (the Investor Shares) with effect from Closing, credited as fully paid, against payment by the Investor to JVC of the total issue price of (This material has been omitted pursuant to a request for confidential treatment, and such material has been filed separately with the Commission.) (the First Investor Cash Contribution).

 

2.2                               Subject to the terms and conditions hereof, the Investor shall make additional cash contributions to JVC on the dates and in the amounts set forth in Part B of Schedule 5, (each, a Subsequent Investor Cash Contribution); provided, however, that all or any portion of such contribution may be settled as provided in clause 6.6. No additional Shares shall be issued to the Investor as a result of a Subsequent Investor Cash Contribution and such Subsequent Investor Cash Contributions shall be treated as part of the payment of consideration to subscribe for the Investor Shares and shall be allocated to the JVC’s share premium account.

 

2.3                               If the Investor fails to fund any Investor Cash Contribution when required hereunder (after taking into account any amounts credited toward such Investor Cash Contribution by operation of clause 6.6) and such failure is not remedied by the Investor within five (5) Business Days after the due date of such Investor Cash Contribution (such failure to fund, a Defaulted Investor Cash Contribution), then:

 

(a)                                 BKAP (at its sole election and without requiring the consent of the JVC or any other Party) may issue a notice to the Guarantors demanding that the Guarantors fund the amount of such Investor Cash Contribution pursuant to clause 9 no later than thirty (30) days after the date of such notice (the Funding Deadline);

 

(b)                                 at BKAP’s sole election (without requiring the consent of the JVC or any other Party) (i)           at any time after the 5th Business Day following the due date of such Investor Cash Contribution, the Investor’s voting rights of any Redeemable Shares under this Agreement shall be suspended, and (ii) at any time after the Funding Deadline, BKAP shall have the right to remove and replace up to two (2) of the five (5) Investor- appointed directors then serving on the Board, in each case, until the funding of the applicable Investor Cash Contribution by the Investor or Guarantors (or until such time as BKAP shall otherwise direct), at which point such voting rights shall immediately be restored, such right to remove and replace Investor-appointed directors shall immediately terminate, and any Investor-appointed directors who had been removed by BKAP pursuant to such rights shall immediately be reinstated (or, if

 

3

 

Investor so directs, other persons shall immediately be appointed) as members of the Board in place of any interim directors appointed by BKAP;

 

(c)                                  if neither the Investor nor the Guarantors fund such Investor Cash Contribution on or prior to the Funding Deadline, BKAP may (at its sole election and without requiring the consent of the JVC or any other Party) choose either of the following remedies:

 

(i)                  promptly seek specific performance of (x) the Investor’s obligation to fund such Investor Cash Contribution in accordance with this clause 2 and (y) the Guarantors’ obligations to fund such Investor Cash Contribution to the JVC in accordance with, and solely to the extent provided in, clause 9; or

 

(ii)               elect any or all of the following remedies:

 

(A)                               BKAP shall be entitled to immediately terminate the Master Franchise and Development Agreement (following which case clause 2.4 shall immediately apply); and/or

 

(B)                               725 Redeemable Shares (in the event that the Defaulted Investor Cash Contribution is the Second Investor Cash Contribution) or 725 Redeemable Shares (in the event that the Defaulted Investor Cash Contribution is the Third Investor Cash Contribution) shall be redeemed by the JVC for nominal consideration equal to their par value (in each case in accordance with the Memorandum and Articles), until the funding of the applicable Investor Cash Contribution by the Investor or Guarantors (or until such time as BKAP shall otherwise direct), at which point the JVC shall issue to the Investor 725 Ordinary Shares for nominal consideration equal to their par value; and/or

 

(C)                               BKAP shall be entitled to purchase all (but not less than all) of the Ordinary Shares held by the Investor at that time at an amount equal to the Fair Price of such Ordinary Shares (Buy-Out Right). After determination of the Fair Price in accordance with Schedule 10, BKAP shall provide notice to the Investor that it intends to exercise its Buy-Out Right. The Investor shall be bound to sell and BKAP shall be bound to buy such Ordinary Shares then held by the Investor (i) at the Fair Price and (ii) within 30 days of the date on which the Valuation Certificate is delivered in accordance with Schedule 10.

 

(d)                                 In the event BKAP elects to seek specific performance against the Investor and/or the Guarantors pursuant to clause 2.3(c)(i), BKAP shall have the right at any time and at its sole election to cease doing so, upon which (subject to the relevant Defaulted Investor Cash Contribution not having been funded by the Investor or the Guarantors by such time) BKAP shall have the right to any or all of the remedies set out in clause 2.3(c)(ii).

 

(e)                                  For the avoidance of doubt, the remedies set forth in clause 2.3 above shall be the sole and exclusive remedies of BKAP and the JVC, whether arising at law or equity, in the case of the Investor’s failure to fund any Investor Cash Contribution due and payable hereunder, and neither the Investor nor any Guarantor shall have any further liability hereunder with respect to any such failure, save in respect of any fees, costs and expenses reasonably incurred by BKAP or the JVC in enforcing their respective rights under this clause 2.

 

4

 

2.4                               Notwithstanding anything to the contrary contained herein, the obligations of (i) the Investor under clause 2.2 to fund any Subsequent Investor Cash Contribution and (ii) the Guarantors to guarantee any such Subsequent Investor Cash Contribution shall terminate (A) upon the termination of either the Master Franchise and Development Agreement (including pursuant to clause 2.3) or the Development Rights or (B) pursuant to clause 13.7.

 

2.5                               It is the intention of the Parties that any redemption of Redeemable Shares pursuant to this clause 2 is an elective contractual payment and not a payment for breach, provided that in the event that any redemption of Redeemable Shares pursuant to this clause 2, contrary to such stipulation, is treated as a payment for breach it shall be treated as liquidated damages and a genuine pre-estimate of loss.

 

2.6                               Any payment to the JVC pursuant to this clause 2 shall be made in immediately available funds for the account of the JVC to an account as notified by JVC to the Investor in writing no later than five (5) Business Days prior to the date required to be paid (the JVC Account). Any Shares to be allotted and issued in accordance with this clause 2, shall be allotted and issued only after receipt of the relevant issue price by the JVC.

 

2.7                               Each Party agrees to waive any specific right it may have to specific performance of this clause 2 until all of the Closing Conditions have been satisfied or waived in accordance with this Agreement (other than any condition which by its nature is intended to be satisfied at Closing).

 

2.8                               The JVC hereby agrees that it shall not, and the Investor agrees to exercise all voting rights and powers (direct or indirect) available to it in relation to the JVC to ensure that the JVC shall not, waive any rights the JVC may have under this clause 2.

 

3.                                      CONDITIONS TO CLOSING

 

3.1                               Each Party’s obligations at Closing are conditional on the following conditions precedent being fulfilled (unless waived by each Party in writing):

 

(a)                                 in so far as it is legally required that the Transaction receives approval or that waiting periods are observed before Closing pursuant to the merger control, antitrust or competition laws in China or any other jurisdictions, such approval having been obtained or waiting periods having been observed and the Transaction therefore having been permitted to proceed; and

 

(b)                                 no law, rule, decree, ruling or other order shall having become effective prohibiting or making illegal the transactions contemplated hereunder or restricting the ability of the Parties to exercise their respective rights hereunder in any material respect.

 

3.2                               BKAP’s obligations at Closing are conditional on the following conditions precedent being fulfilled (unless waived by BKAP in writing):

 

(a)                                 JVC shall have been duly established and its Memorandum and Articles shall be in a form consistent with this Agreement and otherwise reasonably satisfactory to BKAP and BKAP shall have received reasonably satisfactory evidence thereof;

 

(b)                                 the representations and warranties of the Investor set forth in clauses 6.2 (as such representations and warranties are qualified by clause 6.5(e)) shall be true and correct in all material respects as of Closing as certified by the Investor;

 

5

 

(c)                                  the representations and warranties of KRD Kurdoğlu and Cartesian set forth in clauses 6.3 and 6.4, respectively, (as such representations and warranties are qualified by clause 6.5(e)) shall be true and correct in all material respects as of Closing as certified by each of KRD Kurdoğlu and Cartesian; and

 

(d)                                 receipt by BKAP of the results of a background check for each of the shareholders of KRD Kurdoğlu and the members of Cartesian, and all principals thereof, which background check does not reveal for either Cartesian or the KRD Kurdoğlu shareholders (i) any prior or current criminal activity which would, or would reasonably be expected to, rise to the level of a felony offense; (ii) any evidence of significant moral turpitude or reputational issues; or (iii) that any of such parties or any of their principals have voluntarily disclosed or admitted to, or have otherwise been found by a court of competent jurisdiction to have violated, attempted to violate, aided or abetted another party to violate, or conspired to violate, any of the Anti- Corruption Laws;

 

(e)                                  satisfactory completion of BKAP’s due diligence review of KRD Kurdoğlu and the entities comprising Ecosystem such that BKAP shall be satisfied, in its sole reasonable discretion, that (i) KRD Kurdoğlu holds shares representing not less than (This material has been omitted pursuant to a request for confidential treatment, and such material has been filed separately with the Commission.) of the shares of each of the entities comprising Ecosystem having a value of not less than (This material has been omitted pursuant to a request for confidential treatment, and such material has been filed separately with the Commission.)  and (ii) KRD Kurdoğlu has no liabilities other than its obligations under clause 9 of this Agreement; and

 

(f)                                   the Investor shall have performed in all material respects all of its obligations required to be performed by it hereunder prior to Closing.

 

3.3                               The Investor’s obligations at Closing are conditional on the following conditions precedent being fulfilled (unless waived by the Investor in writing):

 

(a)                                 the representations and warranties of BKAP set forth in clause 6.1 (as such representations and warranties are qualified by clause 6.5(e)) shall be true and correct in all material respects as of Closing as certified by BKAP; and

 

(b)                                 BKAP shall have performed in all material respects all of its obligations required to be performed by it hereunder prior to Closing.

 

3.4                               For the avoidance of doubt, neither BKAP on the one hand nor the Investor on the other hand shall be required to fulfill any of its or their respective obligations at Closing in the event any the conditions precedent described in clauses 3.3 or 3.2, respectively, is not satisfied or waived by the relevant Party or Parties.

 

3.5                               Where satisfaction of any of the conditions precedent described in clauses 3.1, 3.2  and 3.3 (the Closing Conditions) requires a Party’s active involvement or assistance, or where a Party is capable of preventing its satisfaction, that Party shall use reasonable efforts to procure that the Closing Conditions are satisfied as soon as reasonably practicable. The Parties shall use all reasonable efforts to cooperate with each other, and provide each other with all documents, information and assistance which can be reasonably expected of the Parties to provide, to satisfy the Closing Conditions. Nothing shall, however, require the Parties to accept or propose any material conditions of, or material obligations to, competent competition authorities if merger control approval or clearance would only be granted by such competition authority under such conditions or obligations.

 

3.6                               The Investor shall pay (and at the Closing JVC shall reimburse the Investor for) all fees (i) charged by the Authorities for the permits required under any applicable anti-trust or

 

6

 

merger control or other Laws for the consummation of the Transaction and (ii) incurred by the Parties in relation to the incorporation and establishment of JVC. For the avoidance of doubt, the foregoing shall not apply in respect of any stamp duties, fees, costs or expenses charged by the Authorities or otherwise arising with respect to the BKHK Transfer, the HK Development Transfer and the Equity Transfers of the Mainstreets Equity Interests, all of which shall be borne by BKAP.

 

3.7                               Each Party shall keep the other Party reasonably informed and updated on their respective compliance with the Closing Conditions.

 

3.8                               BKAP and the Investor shall use reasonable best efforts to agree the Memorandum and Articles in a form consistent with this Agreement and otherwise reasonably satisfactory to each of BKAP and the Investor on or prior to the Closing Date.

 

3.9                               KRD Kurdoğlu shall (and shall cause its respective Affiliates to) promptly deliver to BKAP and its advisers copies of corporate records, stock ledgers, share certificates, transfer agreements, financial statements, governmental filings and all other documentation necessary for BKAP to complete its due diligence review of KRD Kurdoğlu and Ecosystem.

 

4.                                      CLOSING

 

4.1                               Closing shall take place at the offices of Freshfields Bruckhaus Deringer LLP in Shanghai (or such other venue as the Parties may agree) on ten (10) Business Days’ notice given by BKAP to the other Party as soon as practicable after the fulfillment (or waiver) of the Closing Conditions set out in clauses 3.1 to 3.3.

 

4.2                               At Closing, each Party shall deliver or perform (or ensure that there is delivered or performed) all those documents, items and actions respectively listed in relation to that party or any of its Affiliates (as the case may be) in Part A of Schedule 5.

 

4.3                               Part A of Schedule 6 sets out the shareholdings of each Party in the JVC at Closing.

 

4.4                               If Closing has not occurred on or before 31 October 2012 (the Longstop Date), each of BKAP and the Investor is entitled to terminate this Agreement by giving written notice to the other Party, unless each Party expressly agrees otherwise in writing, provided that if Closing does not take place on or prior to the Longstop Date due to the failure of a Closing Condition to be satisfied as a result of a breach by a Party of its obligations under this Agreement, the breaching Party shall not have the right to rescind this Agreement. Any termination as a result of a breach by a Party shall be without prejudice to a Party’s right to seek available remedies at law for any breach of the Agreement by another Party, including enforcing its right to demand specific performance or indemnification. The Surviving Provisions shall survive any termination, without limit in time.

 

5.                                      INSURANCE

 

5.1 The Parties agree to cooperate in good faith to ensure that such insurance policies are arranged so that, immediately following Closing, the JVC Group has a level of insurance coverage that complies with the requirements set forth in the Master Franchise and Development Agreement and the PRC Company Franchise Agreement.

 

7

 

6.                                      REPRESENTATIONS AND WARRANTIES

 

6.1                               The BKAP Warranties

 

BKAP hereby represents and warrants to the Investor that each of the following warranties is true and correct on the date hereof and, unless specified otherwise in relation to a specific warranty, on the Closing Date:

 

(a)                                 Effectiveness and Enforceability. BKAP is validly formed, in existence and duly registered under the laws of its jurisdiction of formation and has the legal right and full power and authority to enter into and perform this Agreement. This Agreement has been duly entered into by BKAP and constitutes valid and binding obligation of BKAP, enforceable against it as set forth herein. This Agreement does not conflict with, or result in any violation or breach of, (i) any provision of the charter, by-laws, or other organisational document of BKAP or (ii) any contract or agreement to which BKAP is a party.

 

(b)                                 Authorizations. Except for any Governmental Approval, no consent, approval or authorization from any Authority is necessary or shall be obtained for the signature and performance by it of this Agreement, except as would not, or would not reasonably be expected to, individually or in the aggregate, materially impair or delay the ability of it to consummate the Transaction or to perform its obligations under this Agreement.

 

(c)                                  No Conflict. No consent, approval, filing or authorisation from any Authority is necessary or shall be obtained for the signature and performance by BKAP of this Agreement, except as would not, or would not reasonably be expected to, individually or in the aggregate, materially impair or delay the ability of it to consummate the Transaction or to perform its obligations under this Agreement. The execution and delivery of this Agreement by BKAP does not, and the consummation by BKAP of the transactions contemplated by this Agreement will not, (i) conflict with, or result in any violation or breach of, any provision of charter, by-laws, or other similar organisational document of BKAP or any BKAP Subsidiary or (ii) conflict with, or result in any violation or breach of, or constitute (with or without notice or lapse of time, or both) a default (or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any material benefit) under, require a consent or waiver under, require the payment of a penalty under or result in the imposition of any material mortgage, security interest, pledge, lien, charge or encumbrance on BKAP’s or any of the BKAP Subsidiary’s assets under, any of the terms, conditions or provisions of any material lease, licence, contract or other agreement, instrument or obligation to which BKAP is a party or by which it or any of its properties or assets may be bound.

 

(d)                                 BK China Business. BKAP hereby represents and warrants to the Investor that each of the warranties as set forth in Schedule 1-B is true and correct in all material respects on the date hereof and, unless specified otherwise in relation to a specific warranty, on the Closing Date.

 

For purposes of this clause 6.1, Knowledge of BKAP means actual knowledge Sarah Feng, Daniel Schwartz, and Elias Diaz Sese.

 

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6.2                               The Investor Warranties

 

The Investor hereby represents and warrants to BKAP that each of the following warranties is true and correct on the date hereof and, unless specified otherwise in relation to a specific warranty, on the Closing Date:

 

(a)                                 Effectiveness and Enforceability. The Investor is validly formed, in existence and duly registered under the laws of its jurisdiction of formation and has the legal right and full power and authority to enter into and perform this Agreement. This Agreement has been duly entered into by the Investor and constitutes valid and binding obligation of the Investor, enforceable against it as set forth herein. This Agreement does not conflict with, or result in any violation or breach of, (i) any provision of the charter, by-laws, or other organisational document of the Investor or (i)                   any contract or agreement to which the Investor is a party.

 

(b)                                 Financial Capacity. The Investor has, or will have as of the relevant times, sufficient committed capital to make the First Investor Cash Contribution and each Subsequent Investor Cash Contribution as set forth herein. As of the date of this Agreement, there are no side letters or other agreements, contracts or arrangements related to the funding of the First Investor Cash Contribution or any Subsequent Investor Cash Contribution that would materially and adversely impact the ability of the Investor to fund the First Investor Cash Contribution or any Subsequent Investor Cash Contribution and otherwise satisfy the Investor’s material obligations hereunder. As of the date of this Agreement, no event has occurred which, with or without notice, lapse of time or both, would reasonably be likely to result in the First Investor Cash Contribution or any Subsequent Investor Cash Contribution to be unavailable. As of the date of this Agreement, the Investor has no reason to believe that it will be unable to timely pay the First Investor Cash Contribution or any Subsequent Investor Cash Contribution.

 

(c)                                  Authorisations and Non-Conflict. No consent, approval, filing or authorisation from any Authority is necessary or shall be obtained for the signature and performance by the Investor of this Agreement, except as would not, or would not reasonably be expected to, individually or in the aggregate, materially impair or delay the ability of it to consummate the Transaction or to perform its obligations under this Agreement. The execution and delivery of this Agreement by the Investor does not, and the consummation by the Investor of the transactions contemplated by this Agreement will not, (i) conflict with, or result in any violation or breach of, any provision of charter, by-laws, or other organisational document of the Investor or any Subsidiary of the Investor or (ii) conflict with, or result in any violation or breach of,  or constitute (with or without notice or lapse of time, or both) a default (or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any material benefit) under, require a consent or waiver under, require the payment of a penalty under or result in the imposition of any material mortgage, security interest, pledge, lien, charge or encumbrance on the Investor’s or any of its Subsidiary’s assets under, any of the terms, conditions or provisions of any material lease, licence, contract or other agreement, instrument or obligation to which the Investor is a party or by which it or any of its properties or assets may be bound.

 

(d)                                 Absence of Certain Business Practices; Anti-bribery. Neither the Investor nor any of its Subsidiaries, nor any of their respective directors, officers, agents or employees or any other person or entity acting for or on the behalf of them has, (i) directly or indirectly, used or offered to use any corporate funds for unlawful contributions, unlawful gifts, unlawful entertainment or to make any other unlawful payment relating to political activity;  made any unlawful payment to a foreign or domestic

 

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government official (including employees of wholly state-owned or partially state- owned entities) or to foreign or domestic political parties or campaign; violated any Anti-Corruption Laws; made any unlawful bribe, unlawful rebate, unlawful payoff, unlawful influence payment, unlawful kickback or other similar unlawful payment; or established or maintained any unlawful or unrecorded funds; or (ii) agreed to give any unlawful gift or similar unlawful benefit to any customer, supplier, or other person or entity. The Investor agrees that it will notify BKAP in writing immediately upon the occurrence of any event which would render the warranties of this clause 6.2(d) incorrect.

 

(e)                                  No Governmental Ownership. The Investor has disclosed to BKAP that to its knowledge after due inquiry, none of its general partners that have direct controlling interests or decision-making powers in relation to the business operations of the Investor or in the contractual relationship established by this Agreement is a foreign official (as defined in the FCPA).

 

(f)                                   Related Party Transactions. Other than this Agreement and the transactions and other agreements contemplated hereby, there are no existing contracts, arrangements, guarantees rendered or understandings between, on one side, the Investor and, on the other side, any Related Party of the Investor that would, or would be reasonably likely to, materially and adversely affect the transactions and other agreements contemplated by this Agreement.

 

(g)                                  Litigation. There are no pending Claims or, to the best knowledge of the Investor, threatened Claims of civil, tax, labor, environmental, professional regulatory or any other nature pending against or, to the best knowledge of the Investor, any investigation, to the extent any such actions involve or would, or would be reasonably likely to, materially and adversely affect the ability of the Investor to consummate the transactions contemplated by this Agreement.

 

(h)                                 Anti-Money Laundering. To the Investor’s knowledge after due inquiry, it is currently in compliance with all applicable anti-money laundering laws applicable to it.

 

6.3                               KRD Kurdoğlu Warranties

 

KRD Kurdoğlu hereby represents and warrants to BKAP that each of the following warranties is true and correct on the date hereof and, unless specified otherwise in relation to a specific warranty, on the Closing Date:

 

(a)                                 Effectiveness and Enforceability. KRD Kurdoğlu is validly formed, in existence and duly registered under the laws of its jurisdiction of formation and has the legal right and full power and authority to enter into and perform this Agreement. This Agreement has been duly entered into by KRD Kurdoğlu and constitutes a valid and binding obligation of KRD Kurdoğlu, enforceable against it as set forth herein. This Agreement does not conflict with, or result in any violation or breach of, (i) any provision of the charter, by-laws, or other organisational document of KRD Kurdoğlu or (ii) any contract or agreement to which KRD Kurdoğlu is a party.

 

(b)                                 Absence of Certain Business Practices; Anti-bribery. Neither KRD Kurdoğlu nor any of its shareholders, directors, officers, agents, employees or any other person or entity acting for or on the behalf of it has, (i) directly or indirectly, used or offered to use any corporate funds for unlawful contributions, unlawful gifts, unlawful entertainment or to make any other unlawful payment relating to political activity;

 

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made any unlawful payment to a foreign or domestic government official (including employees of wholly state-owned or partially state-owned entities) or to foreign or domestic political parties or campaign; violated any Anti-Corruption Laws; made any unlawful bribe, unlawful rebate, unlawful payoff, unlawful influence payment, unlawful kickback or other similar unlawful payment; or established or maintained any unlawful or unrecorded funds; or (ii) agreed to give any unlawful gift or similar unlawful benefit to any customer, supplier, or other person or entity. KRD Kurdoğlu agrees that it will notify BKAP in writing immediately upon the occurrence of any event which would render the warranties of this clause 6.3(b) incorrect.

 

(c)                                  Anti-Money Laundering. To KRD Kurdoğlu’s knowledge after due inquiry, it is currently in compliance with all applicable anti-money laundering laws applicable to it.

 

(d)                                 Committed Capital. KRD Kurdoğlu has, or will have, committed assets which will be sufficient to enable it to fund its obligations under clause 9 if and solely to the extent required hereunder. KRD Kurdoğlu holds shares representing not less than (This material has been omitted pursuant to a request for confidential treatment, and such material has been filed separately with the Commission.)  of the shares of each of the entities comprising Ecosystem having a value of not less than (This material has been omitted pursuant to a request for confidential treatment, and such material has been filed separately with the Commission.). KRD Kurdoğlu has no liabilities other than its obligations under clause 9 of this Agreement.

 

6.4                               Cartesian Warranties

 

Cartesian hereby represents and warrants to BKAP that each of the following warranties is true and correct on the date hereof and, unless specified otherwise in relation to a specific warranty, on the Closing Date:

 

(a)                                 Effectiveness and Enforceability. Each of Pangaea Two, LP and Pangaea Two Parallel, LP is validly formed, in existence and duly registered under the laws of its jurisdiction of formation and each has the legal right and full power and authority to enter into and perform this Agreement. This Agreement has been duly entered into by Cartesian and constitutes valid and binding obligation of Cartesian, enforceable against it as set forth herein. This Agreement does not conflict with, or result in any violation or breach of, (i) any provision of the charter, by-laws, or other organisational document of Cartesian or (ii) any contract or agreement to which Cartesian is a party.

 

(b)                                 Absence of Certain Business Practices; Anti-bribery. Neither Cartesian nor any of its Subsidiaries, nor any of their respective directors, officers, agents or employees or any other person or entity acting for or on the behalf of them has, (i) directly or indirectly, used or offered to use any corporate funds for unlawful contributions, unlawful gifts, unlawful entertainment or to make any other unlawful payment relating to political activity; made any unlawful payment to a foreign or domestic government official (including employees of wholly state-owned or partially state- owned entities) or to foreign or domestic political parties or campaign; violated any Anti-Corruption Laws; made any unlawful bribe, unlawful rebate, unlawful payoff, unlawful influence payment, unlawful kickback or other similar unlawful payment; or established or maintained any unlawful or unrecorded funds; or (ii) agreed to give any unlawful gift or similar unlawful benefit to any customer, supplier, or other person or entity. Cartesian agrees that it will notify BKAP in writing immediately upon the occurrence of any event which would render the warranties of this clause 6.4(b) incorrect.

 

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(c)                                  No Governmental Ownership. Cartesian has disclosed to BKAP that to its knowledge after due inquiry, none of its general partners that have direct controlling interests or decision-making powers in relation to the business operations of Cartesian or in the contractual relationship established by this Agreement is a foreign official (as defined in the FCPA).

 

(d)                                 Anti-Money Laundering. To Cartesian’s knowledge after due inquiry, it is currently in compliance with all applicable anti-money laundering laws applicable to it.

 

(e)                                  Committed Capital. Cartesian has, or will have, committed assets which will be sufficient to enable it to fund its obligations under clause 9 if and solely to the extent required hereunder.

 

6.5                               Limitations on Warranty Claims

 

(a)                                 No Party shall be liable for any claim for damages actually incurred and resulting from any breach of any of its representations or warranties (Damages) contained in clauses 1.6, 6.1 (including the representations or warranties contained in Schedule 1- B), 6.2, 6.3 or 6.4 (a Warranty Claim):

 

(i)                  unless and until the amount of such Warranty Claim or series of related claims exceeds US$75,000; and

 

(ii)               unless and until the amount of such Warranty Claims when aggregated with the amount of all other Warranty Claims against a Party (and excluding any claims excluded by paragraph (i) above) exceeds US$1,000,000 in which event the full value of such claims against it shall be claimable under this Agreement.

 

(b)                                 The total amount to be paid by any Party under or in connection with Warranty Claims against it under this Agreement shall not under any circumstances exceed an amount equal to an aggregate of US$10,000,000.

 

(c)                                  No Party shall be liable for any Warranty Claim against it unless it receives from another Party written notice (within sixty (60) days of the other Party becoming aware of such Warranty Claim) containing specific details of the Warranty Claim including the other Party’s estimate (on a without prejudice basis) of the amount of the Warranty Claim.  Warranty Claims shall survive for a period of:

 

(i)                  eighteen (18) months following the date on which the representation or warranty giving rise to such Warranty Claim was given;

 

(ii)               five (5) years following the date on which a Fundamental Representation giving rise to a Warranty Claim was given; and

 

(iii)            six (6) years after the Closing Date for claims under clause 19.

 

(d)                                 Notwithstanding anything to the contrary set forth herein, the limitations set forth in clauses 6.5(a) and 6.5(b) will not apply to (i) any Warranty Claim brought with respect to a Fundamental Representation or (ii) any claim under clause 1.6 or clause 19, provided that in no event shall the total paid by any Party in respect of any Warranty Claims and/or any claims under clause 1.6 or clause 19 exceed 50% of the aggregate amount of Investor Cash Contributions actually funded (whether by the

 

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Investor or any Guarantor) hereunder as of the date on which the Warranty Claim or claim under clause 1.6 or clause 19 is finally determined.

 

(e)                                  No liability shall attach to any Party in respect of any Warranty Claim against it to the extent that:

 

(i)                  the fact, matter, event or circumstance forming the basis of the Warranty Claim is fairly disclosed in this Agreement, any other Transaction Document, the Disclosure Schedule or the Due Diligence Information.

 

(ii)               any matter or thing has been done or omitted to be done with respect to the subject matter of the Warranty Claim prior to the Closing Date at the written request, or with the approval or acquiescence, of another Party or its representatives;

 

(iii)            any Party or any of its Affiliates has caused or contributed to such Warranty Claim after the Closing Date;

 

(iv)           the Warranty Claim occurs, arises or is increased as a result of any change made after the Closing Date in any accounting or taxation policies of any member of the JVC Group;

 

(v)              is otherwise recovered by the Party bringing the Warranty Claim or any member of the JVC Group including under the terms of any insurance policy of the other Party or any member of the JVC Group, respectively;

 

(vi)           the Party bringing the Warranty Claim or (in relation to a Warranty Claim against BKAP only) any member of the JVC Group has already recovered any amount under this Agreement in respect of the same Damages; or

 

(vii)        the Warranty Claim either results from or is increased by the passing of, or any change in any Law after the date hereof.

 

(f)                                   Prior to the signing of this Agreement the Investor, its Affiliates or their Representatives have received information about the BKAP Subsidiaries and the PRC Subsidiaries and their respective businesses (the Due Diligence Information) consisting of or contained in (i) the electronic data room assembled by BKAP (the Data Room) which is copied onto the compact disk delivered to the Parties in connection herewith and (ii) written answers and other materials provided by or on behalf of BKAP to any request for information submitted by the Investor.

 

(g)                                  The Investor acknowledges and agrees that:

 

(i)                  BKAP makes no warranty as to the accuracy of any forecasts, estimates, projections, statements of intent or statements of opinion (including the reasonableness of the assumptions underlying the same) contained in the Due Diligence Information or otherwise provided to the Investor; and

 

(ii)               the Investor has made its own evaluation of the adequacy and accuracy of such forecasts, estimates, projections, statements of intent or statements of opinion (including the reasonableness of the assumptions underlying the same).

 

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6.6                               After Closing, if any member of the JVC Group receives a payment (each an ETA Claim Receipt) from any of the Mainstreets Parties in respect to the failure of any representations and warranties set forth in the ETAs to be true and correct (each, an ETA Claim), the JVC shall or shall cause a member of the JVC Group to promptly (but in any event within five (5) Business Days after receipt of such payment) pay to the Investor a cash amount equal to the amount of such ETA Claim Receipt. Notwithstanding the foregoing, at the election of the Investor, in lieu of any such payment to the Investor, the JVC shall instead cause the relevant member of the JVC Group to pay to the JVC an amount in U.S. Dollars equal to the applicable ETA Claim Receipt, and upon receipt by the JVC of such ETA Claim Receipt, credit toward the payment of the next Subsequent Investor Cash Contribution due by the Investor hereunder an amount in U.S. Dollars equal to such ETA Claim Receipt, and thereafter the Investor shall be deemed to have funded an amount equal to such ETA Claim Receipt to the JVC in satisfaction, on a dollar-for-dollar basis, of an equal portion of its next Subsequent Investor Cash Contribution pursuant to clause 2.2.

 

7.                                      CONDUCT OF BUSINESS BETWEEN SIGNING AND CLOSING

 

7.1                               From the date hereof until the earlier to occur of the termination of this Agreement or Closing, BKAP shall cause BK Shanghai, and until PRC Joint Ventures become wholly owned subsidiary of HK Development shall use commercially reasonable efforts to cause and thereafter shall cause the PRC Joint Ventures, except upon prior written instruction or authorisation from the Investor or as otherwise set forth herein, to operate the Existing Restaurants only in the ordinary course and to maintain the business relationships with suppliers, franchisees, customers and others having business relationships with the relevant PRC Subsidiary.

 

7.2                               Without limiting the generality of the foregoing, from the date hereof until the earlier to occur of the termination of this Agreement or Closing, with the prior written consent of the Investor (A) BKAP shall cause BKHK, HK Development and BK Shanghai not to declare or pay any cash dividends to BKAP, repay any shareholder loans to BKAP or otherwise make any cash payments to BKAP (other than royalty payments and franchise fees paid by the PRC Subsidiaries in accordance with existing franchise agreements), and (B) except (i) as expressly contemplated under this Agreement or any of the ETAs and to the extent permitted by Law, or (ii) for the termination of agreements between any PRC Subsidiary on the one side and BKAP and its Affiliates on the other, BKAP shall cause BKHK, HK Development and BK Shanghai not to, and until the PRC Joint Ventures become wholly owned Subsidiaries of HK Development shall use reasonable efforts to cause (and thereafter shall cause) the PRC Joint Ventures, not to:

 

(a)                                 make any amendments or restatements to its memoranda and articles;

 

(b)                                 issue, sell, transfer, pledge, dispose of or encumber any shares in it;

 

(c)                                  acquire (by merger, consolidation, acquisition of stock or assets or otherwise) any equity interest in or a portion of the assets of, or by any other manner acquire any business or any person or division thereof;

 

(d)                                 enter into any joint venture, alliance, preferred provider, partnership or other similar relationship or arrangement;

 

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(e)                                  enter into (or adopt) any new, or amend any existing compensation, benefit or pension plan, as well as make any bonus, commission or incentive or equity compensation payment that are not consistent with past practice;

 

(f)                                   directly or indirectly engage in any transaction with, or enter into any agreement with, any of its directors, officers or Affiliates that would, or would be reasonably likely to, adversely affect the transactions contemplated by this Agreement and the other agreements contemplated hereunder;

 

(g)                                  mortgage, pledge or otherwise encumber any of its tangible or intangible assets or properties;

 

(h)                                 enter into, amend or terminate any contract or agreement which is above US$25,000 outside of the ordinary course of business, it being understood that “ordinary course of business” in respect of this clause 7.2(h) shall include entering into lease agreements in connection with the development of new Burger King Restaurants;

 

(i)                                     acquire or dispose of any assets or property involving consideration in excess of US$25,000 outside of the ordinary course of business;

 

(j)                                    initiate or settle any litigation where such action is likely to result in a payment to or by any person of US$25,000 or more or where the subject matter of any litigation involves a form of non-monetary or equitable relief;

 

(k)                                 take or increase the principal amount of any loans and/or indebtedness or issue any debt securities, or enter into any credit facility or other financing;

 

(l)                                     pay or declare any dividends or other distributions to any of its shareholders or make any other payments to its Shareholders outside of the ordinary course of business or pursuant to this Agreement;

 

(m)                             assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person;

 

(n)                                 amend or modify the ETAs; or

 

(o)                                 agree or commit to do any of the foregoing.

 

BKAP shall provide the Investor with prompt written notice if it becomes aware that any of the foregoing actions or events have occurred.

 

8.                                      GUARANTEES

 

8.1                               No Shareholder (nor any member of its respective Group) shall be obliged to participate for the benefit of any member of the JVC Group in any guarantee, bond or financing arrangement with any bank or financial institution, whether as a guarantor or in any other capacity whatsoever.

 

8.2                               If and to the extent that each of the Shareholders agree to participate (or agree to procure that members of their respective Groups participate) in any such guarantee, bond or financing arrangement then, unless the Shareholders agree otherwise, any liability or obligation to be assumed by them in relation to any such guarantee, bond or financing arrangement shall be borne in their Equity Proportions and shall be several and not joint.  If a

 

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Shareholder (or a member of its Group) incurs any such liability, unless such Shareholder agrees otherwise, that Shareholder shall be entitled to a contribution from the other Shareholders to ensure that the aggregate liability of the Shareholders or members of their respective Groups (as the case may be) is borne by each of them in their Equity Proportions at the time the relevant guarantee, bond or financing arrangement is made.

 

9.                                      GUARANTORS’ OBLIGATIONS

 

9.1                               In consideration of BKAP entering into this Agreement, each Guarantor hereby unconditionally and irrevocably guarantees to BKAP, on a joint and several basis, the payment by the Investor of each Investor Cash Contribution to the JVC on the terms and conditions set forth herein, solely if and to the extent any such payment obligation is due and payable by the Investor hereunder; provided that (A) the maximum aggregate liability of each Guarantor pursuant to this clause 9 other than in respect of costs, fees and expenses reasonably incurred by BKAP or the JVC in enforcing their respective rights under this Agreement (Enforcement Costs) (which, for the avoidance of doubt, shall be in addition to and not be subject to the following caps, but shall instead be subject to the limitation described the final sentence of this clause 9.1) shall not exceed (x) at any time prior to Closing, (This material has been omitted pursuant to a request for confidential treatment, and such material has been filed separately with the Commission.), (y) after Closing but prior to the payment in full of the first Subsequent Investor Cash Contribution, (This material has been omitted pursuant to a request for confidential treatment, and such material has been filed separately with the Commission.), and (z) after payment in full of the first Subsequent Investor Cash Contribution but prior to the payment in full of the second Subsequent Investor Cash Contribution, (This material has been omitted pursuant to a request for confidential treatment, and such material has been filed separately with the Commission.) (as applicable for each Guarantor from time to time, the Maximum Amount), (B) the maximum aggregate liability of each Guarantor pursuant to this clause 9 with respect to Enforcement Costs shall not exceed (This material has been omitted pursuant to a request for confidential treatment, and such material has been filed separately with the Commission.) (the Enforcement Costs Limit), and (C) notwithstanding anything to the contrary contained herein, the obligations of Cartesian under this clause 9.1 shall be several and not joint among PT and PTP based on their respective Allocable Percentages. It is agreed that (a) no Guarantor shall be required to pay more than its Maximum Amount and Enforcement Costs Limit under or in respect of this clause 9 (subject, in the case of Cartesian, to clause (C) above, and (b) no Guarantor shall have any obligation or liability to any Person, or any rights, relating to,  arising out of or in connection with this Agreement other than as expressly set forth in this clause 9. For the avoidance of doubt, save for Enforcement Costs, no Guarantor shall be required to pay more than (This material has been omitted pursuant to a request for confidential treatment, and such material has been filed separately with the Commission.) (or in the case of Cartesian, PT’s and PTP’s respective Allocable Percentages of (This material has been omitted pursuant to a request for confidential treatment, and such material has been filed separately with the Commission.)) under or in respect of this clause 9. As used herein, the term Allocable Percentage means (This material has been omitted pursuant to a request for confidential treatment, and such material has been filed separately with the Commission.)  in the case of PT and (This material has been omitted pursuant to a request for confidential treatment, and such material has been filed separately with the Commission.)  in the case of PTP.

 

9.2                               No Party may assign its rights, interests or obligations under this clause 9 without the prior written consent of the other Parties, and the granting of such consent in a given instance shall be solely in the discretion of such other Parties and, if granted, shall not constitute a waiver of this requirement as to any subsequent assignment. Any assignment in violation of the preceding sentence shall be null and void ab initio.

 

9.3                               KRD Kurdoğlu agrees that: (a) until the termination of its obligations under this clause 9, it will hold shares in each of the entities comprising Ecosystem representing not less than (This material has been omitted pursuant to a request for confidential treatment, and

 

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such material has been filed separately with the Commission.) of the shares of each of the entities comprising Ecosystem, having an aggregate value of not less than (This material has been omitted pursuant to a request for confidential treatment, and such material has been filed separately with the Commission.), and (b) until the termination of its obligations under this clause 9, in accordance with this clause 9, it will have no liabilities other than its obligations under this clause 9 and other than liabilities or obligations that would not potentially affect the ability of KRD Kurdoğlu to perform its obligations under this clause 9.

 

9.4                               Except by the unanimous written consent of the Parties, the Guarantors’ liability under clause 9.1 shall not be discharged or impaired by, and each of the Guarantors hereby

 

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irrevocably, unconditionally and expressly agrees that it shall not assert as a defense to its obligations hereunder:

 

(a)                                 any amendment, variation or assignment of this Agreement or any waiver of its terms (provided that any such change, rescission, waiver, compromise, consolidation or other amendment or modification shall be subject to the prior written consent of each Guarantor);

 

(b)                                 any release of, or granting of time or other indulgence to, the Investor or any third party;

 

(c)                                  any winding up, dissolution, reconstruction, legal limitation, incapacity or lack of corporate power or authority or other circumstances affecting the Investor (or any act taken by BKAP in relation to any such event); or

 

(d)                                 any other act, event, neglect or omission (whether or not known to the Investor, BKAP or the Guarantors) which would or might (but for this clause) operate to impair or discharge the Guarantors’ liability or afford the Guarantors or the Investor any legal or equitable defence.

 

9.5                               Notwithstanding anything to the contrary contained in this clause 9, the Parties agree that (i) each Guarantor may assert as a defence to, or release or discharge of, any payment or performance by such Guarantor under this clause 9, any defence or release that the Investor could assert against the JVC under the terms of this Agreement that the relevant Investor Cash Contribution is not then required to be paid by the Investor pursuant to the terms and conditions hereof) and (ii) to the extent the Investor is relieved of its obligations under clause 2 of this Agreement, each Guarantor shall be similarly relieved of its obligations under this clause 9.

 

9.6                               The JVC acknowledges that the sole assets of the Investor are cash in a de minimis amount and its rights under this Agreement, and that no additional funds are expected to be contributed to the Investor unless and until Closing occurs, and that, except for rights against the Guarantors to the extent expressly provided in this clause 9, and subject to all of the terms, conditions and limitations herein, the JVC shall not have any right to cause any assets to be contributed to the Investor by any Guarantor, any Affiliate of any Guarantor, or any other Person. Notwithstanding anything that may be expressed or implied in this clause 9, and notwithstanding the fact that a Guarantor may be a partnership or limited liability company, by its acceptance of the benefits of this clause 9, the JVC acknowledges and agrees that it has no right of recovery against, and no personal liability shall attach to, the former, current or future security holders, directors, officers, employees, agents, affiliates, members, managers, general or limited partners or assignees of the Investor, any Guarantor or any of their respective former, current or future security holders, directors, officers, employees, general or limited partners, members, managers, affiliates, agents, assignees or representatives (each a Related Party, and collectively, the Related Parties), through the Investor or otherwise, whether by or through attempted piercing of the corporate, partnership or limited liability company veil, by or through a claim by or on behalf of the Investor against any Guarantor or Related Party by the enforcement of any assessment or by any legal or equitable proceeding, by virtue of any statue, regulation or applicable law, or otherwise, except for its rights to recover from each Guarantor (but not the Related Parties (including any general partner or managing member)) the amounts guaranteed under clause 9.1 (subject to the applicable Maximum Amounts and Enforcement Costs Limit) solely to the extent provided in this clause 9.1.

 

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9.7                               The obligation of the Guarantors under this clause 9.1 shall terminate automatically and immediately upon the earliest to occur of (a) the payment in full of all Investor Cash Contributions (whether paid by the Investor or the Guarantors), (b) the valid termination of the obligations of the Investor to fund Investor Cash Contributions pursuant to clause 2 in accordance with the terms hereof, or (c) the valid termination of this Agreement in accordance with its terms. Without limiting clause 9.4 above, in the event that (i) BKAP or any of its Affiliates or Subsidiaries asserts in any litigation or other proceeding relating to the Investor’s or the Guarantors’ obligation to fund an Investor Cash Contribution under this Agreement that the limitations on the liability of the Guarantors or the selection and limitation of available remedies of BKAP or the JVC in respect of a Defaulted Investor Cash Contribution contained in any of clause 2.3, clause 2.4, or clause 9 are illegal, invalid or unenforceable, in whole or in part, or asserts any theory of liability against any Guarantor or Related Party with respect to the transactions contemplated by this Agreement other than the liability (including the availability of specific performance) of the Guarantors under clause 9.1 (in each case, subject to the terms, conditions and limitations contained therein) and (ii) such assertions, litigation or proceeding, as the case may be, are not withdrawn with prejudice within twenty (20) Business Days after delivery of written notice to BKAP from the Guarantors, then (x) the obligations of each Guarantor under this clause 9 shall terminate ab initio and be null and void, and (y) no Guarantor or Related Party shall have any liability to BKAP or the JVC with respect to their obligations under this Agreement or the transactions contemplated hereby.

 

9.8  Until KRD Kurdoğlu’s obligations under this clause 9 have terminated in accordance with clause 9.7 above, KRD Kurdoğlu shall, on an annual basis, deliver its financial statements to BKAP within 20 days of the date on which the audit for the prior financial year has been issued by KRD Kurdoğlu’s auditors.

 

10.                               BUSINESS OF THE JVC GROUP

 

10.1                        The sole purpose of the JVC and HK Development is, in compliance with applicable Law and their memoranda and articles of association, to:

 

(a)                                 (indirectly or directly, respectively) hold the equity interests in the PRC Subsidiaries;

 

(b)                                 forward to the PRC Subsidiaries as contribution into their registered share capital any funds received from the Shareholders;

 

(c)                                  render support services, such as, for example, management, administrative, co- ordination and finance services, to the PRC Subsidiaries; and

 

(d)                                 take any ancillary actions reasonably necessary with respect to the foregoing.

 

10.2                        The sole purpose of each of the PRC Subsidiaries shall be, in compliance with applicable Law and their articles of association, to:

 

(a)                                 operate the Existing Restaurants as a franchisee of BKAP (with BK Shanghai acting as the master franchisee for the PRC Subsidiaries) in a manner reasonably believed to be in the best interests of the relevant PRC Subsidiary and consistent with the terms of the:

 

(i)                      PRC Company Franchise Agreement entered into by the PRC Subsidiaries and BKAP, provided, however, that this paragraph (i) shall not apply to any

 

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of the PRC Joint Ventures until such PRC Joint Venture has become a Wholly-Owned Subsidiary of HK Development; and

 

(ii)                   Master Franchise and Development Agreement; and

 

(b)                                 develop and open new Burger King Restaurants in China according to the Master Franchise and Development Agreement and the Development Schedule.

 

10.3                        The members of the JVC Group shall be entitled to incur up to an aggregate amount of US$100 million in debt, at such times, on such terms and in such amounts as the Board determines to be necessary to further the Development Schedule (the JV Debt).

 

10.4                        The JVC shall use the proceeds from the Investor Cash Contributions and the JV Debt to expand the JVC Group’s business through the development and operation of new Burger King Restaurants and to finance the working capital needs of the JVC Group.

 

10.5                        If the competent arbitral tribunal has finally determined that either:

 

(a)                                 BKAP has (i) wrongfully terminated the Master Franchise and Development Agreement and (ii) breached the Development Rights granted in clause 4(1) of the Master Franchise and Development Agreement; or

 

(b)                                 BKAP has breached the Development Rights granted in clause 4(1) of the Master Franchise and Development Agreement,

 

and within sixty (60) days of such determination in either (a) or (b) above, BKAP has not cured such breach, then the Investor shall be entitled to purchase all (but not less than all) of the Ordinary Shares held by BKAP at that time at an amount equal to the Fair Price of such Ordinary Shares. After determination of the Fair Price in accordance with Schedule 10, the Investor shall provide notice to BKAP that it intends to exercise its right under this clause 10.5.  BKAP shall be bound to sell to the Investor, and the Investor shall be bound to buy such Ordinary Shares then held by BKAP (i) at the Fair Price and (ii) within 30 days of the date on which the Valuation Certificate is delivered in accordance with Schedule 10. For the avoidance of doubt, the determination of any breach by BKAP of the Development Rights in clause (4)(1) of the Master Franchise and Development Agreement shall be subject to the limitations set forth therein.

 

11.                               SHAREHOLDERS, DIRECTORS AND MANAGEMENT

 

11.1                        Subject to fiduciary and other legal obligations, the Shareholders shall at all times vote their Shares, and, as from Closing, cause the JVC to at all times vote its shares in HK Development, and cause their respective board members to vote in a manner consistent with the terms of this Agreement and the Ancillary Agreements as well as in compliance with applicable Law, in each case except where being challenged in good faith.

 

11.2                        The Board shall (subject to the requirements of clause 12) be responsible for the overall direction, supervision and management of the JVC. The Board shall not, however, take any decision in relation to the Reserved Matters without the requisite approval under clause 12.

 

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11.3                                The Board shall consist of seven (7) Directors. Subject to clause 11.19, BKAP shall be entitled to appoint two (2) Directors and the Investor shall be entitled to appoint five (5) Directors.

 

11.4                                The initial Directors, whose names are identified in Schedule 3 shall be appointed on or before the Closing.

 

11.5                                As soon as reasonably practicable after the date hereof (but in no event later than sixty (60) days after the date hereof), the initial chief executive officer, of the JVC is to be nominated by Investor and approved by BKAP (such approval not to be unreasonably withheld, it being understood that negative results of a background check of the kind described in clause 22.2(d) shall be deemed a valid reason to withhold such consent).

 

11.6                                A Shareholder shall have the right exercisable by notice in writing to require the appointment of a Director nominated by it and by like notice to require the removal of any Director nominated by it and the appointment of another person to act in place of such Director.  Each Shareholder shall use its respective votes in the JVC to ensure that the Board is constituted by persons in the manner set out in this Agreement. A Shareholder removing a Director it is entitled to appoint shall indemnify the JVC against any liability arising from the removal.

 

11.7                                In case of a vacancy in any of the Directors due to resignation, death, expiry of term or any other reasons, the new Director to fill in such vacancy may only be nominated by the relevant Shareholder entitled to nominate such Director pursuant to the provisions of clause 11.3.

 

11.8                                The quorum for transacting business at any Board meeting shall be four (4) Directors (or their alternates); provided, that (i) such quorum must include at least one (1) Director appointed by BKAP (so long as BKAP is entitled to appoint at least one (1) Director), and (ii) if a quorum fails to be established in two consecutive attempts to duly call a Board meeting as a result of the failure of a Director appointed by BKAP or sufficient Directors appointed by the Investor to attend such Board meeting in person or telephonically in order to prevent an action specifically identified in the notice related to such meeting from being taken or approved at such meeting, then the Directors present at the second meeting shall constitute a valid quorum provided, that only such action specifically identified in the notice related to such may be approved and provided further, that the action specifically identified in such notice is not a Reserved Matter. Subject to the foregoing, if a quorum is not present within two (2) hours from the time appointed for a meeting or if during a meeting such a quorum is no longer present, the meeting shall be adjourned for two (2) Business Days to the same place and time and at that adjourned meeting a majority of the Directors (or their alternates) appointed to the Board shall be a quorum. At least one (1) Business Day’s notice of the adjourned meeting will be given to each of the Directors, and any such notice will be given in the same manner, and specifying the same agenda, as for the original meeting.

 

11.9                                At least five (5) Business Days’ written notice shall be given to each Director of any meeting of the Board (except for an adjourned meeting) unless all the Directors (or their alternates) approve a shorter notice period or waive the requirement for any such notice. Any such notice shall include an agenda identifying in reasonable detail the matters to be discussed at the meeting and shall, wherever practicable, be accompanied by copies of any relevant papers. If any matter is not identified in reasonable detail, the Board shall not decide on it unless all Directors agree.

 

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11.10                         Meetings of the Board shall take place at least four (4) times per year if not required more often, and meetings may be convened by the relevant Chairman or by any Director at any time. The Board meetings will be conducted in English.

 

11.11                         Meetings shall be held at JVC’s head office or at such other location as may be agreed by the Board. Decisions may be taken by the Directors without a meeting if a proposal for action is submitted in writing to each of the Directors and all members of the Board consent in writing to such action. Any Director may attend any meeting of the Board telephonically.

 

11.12                            The official minutes of meetings and resolutions taken therein shall be kept in English and shall be signed by the Directors present at the meeting and circulated to all Directors and Shareholders within five (5) Business Days following any meeting.

 

11.13                         The Chairman of the Board shall be appointed jointly by the Parties,  and shall initially be the individual designated as “Chairman” on Schedule 3.

 

11.14                         Any Director (other than an alternate director) may appoint any other Director, or any other person approved unanimously by a resolution of the Board and willing to act, to be an alternate director and may remove from office an alternate director so appointed by him.

 

11.15                         Subject to the requirements of clause 12 and the other provisions in this clause 11, the Board shall decide on matters by a simple majority vote. Each Director present, whether in person, telephonically or (where relevant) represented by an alternate, at any Board meeting shall have one vote (and, for the avoidance of doubt, any alternate present at a meeting shall be entitled (in the absence of his appointor(s)) to a separate vote on behalf of each Director he represents in addition to his own vote (if any) as a Director). The Chairman shall not have a deadlock breaking or casting vote.

 

11.16                         Subject to the provisions of clause 12, the Chief Executive Officer shall have (i) the authority and responsibility for implementing the Business Plan and each Budget and (ii) responsibility for the day-to-day management of the JVC including general charge of the business, affairs and property of the corporation, and control over its officers, agents and employees.

 

11.17                         If the JVC misses an Exclusivity Milestone or Annual Opening Target by (This material has been omitted pursuant to a request for confidential treatment, and such material has been filed separately with the Commission.) or more at the end of any applicable Year (as each term is defined and set out in the Development Schedule attached to the Master Franchise and Development Agreement), at the request of BKAP, the Shareholders shall use their best efforts to replace the Chief Executive Officer of the JVC and such appointment shall require a unanimous vote by all Directors, provided that BKAP shall not request a replacement pursuant to this clause 11.17 until the second anniversary of the appointment of the relevant Chief Executive Officer.

 

11.18                         The JVC or its Subsidiary shall reimburse each Director for its reasonable out of pocket costs and expenses incurred in connection with attending any Board meeting.

 

11.19                         Notwithstanding anything to the contrary contained herein, (a) if BKAP ceases to own at least 50% of the aggregate number of BKAP Consideration Shares, then BKAP shall be entitled to appoint only one (1) Director so long as BKAP continues to own at least 25% of the aggregate number of BKAP Consideration Shares and remains a direct or indirect wholly owned Subsidiary of BKC, and (b) BKAP shall not be entitled to appoint any Directors if BKAP either (i) ceases to own at least 25% of the aggregate number of BKAP Consideration Shares or (ii) owns between 25% and 50% of the aggregate number of BKAP Consideration Shares but ceases to be a direct or indirect wholly owned Subsidiary of BKC; provided,

 

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however, that if and to the extent that BKAP transfers any of its Shares to another Shareholder pursuant to clause 16.1(b), then such Shares so transferred shall not be taken into account for purposes of determining BKAP’s holdings with respect to this clause 11.19.

 

11.20                         To the extent reasonably practicable and permissible by law, the Parties shall seek to not have boards of directors for the members of the JVC Group other than the JVC but instead shall procure that decisions are otherwise made and implemented by each member of the JVC Group other than the JVC. To the extent any JVC Group Company other than the JVC is required by law to have a board of directors, the Parties shall procure that the structure and rights of such board shall reflect the provisions of this clause 11 mutatis mutandis.

 

11.21                         The Board may, by resolution, designate from among the Directors one or more committees (including an audit/finance committee and compensation committee), each of which will be comprised of at least two (2) Directors and may designate at least two the Directors as alternate members of any such committee who may, subject to any limitations imposed by the Board, replace absent or disqualified Directors at any meeting of that committee. Furthermore, each Shareholder who is entitled to appoint a Director to the Board shall also be entitled to appoint a Director to serve as a member of the audit/finance committee, the compensation committee and any executive committee. Any such committee, to the extent provided in such resolution, will have and may exercise all of the authority of the Board, subject to the limitations set forth by applicable law or in the establishment of the committee. Subject to the foregoing, any members thereof may be removed by the unanimous decision of Board. Except as otherwise determined by the Board or required by applicable law, the provisions of this clause 11 relating to the Board and the Directors will apply to each committee and its members, mutatis mutandis.

 

12.                               RESERVED MATTERS

 

12.1                                The Shareholders shall use their respective powers to ensure, so far as they are legally able, that no action or decision is taken (whether by the Board, any member of the JVC Group or any of their officers or managers) to proceed with any of the matters specified in clause 12.2 (Reserved Matters) without the prior written consent of BKAP and the Investor. Notwithstanding the foregoing, in the event BKAP or the Investor ceases to hold at least 50% of the aggregate number of Shares acquired by such Person at Closing (and in the case of BKAP, in the event BKAP ceases to be an indirect wholly owned subsidiary of BKC), then BKAP or the Investor, as the case may be, shall no longer be entitled to approve Reserved Matters pursuant to this clause 12; provided, however, that if and to the extent that BKAP transfers any of its Shares to another Shareholder pursuant to clause 16.1(b), then such Shares so transferred shall not be taken into account for purposes of determining BKAP’s holdings with respect to this clause 12.

 

12.2                                The Reserved Matters are:

 

(a)                                         Articles: altering the Memorandum and Articles or other constitutional documents of the JVC;

 

(b)                                         changes in share capital: changing the share capital of the JVC, including issuance of new Shares (other than a Listing), the creation of new class of shares or changes in the rights or preferences of the share capital of the JVC; provided that if at any time after the third anniversary of the date hereof the JVC is in compliance with the Development Schedule and seeks to raise expansion capital by issuing additional Shares or share capital, then no Shareholder shall unreasonably withhold its consent

 

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to such issuance under this clause 12.2(b) so long as (i) such issuance is based on an independent valuation of the JVC provided by an internationally recognized investment bank, or (ii) the Shareholders are entitled to acquire their pro rata share of any such Shares or share capital in accordance with the preemptive rights to be set forth in the Memorandum and Articles, it being understood that it shall be reasonable for a Shareholder to withhold its consent to any issuance that is in violation of clause 22.2;

 

(c)                                          change in nature of Business: materially changing the nature or scope of the business of the JVC as set forth in the Memorandum and Articles;

 

(d)                                         acquisitions and disposals: any member of the JVC Group acquiring or disposing of (whether in a single transaction or series of transactions) any business (or any material part of any business) or any shares in any company where the value of that business or those shares exceeds US$25,000,000;

 

(e)                                          consolidation, amalgamation or merger: any member of the JVC Group consolidating with, amalgamating with, merging with or into, or selling, conveying, transferring, leasing or otherwise disposing of all or substantially all of its property and assets (as an entirety or substantially an entirety in one transaction or a series of related transactions) to, any entity or permitting any entity to merge with or into any member of the JVC Group (in each case other than to or among other members of the JVC Group);

 

(f)                                           transactions with Shareholders or their Groups: any member of the JVC Group entering into, renewing or amending any transaction with any Shareholder or a member of its Group which is not on commercial arm’s length terms, provided that the foregoing shall not apply to franchise agreements with franchisees that are affiliates of the JVC Group;

 

(g)                                          management fees: any member of the JVC Group entering into any contract or arrangement to pay any management fee to the Investor or its Affiliate;

 

(h)                                         borrowings: any member of the JVC Group borrowing or raising money (including entering into any finance lease, but excluding normal trade credit and borrowings or raising of capital from Shareholders) for an amount exceeding the JV Debt by more than US$25,000,000 unless otherwise provided in the Business Plan;

 

(i)                                             accounting policies: except as required by Law, any material change in the Accounting Principles of the JVC and/or any change in the end of the Financial Year of the JVC;

 

(j)                                            auditors: appointing or removing the JVC’s Auditor other than in accordance with clause 14.5;

 

(k)                                         material litigation: decisions relating to the conduct (including the settlement) of any legal proceedings to which a member of the JVC Group is a party where there is a potential liability or claim of more than US$25,000,000;

 

(l)                                             winding-up; insolvency events: any proposal to wind up any member of the JVC Group or other proceeding seeking liquidation, administration (whether out of court or otherwise), reorganisation, readjustment or other relief under any bankruptcy, insolvency or similar law or the consent by such JVC Group member to a decree or order for relief or any filing of a petition, application or document under such law or

 

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to the appointment of a trustee, receiver, administrator (whether out of court or otherwise) or liquidator.

 

(m)                                     budget: approving JVC’s Budget if it materially deviates from the Business Plan after 2013 or any changes to the Budget which materially deviate from the Business Plan;

 

(n)                                         restructuring: any change to the corporate structure of the JVC Group that may materially increase or otherwise materially change BKAP’s liability in respect of Taxes;

 

(o)                                         Intellectual Property Rights: any member of the JVC Group making any material acquisition or disposal (including, subject to the terms of the Master Franchise and Development Agreement, any grant of any material licence) of or relating to any Intellectual Property Rights;

 

(p)                                         Business Plan:  material changes to the Business Plan after 2013;

 

(q)                                         dividends:  the JVC declaring or paying any dividend or distribution;

 

(r)                                            Development Plan:  approval of annual Development Plan; or

 

(s)                                           Change in code of conduct: materially changing the compliance programme and code of business ethics established pursuant to clause 13.1;

 

12.3                                General meetings of Shareholders shall take place in accordance with the applicable provisions of the Memorandum and Articles including on the basis that (i) the quorum shall be duly authorised representatives of Shareholders holding, in aggregate, not less than a majority of the issued and outstanding Shares and (ii) the notice of meeting shall set out an agenda identifying in reasonable detail the matters to be discussed (unless the Shareholders unanimously agree otherwise). Any matters requiring a general meeting of or approval by the Shareholders under relevant corporate laws shall be dealt with in accordance with the Memorandum and Articles and applicable corporate laws.

 

13.                               ANTI-CORRUPTION LAWS AND COMPLIANCE

 

13.1                                The Shareholders shall use commercially reasonable efforts to agree on and cause the JVC and each member of the JVC Group to adopt as soon as practicable following the Closing a compliance program and a code of business ethics to establish internal control and reporting mechanisms to prevent, detect, identify, investigate and correct unethical, illegal or otherwise improper business practices, including violations of the FCPA and all other anti- corruption, anti-bribery, fraud, kickback, anti-money laundering, anti-boycott laws, regulations or orders, and all similar laws, regulations or orders in the Territory and any other relevant jurisdictions applicable to the JVC Group (together, the Anti-Corruption Laws).

 

13.2                                Each member of the JVC Group shall provide anti-corruption training to its employees, officers, directors and any other appropriate third parties on a regular basis and the JVC shall comply with the accounting control provisions (if any) of such Anti-Corruption Law(s).

 

13.3                                Each member of the JVC Group shall undertake that neither it nor any of its Subsidiaries, nor any of their respective directors, officers, agents or employees or any other person or any other person or entity affiliated with or acting for or on the behalf of them shall,

 

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(i) directly or indirectly, use or offer to use any corporate funds for unlawful contributions, unlawful gifts, unlawful entertainment or make any other unlawful payment relating to political activity; make any unlawful payment to a foreign or domestic government official (including employees of wholly state-owned or partially state-owned entities) or to foreign or domestic political parties or campaign; violate any Anti-Corruption Laws; make any unlawful bribe, unlawful rebate, unlawful payoff, unlawful influence payment, unlawful kickback or other similar unlawful payment; or establish or maintain any unlawful or unrecorded funds; or (ii) agree to give any unlawful gift or similar unlawful benefit to any customer, supplier, or other person or entity.

 

13.4                                Each Shareholder shall inform the other Shareholder promptly after becoming aware that any foreign official (within the meaning of the FCPA) acquires equity interests in such Shareholder, provided that any such notification obligations will limited to those persons with a direct controlling interest and decision-making power of the business operations of the Investor or in the contractual relationship established by this Agreement.

 

13.5                                The JVC shall, as part of the internal controls referenced in clause 13.1, devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that—

 

	
(i)
    	
transactions are executed in accordance with   management’s general or specific authorisation;
    
	
 
    	
 
    
	
(ii)
    	
transactions are recorded as necessary (X) to   permit preparation of financial statements in conformity with generally   accepted accounting principles or any other criteria applicable to such   statements, and (Y) to maintain accountability for assets;
    
	
 
    	
 
    
	
(iii)
    	
access to assets is permitted only in accordance with   management’s general or specific authorisation; and
    
	
 
    	
 
    
	
(iv)
    	
the recorded accountability for assets is compared   with the existing assets at reasonable intervals and appropriate action is   taken with respect to any differences.
    

 

13.6                                At any time after Closing, in the event a Shareholder believes, in good faith, that there is prima facie evidence suggesting a violation by a member of the JVC Group or any director, officer or employee thereof of any Anti-Corruption Laws (a Compliance Breach), such Shareholder shall be entitled to provide written notice of its concerns to the Board (a Compliance Notice).

 

13.7                                The Parties shall use their respective commercially reasonable efforts to procure that a meeting of the Board is convened as soon as practicable after a Compliance Notice is sent pursuant to clause 13.6. In the event that the Board fails, in the reasonable opinion of such Shareholder, to promptly decide upon and approve an appropriate method by which the Compliance Breach identified in the Compliance Notice may be remedied promptly, such Shareholder shall have the right to (i) refuse to commit any additional capital or funding to any member of the JVC Group, any other provision of this Agreement notwithstanding and (ii) in the case of BKAP, cause the Investor to acquire all of its Shares at Fair Value in accordance with Schedule 10.

 

Notwithstanding the foregoing, a Shareholder’s right to take the action(s) specified above in this clause 13.7 shall be conditional upon (i) such Shareholder first receiving an opinion letter from external legal counsel representing the Shareholders providing such counsel’s view that

 

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there is evidence establishing a prima facie violation of one or more Anti-Corruption Laws and the Board has failed to approve an appropriate method by which the Compliance Breach identified in the Compliance Notice may be remedied and (ii) such Shareholder’s representatives on the Board having voted in favor of taking remedial action. To effectuate the foregoing, the Shareholders undertake to promptly hire external legal counsel to conduct an investigation and issue such opinion within ten (10) days of a determination by the Shareholders that the Compliance Breach identified in the Compliance Notice cannot be remedied. If the Shareholders are unable to agree upon such external legal counsel, then the Shareholders agree that they will hire one of the following law firms (or their successors) within the applicable ten (10) day time period: Willkie, Farr & Gallagher; Debevoise & Plimpton; and Shearman & Sterling. The Shareholders shall use their respective commercially reasonable efforts to ensure such opinion is treated as confidential and privileged, and that such privilege is waived only after prior agreement by all Shareholders.

 

14.                               FINANCIAL MATTERS

 

14.1                                JVC’s Financial Year shall be 1 January — 31 December, unless otherwise agreed in accordance with clause 12.

 

Maintenance of Books; Audit Rights

 

14.2                                JVC shall keep at the principal office of the JVC complete and accurate books, records and accounts of the JVC and supporting documentation of the transactions with respect to the conduct of the JVC’s business. Such books, records, and accounts shall, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the JVC in a manner compliant with the Anti-Corruption Laws. The books and records shall be maintained with respect to accounting matters in accordance with the Accounting Principles. All books and records shall be available at JVC’s principal office for examination by any Shareholder or such Shareholder’s duly authorised representative at any and all reasonable times during normal business hours with reasonable prior notice. Any Shareholder may request the audit of the JVC’s books and records at its own sole cost and expense.

 

Reporting

 

14.3                                Without prejudice to the generality of clause 14.2, JVC shall supply the Shareholders with copies of:

 

(a)                                         quarterly unaudited financial statement of the JVC in accordance with the Accounting Principles within thirty (30) Business Days after the respective quarter end. The quarterly financial statement shall be reviewed by the Auditors;

 

(b)                                         audited annual accounts for the JVC (complying with all relevant legal requirements) (which shall be prepared and reported on by the Auditors within five (5) months after the end of the Financial Year in question);

 

(c)                                          itemised revenue and capital budgets for each Financial Year covering each Subsidiary of the JVC and showing proposed trading and cash flow figures, manning levels and all material proposed acquisitions, disposals and other commitments for that Financial Year (a Budget); and

 

(d)                                         monthly/quarterly management accounts of each principal division of the JVC; these shall include a consolidated profit and loss account, balance sheet and cash flow statement broken down according to the principal divisions of the JVC.

 

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Tax Filings

 

JVC shall always file on a timely basis all Tax declarations required under applicable Law and comply on a timely basis with their respective obligations under applicable Tax Law. JVC, at a Shareholder’s request, shall provide to such Shareholder any information reasonably required by the requesting Shareholder in order to comply with its own obligations under applicable Law, including the preparation of a Shareholder’s future tax returns as required by the relevant Authorities, as soon as reasonably practicable and in any event no later than 90 days following the end of the financial year to which it relates. Such information shall be prepared on a basis consistent with the requirements of the jurisdictions in which the tax reporting obligations apply from time to time as established by then current law or practice.

 

Auditors and Accounting Principles

 

14.4                                JVC shall prepare its financial statements and management accounts in accordance with the Accounting Principles.

 

14.5                                The Auditor of the JVC shall be one of Deloitte Touche Tohmatsu, PricewaterhouseCoopers, Ernst & Young or KPMG or their respective affiliated audit entities.

 

14.6                                The Parties agree that the Accounting Principles to be adopted by JVC must be in accordance with US GAAP.

 

15.                               CHANGE OF CONTROL; LISTING OF THE INVESTOR

 

15.1                                Until the fourth anniversary of the Closing Date, the Investor undertakes to BKAP that no Change of Control of the Investor shall take place without the prior written approval of BKAP.

 

15.2                                From and after the fourth anniversary of the Closing Date, if a Transfer of equity securities of the Investor would constitute a Change of Control, then BKAP’s right to participate in such Transfer pursuant to clause 24 shall be modified as described in clause 24.7.

 

15.3                                The Investor undertakes that it shall not list any of its share capital on any regulated market or stock exchange anywhere in the world prior to a Listing of the JVC’s Shares.

 

16.                               WARRANT; OPTION TO PURCHASE

 

16.1                              The Shareholders agree that:

 

(This material has been omitted pursuant to a request for confidential treatment, and such material has been filed separately with the Commission.).

 

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17.                               LISTING

 

17.1                                Each of the Shareholders acknowledges and agrees that it is the intention that the JVC Group’s business should be developed so that, as soon as is practicable, the Shares in the capital of the JVC (or another intermediary holding company of the JVC Group’s business) are admitted to trading on the stock exchange of Hong Kong, Singapore or New York, or on any other regulated market of one or more recognised stock exchanges which provides a liquid and genuine market for the Shares of sufficient liquidity (a Listing).

 

17.2                                Without prejudice to clause 17.1, at any time after completion of all Subsequent Investor Cash Contributions, any Shareholder holding fifteen percent (15%) or more of the issued share capital of the JVC may give notice to the Board and the other Shareholders (a Listing Notice) that it desires the JVC and the other Shareholders to take such steps as may be necessary to obtain a Listing at the sole cost and expense of JVC.

 

17.3                                Following a Listing Notice, the JVC shall appoint an internationally recognised firm of investment bankers selected by the Board (which firm shall be reasonably familiar with the markets and sector in which the JVC Group operates and not a member of any Shareholder’s Group), to advise on the viability of obtaining a Listing and act as the managing underwriter in relation to the Listing (the Sponsor). If the Board determines, in consultation with the Sponsor, that a Listing is not viable, then the remaining provisions of this clause 15 shall cease to apply with respect to such Listing Notice. No Shareholder shall be entitled to give another Listing Notice until after six (6) months from the date of the previous Listing Notice. If the Sponsor advises that a Listing is viable, then:

 

(a)                                         the Shareholders will co-operate fully with each other and the JVC and their respective financial and other advisers in relation to the timing of, and actions to achieve, the Listing in accordance with the rules and regulations of the relevant recognised investment exchange or competent listing authority;

 

(b)                                         the Shareholders will provide all necessary assistance and information as the JVC or the Sponsor may reasonably require for the preparation and verification of any prospectus, listing particulars or registration statement in respect of the JVC;

 

(c)                                          if existing Shares are intended to be placed or offered for sale in connection with the Listing, each Shareholder shall have the right (but not the obligation) to place or offer for sale its Shares in connection with the Listing, pro rata to its Equity Proportion;

 

(d)                                         the Shareholders shall execute all such documents and deeds, and do all such acts and things, as the JVC or the Sponsor may request as being reasonably necessary or expedient for the purpose of obtaining the Listing and which are in accordance with market practice at such time (including altering the articles of association or

 

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equivalent constitutional documents of any member of the JVC Group, entering into any agreement to be bound by dealing restrictions, passing such resolutions as may be required, approving the appointment and removal of Directors and the giving of customary warranties (including as to title to any shares) by the parties or Directors) conditioned upon completion of the Listing;

 

(e)                                          in the event that the governing body or listing authority of a stock exchange on which a Listing is sought requires that the franchise or intellectual property licence arrangements between BKAP and the JVC Group (the Business Arrangements) be revised in order to obtain a Listing on such stock exchange and the Parties believe it is in the best interest of the JVC Group to obtain a Listing on such stock exchange at such time, the Parties shall use their respective reasonable efforts to amend the then existing Business Arrangements (including the Master Franchise and Development Agreement) to facilitate the Listing conditioned upon completion of the Listing, while aiming to preserve the financial, development and other material terms contained within the then existing Business Arrangements; and

 

(f)                                           the parties will co-operate to ensure that the Shareholders will continue to be entitled to exercise board appointment and other control rights in relation to the JVC following the Listing (unless market practice at such time clearly indicates that such rights would be undesirable).

 

17.4                                No Shareholder shall be obliged to subscribe for any new securities of the JVC issued pursuant to any placing or offer for sale, including in connection with a Listing.

 

18.                               CONFIDENTIALITY

 

18.1                                BKAP and the Investor shall jointly agree, in writing, the manner, content and timing of the disclosure of any other press releases, announcements or any disclosures whatsoever relating to this Agreement and the transactions herein, except to the extent such release, announcement or disclosure may be required by Law, US or PRC franchise disclosure requirements and/or the US Securities and Exchange Commission (or any foreign equivalent) or other stock exchange on which the shares of a Party or its Affiliates at the time may be registered, in which case the Party required to make the release, announcement or disclosure shall (to the extent legally permitted reasonably practicable) allow the other Parties reasonable time to comment on such release, announcement or disclosure in advance of such issuance or disclosure and if desired, seek a protective order or similar relief, if applicable.

 

18.2                                Except as set forth above, each Party, for itself and its respective Affiliates, officers, employees, counsels, accountants and other authorised representatives, undertakes to keep this Agreement, its provisions and Exhibits, and all information and materials, whether written, oral, electronic or otherwise, obtained or received from the other Parties during the negotiation, preparation and performance of this Agreement, as well as all sensitive business and proprietary information related to any member of the JVC Group or their business operations, strictly confidential (Confidential Information). For the avoidance of doubt, Confidential Information shall not include ordinary-course-of-business information of a nature that is not customarily kept confidential. The Parties and their respective Affiliates further undertake not to use or disclose any Confidential Information except for the purposes hereof.

 

18.3                                Disclosure of information shall not be considered a violation hereof in case:

 

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(a)                                 a prior written consent to the disclosure is obtained from the person which owns the Confidential Information;

 

(b)                                 the relevant information is or becomes generally available to the public other than as a result of a breach hereof;

 

(c)                                  the information is or becomes known or available to the disclosing person or any of its Affiliates on a non-confidential basis from a source (other than the person owning the information or any of its Affiliates) that, to the receiving person’s best knowledge, after due inquiry, it is not prohibited from disclosing such information as a consequence of an obligation owed to the person owning the information or any of its Affiliates;

 

(d)                                 the information is developed by the disclosing person independently and without reference to any Confidential Information of the person owning the information;

 

(e)                                  the information was already lawfully known to the receiving person or its Affiliates as of the date of its disclosure by the other person;

 

(f)                                   the information is required to be disclosed under applicable Laws, US or PRC franchise disclosure requirements and/or the US Securities and Exchange Commission (or any foreign equivalent) or other stock exchange on which the shares of a Party or its Affiliates at the time may be registered, provided that the disclosing person must always previously consult with the person owning the information before the disclosure thereof to the extent legally permitted and not impracticable;

 

(g)                                  in connection with a Listing; provided that any member of the JVC Group will not disclose any information of a nature proprietary to the Burger King System that is not customarily disclosed to investors in comparable situations and which a reasonable prospective investor would not need to know to make an informed investment decision, and provided further that BKAP shall have the right to review and approve any disclosure with respect to the Burger King System; or

 

(h)                                 to a potential acquirer of shares in a member of the JVC Group or Investor, subject to identifying the information as confidential to such person and such person entering into a customary confidentiality agreement providing for third-party beneficiary rights in favour of that member of the JVC Group or Investor, as the case may be, and JVC’s other shareholders or providing that the disclosing party shall be liable to BKAP for any disclosure of Confidential Information by such person in breach of its confidentiality restrictions.

 

18.4        If a Party becomes compelled in any Claim or is requested by a competent Authority to make any disclosure that is prohibited or otherwise constrained hereby, it shall provide the other Parties (to the extent legally permitted and not impracticable) with reasonably prompt notice of such compulsion or request so that it may seek (at its sole cost) an appropriate protective order or other appropriate remedy or waive compliance with the provisions hereof. In the absence of a protective order or other remedy, such Party may disclose that portion (and only that portion) of the Confidential Information that, based upon advice of such Party’s counsel, such Party is legally required or compelled to disclose or that has been requested by such Authority; provided, however, that such person shall use commercially reasonable efforts to obtain reliable assurance that confidential treatment will be accorded by any person to whom any Confidential Information is so disclosed.

 

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18.5        The confidentiality obligations undertaken herein shall be valid and enforceable against the Parties until five (5) years after the later to occur of the termination of this Agreement in accordance with its terms or such Party ceasing to be a Shareholder, provided that the confidentiality obligations with respect to Confidential Information relating to the Burger King System that is of a proprietary, trade secret nature shall continue indefinitely.

 

19.                               TAX MATTERS

 

19.1        Each of the Shareholders agrees to provide such information, and to co-operate to such extent, as may be reasonably requested in connection with the making of any returns, claims, or elections for taxation purposes (i) by JVC or any other member of the JVC Group in relation to the taxation affairs of the JVC Group or (ii) by any Shareholder in relation to the taxation affairs of any member (or former member) of its Group.

 

19.2                        Circular 698 Tax Matters.

 

(a)                                 Filing of Circular 698 Returns. BKAP shall use commercially reasonable efforts to timely file, or cause to be timely filed, all information and Tax Returns that are due under PRC Law (including, without limitation, pursuant to PRC Circular 698) in connection with the transactions hereunder (the Circular 698 Returns), and such Circular 698 Returns shall be true, accurate and complete in all material respects. Within ten (10) Business Days of filing the Circular 698 Returns, BKAP shall provide the Investor with final, accurate copies of all such Circular 698 Returns that were filed.

 

(b)                                 Assessment of Circular 698 Taxes. BKAP shall provide the Investor with accurate copies of any official assessments of the PRC Tax authorities with respect to the Circular 698 Returns within ten (10) Business Days of receipt thereof, and BKAP shall timely pay, or cause to be timely paid, all Taxes due and payable with respect to such official assessments.

 

(c)                                  BKAP Tax Contest. BKAP shall notify the Investor within ten (10) Business Days upon receipt by BKAP or any of its Affiliates of notice of any pending or threatened PRC Tax audit, assessment or other review affecting the Circular 698 Returns (a BKAP C698 Claim), and BKAP or such Affiliate shall keep the Investor reasonably informed on the status of any such BKAP C698 Claim.

 

19.3                        Tax Indemnity

 

(a)                                 Subject to the limitations set forth in clause 6.5, BKAP hereby covenants with the Investor to indemnify the Investor and the JVC Group and to hold each of the foregoing persons harmless against any liability of the JVC Group to make or suffer an actual payment of Tax and all Losses which have been actually incurred or suffered (including all Losses incurred or suffered at any future time after such Losses have been actually incurred or suffered) by any JVC Group member in connection with such liability (determined on a net basis taking into account any actual financial benefit that such JVC Group member has received as a result of such Tax liability):

 

(i)                  arising in respect of, by reference to or in consequence of any income, profits or gains earned, accrued or received in respect of any time prior to the Closing Date to the extent that such JVC Group member either retains the

 

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benefit of such income, profit or gain at the Closing Date, or such income, profit or gain has been expended or distributed by such JVC Group member; or

 

(ii)               arising out of any failure, whether intentional or not, by such JVC Group member to comply with any applicable laws of the PRC or of any other applicable jurisdiction relating to Tax, occurring or arising from any fact, event or matter that occurred at any time prior to the Closing Date; or

 

(iii)            properly attributable to BKAP including any Tax payable pursuant to PRC Circular 698,

 

save to the extent that provision in respect of the liability to Tax has been made in the Last Accounts.

 

(b)                                 For the purpose of clause 19.3, there shall be treated as an actual payment of Tax equal to the amount of Tax saved in consequence of any use or set off of

 

(i)                  any relief arising to any JVC Group member in respect of an event occurring or period ending after Closing; or

 

(ii)               any relief arising to the Investor,

 

in circumstances where, but for such use or set off, such JVC Group member would have been liable to make an actual payment of Tax. Any reference to an event which occurs or occurred on or before Closing shall include a series or combination of events the first of which occurred on or before Closing.

 

(c)                                  Subject to the limitations set forth in clause 6.5, BKAP shall pay to the Investor or, at the Investor’s direction, the JVC (provided that in the Investor’s reasonable opinion they would be necessary for the purpose of the JVC’s operations) the full amount claimed under clause 19.3 (such amount shall be grossed up to include all Taxes, interests and penalties arising thereof) on or before the date which is forty-five (45) Business Days after written demand is made therefore.

 

(d)                                 BKAP hereby covenants with the Investor, subject to the limitations set forth in clause 6.5, to indemnify the Investor, their Affiliates and the JVC Group from, and to hold each of the foregoing persons harmless against any, Losses incurred by either of the foregoing persons at any time as a result of BKAP’s or its applicable Affiliate’s failure to make any filings or reports which are required to be made in connection with the transactions contemplated hereunder and the Equity Transfers pursuant to the applicable tax laws, including the prevailing PRC Corporate Income Tax Law.

 

20.                               NON-COMPETITION; OUTSIDE ACTIVITIES

 

20.1        The Investor and any of its Affiliates (including, for the avoidance of doubt, each of its shareholders) shall not at any time acquire or own any ownership interest in, consult, open, operate or act as a franchisee for any Competitor whether directly or indirectly, with the exception of purely financial investments in publicly listed companies without the ability to control the strategy and business of such companies, not to exceed 5% of the outstanding equity of such publicly-listed company. For the sake of clarity, neither the operations of TAB Gida or its Affiliates as conducted on the date hereof (nor the direct or indirect investment in

 

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TAB Gida by the Kurdoğlu Family, KRD Kurdoğlu and Cartesian (or any of their respective Affiliates)) shall be prohibited by this clause 20.

 

20.2           Nothing in this Agreement shall prevent the Investor from owning any ownership interests in, opening, operating or acting as a franchisee for any fast food burger restaurants under the Burger King System either through JVC Group or otherwise.

 

20.3           The obligations set out in clause 20.1 shall, with respect to any given party to which they apply, terminate twelve (12) months after the earlier of (i) the date on which neither it nor any of its Affiliates are shareholders in the JVC and (ii) the termination of this Agreement for any reason; provided that Cartesian’s obligation under this clause 20.3 shall terminate earlier if approved by BKAP in writing (which approval shall not be unreasonably withheld).

 

20.4           The Shareholders expressly acknowledge that,  (i)  subject to compliance with clause 20.1, the Investor and its respective Affiliates are permitted to have, and may presently or in the future have, investments or other business relationships with entities engaged in other, complementary or competing lines of business other than through the JVC Group (each, an Other Business), (ii) subject to compliance with clause 20.1, the Investor and its Affiliates may have or may develop a strategic relationship with businesses that are and may be competitive or complementary with the JVC Group, (iii) subject to compliance with clause 20.1, neither the Investor nor its respective Affiliates shall be prohibited by virtue of its investment in JVC from pursuing and engaging in any such activities, (iv) neither the Investor nor its respective Affiliates shall be obligated to inform the JVC or any of its Subsidiaries of any such opportunity, relationship or Investment, (v) the other Shareholders will not acquire or be entitled to any interest or participation in any Other Business as a result of the participation therein of the Investor and/or its Affiliates, and (vi) the involvement of any equityholder of the Investor and/or its Affiliates in any Other Business will not constitute a conflict of interest by such Persons with respect to the JVC or its Shareholders or any of its Subsidiaries. Without limiting the foregoing, nothing contained in this clause 20.4 shall limit the obligations of the Investor under clause 17 or 20.1.

 

21.                               REGULATORY MATTERS

 

21.1           The Shareholders shall co-operate with each other to ensure that all information required in connection with any notification or filing or request from a regulatory authority made in respect of this Agreement, or the transactions contemplated by it, is supplied properly, accurately and timely.

 

21.2           If any material Regulatory Action is taken or threatened, the Shareholders shall timely meet to discuss (i) the situation and the action to be taken as a result and (ii) whether any modification to the terms of this Agreement (or any agreement entered into pursuant to this Agreement) should be made in order that any requirement (whether as a condition of giving any approval, clearance or consent or otherwise) of any regulatory authority may be reconciled with the business arrangement contemplated by this Agreement. The Parties shall co-operate to give effect to any agreed modifications.

 

22.                               TRANSFERS OF SHARES

 

22.1           Prior to a Listing or the fourth anniversary of the Closing Date, whichever is the earlier, no Shareholder shall at any time, directly or indirectly, effect a Transfer of Shares other than:

 

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(a)                                 a Transfer of Shares held by BKAP or the Investor to an Affiliate of BKAP or the Investor, respectively, provided that, in each case, the transferring Shareholder and the transferee shall provide an undertaking that, upon the transferee ceasing or proposing to cease to be an Affiliate of the transferring Shareholder, the transferee shall immediately transfer all of its interest in any Shares to the transferring Shareholder or to another member of the transferring Shareholder’s Group (an Intra- Group Transfer);

 

(b)                                 a Transfer to a Third Party Purchaser (after compliance with clauses 23 and 24):

 

(i)                 with the prior written consent of the non-transferring Shareholders at their sole discretion;

 

(ii)                  for Shares representing not more than (This material has been omitted pursuant to a request for confidential treatment, and such material has been filed separately with the Commission.) of Shares held by that Shareholder and is effected after the second anniversary but prior to the third anniversary of the Closing Date;

 

(iii)                   for Shares representing not more than (This material has been omitted pursuant to a request for confidential treatment, and such material has been filed separately with the Commission.)  of the Shares held by that Shareholder and is effected after the third anniversary but prior to the fourth anniversary of Closing Date; or

 

(iv)                  for Shares representing up to 100% of the Shares held by that Shareholder and is effected after the fourth anniversary of the Closing Date in accordance with and as required or permitted by clauses 23 and 24.

 

22.2        Notwithstanding any other provision of this Agreement, no Shareholder may, without the prior written consent of the other Shareholder, effect a Transfer of its Shares at any time:

 

(a)                                 when it is not in compliance in all material respects with any of its material obligations hereunder;

 

(b)                                 to a Competitor;

 

(c)                                  before the pre-emption and tag-along rights contained in clauses 23 and 24 have first been exhausted (other than an Intra-Group Transfer);

 

(d)                                 to a Third Party Purchaser when, if BKAP is the Non-Transferring Shareholder, BKAP has not yet received the results of a background check on the transferee and all principals thereof or such results reveal (i) prior or current criminal activity which would, or would reasonably be expected to, rise to the level of a felony offense; (ii) evidence of significant moral turpitude or reputational issues; or (iii) that the Third Party Purchaser or any of the principals thereof has voluntarily disclosed or admitted to, or has otherwise been found by a court of competent jurisdiction to have violated, attempted to violate, aided or abetted another party to violate, or conspired to violate, any of the Anti-Corruption Laws.

 

22.3                        The provisions of Schedule 9 shall apply in relation to any Transfer of Shares.

 

22.4        Notwithstanding anything to the contrary, the provisions of this clause 22 shall apply to any Transfer of equity securities of the Investor,  mutatis mutandis, provided that if (a) such Transfer would require the consent of BKAP pursuant to clause 22.1 (other than by operation of this clause 22.4), (b) the transferee will not have the right to appoint a member of the Board or the board of directors (or similar governing body) of the Investor, and (c) such

 

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transfer will not result in a Change of Control, then notwithstanding anything to the contrary

 

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contained herein, BKAP’s consent under clause 22.1 shall not be required with respect to such Transfer (it being understood and agreed, however, that the foregoing will not impact BKAP’s rights under clauses 22.2(b) and (d), which will continue to apply to such Transfer).

 

23.                               RIGHT OF FIRST REFUSAL

 

23.1        If a Shareholder (the Transferor) wishes to accept a bona fide offer in writing (the Offer) to purchase all or a portion of its Shares made by a third party that is not an Affiliate of the Transferor (in each case, a Third Party Purchaser), it shall serve on the other Shareholders (each, a Non-Transferring Shareholder and collectively, the Non-Transferring Shareholders) a notice in writing (the Transfer Notice) offering to transfer all of the Transferor’s Shares to the Non-Transferring Shareholders in proportion (as nearly as may be) to the number of Shares held by the Non-Transferring Shareholders as at the date of the Transfer Notice and at the same price as set out in the Offer and on terms which are no less favourable than those contained in the Offer. The Transfer Notice shall:

 

(a)                                 state the number of Shares (the Relevant Sale Securities) which the Transferor is proposing to transfer and the number of Relevant Sale Securities offered to each Non- Transferring Shareholder (each a Proportionate Entitlement) (and for the avoidance of doubt if there is only one Non-Transferring Shareholder that Shareholder will be offered all of the Relevant Sale Securities);

 

(b)                                 state the price, which must be cash, at which the Transferor desires to Transfer the Relevant Sale Securities (the Sale Price);

 

(c)                                  give details of the Third Party Purchaser to whom the Transferor wishes to Transfer the Relevant Sale Securities;

 

(d)                                 include any other material terms of the proposed Transfer (the Transfer Offer Terms);

 

(e)                                  state the date (being a reasonably appropriate number of days after the date of service of the Transfer Notice) (the Reference Date) and place for completion of the Transfer in the event that the right of first refusal under clause 23.2 hereof is exercised; and

 

(f)                                   be irrevocable, once given.

 

23.2        Each of the Non-Transferring Shareholders shall be entitled, within twenty (20) Business Days after receipt of a Transfer Notice (the Acceptance Period), to give notice in writing (the Purchase Notice) to the Transferor of:

 

(a)                                 its wish to purchase a Proportionate Entitlement of the Relevant Sale Securities offered to it by the Transferor at the relevant portion of the Sale Price and on the Transfer Offer Terms, to itself or to its Affiliate (in accordance with clause 21.1(a)); and

 

(b)                                 if applicable, its wish to apply for Relevant Sale Securities in excess of its Proportionate Entitlement by specifying in its Purchase Notice the number of Relevant Sale Securities in excess of its Proportionate Entitlement which it is prepared to purchase.

 

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23.3           If there is more than one Non-Transferring Shareholder who serves a Purchase Notice, the Relevant Sale Securities shall be allocated to such Non-Transferring Shareholders in proportion as nearly as may be to their respective Proportionate Entitlements. If any Non- Transferring Shareholder fails to serve a Purchase Notice before the expiry of the Acceptance Period, it shall be deemed to have declined the offer by the Transferor constituted in the Transfer Notice. For the avoidance of doubt, if the Third Party Purchaser in clause 23.1(c) happens to be a Shareholder, such Third Party Purchaser and the Non-Transferring Shareholder(s) having served a Purchase Notice as provided in this clause 23.3 shall purchase the Relevant Sale Securities in proportion, as close as possible, to their respective Proportionate Entitlements.

 

23.4        If any Non-Transferring Shareholder has applied for less than its Proportionate Entitlement:

 

(a)                                 the excess shall be allocated (as nearly as may be) to each Non-Transferring Shareholder who has applied for Relevant Sale Securities in excess of its Proportionate Entitlement, pro rata to the number of Shares held by the Non- Transferring Shareholders who have so applied as at the date of the Transfer Notice; and

 

(b)                                 any allocation made under this clause shall not, however, result in any Non- Transferring Shareholder being allocated more Relevant Sale Securities than it has applied for; any remaining excess shall be apportioned between the other Non- Transferring Shareholders by applying this clause excluding each Non-Transferring Shareholder who has been allocated the maximum it applied for.

 

23.5        If a Purchase Notice is served for all of the Relevant Sale Securities in accordance with the requirements of clause 23.2, then, subject only to any required Consents and compliance with applicable Law (including anti-trust requirements, if any):

 

(a)                                 the relevant Non-Transferring Shareholder(s) shall be bound to complete or procure the completion of the transfer of the Relevant Sale Securities at the Sale Price and upon the Transfer Offer Terms on the Reference Date and at the place stated in the Transfer Notice; and

 

(b)                                 the Transferor shall be bound, on receipt of payment of the Sale Price, to transfer the Relevant Sale Securities to the Non-Transferring Shareholder(s) or its Affiliate as the Non-Transferring Shareholder may direct, on the Reference Date and at the place stated in the Transfer Notice.

 

23.6        If any Consent has not been obtained by the Reference Date, completion of the Transfer will take place within ten (10) Business Days of the date on which of the last Consent to be obtained is obtained. If any Consent has not been obtained within ninety (90) days after the Reference Date, the Transfer Notice shall lapse and have no further effect.

 

23.7                        If:

 

(a)                                 at the end of the Acceptance Period, none of the Non-Transferring Shareholders has served a Purchase Notice or Purchase Notices have been served by Non-Transferring Shareholders for less than all of the Relevant Sale Securities; or

 

(b)                                 any of the Non-Transferring Shareholders which has served a Purchase Notice fails to proceed with the completion of the Transfer in accordance with clause 23.5 and any

 

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other Non-Transferring Shareholders do not fulfil the defaulting Shareholders obligations,

 

23.8        (a ROFR Longstop Event), then the Transferor shall be at liberty thereafter to (i) withdraw its Transfer Notice and retain all the Relevant Sale Securities or (ii) transfer all the Relevant Sale Securities at any time within sixty (60) days of the ROFR Longstop Event to the person specified in the Transfer Notice on terms not more favourable than those offered to the Non-Transferring Shareholders under this clause 23. The Transferor shall indicate whether it has elected for option (i) or option (ii) by notice to the Non-Transferring Shareholders, within ten (10) Business Days of the ROFR Longstop Event. If it does not so elect, it shall be deemed to have elected for option (i).

 

23.9        For the avoidance of doubt, this clause 23 shall not apply in case of Intra-Group Transfers.

 

24.                               TAG ALONG RIGHT

 

24.1           If any of BKAP or the Investor, prior to a Listing, desires to Transfer all or any portion of its Shares on a bona fide arm’s length sale to a Third Party Purchaser in accordance with clause 23.7, it shall not complete the Transfer unless it ensures that the Third Party Purchaser offers to buy, on the same terms (including price per Share) that apply to the purchase of the Relevant Sale Securities, from each Non-Transferring Shareholder the Tag- Along Pro Rata Shares of the Shares to be sold. Non-Transferring Shareholders’ Tag-Along Pro Rata Shares shall mean the ratio that (i) the sum of the number of Shares held by Non- Transferring Shareholders bears to (ii) the sum of the total number of then issued and outstanding Shares of the JVC. The offer shall:

 

(a)                                 be irrevocable and unconditional (except for any conditions which apply to the proposed Transfer of the Relevant Sale Securities);

 

(b)                                 describe all material terms and conditions (including terms relating to price, time of completion and conditions precedent) agreed between the selling Shareholders and the Third Party Purchaser;

 

(c)                                  be governed by the laws of Hong Kong; and

 

(d)                                 be open for acceptance by the other Shareholders during a period of not less than ten (10) days after receipt of the offer.

 

24.2        Each Non-Transferring Shareholder shall, within ten (10) days following the delivery of the offer, deliver a written notice to the Transferring Shareholder, specifying its election and the number of Shares to be sold to the Third Party Purchaser. Failure of a Non- Transferring Shareholder to deliver its notice within such period shall be deemed a waiver by that Non-Transferring Shareholder of its rights under this clause 24. Such notice shall be irrevocable and shall only be subject to no other Non-Transferring Shareholder exercising its right of first refusal under clause 23 within the Acceptance Period.

 

24.3        If a Non-Transferring Shareholder accepts an offer made in accordance with clause 24.1, the Transfer shall be conditional upon completion of the Transferor’s Transfer to the Third Party Purchaser and shall be completed at the same time as that Transfer.

 

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24.4        The Non-Transferring Shareholder will Transfer its Shares to the Third Party Purchaser at the time and place at which the Transferor shall Transfer its Relevant Sale Securities to the Third Party Purchaser. The Non Transferring Shareholder will not be obligated to Transfer any Shares to the Third Party Purchaser if the Transferor defaults in its obligation to Transfer its Relevant Sale Securities to the Third Party Purchaser.

 

24.5        In the event that the material terms or conditions of the Transfer to the Third Party Purchaser set forth in offer shall be modified, or the Third Party Purchaser shall refuse to purchase the Shares from the Non Transferring Shareholder, the Transferor shall not Transfer to the Third Party Purchaser any Relevant Sale Securities without again complying with all of the terms and provisions of this clause. In addition, any Relevant Sale Securities that are not Transferred by the Transferor to the Third Party Purchaser in compliance with this clause prior to the date which is ninety (90) Business Days following the termination of the rights of the Non-Transferring Shareholder pursuant to clause 24.2 may not be Transferred by the Transferor without complying again with the provisions of this clause 24 and clause 23.

 

24.6        For the avoidance of doubt, this provision shall not apply in case of Intra-Group Transfers.

 

24.7        Notwithstanding anything to the contrary, the provisions of this clause 24 shall apply to any Transfer of equity securities of the Investor, mutatis mutandis, provided that if such Transfer would result in a Change of Control of the Investor, then at the option of BKAP, BKAP’s Tag Along Pro Rata Share shall mean 100% of BKAP’s Shares.

 

25.                               DEED OF ADHERENCE

 

25.1        The Parties will procure that it shall be a condition of any Transfer or issue of Shares that if the transferee or subscriber (the Acquirer) is not already a party to this Agreement whether as an original party or by having executed a Deed of Adherence, the Acquirer shall:

 

(a)                                 where the Acquirer will after such Transfer or issue of Shares hold 25% or more of the issued share capital of the JVC (disregarding any shares issued or transferred pursuant to clause 16 or pursuant to a management incentive plan approved by the Board), enter into and deliver to JVC, BKAP, the Investor and any other Shareholders a New Party Deed of Adherence in the form set out in Part B Schedule 7 in a legally binding manner before it becomes the holder of such Shares; or

 

(b)                                 where the Acquirer will not after such Transfer or issue of Shares hold 25% or more of the issued share capital of the JVC (disregarding any shares issued or transferred pursuant to clause 16 or pursuant to a management incentive plan approved by the Board), enter into a shareholders’ agreement with the JVC, BKAP, the Investor and any other Shareholders on terms to be agreed between the parties thereto. For the avoidance of doubt, the Parties agree that no rights to vote in respect of any Reserved Matter or to appoint Directors to the Board shall be granted to such an Acquirer under its shareholders’ agreement.

 

25.2        An Acquirer who enters into a Deed of Adherence shall be designated by the Deed of Adherence as a Party and a Shareholder and shall also be designated as:

 

(a)                                 BKAP, if the Transfer is by BKAP to a Third Party Purchaser that acquires Shares representing at least 25% of the issued share capital of the JVC (disregarding any shares issued or transferred pursuant to clause 16  or pursuant to a management

 

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incentive plan approved by the Board), or the Transfer, issue or allotment is to a member of BKAP’s Group.

 

(b)                                 the Investor, if the Transfer is by the Investor to a Third Party Purchaser that acquires Shares representing at least 25% of the issued share capital of the JVC (disregarding any shares issued or transferred pursuant to clause 16 or pursuant to a management incentive plan approved by the Board), or the Transfer, issue or allotment is to a member of the Investor’s Group.

 

For the avoidance of doubt, the foregoing shall in no event be construed as creating joint and several liability between Third Party Purchaser and either BKAP or the Investor, as the case may be, for the obligations set forth in this Agreement.

 

25.3        A person who has entered into a Deed of Adherence pursuant to this Agreement shall have the benefit of and be subject to the burden of all the provisions of this Agreement as if he were party to it in the capacity designated in the Deed of Adherence, and this Agreement shall be interpreted accordingly. A party may be designated in a Deed of Adherence in more than one capacity.

 

26.            TERMINATION

 

26.1 Unless terminated earlier in accordance with clause 4.4 or 26.4, this Agreement shall remain valid and in force with a fixed term until 31 December 2031, and shall thereafter automatically renew for additional 5 year periods unless terminated by a Shareholder with a six-month notice period with effect as of 31 December 2031 or the end of any of the subsequent five-year periods.

 

26.2  Without prejudice to clause 17.3(f), clauses 11, 12, 13, 15.2, 15.3, 17, 22, 23, 24 and 25 shall terminate and cease to be of further legal effect upon the consummation of a Listing.

 

26.3        Without prejudice to clause 17.3(f) or clause 26.2, upon the consummation of a Listing, the Parties shall cooperate in good faith to amend this Agreement (taking into account the termination of the provisions enumerated in clause 26.2) to comply with applicable listing rules and to reflect the then-existing relationship among the Parties.

 

26.4        This Agreement:

 

(a)           may be terminated by written consent of all of the Parties hereto; and

 

(b)                                 shall be terminated with respect to any Shareholder, automatically upon the date such Shareholder ceases to be a shareholder of the JVC by the transfer of all of its Shares in the JVC in accordance with the terms of this Agreement.

 

27.            WINDING UP

 

27.1        Prior to any resolution for winding up the JVC being passed, the Shareholders shall seek to agree on a suitable basis for dealing with the JVC’s interests and assets in such event. For this purpose:

 

(a)                                 the Shareholders shall co-operate (but without any obligation to provide any additional funding or guarantee) with a view to enabling all existing obligations of the

 

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JVC to be completed insofar as its resources allow. The Shareholders shall consult together with a view to JVC novating or re-allocating outstanding contracts within the JVC Group’s business in a suitable manner;

 

(b)                                 JVC shall not assume any new contractual obligation for the supply of products or services;

 

(c)                                  unless the Shareholders agree otherwise, the Shareholders shall ensure that the JVC is wound up as soon as practicable; and

 

(d)                                 each Shareholder shall promptly deliver up to each other Shareholder, and JVC shall as soon as reasonably practicable deliver up to each Shareholder, all drawings, notes, copies or other representations of confidential information proprietary to and/or originating from that other Shareholder or its Group.

 

This Agreement shall terminate upon completion of such winding-up except that winding-up shall not affect the obligations of the parties under clause 18 (Confidentiality) which shall remain in full force and effect.

 

27.2        If BKAP ceases or is about to cease to be a Shareholder or to have any of its Subsidiaries as a Shareholder, each Shareholder shall, at the request of that party exercise its powers with a view to ensuring that the JVC’s name (or that of any other relevant member of the JVC Group) is changed so that it no longer includes the name, initials or trade mark, or any reference to the name, initials or trade mark, of the Shareholder making the request.

 

28.            FURTHER ASSURANCES

 

28.1        So far as it is legally able, each Shareholder agrees with the others to exercise all voting rights and powers (direct or indirect) available to it in relation to any person and/or JVC to ensure that the provisions of this Agreement (and the other agreements referred to in this Agreement) are completely and punctually fulfilled, observed and performed and generally that full effect is given to the principles set out in this Agreement.

 

28.2        Each Shareholder shall ensure that its Subsidiaries perform (i) all obligations under this Agreement which are expressed to relate to members of its respective Group and (ii) all obligations under any agreement entered into by any of its Subsidiaries pursuant to this Agreement. The liability of a Shareholder under this clause 28.2 shall not be discharged, or impaired by any amendment to or variation of this Agreement any release of or granting of time or other indulgence to any of its Subsidiaries or any third party or any other act, event or omission which but for this clause would operate to impair or discharge the liability of such Shareholder under this clause 28.2.

 

29.            CLAIMS BY JVC AGAINST SHAREHOLDERS

 

If any member of the JVC Group has or may have any claim against a Shareholder or any member of its Group arising out of any agreement entered into by a Shareholder or any member of that Shareholder’s Group, that Shareholder will ensure that its nominated Directors shall not do anything to prevent or hinder any member of the JVC Group asserting or enforcing the claim against the first mentioned Shareholder and that they shall, if necessary, enable all decisions regarding such claim to be taken by the Directors nominated

 

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by the Shareholders wishing to assert or enforce the claim. This is without prejudice to any right of the defendant Shareholder itself to dispute the claim.

 

30.            INDEPENDENCE OF OBLIGATIONS

 

Subject to any explicit provisions otherwise, the Shareholders shall not be jointly and severally liable with respect to their obligations under this Agreement.

 

31.            NON-ASSIGNMENT

 

No party shall (nor shall purport to) assign, transfer, charge or otherwise deal with all or any of its rights and/or obligations under this Agreement nor grant, declare, create or dispose of any right or interest in it in whole or in part (otherwise than pursuant to a transfer of Shares in accordance with the terms of this Agreement).

 

32.            WAIVER OF RIGHTS

 

No waiver by a party of a failure by any other party to perform any provision of this Agreement operates or is to be construed as a waiver in respect of any other failure whether of a like or different character.

 

33.            AMENDMENTS

 

33.1        No amendment of this Agreement (or of any of the documents referred to in it) shall be valid unless it is in writing and duly executed by or on behalf of all the parties to it.

 

33.2        In the event that the governing body or listing authority of a stock exchange on a Listing is sought requires certain amendments to this Agreement to be made in order for the JVC Group or any part thereof to be eligible for admission to trading on that stock exchange, the Parties shall negotiate in good faith to amend this Agreement accordingly and shall use reasonable endeavours to ensure that the intended effect of the provisions of this Agreement is retained to the extent possible under such circumstances.

 

34.            INVALIDITY

 

Each of the provisions of this Agreement is severable. If any such provision is held to be or becomes invalid or unenforceable in any respect in any jurisdiction it shall have no effect in that respect, and the Parties shall then use all reasonable efforts to replace the invalid or unenforceable provision by a valid provision the effect of which is as close as possible to its intended effect as possible.

 

35.            NO PARTNERSHIP OR AGENCY

 

Nothing in this Agreement (or any of the arrangements contemplated by it) is or shall be deemed to constitute a partnership between the Shareholders nor, except as may be expressly

 

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set out in it, constitute any party the agent of the other for any purpose. Unless the Shareholders agree otherwise in writing, none of them shall (i) enter into any contract or commitment with third parties as agent for any member of the JVC Group or for any of the other Shareholders or (ii) describe itself as such an agent or in any way hold itself out as being such an agent.

 

36.            ANNOUNCEMENTS

 

36.1        No Party (nor any member of its Group) shall make any announcement or issue any circular in connection with the existence or subject matter of this Agreement without the prior written approval of all the Shareholders (such approval not to be unreasonably withheld or delayed).

 

36.2        The restriction in clause 36.1 shall not apply to the extent that any announcement or circular is required by Law, by any stock exchange or any regulatory or supervisory body, whether or not the requirement has the force of law. If this exception applies, the Party making the announcement or issuing the circular shall use its reasonable efforts to consult with the other Party in advance as to its form, content and timing.

 

37.            COSTS

 

Unless expressly provided otherwise in this Agreement, each of the Shareholders shall be responsible for its own costs, charges and expenses (including taxation) incurred in connection with the Transaction.

 

38.            WHOLE AGREEMENT

 

38.1        This Agreement and the Ancillary Agreements set out the whole agreement between the Parties relating to the Transaction and supersedes any prior agreement (whether oral or written) relating to it. It is agreed that:

 

(a)                                 no Party shall have any claim or remedy in respect of any statement, representation, warranty or undertaking, made by or on behalf of any other Party in relation to the Transaction which is not expressly set out in this Agreement; and

 

(b)                                 except for any liability in respect of a breach of this Agreement, no Party shall owe any duty of care or have any liability in tort or otherwise to any other party in relation to the Transaction,

 

provided that this clause shall not exclude any liability for (or remedy in respect of) fraudulent misrepresentation.

 

38.2        Each Party represents to the others that there is no agreement or arrangement between itself and any other Party or Parties pertaining to any of the matters set forth in this Agreement save for the Transaction Documents and the collaboration agreement entered into between KRD Kurdoğlu and Cartesian on or about the date hereof in relation to governance matters of the Investor.

 

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39.            CONFLICT WITH ARTICLES

 

39.1        If the provisions of this Agreement conflict with the Memorandum and Articles or JVC’s other constitutional documents, the provisions of this Agreement shall prevail as between the Shareholders. The Shareholders shall (i) exercise all voting and other rights and powers available to them to give effect to the provisions of this Agreement and (ii) (if necessary) ensure that any required amendment is made to the Memorandum and Articles or other constitutional document of the JVC.

 

39.2        JVC is not bound by any provision of this Agreement to the extent that it constitutes an unlawful fetter on any statutory power of the JVC. This shall not affect the validity of the relevant provision as between the Shareholders or the respective obligations of the Shareholders as between themselves under clause 39.1.

 

40.            NOTICES

 

40.1        Any notice in connection with this Agreement shall be in writing in English and delivered by hand, fax, registered post or courier using an internationally recognised courier company. A notice shall be effective upon receipt and shall be deemed to have been received (i) at the time of delivery, if delivered by hand, registered post or courier or (ii) at the time of transmission if delivered by fax provided that, in either case, where delivery occurs outside Working Hours, notice shall be deemed to have been received at the start of Working Hours on the next following Business Day.

 

40.2        The address and fax numbers of the parties for the purpose of clause 40.1 are as set forth in Schedule 8.

 

41.            SETTLEMENT OF DISPUTES AND ARBITRATION

 

41.1        If any dispute, controversy or claim arises out of or in connection with this Agreement and/or any other Transaction Document, including the breach, termination or invalidity thereof (Dispute), any party may serve written notice on the other Parties that a Dispute has arisen (Notice of Dispute).

 

41.2        The Parties shall use reasonable efforts for a period of thirty (30) days from the date on which the Notice of Dispute is served by one Party on the other Parties (or such longer period as may be agreed in writing between the Parties) to resolve the Dispute on an amicable basis.

 

41.3        If the Dispute is not resolved within the time period referred to in clause 41.2, the Dispute shall be referred to the respective chief executives (or, to the extent such position does not exist, executive vice presidents) of the Ultimate Holding Companies of the Shareholders who shall attempt to resolve the Dispute. If the respective chief executives (or, to the extent such position does not exist, executive vice presidents) of the Ultimate Holding Companies of the Shareholders fail to resolve the Dispute within thirty (30) days (or such longer period as may be agreed in writing between the Parties), the Dispute shall be resolved in accordance with clause 41.4 below.

 

41.4        Subject to clauses 41.1 to 41.4, the Dispute shall be finally settled by arbitration under the Rules of Arbitration of the International Chamber of Commerce by three arbitrators appointed in accordance with the said Rules. The place of arbitration shall be Hong Kong and

 

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the language to be used in the arbitral proceedings shall be English, save that all documents filed in the arbitration do not have to be translated from their original language unless expressly ordered by the tribunal in consultation with the Parties.

 

42.            COUNTERPARTS

 

This Agreement may be executed in any number of counterparts, and by each party on separate counterparts. Each counterpart is an original, but all counterparts shall together constitute one and the same instrument. Delivery of a counterpart of this Agreement by e-mail attachment or telecopy shall be an effective mode of delivery.

 

43.            NO THIRD PARTY ENFORCEMENT RIGHTS

 

Except as expressly stipulated in this Agreement, this Agreement shall not grant any right to persons who are not a party to this Agreement. To the extent this Agreement grants expressly rights to third parties (other than the JVC), the parties to this Agreement shall be permitted to change or exclude such rights at any time without the consent of the respective third party; provided that if and to the extent that this Agreement grants any third-party right to the JVC, such right shall not be waived, changed or excluded by the JVC without the prior consent of both the Investor and BKAP (and the Investor and the JVC shall procure that the JVC shall not waive, change or exclude any right in contravention of this clause 43).

 

44.            GOVERNING LAW

 

This Agreement and any non-contractual obligations arising out of or in connection with this Agreement shall be governed by, and interpreted in accordance with, Hong Kong law.

 

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SCHEDULE 1 - A

BK CHINA BUSINESS

 

Part A

Structure Chart

 

 

Part B

 

Burger King Restaurants

 

Restaurants owned by BK Shanghai:

 

(This material has been omitted pursuant to a request for confidential treatment, and such material has been filed separately with the Commission.)

 

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Restaurants owned by PRC Joint Ventures:

 

(This material has been omitted pursuant to a request for confidential treatment, and such material has been filed separately with the Commission.)

 

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SCHEDULE 1 — B

 

WARRANTIES ON BK CHINA BUSINESS

 

Part A: General/Commercial

 

1.                      THE SELLER AND THE SALE EQUITY

 

1.1.                          Details of JVC; BKAP Subsidiaries; Information Provided

 

(a)                 Each BKAP Subsidiary is validly incorporated, in existence and duly registered under the laws of its jurisdiction of incorporation and has full power under its memorandum or articles of association, by-laws or equivalent constitutional documents to conduct its business as conducted at the date of this Agreement.

 

(b)                 Except as set out or contemplated in this Agreement or as otherwise set forth in the Disclosure Schedule, the shares or equity interests in each of the BKAP Subsidiaries constitute the whole of the issued share capital of the relevant BKAP Subsidiary and they are fully paid or properly credited as fully paid and BKAP is or will at Closing be (i) the sole beneficial owner of such shares or equity interests free from all Third Party Rights and (ii) entitled to transfer or procure the transfer of such shares or equity interests on the terms of this Agreement. The information on each of the BKAP Subsidiaries provided in the Due Diligence CD is in all material respects true, accurate, complete and not misleading as at the date of this Agreement.

 

(c)                  HK Development has, directly or indirectly, full legal and beneficial ownership of all of the equity interests in each of BK Beijing and BK Shenzhen free from Third Party Rights. HK Development owns 30% of the equity interests in BK Guangzhou free from Third Party Rights. Upon the Completion of the Equity Transfers and the BKHK Transfer, the ownership structure of the JVC shall be as set forth in Schedule 1-A, Part A of the Agreement.

 

(d)                 Except as set forth in the Disclosure Schedule, the total registered capital for each BKAP Subsidiary has been fully paid in, and there is no liability to pay any additional contributions in respect of the shares or equity interests in each BKAP Subsidiary.

 

(e)                  Except as set forth in the Disclosure Schedule, there is no agreement or obligation requiring the increase, reduction, contribution, issuance, transfer or pledge, or of the grant to any person of the rights to require the issuance, transfer or pledge, of the registered capital of any BKAP Subsidiary.

 

1.2.                          Due Diligence Matters

 

(a)                 Other than Burger King (Shanghai) Commercial Consulting Company Ltd., BKAP does not hold any shares, interests or equity in any other person in connection with the BK China Business that is not being contributed, directly or indirectly, to the JVC under the Agreement.

 

(b)                 HK Development has made all filings and reports with the Governmental Entities in the PRC which are required to be made by HK Development in connection with the sale and transfer of the Mainstreet Equity Interests to HK Development.

 

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2.                      FINANCIAL MATTERS

 

2.1                               The Accounts. The Last Accounts give a true and fair view of the state of affairs of each BKAP Subsidiary and its assets and liabilities as at the Last Accounts Date and of the results thereof for the financial year ended on the Last Accounts Date and:

 

(a)                 the Last Accounts make full provision for or disclose in accordance with the relevant generally accepted accounting principles all material liabilities (whether actual, contingent or disputed and including finance lease commitments and pension liabilities), all material outstanding capital commitments and all material bad or doubtful debts of each BKAP Subsidiary; and

 

(b)                 the results shown by the Last Accounts were not affected by any extraordinary or exceptional item or by any other factor rendering such results for all or any of those periods unusually high or low.

 

2.2                               Management Accounts. The Management Accounts of each BKAP Subsidiary for all periods ended after the Last Accounts Date to which they relate were properly prepared in all material respects using accounting policies consistent with those adopted in the preparation of the Accounts. On the basis of the accounting bases, practices and policies used in their preparation and having regard to the purpose for which they were prepared, the Management Accounts are not misleading in any material respect.

 

2.3                               Position since Last Accounts Date. Since the Last Accounts Date:

 

(a)                 there has been no Material Adverse Change;

 

(b)                 each BKAP Subsidiary has carried on business in the ordinary and usual course and no BKAP Subsidiary has made or agreed to make any payment other than routine payments in the ordinary and usual course of trading;

 

(c)                  no BKAP Subsidiary has declared, authorised, paid or made any dividend or other distribution (whether in cash, stock or in kind) nor has it reduced any paid-up share capital (except for any dividends provided for in the Accounts);

 

(d)                 no BKAP Subsidiary has increased or reduced, or agreed to increase or reduce, its registered capital;

 

(e)                  no BKAP Subsidiary has entered into any material agreement outside the ordinary course of business, other than in connection with the Equity Transfers and the Agreement; and

 

(f)                   no BKAP Subsidiary has acquired or disposed of, or agreed to acquire or dispose of, any asset having a value in excess of US$1,000,000.

 

2.4                               No undisclosed liabilities; Financial Debt. There are no actual or contingent liabilities (including with respect to indebtedness) of any BKAP Subsidiary except for (i) liabilities disclosed or provided for in the Last Accounts; (ii) liabilities incurred in the ordinary and usual course of business since the Last Accounts Date which, taken together, do not result in a Material Adverse Change or (iii) liabilities disclosed elsewhere in this Agreement.

 

2.5                               Past transactions in accordance with applicable laws. No BKAP Subsidiary has issued any dividend to BKAP in violation of applicable Law.

 

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2.6                               Amounts due to Affiliates. Except for amounts payable to BKAP in the ordinary course of business pursuant to commercial contracts that have been disclosed to the Investor prior to the date hereof, immediately after Closing, there will be no outstanding amounts owed by the BKAP Subsidiaries to BKAP or it Affiliates.

 

3.                      REGULATORY MATTERS

 

3.1                               Licences. Each BKAP Subsidiary has obtained all material licences, permissions, authorisations (public or private) and consents (together, Approvals) required for maintaining its corporate existence in good standing and required for carrying on its business substantially in the manner in which it is carried on at the date of this Agreement, in each case in accordance with all applicable laws and regulations. These Approvals are in full force and effect, are not limited in duration or subject to any materially unusual or onerous conditions, and have been complied with in all material respects. So far as BKAP is aware, there are no circumstances which indicate that any Approval will or is likely to be revoked or not renewed, in whole or in part, in the ordinary course of events (whether as a result of the transactions contemplated by this Agreement or any of the Transaction Documents or otherwise).

 

3.2                               Compliance with Law. Each BKAP Subsidiary has conducted its business and corporate affairs in accordance with its articles of association, by-laws or other equivalent constitutional documents and in all material respects in accordance with all applicable Law and regulations. Each BKAP Subsidiary is not in default of any statute, regulation, order, decree or judgment of any court or any governmental or regulatory authority in any jurisdiction.

 

3.3                               Absence of certain Business Practices; Propriety of Payments. No BKAP Subsidiary has, nor has any shareholder, director, officer, employee or agent of such BKAP Subsidiary or any other person acting on behalf of such BKAP Subsidiary, (i) directly or indirectly, used or offered to use any corporate funds for unlawful contributions, unlawful gifts, unlawful entertainment or to make any other unlawful payment relating to political activity; made any unlawful payment to a foreign or domestic government official (including employees of wholly state-owned or partially state-owned entities) or to foreign or domestic political parties or campaign; violated any Anti-Corruption Laws; made any unlawful bribe, unlawful rebate, unlawful payoff, unlawful influence payment, unlawful kickback or other similar unlawful payment; or established or maintained any unlawful or unrecorded funds; or (ii) agreed to give any unlawful gift or similar unlawful benefit to any customer, supplier, or other person or entity.

 

4.                      THE BUSINESS ASSETS

 

4.1                               Existing Restaurants. Part A, Section 4.1 of the Disclosure Schedule sets forth a true and complete list of the existing restaurants in the Territory that are owned (directly or indirectly) by BK Shanghai (for the purposes of this clause 4.1 only, the Existing Restaurants) and the PRC Joint Ventures as at the date hereof, and for each Existing Restaurant: (i) its location, and (ii) ownership information concerning the restaurant. The assets which are either owned by BK Shanghai or in which BK Shanghai has a contractual or other right to use together with the agreements to which BK Shanghai is a party, taken as a whole, are sufficient and appropriate for operating the Existing Restaurants, as currently operated. Since 1 January 2012, the Existing Restaurants were operated in the ordinary course of business and in substantially the same manner as during the fiscal year ended on 31 December 2011. Except as set forth in Part A, Section 4.1 of the Disclosure Schedule there are no unpaid and outstanding rental fees due by BK Shanghai to the landlord of any Existing Restaurant.

 

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4.2                               Insurances. A summary of the insurances maintained by or covering each BKAP Subsidiary is set out in Part A, Section 4.1 of the Disclosure Schedule. The details in that summary are in all material respects true, accurate and not misleading. Those insurances are in full force and effect, are not void or voidable and all premiums payable to date have been paid and, to BKAP’s Knowledge, there are no circumstances which might lead to the insurers avoiding any liability under them or the premiums being increased. To BKAP’s Knowledge, Closing will not have the effect of terminating, or entitling any insurer to terminate, cover under any such insurance. Neither BKAP nor any BKAP Subsidiary has any outstanding material claim under any such insurance and, to BKAP’s Knowledge, there are no circumstances likely to give rise to such a claim.

 

5.                      CONTRACTUAL MATTERS

 

5.1                               No contracts. Except as specified in Part A, Section 5 of the Disclosure Schedule, no BKAP Subsidiary is a party to any agreement or arrangement which:

 

(a)                 was entered into otherwise than in the ordinary course of business or not on arm’s length terms;

 

(b)                 requires, or confers any right to require, the issue of any shares, debentures or other securities of any BKAP Subsidiary now or at any future time;

 

(c)                  establishes any joint venture, consortium, partnership or profit (or loss) sharing agreement or arrangement;

 

(d)                 establishes any material agency, distributorship, marketing, purchasing, manufacturing or licensing agreement or arrangement; or

 

(e)                  is a bid, tender, proposal or offer which, if accepted, would result in any BKAP Subsidiary being committed to any agreement or arrangement of a kind described in paragraphs 5.1(a) to 5.1(d) above.

 

5.2                               Defaults. No BKAP Subsidiary is in default under any material provision of any material existing agreement to which it is a party and, to BKAP’s Knowledge, there are no circumstances likely to give rise to such a default. To BKAP’s Knowledge, no party with whom any BKAP Subsidiary has entered into any material existing agreement is in default under any material provision of it and there are no circumstances likely to give rise to such a default.

 

5.3                               No termination. As at the date hereof, all material contracts to which the BKAP Subsidiaries are party are valid and binding obligations of the BKAP Subsidiaries and each other party thereto. No written notice of termination or of intention to terminate has been received or given by any BKAP Subsidiary in respect of any such agreements as at the date hereof.

 

5.4                               Intra-group agreements. Except as set forth in Part A, Section 5.4 of the Disclosure Schedule and except for the agreements contemplated hereunder, as at the date hereof, there are no other agreements in place between BKAP (and any of its Affiliates) on the one side and any of the BKAP Subsidiaries on the other.

 

6.                      LITIGATION

 

Except as set forth in Part A, Section 6 of the Disclosure Schedule, as of the date hereof, there are no pending or, to BKAP’s Knowledge, threatened Claims of civil,

 

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tax, labour, environmental, professional regulatory or any other nature pending against or any investigation involving or affecting any BKAP Subsidiary, and no BKAP Subsidiary has received any notices from any Authority that may reasonably be expected to result in any such Claims. Except as set forth in Part A, Section 6 of the Disclosure Schedule, as at the date hereof, there is no decision, judgment, injunction, writ from a civil, tax, labor, environmental, professional regulatory or other nature by or before any court, administrative or other Authority pending or, to BKAP’s Knowledge, threatened, against any BKAP Subsidiary.

 

7.                      INSOLVENCY ETC.

 

7.1                               Winding up. No order has been made, petition presented or meeting convened for the winding up of BKAP, any BKAP Subsidiary or BKC or for the appointment of any provisional liquidator or in relation to any other process whereby the business is terminated and the assets of any BKAP Subsidiary concerned are distributed amongst the creditors and/or shareholders or other contributors, and, to BKAP’s Knowledge, there are no cases or proceedings under any applicable insolvency, reorganisation or similar laws in any relevant jurisdiction, and no events have occurred which, under applicable laws, would be reasonably likely to justify any such cases or proceedings.

 

7.2                               Administration and receivership. No person has taken any step, legal proceeding or other procedure with a view to the appointment of an administrator, whether out of court or otherwise, in relation to BKAP, any BKAP Subsidiary or BKC and no receiver (including any administrative receiver) has been appointed in respect of the whole or any part of any of the property, assets and/or undertaking of any BKAP Subsidiary nor has any such order been made (including, in any relevant jurisdiction, any other order by which, during the period it is in force, the affairs, business and assets of the company concerned are managed by a person appointed for the purpose by a court, governmental agency or similar body).

 

7.3                               Voluntary arrangement etc. None of BKAP, BKAP Subsidiaries or BKC has taken any step with a view to a suspension of payments or a moratorium of any indebtedness or has made any voluntary arrangement with any of its creditors or is insolvent or unable to pay its debts as they fall due.

 

Part B: IP

 

1.                                      IP. The BKAP Subsidiaries own, license, sublicense or otherwise possess legally enforceable rights to use all Burger King Marks necessary to conduct the business of the BKAP Subsidiaries and the Existing Restaurants within the Territory as currently conducted. To BKAP’s Knowledge, the conduct of the business of the BKAP Subsidiaries and the Existing Restaurants as currently conducted does not infringe, violate or constitute a misappropriation of any Intellectual Property Rights of any third party within the Territory in any material respects.

 

2.                                      Licenses. The licences granted pursuant to the (This material has been omitted pursuant to a request for confidential treatment, and such material has been filed separately with the Commission.) binding and in force. None of the parties to them is in material default, and to BKAP’s Knowledge there are no grounds on which they might be terminated and no disputes have arisen or to BKAP’s Knowledge are foreseeable in connection with them.

 

3.                                      Encumbrances. The licenses granted pursuant to (This material has been omitted pursuant to a request for confidential treatment, and such material has been filed separately with the Commission.) are not subject to any security interest, option, mortgage, charge or lien, and such licenses will not be lost, or rendered liable to termination, by virtue of the acquisition of the Mainstreet Equity Interests or the performance of this Agreement.

 

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Part C Leasehold Property

 

1.                                      Leasehold Property. Part C, Section 1 of the Disclosure Schedule sets out a complete list of BKAP Subsidiaries’ leasehold properties (the Leasehold Property). The use of the Leasehold Property by BKAP Subsidiaries is in material compliance with all applicable land- use, planning, zoning and property laws.

 

2.                                      No Adverse Notice. No BKAP Subsidiary has received written notices of any pending or threatened Action by any Governmental Entity which would materially adversely affect its rights to the Leasehold Property or any part thereof or give rise to any payment obligation on the part of any BKAP Subsidiary in relation to maintaining such rights.

 

3.                                      No other Property. No BKAP Subsidiary owns, leases or occupies, or has any outstanding liability in respect of, any land or buildings other than the Leasehold Property.

 

4.                                      Leases. In relation to Leasehold Properties:

 

(a)                 there are no unpaid and outstanding rental fees in excess of US$100,000 in the aggregate due by any BKAP Subsidiary to the landlord of that property;

 

(b)                 there are no subsisting notices alleging a material breach of any material covenants, conditions and agreements contained in the relevant leases, on the part of the tenant; and

 

(c)                  no material tenancy is being continued after the contractual expiry date whether pursuant to statute or otherwise.

 

Part D: Environmental Matters

 

1. Compliance with Environmental Laws. Each BKAP Subsidiary is in material compliance with all requirements of Environmental Laws.

 

Part E: Employment

 

1.                      Employees. Part E, Section 1 of the Disclosure Schedule sets out a complete and accurate list of all Key Employees of each BKAP Subsidiary as of the date hereof. Except as indicated in Part E, Section 1of the Disclosure Schedule, as of the date hereof, no written notice of termination or of intention to terminate has been received or given by any BKAP Subsidiary in respect of any such Key Employee. For the purposes of this clause, Key Employee means any employee with an annual base salary of no less than RMB120,000 (excluding bonuses and other benefits).

 

2.                      Employment Agreements and Termination.

 

(a)                 There are no unpaid and outstanding salaries due by any BKAP Subsidiary to its employees except those unpaid and outstanding in the ordinary course;

 

(b)                 No material outstanding liability has been incurred by any BKAP Subsidiary for breach of any contract of employment or for services or redundancy payments, protective awards, compensation for wrongful dismissal or unfair dismissal or for failure to

 

54

 

comply with any order for the reinstatement or re-engagement of any employee or for any other liability accruing from the termination of any contract of employment or for services; and

 

(c)                  Except as required under applicable Law and agreed by the Investors, no material gratuitous payment has been promised to be made or given by any BKAP Subsidiary in connection with the actual or proposed termination or suspension of employment, or variation of any contract of employment, of any present or former director or employee of any BKAP Subsidiary, or otherwise in connection with the transactions contemplated by this Agreement.

 

Part F: Taxes

 

Each BKAP Subsidiary has duly prepared and filed, in a timely manner and in accordance with all applicable laws, all Tax returns, statements, reports and forms required to be filed. All such returns are true and complete in all material respects and all Taxes due and payable on the returns have been fully paid in a timely manner. There are no Tax-related audits, actions, proceedings, investigations, claims or assessments pending, or, to BKAP’s Knowledge, proposed or threatened in writing against or with respect to any BKAP Subsidiary. No BKAP Subsidiary has received any tax ruling or entered into any written and legally binding agreement or is currently under negotiations to enter into any such agreement with any Governmental Entity competent for the imposition of any Tax which would affect the Tax situation of any BKAP Subsidiary in any period ending after the payment date.

 

55

 

SCHEDULE 2

 

MASTER FRANCHISE AND DEVELOPMENT AGREEMENT

 

56

 

SCHEDULE 3

 

INITIAL DIRECTORS

 

(This material has been omitted pursuant to a request for confidential treatment, and such material has been filed separately with the Commission.)

 

57

 

SCHEDULE 4

 

DEVELOPMENT AND FRANCHISE AGREEMENTS

 

Part A Development Agreements

 

All Development Agreements with BK Beijing and BK Shenzhen have been terminated.

 

Part B 2.                                                                                          Franchise Agreements between BK Shanghai and the PRC Joint

Ventures (excluding BK Guangzhou):

 

	
No.
    	
 
    	
Name of PRC

Subsidiary

franchisee
    	
 
    	
BK#
    	
 
    	
Execution

Date
    	
 
    	
Restaurant location to which

Franchise Agreement relates
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

(This material has been omitted pursuant to a request for confidential treatment, and such material has been filed separately with the Commission.)

 

58

 

SCHEDULE 5

 

CLOSING ARRANGEMENTS

 

Part A

Closing

 

1.                                      At Closing:

 

1.1                               BKAP shall:

 

(a)                                 contribute and transfer to the JVC (or, if so directed by JVC, a 100% owned subsidiary of JVC) the entire issued share capital of HK Development and any outstanding shareholder loan owed by HK Development at Closing;

 

(b)                                 deliver or procure the delivery to the JVC of an application letter in respect of the BKAP Consideration Shares;

 

(c)                                  enter into the Master Franchise and Development Agreement in the form attached hereto as Schedule 2 with BK Shanghai;

 

(d)                                 enter into the PRC Company Franchise Agreement in the form attached as Exhibit G to the Master Franchise and Development Agreement with BK Shanghai;

 

(e)                                  deliver to the Investor and the JVC a certified copy of minutes of the board of directors of BKAP (or extracts thereof) approving and authorising the performance by it of all of its obligations and transactions contemplated under this Agreement;

 

(f)                                   deliver to the Investor documents evidencing approvals by and registrations with applicable Chinese Governmental Entities of (a) the Equity Transfers, (b) the change of directors, legal representative and supervisor for each of BK Shenzhen and BK Beijing in connection with the Equity Transfers, and (c) the amendments to the articles of association for each of BK Shenzhen and BK Beijing in connection with such Equity Transfers; and

 

(g)                                  deliver to the Investor letters of resignation duly executed by those directors, officers, legal representatives, supervisors and general managers of each BKAP Subsidiary (as applicable) requested by the Investor at least five (5) Business Days prior to Closing and relevant shareholders’ resolutions or board resolutions (as applicable) effectuating the resignation of such directors, officers, legal representatives, supervisors and general managers from the board of directors and management for each BKAP Subsidiary.

 

1.2                               the Investor shall:

 

(a)                                 pay the First Investor Cash Contribution to the JVC Account in immediately available funds for the account of the JVC;

 

(b)                                 deliver or procure the delivery to the JVC of an application letter in respect of the Investor Shares; and

 

59

 

(c)                                  deliver to each of BKAP and the JVC a certified copy of the minutes of the board of directors of the Investor (or extracts thereof) approving and authorising the performance by it of all of its obligations and transactions contemplated under this Agreement; and

 

1.3                               the JVC shall:

 

(a)                                 allot and issue to BKAP (credited as fully-paid) the BKAP Consideration Shares, enter the name of BKAP in its register of members as the holder of the BKAP Consideration Shares subscribed for by it and issue and deliver the relevant share certificate(s) to BKAP in respect of the BKAP Consideration Shares subscribed for by it;

 

(b)                                 allot and issue to the Investor (credited as fully-paid) the Investor Shares, enter the name of the Investor in its register of members as the holder of such Investor Shares subscribed for by it and issue and deliver the relevant share certificate(s) to the Investor in respect of the Investor Shares subscribed for by it;

 

(c)                                  deliver to each of BKAP and the Investor a certified copy of minutes of the Board (or extracts thereof) approving and authorising the performance by it of all of its obligations and transactions contemplated under this Agreement; and

 

1.4                               KRD Kurdoğlu shall deliver to BKAP the legal opinion of Somay Hukuk Bürosu, Turkish counsel to KRD Kurdoğlu, that (i) KRD Kurdoğlu has been duly incorporated and is validly existing, (ii) has legal capacity to enter into and perform its obligations under this Agreement, (iii) (This material has been omitted pursuant to a request for confidential treatment, and such material has been filed separately with the Commission.) of the shares in each of the entities comprising the Ecosystem have been duly transferred to KRD Kurdoğlu and that all such transfers have been completed and that KRD Kurdoğlu has been duly registered in the share ledgers of each of the entities comprising the Ecosystem as a shareholder in respect of the number of shares in that member of the Ecosystem transferred to it, (iv) the obligations assumed by KRD Kurdoğlu under this Agreement are legal, valid and binding and are enforceable against it in accordance with its terms in the Republic of Turkey, in a form acceptable to BKAP.

 

2.                                      If either BKAP or the Investor fails or is unable to comply with any of its obligations under paragraph 1 of Part A of this Schedule, each non-breaching Party shall not be obliged to perform any of its obligations under that paragraph and may by written notice to the breaching Party and any other non-breaching Party:

 

(a)                                 defer the Closing for a maximum period of one (1) month, in which case this paragraph 2 shall apply to the Closing as so deferred; provided that such deferral right cannot be exercised by any Party after the Longstop Date;

 

(b)                                 waive all or any such act or obligation and proceed to the Closing as far as practicable; or

 

(c)                                  terminate this Agreement (other than the Surviving Provisions).

 

Part B

Subsequent Investor Capital Contributions

 

1.              The First Investor Cash Contribution shall be made at the Closing.

 

60

 

2.              The second Investor Cash Contribution shall be made no later than the date that is one year after the Closing Date (the Second Investor Cash Contribution).

 

3.              The final Investor Cash Contribution shall be made no later than the date that is two years after the Closing Date (the Third Investor Cash Contribution).

 

61

 

SCHEDULE 6

 

JVC SHAREHOLDINGS

 

Part A

JVC Shareholdings Upon Closing

 

	
Shareholder
    	
 
    	
Number of Shares
    	
 
    	
Representing % in
   the issued share
   capital of the JVC
    	
 
    
	
Pangaea Foods,   SPC
    	
 
    	
2,175
    	
 
    	
72.5
    	
%
    
	
BKAP
    	
 
    	
825
    	
 
    	
27.5
    	
%
    
	
Total
    	
 
    	
3,000
    	
 
    	
100.00
    	
%
    

 

62

 

SCHEDULE 7

 

DEED OF ADHERENCE

 

Part A: JVC Deed of Adherence

 

THIS DEED is made on [·]

 

BY [·] (the JVC)

 

WHEREAS:

 

(A)                               On [                       ], the Investor and BKAP entered into a joint venture and investment agreement governing their subscription for Shares in and subsequent relationship as shareholders in the JVC and establishing the manner in which the affairs of the JVC would be conducted (such agreement being as amended, supplemented or novated from time to time) (the JVI Agreement).

 

(B)                               This Deed is entered pursuant to clause 1.3 of the JVI Agreement.

 

NOW THIS DEED WITNESSES as follows:

 

1.                                      Words and expressions defined in the JVI Agreement shall, unless the context otherwise requires, have the same meanings when used in this Deed.

 

2.                                      The JVC hereby undertakes with the Investor and BKAP to be bound by and comply in all respects with the JVI Agreement, and to assume the benefits of the JVI Agreement, as if the JVC had executed the JVI Agreement and was named as a party to it.

 

3.                                      The JVC warrants to BKAP that (A) it is validly incorporated, in existence and duly registered under the laws of its jurisdiction of incorporation and it has the legal right and full power and authority to enter into and perform this Deed. This Deed has been duly entered into by the JVC and constitutes valid and binding obligation of the JVC, enforceable against it as set forth herein; (B) No consent, approval, filing or authorisation from any Authority is necessary or shall be obtained for the signature and performance by the JVC of this Deed, except as would not, or would not reasonably be expected to, individually or in the aggregate, materially impair or delay the ability of it to consummate the Transaction or to perform its obligations under this Deed. The execution and delivery of this Deed by it does not, and the consummation by it of the transactions contemplated by this Deed will not, (i) conflict with,  or result in any violation or breach of, any provision of charter, by-laws, or other organisational document of the JVC or (ii) conflict with, or result in any violation or breach of, or constitute (with or without notice or lapse of time, or both) a default (or give rise to a right of termination, cancellation or acceleration of any obligation or loss of any material benefit) under, require a consent or waiver under, require the payment of a penalty under or result in the imposition of any material mortgage, security interest, pledge, lien, charge or encumbrance on its assets under, any of the terms, conditions or provisions of any material lease, licence, contract or other agreement, instrument or obligation to which the JVC is a party or by which it or any of its properties or assets may be bound.

 

4.                                              This Deed shall be governed by and construed in accordance with the laws of Hong Kong.

 

The provisions of clause 41 of the JVI Agreement shall apply to this Deed.

 

63

 

IN WITNESS WHEREOF this Deed has been duly executed the day and year first above written.

 

	
SIGNED SEALED and DELIVERED
    	
 
    	
)
    	
 
    	
 
    
	
by [name of signatory],
    	
 
    	
)
    	
 
    	
 
    
	
the authorised representative of
    	
 
    	
)
    	
 
    	
[seal and signature]
    
	
[name of company],   whose
    	
 
    	
)
    	
 
    	
 
    
	
signature(s) is/are verified by:
    	
 
    	
)
    	
 
    	
 
    

 

	
SIGNED SEALED and DELIVERED
    	
 
    	
)
    	
 
    	
 
    
	
by [name of signatory],
    	
 
    	
)
    	
 
    	
 
    
	
the authorised representative of
    	
 
    	
)
    	
 
    	
[seal and signature]
    
	
[name of company],   whose
    	
 
    	
)
    	
 
    	
 
    
	
signature(s) is/are verified by:
    	
 
    	
)
    	
 
    	
 
    

 

	
SIGNED SEALED and DELIVERED
    	
 
    	
)
    	
 
    	
 
    
	
by [name of signatory],
    	
 
    	
)
    	
 
    	
 
    
	
the authorised representative of
    	
 
    	
)
    	
 
    	
[seal and signature]
    
	
[name of company],   whose
    	
 
    	
)
    	
 
    	
 
    
	
signature(s) is/are verified by:
    	
 
    	
)
    	
 
    	
 
    

 

64

 

Part B: New Party Deed of Adherence

 

THIS DEED is made on [                                                                                                                                                                                                             ]

 

BY [                                                                                                                               ] of [                                                                                                                                                                                                                      ] (the New Party)

 

WHEREAS:

 

(C)               On [                                                                                                                                                 ], the persons in the Schedule to this Deed entered into a joint venture and investment agreement governing their relationship as shareholders in [ ]  (the JVC) and establishing the manner in which the affairs of the JVC would be conducted (such agreement being as amended, supplemented or novated from time to time) (the JVI Agreement).

 

(D)               [By a transfer dated [                                                      ], [                                                   ] transferred to the New Party [       ] Shares in the JVC.]

 

(E)                [By an allotment of shares on [       ], the JVC allotted [      ] Shares to the New Party.]

 

(F)                 This Deed is entered into in compliance with the terms of clause 25 (Deed of Adherence) of the JVI Agreement.

 

NOW THIS DEED WITNESSES as follows:

 

5.                                      Words and expressions defined in the JVI Agreement shall, unless the context otherwise requires, have the same meanings when used in this Deed.

 

6.                                      The New Party hereby undertakes with (a) the JVC and each of the other persons in the Schedule to this Deed and (b) each such other person who may from time to time expressly adhere to the JVI Agreement, to be bound by and comply in all respects with the JVI Agreement, and to assume the benefits of the JVI Agreement, as if the New Party had executed the JVI Agreement and was named as a party to it.

 

7.                                      [[     ] hereby fully and irrevocably assigns to the New Party the right to appoint one Director to the Board pursuant to clauses 11.3 and 11.6 of the JVI Agreement.] [TBD]

 

8.                                      The New Party hereby represents, warrants and undertakes to the JVC and to each of the other Shareholders (and each other person who may from time to time expressly adhere to the JVI Agreement) in the terms (as applicable) set out in clause[6.1]of the JVI Agreement, but so that such representations, warranties and undertakings (as applicable) shall be deemed to be given on the date of this Deed and shall be deemed to refer to this Deed of Adherence as well as the JVI Agreement.

 

9.                                      For the purpose of the JVI Agreement, the New Party’s address for notices shall be as follows:

 

Address:

 

Fax No:

 

For the attention of:

 

65

 

10.                               This Deed shall be governed by and construed in accordance with the laws of Hong Kong.

 

The provisions of clause 41 of the JVI Agreement shall apply to this Deed.

 

IN WITNESS WHEREOF this Deed has been duly executed the day and year first above written.

 

	
SIGNED SEALED and DELIVERED
    	
 
    	
)
    	
 
    	
 
    
	
by [name of signatory],
    	
 
    	
)
    	
 
    	
 
    
	
the authorised representative of
    	
 
    	
)
    	
 
    	
[seal and signature]
    
	
[name of company],   whose
    	
 
    	
)
    	
 
    	
 
    
	
signature(s) is/are verified by:
    	
 
    	
)
    	
 
    	
 
    

 

	
SIGNED SEALED and DELIVERED
    	
 
    	
)
    	
 
    	
 
    
	
by [name of signatory],
    	
 
    	
)
    	
 
    	
 
    
	
the authorised representative of
    	
 
    	
)
    	
 
    	
[seal and signature]
    
	
[name of company],   whose
    	
 
    	
)
    	
 
    	
 
    
	
signature(s) is/are verified by:
    	
 
    	
)
    	
 
    	
 
    

 

	
SIGNED SEALED and DELIVERED
    	
 
    	
)
    	
 
    	
 
    
	
by [name of signatory],
    	
 
    	
)
    	
 
    	
 
    
	
the authorised representative of
    	
 
    	
)
    	
 
    	
[seal and signature]
    
	
[name of company],   whose
    	
 
    	
)
    	
 
    	
 
    
	
signature(s) is/are verified by:
    	
 
    	
)
    	
 
    	
 
    

 

Solicitor, Hong Kong SAR

 

66

 

SCHEDULE 8

 

NOTICE ADDRESSES

 

Part A - INVESTOR OR ANY GUARANTOR

 

	
 
    	
KRD Kurdoğlu
    	
 
    
	
 
    	
Dikilitaş Mah.Emirhan Cad No: 109.
    	
 
    
	
 
    	
Kat:19 Atakule — Balmumcu
    	
 
    
	
 
    	
Istanbul Turkey
    	
 
    
	
 
    	
Facsimile: +90 212 310 6410
    	
 
    
	
 
    	
Attention: Erhan Kurdoğlu and Korhan   Kurdoğlu
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
with a copy to:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Cartesian Capital Group, LLC
    	
 
    
	
 
    	
505 Fifth Avenue, 15th Floor
    	
 
    
	
 
    	
New York, NY 10017
    	
 
    
	
 
    	
Facsimile: 212-446-6366
    	
 
    
	
 
    	
Attention: Peter Yu and Paul S. Hong
    	
 
    

 

Part B - BKAP

 

	
 
    	
BK AsiaPac, Pte. Ltd
    	
 
    
	
 
    	
101 Thomson Road
    	
 
    
	
 
    	
#13-03/04 United Square
    	
 
    
	
 
    	
Singapore 307591
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
with copy to:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
Burger King Corporation
    	
 
    
	
 
    	
5505 Blue Lagoon Drive
    	
 
    
	
 
    	
Miami, FL 33126
    	
 
    
	
 
    	
Facsimile: +1 305 378 7868
    	
 
    
	
 
    	
Attention: Lisa Giles-Klein, Vice-President,   Assistant General Counsel
    

 

67

 

SCHEDULE 9

 

TRANSFER TERMS

 

1.                                      This Schedule sets out the terms on which any Transfer of Shares are to be made under clauses 22, 23 and 24.

 

2.                                      In this Schedule :

 

(a)                                 Buyer(s) means the Non-Transferring Shareholders, BKAP, the Investor, or a Third Party Purchaser (as the case may be) acquiring the Seller’s Securities;

 

(b)                                 Consent means regulatory approval or the consent of a third party or a Shareholder;

 

(c)                                  Relevant Notice means the relevant Transfer Notice or Option Notice (as the case may be);

 

(d)                                 Sale Proportion means the proportion which the Seller’s Securities to be transferred to the Buyer (or, where more than one, to each Buyer) bears to the number of Seller’s Securities held by the Seller prior to the transfer;

 

(e)                                  Seller means the Transferring Shareholder, the Transferor, BKAP, or the Investor (as the case may be); and

 

(f)                                   Seller’s Securities means the Seller’s Shares or the Relevant Sale Shares (as the case may be).

 

3.                                      Any Transfer of Seller’s Securities pursuant to clauses 22, 23 and 24 shall be on the following terms:

 

(a)                                 the Seller’s Securities shall be sold free from all liens, charges and encumbrances and third party rights, together with all rights of any nature attaching to them including all rights to any dividends or other distributions declared, paid or made after the date of the Relevant Notice;

 

(b)                                 with effect from the completion date the Buyer shall assume any obligations of the Seller (and any member of its Group) (in each case in the Sale Proportion) under, and shall ensure the release of, any guarantees, indemnities, letters of comfort and/or counter-indemnities given by the Seller to third parties in relation to the business of the JVC. This is without prejudice to the right of the Buyer(s) to receive a contribution from the Seller and any member of its Group for its share of any claims attributable to any liabilities arising in respect of the period before the completion date;

 

(c)                                  if completion without a Consent, would breach any relevant law or regulation or provision of an entity’s constitutional documents, the transfer shall be conditional on obtaining the Consent, the relevant parties shall take all reasonable steps to obtain the Consent as soon as possible after the date of the transfer and any time period stated in the procedure to be followed under this Agreement to effect the transfer shall be deemed to be extended until such time as the Consent has been obtained;

 

(d)                                 the Seller shall deliver to the Buyer(s) duly executed transfer(s) in favour of the Buyer(s), or as it or they may direct, together with, if appropriate, certificate(s) for the Seller’s Securities and a certified copy of any authority under which such transfer(s)

 

68

 

is/are executed and, against delivery of the transfer(s), the Buyer(s) shall pay the consideration for the Seller’s Securities (in the Sale Proportion) to the Seller in cleared funds for value on the completion date;

 

(e)                                  the parties shall ensure (insofar as they are able) that the relevant transfer or transfers (subject to their being duly stamped, stamp duty to be paid by the Buyer(s) or in case of a Third Party Purchaser, as otherwise agreed by the Seller and the Buyer(s)) (in the Sale Proportion) are registered in the name(s) of the Buyer(s) or as it or they may direct;

 

(f)                                   the Seller shall do all such other things and execute all other documents (including any deed) as the Buyer(s) may reasonably request to give effect to the sale and purchase of the Seller’s Securities; and

 

(g)                                  if requested by the Buyer(s), the Seller shall ensure that all the Directors appointed by it resign, the JVC shall release the Directors from any and all obligation (save in respect of any antecedent breach) and the resignation(s) take effect without any liability on the JVC for compensation for loss of office or otherwise.

 

4.                                      The transfer terms of paragraph 3 above (except for paragraph (b)) shall also apply to any Intra-Group Transfer on the basis that references to the Buyer(s) shall be deemed to be references to the transferee and references to the Seller shall be deemed to be references to the transferring Shareholder.

 

69

 

SCHEDULE 10

 

FAIR PRICE VALUATION

 

1.                                      The Fair Price for any Ordinary Shares to be valued for the purposes of clauses 2.3(c) and 10.5 (the Valuation Shares) shall (subject to the final sentence of this paragraph) equal the arithmetic average of (i) the fair price of such Valuation Shares as calculated by an internationally recognized investment bank selected by the Investor, (ii) the fair price of such Valuation Shares as calculated by an internationally recognized investment bank selected by BKAP, and (iii) the fair price of such Valuation Shares as calculated by an internationally recognized investment bank selected by the investment banks described in the foregoing clauses (i) and (ii) and reasonably acceptable to the Investor and BKAP. The investment banks described above shall be collectively referred to as Valuation Experts. Notwithstanding anything to the contrary contained herein, for purposes of determining the arithmetic average of the valuations prepared by the Valuation Experts, the parties shall disregard the valuation provided by any Valuation Expert if such valuation is more than 25% greater or less than the middle valuation provided by the Valuation Experts, provided that, for the purpose of this sentence, in the event two of the valuations prepared by the Valuation Experts are the same, such valuation shall be treated as such middle valuation.

 

2.                                      Each of the Valuation Experts shall determine its calculation of the fair price of the Valuation Shares on the following basis:

 

(a)                                 by valuing JVC on a going concern basis for an arms’ length sale between a willing buyer and a willing seller and on the assumption that the subject matter of the valuation is exposed to an open market;

 

(b)                                 by valuing the Valuation Shares by reference to the value of the JVC as a whole (and therefore without regard to the size of any relevant holding); and

 

(c)                                  making no allowances for any expenses that might be incurred in connection with the issue, sale or purchase of the Valuation Shares.

 

3.                                      The Valuation Experts shall act as experts and not as arbitrators. Each Valuation Expert will incorporate in a certificate (the Valuation Certificate) their respective calculations of the fair price of the Valuation Shares based on the criteria set out in this Schedule 10 (copies of which will be provided to the Shareholders and to the JVC). Such decision of the Valuation Experts shall be final and binding on the Shareholders (and JVC) and not subject to appeal to any court or tribunal on any basis whatsoever and the Shareholders and the Shareholders (and JVC) shall not challenge the Valuation Experts’ decisions in determining the Fair Price, in each case absent manifest error or failure by a Valuation Expert to prepare its calculation of the fair price of Valuation Shares in accordance with this Schedule 10. The Valuation Expert’s fees and expenses shall be borne by the JVC.

 

4.                                      Each Valuation Expert shall exercise its independent professional judgment in arriving at a determination of the fair price (which shall be expressed in US$) of any Valuation Shares by (i) assessing the historical and projected financial performance of the JVC, (ii) applying generally accepted methodologies for valuing JVC, including discounted cash flow analysis, comparisons with any similar companies whose shares are traded on any stock exchange and comparisons with any publicly disclosed sales of similar companies or significant pools of similar assets, and (iii) such other valuation methods as such Valuation Expert shall consider to be appropriate in the circumstances.

 

70

 

5.                                      Each Valuation Expert shall have access to all accounting records or other relevant documents of the JVC which it requests for the purposes of its determination, subject to any existing confidentiality provisions.

 

71

 

SCHEDULE 11

 

DEFINITIONS AND INTERPRETATION

 

1.                                      Definitions. In this Agreement, and in the Recitals and Schedules, the terms set out below shall (unless the context requires otherwise) have the following respective meanings:

 

Accounts means, in relation to any financial year of each BKAP Subsidiary, the audited balance sheet of each BKAP Subsidiary (and, where relevant, the audited consolidated balance sheet of each BKAP Subsidiary) and the audited profit and loss account of each BKAP Subsidiary (and, where relevant, the audited consolidated profit and loss account of each BKAP Subsidiary), in each case as at the Accounts Date in respect of that financial year, as included in the Data Room, together with any notes, reports, statements or documents included in or annexed or attached to them;

 

Accounts Date means 31 December;

 

Acceptance Period has the meaning given in clause 23.2;

 

Accounting Principles means the accounting principles and policies to be adopted by JVC which shall be consistent with US GAAP;

 

Acquirer has the meaning given to it in clause 25.1;

 

Affiliate shall mean, in relation to a person, any person which, directly or indirectly, Controls, is Controlled by or is under common Control with the relevant person;

 

Agreement shall mean this agreement;

 

Allocable Percentage has the meaning given in clause 9.1;

 

Ancillary Agreements means the Master Franchise and Development Agreement and the PRC Company Franchise Agreement;

 

Annual Opening Target has the meaning given in the Development Schedule;

 

Anti-Corruption Laws has the meaning given in clause 13.1;

 

Approvals has the meaning given in paragraph 3.1 of Part A of Schedule 1-B;

 

Asia Pacific Region means Australia, Bangladesh, Bhutan, Brunei, Burma/Myanmar, Cambodia, Fiji, Guam, Hong Kong, India, Indonesia, Japan, Kiribati, Laos, Macao, Malaysia, Maldives, Marshall Islands, Micronesia, Mongolia, Nauru, Nepal, New Zealand, North Korea, Pakistan, Palau, Papua New Guinea, the Philippines, PRC, Republic of China (Taiwan), Samoa, Singapore, Solomon Islands, South Korea, Sri Lanka Thailand, Timor-Leste, Tonga, Tuvalu, Vanuatu and Vietnam;

 

Auditors means the auditors of the JVC from time to time;

 

Authority shall mean any federal, state, municipal, local or other governmental department, commission, board, bureau, agency or instrumentality, or any administrative, judicial or arbitration court or panel, with jurisdiction over the applicable matter;

 

BK Beijing means BK (Beijing) Restaurant Management Co., Ltd;

 

72

 

BK China Business means the business of BKAP which consists of (i) indirectly held wholly owned PRC companies which own the restaurants listed in Part B of Schedule 1, (ii) 30% of the share capital of BK Guangzhou owned by HK Development, (iii) all franchise and development agreement with Existing Franchisees, and (iv) infrastructure, office space, equipment and systems in existence as at the date of Closing;

 

BK Guangzhou means BK (Guangzhou) Restaurant Co., Ltd;

 

BK Shanghai means Burger King (Shanghai) Restaurant Company, Ltd;

 

BK Shenzhen means BK Foods (Shenzhen) Ltd;

 

BKAP has the meaning given in the preamble;

 

BKAP Consideration Shares has the meaning given in clause 1.5;

 

BKAP C698 Claim has the meaning given in clause 19.2(c);

 

BKAP Subsidiaries means HK Development, BKHK and BK Shanghai, and BKAP Subsidiary means any of them;

 

BKC means Burger King Corporation.

 

BKHK means Burger King (Hong Kong) Ltd;

 

BKHK Shares means the (This material has been omitted pursuant to a request for confidential treatment, and such material has been filed separately with the Commission.) ordinary shares of HK$1 each in the capital of BKHK held by BKAP as at the date of this Agreement;

 

BKHK Transfer has the meaning given in clause 1.4;

 

BMIG means Beijing Mainstreets Investment Group Corporation;

 

BMIG Equity Interests means the (This material has been omitted pursuant to a request for confidential treatment, and such material has been filed separately with the Commission.) equity interests held by BMIG in each of BK Beijing and BK Shenzhen as at the date of this Agreement;

 

Board means the board of directors of the JVC;

 

BQIC means Beijing Qingweitang Investment Consulting Co. Ltd;

 

BQIC Equity Interests means the (This material has been omitted pursuant to a request for confidential treatment, and such material has been filed separately with the Commission.) equity interests held by BQIC in each of BK Beijing and BK Shenzhen as at the date of this Agreement;

 

Budget has the meaning given in clause 14.3(c);

 

Burger King Marks means the trademarks, service marks, trade names, trade dress, logos (including but not limited to the principal logo used by BKAP from time to time in respect of the Burger King System), slogans, designs and other commercial symbols and source- identifying indicia (and the goodwill associated therewith) used in the operation of the Restaurants and the Burger King System, whether registered, applied for or unregistered

 

Burger King Restaurant means a quick service or fast food restaurant operating under the

 

73

 

Burger King System and utilising the Burger King Marks. Burger King Restaurants may be (i) Free Standing Restaurants, (ii) In-Line Restaurants, (iii) Food Court Restaurants and (iv) BK® Grill Restaurants. In addition, Burger King Restaurants may include Direct-Owned

 

74

 

Restaurants and Franchised Restaurants (each of which are defined in the Master Franchise and Development Agreement);

 

Burger King System means the unique restaurant format and operating system developed by BKAP and/or its Affiliates for the development and operation of quick service or fast food restaurants, including proprietary designs and color schemes for restaurant buildings, equipment, layout and décor, proprietary menu and food preparation and service formats, uniform product and quality specifications, training programs, restaurant operations manuals, bookkeeping and report formats, marketing and advertising formats, promotional marketing items and procedures for inventory and management control, and also includes the Burger King Marks and all confidential information, other proprietary information, copyrights and other Intellectual Property Rights relating to the system, and modifications BKAP or any of its Affiliates may make to the system from time to time;

 

Business Arrangements has the meaning given in clause 17.3(e);

 

Business Day means a day, other than a Saturday or Sunday or any public holiday in Hong Kong, Istanbul, New York or Miami, on which banks generally are open in Hong Kong, Istanbul, New York and Miami for general commercial business;

 

Buyer(s) has the meaning given in paragraph 2(a) of Schedule 9;

 

BZET Beijing Zhongbeineng Energy Technology Co. Ltd.;

 

BZET Equity Interests means the (This material has been omitted pursuant to a request for confidential treatment, and such material has been filed separately with the Commission.) equity interests held by BZET in each of BK Beijing and BK Shenzhen as at the date of this Agreement;

 

Chairman means the chairman from time to time of the Board;

 

Change of Control means any event whatsoever that results in either (i) KRD Kurdoğlu, Cartesian and their respective Affiliates, collectively, ceasing to own (directly or indirectly) more than 50% of the outstanding equity securities of the Investor (from an economic and voting perspective), or (ii) KRD Kurdoğlu, Cartesian and (to the extent relevant) their respective Affiliates ceasing to be able to appoint (directly or indirectly) a majority of the directors of the Investor

 

Circular 698 Returns has the meaning given to it in clause 19.2(a);

 

Claim means any claim, lawsuit, litigation, dispute, arbitration or mediation or any other proceeding before a judicial, administrative or arbitration court or panel;

 

Closing means closing of the establishment of the JVC in accordance with clause 4 and ;

 

Closing Conditions has the meaning given to it in clause 3.5;

 

Closing Date means the day on which Closing takes place pursuant to clause 4;

 

company means any body corporate, wherever incorporated;

 

Competitor means any person who owns or operates any type of Fast Food Burger Restaurant anywhere in the world, or any Affiliate of such person (excluding Burger King Restaurants). For the purposes of this definition, the term Competitor shall also include (i) any director or officer of such person or Affiliate, (ii) any entity with respect to which such person or Affiliate has the right to appoint a member of the management or supervisory or advisory

 

75

 

body or a member of senior management, either through the direct or indirect ownership of equity interests, a contractual arrangement with one or more equity holders or otherwise, (iii) any entity by means of which, upon such entity becoming a shareholder of JVC, such person or Affiliate would have the right to receive Confidential Information of the JVC, or a right to audit the books and records of the JVC (unless such person has executed the Deed of Adherence) and (iv) any immediate family member, spouse or ex-spouse of such person (or any Affiliate of any of the foregoing);

 

Completion in respect of an Equity Transfer means the closing or completion of the Equity Transfer as contemplated by the relevant ETA(s), which results in the direct or indirect transfer of full legal and beneficial ownership, free of any Third Party Interest, of the relevant Mainstreets Equity Interest or ITG Equity Interest to HK Development and Completed shall be construed accordingly;

 

Compliance Breach has the meaning given in clause 13.6;

 

Compliance Notice has the meaning given in clause 13.6;

 

Confidential Information has the meaning given in clause 18.2;

 

Consent has the meaning given to it in paragraph 2(b) of Schedule 10;

 

Control means the ownership, whether by ownership of securities, contract, proxy or otherwise, of shareholding or contractual rights of a person that (i) assures the majority of the votes in the resolutions of such person, or (ii) the power to appoint the majority of the managers or directors of such person, or (iii) the power to direct or cause the direction of the management or policies of such person, and the related terms Controlled by, Controlling or under common Control with shall be read accordingly;

 

Damages has the meaning given in clause 6.5(a);

 

Data Room has the meaning given to it in clause 6.5(f);

 

Development Rights shall have the meaning given to it in the Master Franchise and Development Agreement;

 

Development Schedule shall have the meaning given to it in clause 1.7;

 

Directors means the JVC’s directors;

 

Disclosure Schedule means the disclosure against the representation and warranties set forth in Schedule 1-B and delivered to the Investor on the date of this Agreement;

 

Dispute has the meaning given in clause 41.1;

 

Due Diligence CD means a CD or set of CDs which is attached hereto as Schedule 10 and is signed for identification purposes by the Investor or advisors to the Investor containing only those documents reviewed by the Investor and its representatives in connection with the Due Diligence

 

Due Diligence Information has the meaning given in clause 6.5(f);

 

Ecosystem means the group of Affiliates of the Kurdoğlu Family comprising the following entities: (i) TAB Gida; (ii) Fasdat Gıda Dağıtım Sanayi ve Ticaret A.Ş., a joint stock company

 

76

 

formed under the laws of Turkey, registered with the Gebze Trade Registry under no. 3513 and with its registered office at Tavşanlı Köyü, Kömürcüoğlu Caddesi, No: 7-11, Gebze, Kocaeli, Turkey; (iii) Reklam Üssü Reklam Ajansı Prodüksiyon Danışmanlık Organizasyon Sanayi ve Dış Ticaret A.Ş., a joint stock company formed under the laws of Turkey,  registered with the Istanbul Trade Registry under no. 620407 and with its registered office at Emirhan Caddesi, Ata Kule, No: 109, K:16, Istanbul, Turkey; and (iv) Ekmek Unlu Gıda Sanayi ve Ticaret A.Ş., a joint stock company formed under the laws of Turkey, registered with the Istanbul Trade Registry under no. 3513 and with its registered office at Kömürcüoğlu Caddesi Taşocakları Mevkii No:11 Tavşanlı Köyü Gebze Kocaeli, Turkey.;

 

Enforcement Costs has the meaning given in clause 9.1;

 

Enforcement Costs Limit has the meaning given in clause 9.1;

 

Environment means (i) all or any of the following media, namely air (including the air within buildings or other natural or man-made structures above or below ground), water (including surface or ground water, water in pipes, drainage or sewerage systems) and/or land and (ii) any living organisms (including human beings) or systems supported by all or any of those media;

 

Environmental Laws means all or any international, national, provincial or local Laws, regulations, rules, guidelines, treaties, directives, decisions, decrees, orders, judgments, awards, directions, standards, authorizations, permits and similar requirements relating to Environmental Matters (including without limitation clean-up standards and practices for Hazardous Substances in buildings, equipment, soil, sub-soil, air, surface water or groundwater), together with any judicial or administrative interpretations of each of the foregoing;

 

Environmental Matters means all or any matters relating to the pollution or protection of the Environment, the use, storage, handling or disposal of Hazardous Substances, human health and safety (including health and safety of employees, occupiers and invitees, food safety and fire safety) and matters relating to the construction, demolition, alteration or use of buildings or land to the extent that they relate to any of the foregoing;

 

Equity Proportions means the respective proportions in which the Shares are held from time to time by each of the Shareholders save that, if the expression Equity Proportion is used in the context of some (but not all) of the Shareholders, it shall mean the respective proportions in which Shares are held by each of those particular Shareholders;

 

Equity Transfers means the direct or indirect acquisition by, and transfer to, HK Development of all of the Mainstreets Equity Interests on terms as determined by BKAP in its sole discretion and Equity Transfer shall be construed accordingly;

 

ETAs means the binding sale and purchase agreements in respect of the Equity Transfers and ETA shall be construed accordingly;

 

Exclusivity Milestones has the meaning given in the Development Schedule;

 

Existing Restaurants (save where used in The Disclosure Schedule) means the 45 Burger King Restaurants throughout China operated by the PRC Subsidiaries on the date of this Agreement;

 

Fair Price means an amount determined in accordance with Schedule 10;

 

77

 

Fast Food Burger Restaurant means any restaurant which (i) has burgers or burger based products, which account for 15% or more of total menu items or total gross sales, and (ii) which does not offer table service as the principal method of ordering or food delivery;

 

FCPA means the Foreign Corrupt Practices Act of 1977, as amended;

 

Financial Year means a financial period of the JVC (commencing, other than in the case of its initial financial period, on 1 January and ending on 31 December);

 

First Investor Cash Contribution has the meaning given to it in clause 2.1;

 

Fundamental Representations means, collectively, the representations and warranties set forth in the following provisions or in any certificate delivered hereunder with respect to any such representations and warranties:

 

(i) clauses 6.1(a), 6.1(b), 6.1(c), 6.2(a), 6.2(c); and

 

(ii) Section 1.1 of Part A to Schedule 1-B; and

 

(iii) Part B to Schedule 1-B.

 

Funding Deadline has the meaning given in clause 2.3(a);

 

Group means, in relation to a Party, that person and its Affiliates for the time being;

 

Governmental Entity means any supra-national, national, state, municipal or local government (including any subdivision, court, administrative agency or commission or other authority thereof) or any quasi-governmental or private body exercising any regulatory, taxing, importing or other governmental or quasi-governmental authority;

 

Hazardous Substance means any pollutant, contaminant, toxic or dangerous substance or other material or substance, including waste, which, alone or in combination with other substances, causes or may cause harm or damage to the Environment or detriment to the health and safety of any person including, for the avoidance of doubt, asbestos or asbestos containing materials, energy radiation, radioactive substances, and electromagnetic fields;

 

HK Development means BK (Hong Kong) Development Co., Ltd;

 

HK Development Share means an ordinary share of US$1 each in the capital of shares in HK Development;

 

HK Development Transfer has the meaning given in clause 1.5;

 

Holding Company means, in relation to a company, any company of which the latter is a Subsidiary;

 

Hong Kong means the Hong Kong Special Administrative Region of the People’s Republic of China;

 

Intellectual Property Rights means patents, trade marks, service marks, logos, trade names, internet domain names, copyright (including rights in computer software) and moral rights, database rights, semi-conductor topography rights, utility models, rights in designs, rights in get-up, rights in inventions, rights in know-how and other intellectual property rights, in each case whether registered or unregistered, and all rights or forms of protection having

 

78

 

equivalent or similar effect anywhere in the world and registered includes registration and applications for registration;

 

Intra-Group Transfer has the meaning given in clause 22.1(a);

 

Investor has the meaning given in the preamble;

 

Investor Cash Contributions means, collectively, the First Investor Cash Contribution and the Subsequent Investor Cash Contributions;

 

Investor Shares has the meaning given in clause 2.1;

 

ITG means Xiamen ITG Group Corporation Ltd. or any of its Affiliates;

 

ITG Equity Interest means the (This material has been omitted pursuant to a request for confidential treatment, and such material has been filed separately with the Commission.) equity interest in BK Guangzhou held by ITG as at the date of this Agreement;

 

JV Debt has the meaning given in clause 10.3;

 

JVC means a company incorporated in Cayman Islands established in accordance with this Agreement;

 

JVC Account has the meaning given in clause 2.6;

 

JVC Deed of Adherence means a deed in the form set out in Part A of Schedule 7;

 

JVC Group means JVC, HK Development, BKHK, the PRC Subsidiaries and any other Subsidiary of the JVC established from time to time after Closing;

 

Key Employee has the meaning given in paragraph 1 of Part E of Schedule 1-B;

 

Knowledge has the meaning given in clause 6.1, for the purposes of clause 6;

 

Kurdoğlu Family means Erhan Kurdoglu, Korhan Kurdoglu, Tuna Kurdoglu and Ertuğrul Kurdoglu;

 

Law means any laws, rules, statutes, decrees, regulations, circulars, ordinances or orders, including all applicable public, environmental, and competition laws and regulations; and any administrative decisions, judgments and other pronouncements enacted, issued promulgated, enforced or entered by any Authority;

 

Last Accounts means, in relation to each BKAP Subsidiary, the Accounts of such BKAP Subsidiary in respect of its financial year ended on the Last Accounts Date;

 

Last Accounts Date means, (a) with respect to either of BKHK and HK Development, 31 December 2010 and (b) with respect to BK Shanghai, 31 December 2011;

 

Leasehold Property has the meaning given in paragraph 1 of Part C of Schedule 1-B;

 

Listing has the meaning given in clause 17.1;

 

Listing Notice has the meaning given in clause 17.2;

 

Longstop Date has the meaning given in clause 4.4;

 

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Losses means all losses, claims, costs (including reasonable legal costs) and damages (including loss of profits) and expenses (including Taxes), penalties and interest charges, in each case of any nature whatsoever, but shall exclude incidental or consequential losses or otherwise losses of an indirect nature not reasonably foreseeable by the Parties at the time of execution of this Agreement;

 

Mainstreets Development Rights means the rights granted under the Development Agreements between BK Shanghai on the one side and BK Beijing and BK Shenzhen on the other, as set out in Schedule 4.

 

Mainstreets Equity Interests means the BMIG Equity Interests, the BQIC Equity Interests and the BZET Equity Interests and a Mainstreets Equity Interest means any of these;

 

Mainstreets Parties means any and all of BMIG, BZET and BQIC;

 

Management Accounts means the unaudited monthly management accounts of each BKAP Subsidiary for the period commencing on the Last Accounts Date and ending on the Management Accounts Date, each in the form contained in the Data Room;

 

Management Accounts Date means (a) with respect to either of BKHK and HK Development, 31 December 2011 and (b) with respect to BK Shanghai, 31 December 2011;

 

Master Franchise and Development Agreement means a master franchise and development agreement in the form set out in Schedule 2;

 

Material Adverse Change means any event, circumstance, effect, occurrence or state of affairs or any combination thereof (whether existing or occurring on or before the date of this Agreement or arising or occurring afterwards) which is materially adverse to the business, operations, assets, liabilities (including contingent liabilities) financial condition or prospects of the BK China Business as a whole;

 

Memorandum and Articles means JVC’s memorandum and articles of association as amended from time to time;

 

New Party Deed of Adherence means a deed in the form set out in Part B of Schedule 7;

 

Non-Transferring Shareholder(s) has the meaning given in clause 23.1;

 

Notice of Dispute has the meaning given in clause 41.1;

 

Offer has the meaning given in clause 23.1;

 

Ordinary Shares means the ordinary shares of US$0.0001 each in the capital of the JVC having the rights set out in the Memorandum and Articles;

 

Parties means the Investor and BKAP and any other person who at the relevant time is a party to, or has agreed (by executing a deed of adherence on the terms as set out in this Agreement) to be bound by, this Agreement and Party means any one of them;

 

PRC means the People’s Republic of China, excluding Hong Kong, Taiwan and the Special Administrative Region of Macau;

 

PRC Company Franchise Agreement has the meaning given to it in the Master Franchise and Development Agreement;

 

80

 

PRC Joint Ventures means each of BK Beijing, BK Shenzhen, BK Guangzhou and PRC Joint Venture any of them;

 

PRC Subsidiaries means each of the PRC Joint Ventures and BK Shanghai, and PRC Subsidiary means any of them;

 

Proportionate Entitlement has the meaning given in clause 23.1(a);

 

PT has the meaning given in the preamble;

 

PTP has the meaning given in the preamble;

 

Purchase Notice has the meaning given in clause 23.2;

 

Redeemable Shares means any Ordinary Shares which by their terms of issue are redeemable by the JVC;

 

Reference Date has the meaning given in clause 23.1(e);

 

Regulatory Action means any order of a court of competent jurisdiction, any order, decision or conclusive view made, given or expressed by a competent supranational, government or regulatory authority or agency or an enactment of a legislative body which: (i) materially prohibits or restricts Closing of the transactions contemplated by this Agreement or requires it to be delayed beyond the date referred to in clause 4 or (ii) after Closing would materially prohibit or restrict the carrying on of the business of the JVC Group as contemplated by this Agreement;

 

Relevant Notice has the meaning given in paragraph 2(c) of Schedule 9;

 

Relevant Sale Securities has the meaning given in clause 23.1(a);

 

Reserved Matters means those matters set out in clause 22.112.1;

 

ROFR Longstop Event has the meaning given in clause 23.8;

 

Sale Price has the meaning given in clause 23.1(b);

 

Sale Proportion has the meaning given in paragraph 2(d) of Schedule 9;

 

Second Exclusivity Milestone has the meaning given in the Development Schedule;

 

Second Investor Cash Contribution has the meaning given in Part B of Schedule 5;

 

Seller has the meaning given in paragraph 2(e) of Schedule 9;

 

Seller’s Securities has the meaning given in paragraph 2(f) of Schedule 9;

 

Shareholders means those parties to this Agreement which at the relevant time hold Shares (and Shareholder means any one of them), including any person to whom Shares have been transferred or issued and who has agreed to be bound by this Agreement by executing a deed of adherence on the terms as set out in this Agreement;

 

Shares means Ordinary Shares and Redeemable Shares;

 

81

 

Sponsor has the meaning given in clause 17.3;

 

Subsequent Investor Cash Contribution shall have the meaning given in clause 2.2

 

Subsidiary means, with respect to any party, any corporation, partnership, trust, limited liability company or other business enterprise or organisation which such party (or another Subsidiary of such party) Controls ;

 

Surviving Provisions means clause 18 (Confidentiality), clause 20  (Non-Competition),  clause 32 (Waiver of Rights), clause 34 (Invalidity), clause 35 (No Partnership or Agency), clause 36 (Announcements) clause 37 (Costs), clause 38 (Whole Agreement), clause 40 (Notices), clause 41 (Settlement of Disputes) clause 43 (No Third Party Enforcement Rights), clause 43 (Governing Law) and Schedule 11;

 

TAB Gida means TAB Gıda Sanayi Ve Ticaret A.Ş. together with its successors and assigns.

 

Tag-Along Pro Rata Shares has the meaning given in clause 24.1;

 

Taxes means all taxes, charges, duties, fees, levies, contributions or other assessments, including income, excise, property, sales, value added, profits, licence, withholding (with respect to employment compensation or otherwise) payroll, employment, network, capital gains, transfer, stamp, environmental, occupation and franchise taxes imposed by any governmental authority, and including any interest, penalties and additions attributable thereto, further including any employees social security contributions, and Tax shall be construed accordingly;

 

Tax Returns means returns, declarations, reports, claims for refund, information returns or other documents (including any related or supporting schedules, statements or information) filed or required to be filed in connection with the determination, assessment or collection of any Taxes of any party or the administration of any Laws relating to any Taxes.

 

Territory means the de jure boundaries of the PRC;

 

Third Investor Cash Contribution has the meaning given in Part B of Schedule 5;

 

Third Party Purchaser has the meaning given in clause 23.1;

 

Third Party Rights means any interest or equity of any person (including any right to acquire, option or right of pre-emption or conversion) or any mortgage, charge, pledge, lien, assignment, hypothecation, security interest, title retention or any other security agreement or arrangement, or any agreement to create any of the above;

 

Transaction means the transaction contemplated by this Agreement;

 

Transaction Documents means this Agreement, the Master Franchise and Development Agreement and the PRC Company Franchise Agreement, and Transaction Document means any one of them;

 

Transfer means any transfer, pledge, charge, disposition of or otherwise dealing with any right or interest in any Share (including the grant of any option over any Share);

 

Transfer Notice has the meaning given in clause 23.1;

 

Transfer Offer Terms has the meaning given in clause 23.1(d);

 

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Transferor has the meaning given in clause 23.1;

 

Ultimate Holding Company means a Holding Company which is not a Subsidiary;

 

Valuation Certificate has the meaning given in paragraph 3 of Schedule 10;

 

Valuation Experts has the meaning given in paragraph 1 of Schedule 10;

 

Valuation Shares has the meaning given in paragraph 1 of Schedule 10;

 

Warranty Claim has the meaning given in clause 6.5(a);

 

Wholly-Owned Subsidiary of HK Development means a PRC Joint Venture in respect of which all of the Equity Transfers contemplated under this Agreement have been Completed and upon which such PRC Joint Venture has become a wholly-owned subsidiary of HK Development; and

 

Working Hours means 9.30am to 5.30pm in the relevant location on a Business Day.

 

2.                                      Interpretation.  In this Agreement, unless the context otherwise requires:

 

(a)                                 headings do not affect the interpretation of this Agreement; the singular shall include the plural and vice versa; and references to one gender include all genders;

 

(b)                                 references to an English legal term or concept shall, in respect of any jurisdiction other than Hong Kong, be construed as references to the term or concept which most nearly corresponds to it in that jurisdiction;

 

(c)                                  references to HKD are references to the lawful currency from time to time of Hong Kong SAR;

 

(d)                                 references to US$ are references to the lawful currency from time to time of the United States of America;

 

(e)                                  any phrase introduced by the terms including, include, in particular or any similar expression shall be construed as illustrative and shall not limit the sense of the words preceding those terms;

 

(f)                                   any reference to a document in the agreed form is to the form of that document as initialled for the purpose of identification by or on behalf of the parties (in each case with such amendments as may be agreed by them or on their behalf);

 

(g)                                  references to statutory provisions shall (where the context so admits and unless otherwise expressly provided) be construed as references to those provisions as amended, consolidated, extended or re-enacted from time to time (whether before or after the date of this Agreement);

 

(h)                                 where a term is stated to have the meaning ascribed to it in the Articles, the reference shall be to the Articles as amended from time to time in accordance with the terms of this Agreement;

 

(i)                                     references to persons shall be deemed to include references to natural persons, to firms, to partnerships, to bodies corporate, to associations, to organisations and to

 

83

 

trusts (in each case whether or not having separate legal personality), but references to individuals shall be deemed to be references to natural persons only;

 

(j)                                    references to clauses, schedules and exhibits are references to clauses, schedules and exhibits of this Agreement;

 

(k)                                 references to paragraphs are, unless otherwise expressly provided, references to paragraphs of the clause or schedule in which the references appear;

 

(l)                                     references to the parties include their respective successors in title, permitted assignees, estates and legal personal representatives; and

 

(m)                             words defined in the Articles but not herein defined shall have the same meaning as in the Articles.

 

3.                                      The schedules and exhibits shall be deemed to be incorporated in this Agreement.

 

4.                                      Where any obligation in this Agreement is expressed to be undertaken or assumed by any party, that obligation is to be construed as requiring the party concerned to exercise all rights and powers of control over the affairs of any other person which it is able to exercise (whether directly or indirectly) in order to secure performance of the obligation.

 

5.                                      Whenever the last day for the exercise of any right or the discharge of any obligation hereunder shall fall upon a day that is not a Business Day, the party having such right or obligation may exercise such right or obligation on the next succeeding day which is a Business Day.

 

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SIGNATURE

 

This Agreement is signed by duly authorised representatives of the parties:

 

	
SIGNED
    	
 
    	
) 
    	
SIGNATURE:
    	
 
    
	
for and on behalf of
    	
 
    	
)
    	
 
    	
 
    
	
Pangaea Foods, SPC
    	
 
    	
) 
    	
NAME:
    	
 
    
	
for the account of
    	
 
    	
 
    	
 
    	
 
    
	
Pangaea Foods (China), SP
    	
 
    	
 
    	
 
    

 

79

 

	
SIGNED
    	
 
    	
) 
    	
SIGNATURE:
    	
/s/ Elias Dias Sese
    
	
for and on behalf of
    	
 
    	
)
    	
 
    	
 
    
	
BK ASIAPAC, PTE. LTD
    	
 
    	
) 
    	
NAME:
    	
Elias Dias Sese
    
	
 
    	
 
    	
)
    	
 
    	
 
    
	
 
    	
 
    	
) 
    	
TITLE:
    	
President, APAC
    

 

80

 

	
SIGNED
    	
PANGAEA   TWO, LP
    
	
for and on behalf of
    	
 
    
	
PT
    	
BY:
    	
PANGAEA   TWO GP, LP
    
	
 
    	
Its:
    	
General Partner
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
Pangaea   Two Admin GP, LLC
    
	
 
    	
Its:
    	
General Partner
    
	
 
    	
By:
    	
/s/ Peter Yu
    
	
 
    	
 
    
	
 
    	
 
    	
Name:
    	
Peter Yu
    
	
 
    	
 
    	
Title:
    	
President
    
	
 
    	
 
    	
 
    	
 
    
	
SIGNED
    	
PANGAEA   TWO PARALLEL, LP
    
	
for and on behalf of
    	
 
    
	
PTP
    	
BY:
    	
PANGAEA   TWO GP, LP
    
	
 
    	
Its:
    	
General Partner
    
	
 
    	
 
    
	
 
    	
By:
    	
Pangaea   Two Admin GP, LLC
    
	
 
    	
Its:
    	
General Partner
    
	
 
    	
By:
    	
/s/ Peter Yu
    
	
 
    	
 
    
	
 
    	
 
    	
Name:
    	
Peter Yu
    
	
 
    	
 
    	
Title:
    	
President
    
					

 

81

 

	
SIGNED
    	
 
    	
) 
    	
SIGNATURE:
    	
/s/ Erhan Kurdoğlu
    
	
for and on behalf of
    	
 
    	
)
    	
 
    	
 
    
	
KRD Kurdoğlu
    	
 
    	
)
    	
 
    	
 
    
	
Gıda Sanayi ve Ticaret A.Ş
    	
 
    	
) 
    	
NAME:
    	
Erhan Kurdoğlu
    

 

	
 
    	
 
    	
)
    	
SIGNATURE:
    	
/s/ Korhan Kurdoğlu
    
	
 
    	
 
    	
)
    	
 
    	
 
    
	
 
    	
 
    	
)
    	
 
    	
 
    
	
 
    	
 
    	
)
    	
NAME:
    	
Korhan Kurdoğlu
    

 

82

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