Form of Church's Development Agreement

EXHIBIT 10.5


CHURCHS CHICKEN
DEVELOPMENT AGREEMENT
(Exclusive)


Between


AFC ENTERPRISES, INC.


and


_______________________________


Dev. Agr. No.:________
No. Options:__________
Date:_________________


AFC Enterprises, Inc.


CHURCHS CHICKEN
DEVELOPMENT AGREEMENT
(Exclusive)


TABLE OF CONTENTS


I. GRANT......................................................... 2


II. DEVELOPMENT FEE............................................... 3


III. DEVELOPMENT SCHEDULE.......................................... 3


IV. FRANCHISED UNIT OPENINGS...................................... 4


V. DEFAULT AND TERMINATION....................................... 6


VI. TRANSFERABILITY OF INTEREST................................... 7


VII. CONFIDENTIAL INFORMATION...................................... 10


VIII. COVENANTS..................................................... 11


IX. NOTICES....................................................... 12


X. NON-WAIVER.................................................... 13


XI. INDEPENDENT CONTRACTOR AND INDEMNIFICATION.................... 13


XII. APPROVALS..................................................... 14


XIII. ACKNOWLEDGMENT................................................ 14


XIV. SEVERABILITY AND CONSTRUCTION................................. 15


XV. ENTIRE AGREEMENT AND APPLICABLE LAW........................... 16


EXHIBIT A DEVELOPMENT SCHEDULE.......................................... 18


EXHIBIT B TERRITORY..................................................... 19


EXHIBIT C FRANCHISE AGREEMENT........................................... 20


AFC Enterprises, Inc.


CHURCHS CHICKEN
DEVELOPMENT AGREEMENT
(Exclusive)


THIS AGREEMENT (the "Agreement"), made this ______ day of __________________________, 19___, by and between AFC Enterprises, Inc. (f/k/a Americas Favorite Chicken Company), a Minnesota corporation, with its principal place of business at Six Concourse Parkway, Suite 1700, Atlanta, Georgia 30328- 5352, U.S.A. ("Franchisor") and_________________________________________________ ____________________________ ("Developer").


WITNESSETH:


WHEREAS, Franchisor owns a unique system for opening and operating restaurants ("CHURCHS Restaurant(s)") specializing in the preparation, merchandising, advertising and sale of fried chicken and other quick-service menu items developed and owned by Franchisor (the "CHURCHS System" or the "System");


WHEREAS, the distinguishing characteristics of the CHURCHS System include, without limitation, the names "CHURCHS" and "CHURCHS Chicken"; the distinguishing characteristics of which include, without limitation, uniform and distinctive building designs, interior and exterior layouts, trade dress, equipment layout standards and specifications, development and maintenance of sources of supply, operating procedures for sanitation and maintenance, food and beverage storage procedures, service procedures, and secret food preparation recipes and batter mixes, standards and specifications for equipment, equipment layouts, products, operating procedures and management programs, all of which may be changed, improved and further developed by Franchisor from time to time;


WHEREAS, Franchisor identifies the CHURCHS System by means of certain trade names, service marks, trademarks, logos, emblems, and indicia of origin, including, but not limited to, the marks "CHURCHS" and "CHURCHS Chicken" and such other trade names, service marks, and trademarks as are now, or may hereafter, be designated by Franchisor for use in connection with the System ("Proprietary Marks");


WHEREAS, Franchisor continues to develop, use, and control the use of such Proprietary Marks in order to identify for the public the source of services and products marketed thereunder in the CHURCHS System and to represent the CHURCHS System's high standards of quality, appearance, and service;


WHEREAS, Developer wishes to be assisted, trained and licensed by Franchisor as a CHURCHS developer and franchisee and licensed to use, in connection therewith, the CHURCHS System;


WHEREAS, Developer understands the importance of the CHURCHS System and CHURCHS high and uniform standards of quality, cleanliness, appearance, and service, and the necessity of opening and operating Developer's CHURCHS Restaurants in conformity with the CHURCHS System; and


WHEREAS, Developer wishes to obtain the right to develop CHURCHS Restaurants ("Franchised Units") in the area described in this Agreement and to use the CHURCHS System in connection with those Franchised Units;


NOW, THEREFORE, the parties hereto agree as follows:


I. GRANT


1.01. Franchisor hereby grants the Developer, subject to the terms and conditions of this Development Agreement and as long as Developer shall not be in default of this Agreement or any other development, franchise or other agreement between Developer and Franchisor, development rights to obtain franchises to establish and operate ________ Franchised Units, and to use the Church's System solely in connection therewith, at specific locations to be designated in separate franchise agreements ("Franchise Agreements"), executed as provided in Section 3.01. hereof, and pursuant to the schedule set forth in Exhibit A to this Agreement ("Development Schedule"). Each Franchised Unit - --------- developed pursuant hereto shall be located in the area described in Exhibit B
--------- hereto "(Development Area").


1.02. Subject to the terms and conditions herein, Franchisor shall neither establish nor license anyone other than Developer to establish a Franchised Unit in the Development Area until sixty (60) days after the commencement of operations of the final Franchised Unit under this Agreement, without Developer's prior written consent.


1.03. Each Franchised Unit for which a development right is granted hereunder shall be established and operated pursuant to a Franchise Agreement to be entered into between Developer and Franchisor in accordance with Section 3.01. hereof.


1.04. This Agreement is not a franchise agreement, and does not grant the Developer any right to use Franchisor's Proprietary Marks or the Church's System, but merely sets forth the terms and conditions under which Developer will be entitled to obtain a franchise agreement.


1.05. Developer shall have no right under this Agreement to license others under the Proprietary Marks or to use the Church's System.


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II. DEVELOPMENT FEE


In consideration of the development rights granted herein, Developer has paid to the Franchisor upon execution of this Agreement a non-refundable development fee of __________________________________ Dollars ($_____________) which development fee has been fully earned by Franchisor for administrative and other expenses incurred by Franchisor and for the development opportunities lost or deferred as a result of the rights granted Developer herein.


III. DEVELOPMENT SCHEDULE


3.01. Developer shall exercise each development right granted herein only by executing a Franchise Agreement for each Franchised Unit for a site accepted by the Franchisor in the Development Area as hereinafter provided. Developer's right to execute such a Franchise Agreement shall be contingent upon Developer's continuous performance of all of the terms and conditions of this Agreement and any other development, franchise or other agreements between Developer and Franchisor. The Franchise Agreement for each Franchised Unit developed pursuant to this Agreement shall be in the form of the Franchise Agreement attached hereto as Exhibit C.


3.02. Recognizing that time is of the essence in this Agreement, Developer agrees to exercise the development rights granted hereunder in the manner specified in Section IV hereof and to satisfy the Development Schedule. Failure by Developer to adhere to the Development Schedule shall constitute a default under this Agreement, as provided in Section 5.03. hereof.


3.03. In addition to the development fee required by Section II hereof, Developer shall pay (i) an initial franchise fee for each Restaurant developed hereunder in the amount of Fifteen Thousand Dollars ($15,000) upon execution of a Franchise Agreement for each such Franchised Unit, all of which amount shall be non-refundable and fully earned by Franchisor upon execution of the Franchise Agreement for a Franchised Unit.


3.04 Franchisor reserves the right, in its sole discretion, to grant Developer one or more extensions to the Development Schedule (a Development Schedule Extension) provided, however, Franchisee shall be required to pay Franchisor a fee (the Development Schedule Extension Fee) in an amount not to exceed Three Thousand Dollars and No/Cents ($3,000.00) for each Development Schedule Extension of six (6) months duration or less. Notwithstanding the foregoing, Franchisor reserves the right to waive the applicable Development Schedule Extension Fee, in its sole discretion, upon a showing, by Franchisee, to Franchisor s satisfaction, that (1) Developer has used its best efforts to comply with the Development Schedule and (b) Franchisee has been unable to comply with the Development Schedule as a result of conditions or events beyond Franchisees control. Nothing herein shall be deemed to require Franchisor to grant Franchisee a Development


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Schedule Extension at any time. Furthermore, the grant of one Development Schedule Extension to Franchisee shall not be deemed approval of any further Development


IV. FRANCHISED UNIT OPENINGS


4.01. Developer shall submit a proposed site for each Franchised Unit for acceptance by Franchisor. Franchisor shall, provided there exists no default by Developer under this Agreement or any other development, franchise or other agreement between Developer and Franchisor, evaluate each site proposed and shall promptly, but not more than thirty (30) days after receipt of Developer's proposal, send to Developer written notice of acceptance or non-acceptance of the site. Site acceptance does not assure that a Franchise Agreement will be executed. Execution of the Franchise Agreement is contingent upon Developer purchasing or leasing the proposed site and securing acceptance of the final plans and specifications as provided below.


4.02. Within ninety (90) days after notice of Franchisor's site acceptance, Developer shall:


A. Submit, in writing to Franchisor, satisfactory proof to
Franchisor that Developer:


(i) owns the accepted site;


(ii) has leased the accepted site for a term which, with renewal
options, is not less than the initial term of the Franchise
Agreement; or


(iii) has entered into a written agreement to purchase or to
lease the accepted site on terms provided herein, subject only to
obtaining necessary governmental permits. If Developer leases the
accepted site, the lease must provide: (a) that, in the event
Developer defaults under or otherwise ceases operating the
Franchised Unit at the accepted site during the term of the lease,
Franchisor shall have the right, at its option, to assume
Developer's position under the lease; (b) that, in the event
Developer defaults under the lease, notice of the default shall
immediately be forwarded to Franchisor; and (c) that Franchisor
shall have the right, upon default under the lease or other
cessation of operation at the accepted site, to make the
modifications and alterations to the Franchised Unit set forth in
Section 16.01.D. of the Franchise Agreement. The proof required by
this Section includes, but is not limited to, submission of executed
copies of all leases and deeds, as well as all governmental
approvals if effectiveness of the leases or deeds is conditioned
thereon.


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B. Submit to Franchisor, and obtain Franchisor's written approval of, the
final and complete plans and specifications for the construction (or
renovation) and decoration of the Franchised Unit, which must be in
conformity with Franchisor's standards and specifications for Franchised
Units, as set out in the current Confidential Operating Standards Manual
(as defined in the Franchise Agreement) or otherwise in writing
(hereinafter, the "Construction Plans"). The final Construction Plans
shall include, but are not limited to, floor plans, equipment layouts,
decor, and interior and exterior elevations.


C. Execute the Franchise Agreement and pay all fees required thereunder.
If Developer is a partnership, each general partner shall, and if Developer
is a corporation, each stockholder holding a beneficial interest of five
percent (5%) or more of the securities with voting rights of Developer or
any corporation directly or indirectly controlling Developer shall,
guarantee the performance of the Franchise Agreement by executing the
Franchisor's Franchise Agreement Guarantee form. Franchisor shall not
approve the final construction plans until the Franchise Agreement is
executed and all fees are paid by Franchisee.


4.03. Developer shall procure the insurance coverage provided for in Section XI of the Franchise Agreement, prior to commencement of construction of a Franchised Unit, and shall maintain such insurance coverage throughout the term of the Franchise Agreement.


4.04. No more than thirty (30) days after the Franchisor approves Developer's Construction Plans, Developer shall commence construction or renovation of the Franchised Unit. If commencement of construction or renovation is delayed by a cause beyond the reasonable control of Developer, the date upon which commencement of construction or renovation is to begin may be extended by obtaining written approval of Franchisor.


4.05. Upon commencement of construction or renovation of the Franchised Unit, Developer shall notify Franchisor on such form as Franchisor may prescribe.


4.06. Developer shall have completed construction or renovation and commenced operation of the Franchised Unit within one-hundred eighty (180) days from execution of the Franchise Agreement as provided in Section 4.02.C. hereof. Franchisor may, in its sole discretion, extend this period to address unforeseen construction delays, not within the control of Developer. Nothing herein shall be deemed to relieve Developer of the obligation of complying with the Development Schedule.


4.07. At least ten (10) days prior to the proposed commencement of operation of each Franchised Unit, Developer shall notify Franchisor of such proposed opening. If the Franchised Unit is Developer's first Franchised Unit opened hereunder, Franchisor shall provide a representative to be present at the opening. The Franchised Unit shall not be opened unless such representative is present. Should commencement of operation of the Franchised Unit be delayed by the failure of Franchisor to provide such a representative, the date upon which commencement of operation of the


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Franchised Unit is required pursuant to Exhibit A of this Agreement, shall be extended until such time as such assistance is provided by Franchisor.


V. DEFAULT AND TERMINATION


5.01. The rights granted to Developer in this Agreement have been granted based upon Developer's representations and assurances, among others, that the conditions set forth in Sections III and IV of this Development Agreement will be met by Developer in a timely manner.


5.02. Developer shall be deemed to be in default under this Agreement, and all rights granted herein shall automatically terminate without notice to Developer, if Developer shall become insolvent or make a general assignment for the benefit of creditors; if a petition in bankruptcy is filed by Developer or such a petition is filed against Developer and not opposed by Developer; or if Developer is adjudicated bankrupt or insolvent; or if a receiver or other custodian (permanent or temporary) of Developer's assets or property, or any part thereof, is appointed by any court of competent jurisdiction; or if proceedings for a composition with creditors under the applicable law of any jurisdiction should be instituted by or against Developer; or if a final judgment remains unsatisfied or of record for thirty (30) days or longer (unless a supersedeas bond is filed); or if Developer is dissolved; or if execution is levied against Developer's property or business; or if suit to foreclose any lien or mortgage against the premises or equipment of any Franchised Unit developed hereunder is instituted against the Developer and not dismissed within thirty (30) days; or if the real or personal property of any Franchised Unit developed hereunder shall be sold after levy thereupon by any sheriff, marshall, or constable.


5.03. If Developer fails to comply with the Development Schedule or any other terms of this Agreement, or fails to obtain Franchisor's approval of a site or construction plans and specifications prior to commencement of construction, or fails to comply with any terms or conditions of any franchise agreement covering a Franchised Unit established hereunder, or any other agreement between Developer or any affiliate of Developer and Franchisor or any affiliate of Franchisor, such action shall constitute a default ...