Development Agreement

EXHIBIT 10.89


"SBC COFFEE"
DEVELOPMENT AGREEMENT
BETWEEN


CINNABON, INC., SUCCESSOR IN INTEREST TO
SEATTLE'S BEST COFFEE, LLC


AND


__________________________


FOR


__________________________


Contract No:_________________________
No. of Options:______________________
Date:________________________________


"SBC COFFEE"
DEVELOPMENT AGREEMENT
(INTERNATIONAL)


THIS AGREEMENT (the "Agreement") is made this ____ day of __________, 20__ , by and between CINNABON, INC., SUCCESSOR IN INTEREST TO SEATTLE'S BEST COFFEE, LLC, a Washington corporation, with offices at Six Concourse Parkway, Suite 1700, Atlanta, Georgia, 30328-5352 U.S.A. ("Franchisor" or "SBC") and ________, having its principal address at ________________ ("Developer").


WITNESSETH:


WHEREAS, Seattle's Best Coffee, LLC has developed, in the United States, and owns a unique system for opening and retail operating cafes, kiosks and custom mobile carts specializing in the preparation and sale of proprietary, specialty coffee, beverages, coffee-based products and other menu items developed and owned by Franchisor (the "SBC COFFEE System", "SBC System" or "System");


WHEREAS, the distinguishing characteristics of Franchisor's SBC COFFEE System, in the United States, include, without limitation, the names "SBC", "SBC COFFEE" and "SEATTLE'S BEST COFFEE"; specially designed buildings, distinctive interior and exterior layouts, decor, color schemes, and furnishings; confidential formulas and recipes used in the preparation of SBC Coffee products; specialized menus; standards and specifications for equipment; and 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 SBC COFFEE System by means of certain trade names, service marks, trademarks, logos, emblems, and indicia of origin, including, but not limited to, the marks "SBC", "SBC COFFEE", "SEATTLE'S BEST COFFEE" and such other trade names, service marks, trademarks, and trade dress as are now, or may hereafter, be designated by Franchisor for use in connection with the SBC COFFEE System ("Proprietary Marks");


WHEREAS, pursuant to a Master License Agreement and First Amendment thereto, both dated July 13, 2003, by and between Cinnabon Inc., SBC and Seattle Coffee Company, SBC granted a license to CBI for the use of the SBC System and proprietary marks in performing its obligations under this Agreement;


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 SBC COFFEE System and to represent the SBC COFFEE System's high standards of quality, appearance, and service;


WHEREAS, Developer wishes to obtain the development rights as described herein for the area described on Exhibit A attached hereto and made a part hereof (the "Territory"), in order to enter into franchise agreements with Franchisor to open and operate retail cafes, kiosks and custom mobile carts using the SBC System and the Proprietary Marks ("Franchised Units" or "SBC Retail Units") in the Territory;


WHEREAS, Franchisor has applied for registration of, or may have registered, certain of the Proprietary Marks in the Territory; and


WHEREAS, Developer understands the importance of the SBC COFFEE System and Franchisor's high and uniform standards of quality, cleanliness, appearance, and service, and the necessity of opening and operating SBC Retail Units in conformity with the SBC COFFEE System.


NOW, THEREFORE, the parties hereto agree as follows:


I. DEFINITIONS


1.01 For the purposes of this Agreement, the following terms shall be deemed to have the definitions set forth below:


A. "SBC Cafe" shall mean a free standing or in-line SBC
Retail Unit incorporating the full SBC Cafe design
and trade-dress and offering the full SBC Cafe menu;.


B. "SBC Kiosk"" shall mean a self contained SBC Retail
Unit, incorporating less than the full SBC Cafe
design and trade-dress, with no dedicated seating for
customers (ie food court, kiosk, etc)


C. "SBC Mobile Cart" shall mean a self-contained, mobile
cart, occupying a space of less than 20 square
meters, offering a limited number of proprietary SBC
coffee products under the Proprietary Marks and the
SBC System.


II. GRANT


2.01 Franchisor hereby grants the rights to Developer, and Developer accepts the obligations, pursuant to the terms and conditions of this Development Agreement and as long as Developer shall not be in a default of this Agreement or any other development agreement, franchise agreement, or other agreement between Developer (or any parent, subsidiary or affiliate of Developer) and Franchisor, (or any parent, subsidiary or affiliate of Franchisor) to establish and operate an aggregate of ________Franchised Units, and to use the SBC System and


Proprietary Marks solely in connection therewith, at specific locations to be designated in and in accordance with the terms and conditions set forth in separate franchise agreements ("Franchise Agreements") executed as provided in Section 3.03 hereof, and pursuant to the schedule set forth in Exhibit B to this Agreement ("Development Schedule"). Each Franchised Unit established pursuant hereto shall be located within the Territory at locations approved by Franchisor in accordance with this Agreement. No more than ___ Franchised Units developed hereunder may be Kiosks and no more than ___ Franchised Units may be SBC Carts. Developer must develop a minimum of ___ SBC Cafes hereunder prior to developing any Kiosks and/or SBC Carts.


2.02 Subject to the terms and conditions hereof, Franchisor shall neither open and operate, nor license anyone other than Developer to open and operate an SBC Retail Unit in the Territory prior to the last date specified in the Development Schedule attached hereto as Exhibit B, without Developer's prior written consent.


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


2.04. Developer shall have no right under this Agreement to license others to use the Proprietary Marks or the SBC COFFEE System.


2.05 Franchisor reserves and retains the development rights to establish and operate, and to license others to establish and operate, SBC COFFEE Retail Units in the Territory at United States military bases or other non-U.S. military facilities, which are now, or may at any time hereafter, be located within the Territory; hospitals; schools; mass transportation vehicles, including, without limitation, airplanes, trains, buses, and ferries and ships; travel facilities, including, without limitation, airports, train stations, bus terminals, highway travel plazas, and port facilities; sports facilities and entertainment facilities, and related events, including, without limitation, stadia, arenas, amphitheaters, theme parks, amusement parks, zoos, concert venues, and drive-ins and theaters; governmental cooperatives; institutional facilities and government facilities, including, without limitation, those related to education, health care, the military, and any facility owned by, operated by, or under contract with any government agency.


2.06. Franchisor represents that it has applied for or is applying for the Proprietary Marks described in Exhibit C hereto. Developer acknowledges that Franchisor has applied for, but may have not received as of the date of this Agreement, registration in the Territory of certain of the Proprietary Marks described in Exhibit C attached hereto; that Franchisor may be unable to obtain registration of some or all of the Proprietary Marks for which application has been made; and that Franchisor shall incur no liability to Developer for any failure to obtain such registration. Developer acknowledges Franchisor's right to require such modification, amendment, discontinuance, and substitution of proprietary marks as described in Section V of the Franchise Agreement.


2.07. Developer agrees to:


A. cooperate with Franchisor, to the extent reasonably requested
by Franchisor, in the registration and maintenance of its trademarks,
service marks and trade names in the Territory. Developer shall
promptly advise Franchisor, in writing, of any potentially infringing
uses or claims made by others within the Territory of which Developer
has knowledge, and Franchisor shall take such actions with respect
thereto which it, in its sole discretion, deems advisable; and


B. execute and record any documents that are deemed necessary by
Franchisor to obtain protection for the Proprietary Marks or to
maintain their continued validity and enforceability by Franchisor in
the Territory. However, Developer agrees not to make any application
for registration in the Territory, or in any other country of the
Proprietary Marks, or any trademarks or service marks confusingly
similar thereto, or used by Franchisor in any country unless Franchisor
directs, in writing, Developer to do so.


2.08 Provided Developer is not otherwise in default under this Development Agreement any Franchise Agreement issued hereunder and/or any other agreement between Developer (or any parent, subsidiary or affiliate of Developer), and Franchisor (or any parent, subsidiary or affiliate of Franchisor), and except as otherwise set forth herein, Franchisor shall not, directly or indirectly sell any SBC coffee or coffee products to any retail account located within the Territory whose sale of coffee beverages by the cup constitutes greater than 50% of such account's total coffee sales (a "Wet Coffee Account") until the date upon which Developer has open and in operation at least ten percent (10%) of the total number of Franchised Units required to be developed hereunder in accordance with the Development Schedule attached hereto. Notwithstanding the foregoing, Franchisor shall have the right, from time to time, to grant third parties the right to distribute SBC coffee and coffee products to Wet Coffee Accounts within the Territory (hereinafter, "Wet Venue Distribution Rights"), in the event Franchisor determines, in its sole discretion, that a significant business opportunity has presented itself which would be in the interest of the SBC brand in the Territory, provided, however, Developer shall have the right to "apply" for such Wet Venue Distribution Rights within thirty (30) days of notice from Franchisor of its intention to grant such rights within the Territory ("Developer's Application Period"). Developer's Application Period shall be extended by sixty (60) days, in the event Franchisor receives Developer's application, in satisfactory form, within such thirty (30) day period. Franchisor shall not grant Wet Venue Distribution Rights in the Territory to any third party prior to the expiration of Developer's Application Period (as it may be extended), unless Franchisor receives a written waiver from Developer or disapproves Developer's application prior to the expiration of such Period. Franchisor shall have the right, in its sole discretion, to grant or not grant the Wet Venue Distribution Rights to Developer. In the event Developer fails to apply for the Wet Venue Distribution Rights within the initial thirty (30) day period of the Developer's Application Period, or if Franchisor has failed to approve Developer's application within the Developer's Application Period (as extended), Franchisor shall then be free to grant


the Wet Venue Distribution Right to any third party. For the purposes of this Section 2.08, the term "Wet Coffee Account" shall not include any such account located in (i) any premises owned or controlled by any governmental or quasi-governmental authority, or (ii) any venue described in Section 2.05 hereof.


2.09 Except as otherwise specifically set forth in Section 2.08 above, nothing herein shall be deemed, in any way, to limit Franchisor's right to sell SBC coffee and related coffee products anywhere in the Territory, including, but not limited to, sales on the Internet, by mail order, or through wholesale distribution channels, including, but not limited to department stores, food marts, and grocery stores, during and after the term of this Agreement.


III. FEES


3.01 In consideration of the rights granted herein, Developer has paid to Franchisor, upon execution of this Agreement, receipt of which is hereby acknowledged, a territorial fee of _____________________________________ U.S. dollars, in United States currency, which territorial 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. The territorial fees shall be non-refundable.


3.02 In consideration of the establishment of each SBC Cafe to be developed hereunder and the assistance and services which will be received by Developer under the franchise agreements, Developer shall pay to Franchisor a non-refundable, franchise fee of Twenty Thousand U.S. Dollars (U.S. $20,000) per SBC Cafe, payable _____________ U.S. Dollars (U.S. ________) per SBC Cafe upon execution of this Agreement, and ____________ U.S. Dollars (U.S.___________) per SBC Cafe, payable no later than execution of each franchise agreement for an SBC Cafe, as described in Section IV hereof.


In consideration of the establishment of each SBC Kiosk to be developed hereunder and the assistance and services which will be received by Developer under the franchise agreements, Developer shall pay to Franchisor a non-refundable, franchise fee of Fifteen Thousand U.S. Dollars (U.S. $15,000) per SBC Kiosk, payable _______________ U.S. Dollars (U.S. ________) per SBC Kiosk upon execution of this Agreement, and ____________ U.S. Dollars (U.S. _________) per SBC Kiosk payable no later than execution of each franchise agreement for an SBC Kiosk, as described in Section IV hereof. The franchise fees shall be non-refundable.


In consideration of the establishment of each SBC Cart to be developed hereunder and the assistance and services which will be received by Developer under the franchise agreements, Developer shall pay to Franchisor a non-refundable, franchise fee of Seven Thousand Five Hundred U.S. Dollars (U.S. $7,500) per SBC Cart, payable _________________ U.S. Dollars (U.S. ________) per SBC Cart upon execution of this Agreement, and _____________U.S. Dollars


(U.S.________ ) per SBC Cart payable no later than execution of each franchise agreement for an SBC Cart, as described in Section IV hereof.


The total franchise fees payable upon execution of this Development Agreement shall be ___________ Dollars ($__________) in United States currency. The franchise fees shall be non-refundable.


IV. DEVELOPMENT SCHEDULE


4.01 Except as otherwise provided herein, this Agreement shall expire on the earlier of (i) _____________________, or (ii) the opening of the last Franchised Unit required to be developed under the Development Schedule (as defined below).


4.02 Developer shall have open and in operation the cumulative number of SBC Retail Units in the Territory in accordance with the Development Schedule set forth in Exhibit B hereto.


4.03 Each SBC Retail Unit in the Territory shall be established and operated pursuant to a franchise agreement in substantially the form of the franchise agreement attached hereto as Exhibit D; provided, however, that Franchisor reserves the right, in its sole discretion, to require that each SBC Retail Unit be established and operated pursuant to Franchisor's then-current standard international franchise agreement, except that the initial franchise fee, royalty fee, and required advertising fees and expenditures shall remain the same as in the Franchise Agreement attached hereto. Any franchise agreement executed pursuant hereto shall be modified for use by Franchisor, with the advice of Developer, to conform to the laws and customs of the Territory, as appropriate.


4.04 Developer shall have no right to establish an SBC Retail Unit in the Territory after the last date specified in the Development Schedule.


4.05. 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 9.03. hereof.


V. FRANCHISED UNIT OPENINGS


5.01. Before the commencement of construction, Developer shall submit a description of each proposed site, accompanied by the proposed final and complete plans and specifications for the construction (or renovation) and decoration, for each Franchised Unit for approval by Franchisor. Franchisor reserves the right to require Developer to transmit such information by modem or such other electronic means as Franchisor designates from time to time. No site package shall be reviewed or approved by Franchisor until Developer's satisfactory completion of the New Franchisee Orientation Program described in Section VII hereof. Franchisor shall evaluate each site package proposed and shall promptly, but not more than thirty (30) days after


receipt of Developer's complete proposal package, send to Developer (1) written notice of approval or disapproval of the site and (2) a Franchise Agreement for each approved site for execution by Developer. Franchisor shall not unreasonably withhold site approval. Such site approval shall be valid for thirty (30) days after notice of Franchisor's site approval and shall automatically expire, without notice to Developer, if Franchisor does not receive from Developer, within such thirty-day period, the items described in Section 5.02 hereof. If Franchisor does not approve a site package within thirty (30) days, such site package shall be deemed disapproved.


5.02. Within thirty (30) days after notice of Franchisor's site
approval, Developer shall execute the Franchise Agreement, and send to
Franchisor the executed Franchise Agreement and payment of all fees
required thereunder.


A. 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, and if Developer is a limited liability
company, each member shall guarantee the performance of the Franchise
Agreement by executing the Franchisor's Franchise Agreement Guaranty
and Indemnification Agreement attached as Exhibit E thereto.


B. If Developer fails to send the executed Franchise Agreement or
payment of all fees required thereunder within such time period,
Franchisor shall have the right, at its option, (1) to rescind the site
approval granted in Section 5.01. hereof or (2) treat such failure as a
material default under this Agreement, for which Franchisor shall have
the right to any of the remedies described in Section 9.04. hereof.


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


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


(i) owns the approved site;


(ii) has leased the approved 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 approved 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 the lease, notice of the
default shall


immediately be forwarded to Franchisor; and (b) 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 XVI of the Franchise Agreement.


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 Section VI
hereof) 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. Franchisor shall not approve the final
Construction Plans until Developer submits the executed Franchise
Agreement to Franchisor and all fees have been paid by Developer.


5.04. 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.


5.05. 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.


5.06. Upon commencement of construction or renovation of the Franchised Unit, Developer shall promptly notify Franchisor.


5.07. Developer shall have completed construction or renovation and commenced operation of the Franchised Unit within one-hundred eighty (180) days from the date of Franchisor's site approval described in Section 5.01. hereof.


5.08. At least thirty (30) days prior to the proposed commencement of operation of each Franchised Unit, Developer shall notify Franchisor of such proposed opening. Franchisor shall provide a representative to be present at the opening of the first Franchised Unit for up to ten (10) working days. 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 Franchised Unit is required pursuant to Exhibit B of this Agreement, shall be extended until such time as such assistance is provided by Franchisor. Upon Franchisor's request, Developer


shall provide to Franchisor prompt assistance for, and such information, for obtaining visas for such of Franchisor's employees to enter the Territory.


VI. CONFIDENTIAL OPERATING STANDARDS MANUAL


6.01. Franchisor will loan one (1) copy of the Confidential Operating Standards Manual ("Manual"), in the English language, to Developer , upon satisfactory completion of the NFOP training described in Section 7.01 hereof, for the duration of this Agreement, which Manual contains the standards, specifications, procedures, and techniques of the SBC COFFEE System for the operation of an SBC Retail Unit. The Manual may consist of one or more volumes. Within ninety (90) days after completion of NFOP, Developer shall provide to Franchisor, a proposed translation of the Manual into the principal local language in the Territory and any adaptations to the Manual to the laws, customs, and market characteristics of the Territory. No changes may be made to the Manual without Franchisor's prior written approval. Upon completion of translation of the Manual, the translator of the Manual shall certify to Franchisor that its translation of the Manual is accurate and correct. Developer shall bear all the cost and expense of Developer's proposed translation of the Manual. Franchisor shall use its best efforts to review any proposed translation and adaptation of the Manual within thirty (30) days of Developer's submission to Franchisor of such translated and/or adapted Manual. If Franchisor does not approve any translation and/or adaptation proposed by Developer within thirty (30) days of Franchisor's receipt, such proposed translation and/or adaptation shall be deemed disapproved. Franchisor may, in its sole discretion, correct the proposed translation or adaptation of the Manual, and, in such event, Developer shall bear all costs and expenses of such corrections. Upon request, Developer shall provide to Franchisor a complete copy of the translated Manual.


6.02. Developer shall at all times treat the Manual, any other manuals created for or approved for use in the operation of the Franchised Units, and the information contained therein, as confidential; and shall use all reasonable efforts to maintain such information secret and confidential in accordance with Section XI hereof. Developer shall not, at any time, without Franchisor's prior written consent, copy, duplicate, record, or otherwise make the Manual available to any unauthorized person or source. All requirements related to the Manual herein shall apply to the English-language version and the foreign-language version of the Manual.


6.03. In order that Developer may benefit from new knowledge gained by Franchisor as to improved techniques in the operation of the System, Franchisor may from time-to-time revise the Manual.


6.04. The official text of the Manual shall be an English language text. Developer shall at all times insure that its copy of the Manual is kept current and up-to-date, and in the event of any dispute as to the contents of Developer's Manual, the terms of the master copy of the Manual, in the English language, maintained by Franchisor at Franchisor's home office, shall be controlling.


VII. TRAINING AND SUPERVISION


7.01. Developer, or a partner of Developer if Developer is a partnership, or a principal shareholder of Developer if Developer is a corporation, or a principal member of Developer if Developer is a limited liability company, must complet ...