During the Development Term, is a Churchs Chicken developer allowed to have an ownership interest in a restaurant business that specializes in the sale of fried chicken?

able to adequately protect the System and its trade secrets and confidential and proprietary information against unauthorized use or disclosure and would be unable to adequately encourage a free exchange of ideas and information among Church's Restaurants if franchisees were permitted to hold interests in competitive businesses; and (e) restrictions on Franchisee's right to hold interests in, or perform services for, competitive businesses will not hinder Franchisee's activities.

• (2) Accordingly, Franchisee covenants and agrees that during the Initial Term and any Renewal Term, Franchisee shall not, either directly or indirectly, for itself or through, on behalf of, or in conjunction with any person or entity:
• (a) divert or attempt to divert any business or customer, or potential business or customer, of any restaurant franchised or operated by Cajun or its affiliates to any competitor by direct or indirect inducement or otherwise or do or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with the Proprietary Marks or the System or;
• (b) have an ownership interest in any restaurant business (other than a Church's Restaurant) that specializes in the sale of fried chicken.
• (3) Franchisee further covenants that following the transfer, expiration or earlier termination of this Agreement, regardless of the cause for termination, Franchisee shall not, either directly or indirectly, for itself or through, on behalf of, or in conjunction with any person or entity:
• (a) for a period of 2 years, have an ownership interest in any restaurant business (other than a Church's Restaurant) that specializes in the sale of fried chicken and that is (i) located at or within a 5-mile radius of the Franchised Location, or (ii) located within a 5-mile radius of any Church's Restaurant that is then in existence or under development.

Franchisee further covenants that following the transfer, expiration or earlier termination of this Agreement, regardless of the cause for termination, Franchisee shall not, either directly or indirectly, for itself or through, on behalf of, or in conjunction with any person or entity, for a period of 1 year, sell, assign, lease or transfer the Franchised Location to any person or entity which Franchisee knows, or has reason to know, intends to operate a restaurant business at the Franchised Location that specializes in the sale of chicken or has a method of operation or trade dress similar to that employed in the System. Franchisee, by the terms of any conveyance selling, assigning, leasing or transferring its interest in the Franchised Location, shall include these restrictive covenants as are necessary to ensure that a restaurant business that would violate this Section 17.D.(3) is not operated at the Franchised Location for this 1-year period, and Franchisee shall take all steps necessary to ensure that these restrictive covenants become a matter of public record.

(4) The restrictions in Sections 17.D.(2)(b) and 17.D.(3)(a) shall not apply to Franchisee's existing restaurant or foodservice operations, if any, which are identified in Schedule 1, nor shall they apply to other restaurants operated by Franchisee that are franchised by Cajun or its affiliates. If a court finds that any restriction in Section 17.D. is not enforceable, it is the intent of the parties that the court modify such restriction to the extent reasonably necessary to protect the legitimate business interests of Cajun. If, at any time during the restrictive period following the transfer, expiration or earlier termination of this Agreement, Franchisee fails to comply with its obligations under this Section, that period of noncompliance will not be credited toward Franchisee's completion of the restrictive period provided that Cajun takes action to enforce the obligations under this Section within the restrictive period.

E. Modification. Cajun shall have the right, in its sole discretion, to reduce the extent of any covenant in this Section effective immediately upon Franchisee's receipt of notice, and Franchisee shall be bound by the covenant as so reduced, which shall be fully enforceable notwithstanding the provisions of Section 25.

18. TERMINATION

• **A.

Source: Item 23 — RECEIPT (FDD pages 68–406)