Is the right to develop Alloy facilities granted unconditionally, or are there terms and conditions attached?

perate the number of ALLOY Facilities set forth in Appendix B (the "Facilities") within the territory described on Appendix C (the "Development Territory").

• B. You are bound by the development schedule set forth in Appendix B (the "Development Schedule"). Time is of the essence for the development of each Facility in accordance with the Development Schedule. Each Facility must be developed and operated pursuant to a separate Franchise Agreement that you enter into with us pursuant to Section 4.B below.
• C. If you are in compliance with the Development Schedule, we will not develop or operate or grant anyone else a franchise to develop and operate a ALLOY facility (except for Special Sites as defined in Section 2.D or as otherwise set forth in this Agreement) in the Development Territory prior to the earlier of (i) the expiration or termination of this Agreement; (ii) the date on which you must execute the Franchise Agreement for your last Facility pursuant to the terms of the Development Schedule or (iii) the date on which the Authorized Location for your final Facility under this Agreement is determined. Notwithstanding anything in this Agreement, upon the earliest occurrence of any of the foregoing events (a) your right to develop any additional Facility will expire and (b) we will be entitled to develop and operate, or to franchise others to develop and operate, ALLOY facilities in the Development Territory, except as may be otherwise provided under any Franchise Agreement that has been executed between us and you and that has not been terminated. At the time you execute your final Franchise Agreement under the Development Schedule, you must have an Authorized Location for the Facility to be developed under the final Franchise Agreement.
• D. The rights granted under this Agreement are limited to the right to develop Facilities located in the Development Territory, and do not include (i) any right to sell products and services identified by the Trademarks at any location or through any other channels or methods of distribution, including the Internet (or any other existing or future form of electronic commerce), other than at Facilities within the Development Territory pursuant to the terms of the applicable Franchise Agreement, (ii) any right to sell products and services identified by the Trademarks to any person or entity for resale or further distribution, or (iii) any right to exclude, control or impose conditions on our development or operation of franchised, company or affiliate owned facilities at

any time or at any location outside of the Development Territory. You may not use the words ALLOY or any of the other Trademarks as part of the name of your corporation, partnership, limited liability company or other similar entity.

You acknowledge and agree that we and our affiliates have the right to operate and franchise others the right to operate facilities or any other business within and outside the Development Territory under trademarks other than the ALLOY Trademarks, without compensation to any franchisee, except that our operation of, or association or affiliation with, facilities (through franchising or otherwise) in the Development Territory that compete with ALLOY facilities will only occur through some form of merger or acquisition with an existing facility or retail chain business. Outside of the Development Territory, we and our affiliates have the right to grant other franchises or develop and operate company or affiliate owned ALLOY facilities and offer, sell or distribute any products or services associated with the System (now or in the future) and under the Trademarks or any other trademarks, service marks or trade names or through any distribution channel or method, all without compensation to any franchisee.

We and our affiliates have the right to offer, sell or distribute, within and outside the Development Territory, any services or products associated with the System (now or in the future) or identified by the Trademarks, or any other trademarks, service marks or trade names, through any distribution channels or methods, without compensation to any franchisee. The distribution channels or methods ("Alternative Methods of Distribution") include, without limitation, the internet (or any other existing or future form of electronic commerce).

You acknowledge and agree that certain locations within the Development Territory are by their nature unique and separate in character from sites generally developed as facilities. As a result, you agree that the following captive market locations ("Special Sites") are excluded from the Development Territory and we have the right to develop or franchise such locations: (1) military bases; (2) public transportation facilities (including airports); (3) business or industry locations (e.g. manufacturing site, office building), or sports facilities; (4) student unions or other similar buildings on college or university campuses; (5) malls or enclosed shopping centers; and (6) community and special events.

E. This Agreement is not a Franchise Agreement, and you have no right to use in any manner the Trademarks or operate an ALLOY facility by virtue of this Agreement. You have no right under this Agreement to sublicense or subfranchise others to operate a business or facility or use the System or the Trademarks.

DEVELOPMENT FEE

• 1. Simultaneously with the execution of this Agreement, you must pay a Development Fee as described below:
  • A. As consideration for the rights granted in this Agreement, you must pay us a "Development Fee" in the amount designated on the Data Sheet. The Development Fee is consideration for this Agreement and not consideration for any Franchise Agreement, is fully earned by us upon receipt and is nonrefundable.
  • B. You must submit a separate application for each Facility to be established by you within the Development Territory as further described in Section 4. Upon our consent to the site of your Facility, a separate Franchise Agreement must be executed for each such Facility. Upon the execution of each Franchise Agreement, the terms and conditions of the Franchise Agreement

control the establishment and operation of such Facility. You must execute the Franchise Agreement for the first Facility to be developed hereunder simultaneously with the execution of this Agreement.

DEVELOPMENT SCHEDULE

• 1. The following provisions control with respect to your development rights and obligations:
  • A. You are bound by and strictly must follow the Development Schedule. By the dates set forth in the Development Schedule, you must enter into Franchise Agreements with us pursuant to this Agreement for the number of Facilities described in the Development Schedule. You also must comply with the Development Schedule requirements regarding (i) the opening date for each Facility and (ii) the cumulative number of Facilities to be open and continuously operating for business in the Development Territory. If you fail to either execute a Franchise Agreement or to open an Facility according to the dates set forth in this Agreement or otherwise fail to comply with the Development Schedule, we have the right to immediately terminate this Agreement pursuant to Section 7.B.
  • B. You may not develop a Facility unless (i) at least 45 days, but no more than 60 days, prior to the date set forth in the Development Schedule for the execution of each Franchise Agreement, you send us a notice (a) requesting that we send you our then current disclosure documents, (b) confirming your intention to develop the particular Facility and (c) sending us all information necessary to complete the Franchise Agreement for the particular Facility, and (ii) all of the following conditions have been met (these conditions apply to each Facility to be developed in the Development Territory):
    • 1. Your Submission of Proposed Site. You must find a proposed site for the Facility which you reasonably believe to conform to our site selection criteria (as modified by us from time to time) and submit to us a complete site report (containing such demographic, commercial, and other information and photographs as we may reasonably require) for such site.
    • 1. Our Consent to Proposed Site. You must receive our written consent to your proposed site. We agree not to unreasonably withhold consent to a proposed site.

Source: Item 23 — RECEIPTS (FDD pages 69–245)