Can the B Bops company establish company-owned restaurants in the exclusive territory after the franchise agreement expires?

Under the Development Agreement, you will be granted the exclusive right to establish Franchises in a defined trade area at sites to be approved by the Company. The exact size and boundaries of the trade area will be negotiated between the parties prior to execution of the Development Agreement, with the agreed upon definition of such trade area to be attached as an appendix thereto. The Company contemplates that the trade area will be defined by reference to various streets and highways forming the boundaries of the area and may consist of a portion of a city or county or may include one or more counties or cities. In exchange for the grant of the exclusive development rights, you are required to establish a specified number of Franchises in accordance with a development schedule negotiated between the parties and set forth as an appendix to the Development Agreement. So long as you comply with the development schedule and the Development Agreement otherwise remains in effect, the Company and its affiliates are prohibited from establishing any company-owned B-Bop's Restaurant in the trade area or from granting any third party the right to establish a Franchise in such trade area. Upon termination of the Development Agreement, however, your exclusive development rights are rescinded and, except as noted below with respect to any exclusive territory granted for individual Franchises already established, the Company is thereafter entitled to develop the trade area itself or to grant such right to third parties. The development schedule will supersede the terms of any franchise agreement with respect to the allowable period of time for construction

and opening of any Franchise developed pursuant to the Development Agreement.

Upon the Company's approval of a proposed site in the trade area (and assuming you are in compliance with the Development Agreement and all franchise agreements), the parties will enter into the then current form of franchise agreement, granting you the right to own and operate a Franchise at the specified site. Any franchise agreement executed pursuant to the Development Agreement will survive the termination or expiration of the Development Agreement and continue to govern the rights of the parties with respect to that particular Franchise for the remainder of its term. Under the provisions of each franchise agreement, you will be granted an exclusive territory providing certain territorial rights for the particular Franchise being established. In the event of termination or expiration of the Development Agreement, the exclusive territorial rights granted under the surviving franchise agreement will remain in effect for the remainder of the term of the Franchise, during which time the Company and its affiliates will be precluded from establishing any company-owned B-Bop's Restaurant in the exclusive territory or granting a Franchise to any third party to be located in the exclusive territory. The territorial rights granted under the current Franchise Agreement are discussed above.

Source: Item 12 — TERRITORY (FDD pages 33–35)