Is the franchisee required to construct or acquire a Home conforming to the Beehive Homes standards?

E. Franchisee is desirous of acquiring the right, franchise and sub-license to construct or acquire a Home conforming to the Standards (as defined below) and to operate the Home using the System under the Names and Marks at the Location (as defined in Section 3.1). Franchisor is ready and willing to grant such a right, franchise and sub-license to Franchisee upon the terms and subject to the conditions hereinafter set forth.

AGREEMENT

NOW, THEREFORE, in consideration of the terms, conditions and covenants contained herein, and for other valuable consideration, the receipt and sufficiency of which are hereby mutually acknowledged, it is understood and agreed by and among the parties hereto as follows:

VIII. OBLIGATIONS OF FRANCHISEE

8.1. Home. Franchisee covenants to construct, equip, staff and own one Home, at its own expense, at the Location; to open and commence operation of such Home no later than the date which is three (3) years after the Effective Date of this Agreement and to continuously operate such Home using the System under the Names and Marks, in compliance with this Agreement and the Standards, and in such a manner as to provide courteous, uniform, high quality service to the public, during the Term of this Agreement. Franchisee acknowledges that, although Franchisor provides the

Standards, Franchisee has exclusive day-to-day control of the business and operation of the Home and Franchisor does not in any way possess or exercise such control.

• 8.2.

Compliance With Standards.

Franchisee will comply with the Standards, including Franchisor's specifications for all supplies, products and services.

Franchisor may require Franchisee to purchase particular supplies, products or services meeting certain standards to maintain the common identity and uniqueness of the design, furnishings and appurtenances of the Homes, and Franchisee will comply with such requirements.

Unless Franchisor specifies otherwise, Franchisee may purchase supplies, products and services from any source of distribution which meets the specifications and Standards.

• 7.2. Home Design and Specifications. Franchisor will provide general architectural and design drawings, which may include elevations, floor plans and number of beds, as guidelines for the required "trade dress" of the Home. Any variation, alteration or modification of these guidelines shall require the prior written approval of Franchisor. Franchisor will also provide an itemization of all furnishings, equipment and supplies to be used in the operation of the Home. Additional Homes or any increase in the number of beds may be constructed at the Location but only with Franchisor's prior written approval and provided that each additional Home or increase in the number of beds is subject to a separate Franchise Agreement and Franchise Fee.

Franchisee, at its sole expense, shall be responsible to engage its own architect, attorneys, contractors, general and subs, and other advisors to prepare final plans, construct the improvements and obtain all required permits and licensing. Final plans must be approved in writing by the Franchisor for compliance with "trade dress" guidelines prior to submission for building permits. Franchisor shall not be obligated to become a party to, and will have no liability whatsoever in connection with, anyagreements pertaining to the construction, furnishing, equipping and supplying of the Home.

Source: Item 23 — RECEIPTS (FDD pages 34–123)