Under what conditions will each provision of the Belocal franchise agreement be effective?

• X.

Continuing Obligations.

Franchisee and Franchisee's Principals make the foregoing representations, warranties, and covenants understanding that such representations, warranties, and covenants are continuing obligations.

Franchisee agrees to cooperate with Franchisor to verify the continuing compliance of Franchisee and its Principals with such representations, warranties, and covenants.

Any failure to comply with these representations, warranties, and covenants shall constitute a material event of default under this Agreement.

• Y.

Background Checks.

Franchisor has the right to obtain background checks on Franchisee and its Principals.

• Z.

Crisis.

Franchisee shall notify Franchisor immediately upon the occurrence of any situation that may have a significant negative impact on Franchisee, Franchisor, the Publication, or which could have a deleterious effect on the BELOCAL brand, Marks or System (a "Crisis").

Franchisee shall cooperate fully with Franchisor with respect to Franchisor's response to any Crisis and shall follow all of Franchisor's policies, procedures, and instructions in every such situation, including, without limitation, instructions regarding managing public relations and communications, as directed by Franchisor or as specified in the Franchise Brand Standards Manual and regardless of whether Franchisee has retained outside counsel or a public relations firm to assist with any such matter.

A "Crisis" includes, but is not limited to, any event that occurs in connection with the Franchised Business or Publication that has or may cause harm or injury to the public, advertisers, or Independent Staff.

In the event of the occurrence of a Crisis, Franchisor may establish emergency procedures which may require Franchisee to temporarily cease publishing the Publication, in which case Franchisor shall not be liable to Franchisee for any loss or costs, including consequential damages or lost profits occasioned thereby.

Franchisor shall have the right to take control of the management of communications if Franchisor determines that the publicity surrounding the event is likely to have a material adverse effect on the reputation or goodwill of the Franchised Business, Publication, Marks, System, or Franchisor.

For the avoidance of doubt, Franchisee has an obligation to continue to operate the Franchised Business until the effective date of termination.

If Franchisee abandons the Franchised Business prior to the effective date of termination established by Franchisor or fails to comply with the wind-down procedures in the Franchise Brand Standards Manual, Franchisee shall be in default under this Agreement and Franchisor shall have the right to immediately terminate this Agreement and charge the Wind-Down Damages.

Franchisee shall pay all costs, expenses and attorneys' fees incurred by Franchisor in enforcing the terms and conditions of this provision.

Nothing contained herein shall be construed as prohibiting Franchisor from additionally pursuing any other remedies which may be available to Franchisor for a breach.

• G.

Step-In Rights.

In addition to Franchisor's right to terminate this Agreement, and not in lieu of such right, or any other rights Franchisor may have against Franchisee, upon a failure by Franchisee or any Principal to comply with any of the requirements of this Agreement, or upon a failure to cure any default within the applicable time period (if any), Franchisor shall have the right, but not the obligation, to assume management of the Franchised Business (or appoint a party to assume its management) until such time as Franchisor determines that the default has been cured and Franchisee is otherwise in compliance with this Agreement, or until Franchisor determines it will no longer exercise its step-in right.

The terms and conditions for the exercise of Franchisor's step-in right are set forth in Section 12.E.

• H.

Limitation of Services or Benefits.

• (3) The transferor and its principals, for themselves and on behalf of their respective guarantors, predecessors, affiliates, shareholders, members, partners, officers, directors, managers, employees, agents, representatives, attorneys, accountants, heirs, executors, administrators, successors, and assigns, if applicable, shall have executed a general release, in a form satisfactory to Franchisor, of any and all claims against Franchisor, Franchisor's predecessors and affiliates, their respective officers, directors, shareholders, partners, managers, members, agents, representatives, independent contractors, servants, employees, attorneys, accountants, guarantors, successors, and assigns, past and present, in their corporate and individual capacities, including, without limitation, claims arising under this Agreement and any other agreement with Franchisor or its affiliates, and under federal, state, or local laws, rules, and regulations or orders;

• (4) The proposed transferee shall have demonstrated to Franchisor's satisfaction that it meets Franchisor's then-current qualifications, and, at the transferee's expense, transferee and any of its principals and any other personnel required by Franchisor shall complete any training programs then in effect for N2 publication franchisees upon such terms and conditions as Franchisor may require;

• (5) The transferee shall enter into a written agreement, in a form satisfactory to Franchisor, whereby transferee shall assume full, unconditional, and joint-and-several liability for, and agree to perform from the date of the transfer, all obligations, covenants, and agreements of Franchisee under this Agreement.

If the transferee is a corporation, partnership, limited liability company, or other entity, those of transferee's principals who are designated as principals by Franchisor must also execute such agreement and guarantee the performance thereof;

• (6) The transferee shall execute Franchisor's then-current form of franchise agreement for a term ending on the expiration date of this Agreement.

The new franchise agreement shall supersede this Agreement in all respects, and its terms may differ from the terms of this Agreement, including higher fees, but the transferee shall not be required to pay an initial franchise fee.

Section 5. above, it is assuming the risk of such unknown and unanticipated claims and agrees that its release contained in this Agreement applies thereto.

• 1. [OMIT FOR WASHINGTON FRANCHISEES; FOR USE IN STATES OTHER THAN WASHINGTON:] Acknowledgments Regarding Releases. By affixing its signature to this Agreement, Assignor acknowledges that it has carefully read and fully understands the provisions of this Agreement, including, specifically, the release of claims set forth in Sections 5. of this Agreement, and that its release of such claims is knowing and voluntary. Assignor acknowledges that it has had a reasonable opportunity to consult with an attorney prior to executing this Agreement and that it has executed this Agreement voluntarily. Assignor acknowledges that Franchisor has advised it to consult with an attorney before executing this Agreement. Assignor represents that it does not rely, and has not relied upon, any representation or statement made by any of the Released Parties or any of their representatives with regard to the subject matter, basis, or effect of this Agreement.
• 1. Governing Law. This Agreement is entered into in the State of Texas and will be construed and interpreted in accordance with its laws, without regard to its conflict of law principles.
• 1. Construction. Capitalized terms have the meanings given to them in the Franchise Agreement, unless otherwise defined in this Agreement.
• 1. Enforceability. If any one or more of the provisions contained in this Agreement is for any reason held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability will not affect any other provision hereof, and this Agreement will be construed as if such invalid, illegal, or unenforceable provision had never been contained herein.
• 1. WAIVER OF JURY TRIAL. THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM, WHETHER AT LAW OR IN EQUITY, BROUGHT BY ANY OF THEM AGAINST THE OTHER, AND RELATING TO THIS AGREEMENT AND/OR THE FRANCHISE AGREEMENT, WHETHER OR NOT THERE ARE OTHER PARTIES IN SUCH ACTION OR PROCEEDING.
• 1. Notices. Any notices required or permitted to be given hereunder will be in accordance with the notice provisions set forth in the Franchise Agreement.

• a. California Business and Professions Code Sections 20000 through 20043 provide rights to the franchisee concerning termination, transfer, or non-renewal of a franchise. If the Agreement contains a provision that is inconsistent with the law, the law will control.
• b. The Agreement provides for termination upon bankruptcy. This provision may not be enforceable under federal bankruptcy law (11 U.S.C.A. Sec. 101 et seq.).
• c. The Agreement contains a covenant not to compete which extends beyond the termination of the franchise. This provision may not be enforceable under California law.
• d. The Agreement contains a liquidated damages clause. Under California Civil Code Section 1671, certain liquidated damages clauses are unenforceable.
• e. The Agreement requires application of the laws of Texas. This provision may not be enforceable under California law.
• f. The Agreement requires binding arbitration. The arbitration will occur in the city in which Franchisor maintains its principal business office at the time of the arbitration with the costs being borne by initially be paid equally by the two sides to the arbitration. The arbitrator must award to the prevailing party the reasonable costs and fees, including attorneys' fees, incurred in the arbitration. Prospective franchisees are encouraged to consult private legal counsel to determine the applicability of California and federal laws (such as Business and Professions Code section 20040.5, Code of Civil Procedure section 1281, and the Federal Arbitration Act) to any provisions of the Agreement restricting venue to a forum outside the State of California.
• g. The following statement is added to the Agreement: No statement, questionnaire, or acknowledgment signed or agreed to by a franchisee in connection with the commencement of the franchise relationship shall have the effect of (i) waiving any claims under any applicable state franchise law, including fraud in the inducement, or (ii) disclaiming reliance on any statement made by any franchisor, franchise seller, or other person acting on behalf of the franchisor. This provision supersedes any other term of any document executed in connection with the franchise.

Source: Item 22 — CONTRACTS (FDD page 71)