What must a prospective franchisee do before Big Apple Bagels will consider granting a BAGELS Franchise?

dividual Signatures:

23. RECEIPTS

You will find copies of a detachable receipt at the very end of this Disclosure Document.

EXHIBIT A TO FRANCHISE DISCLOSURE DOCUMENT

Preliminary Agreement

BAB SYSTEMS, INC.

PRELIMINARY AGREEMENT

RECITALS

• A. BAB has developed stores that are operated utilizing BAB's distinctive business formats, signs, equipment, layouts, systems, methods, specifications, standards, operating procedures and designs and advertising. Among these are stores that operate under the name "Big Apple Bagels" known as "BAGELS Stores." BAB owns, uses, promotes and licenses certain trademarks and service marks and other commercial symbols, including "Big Apple Bagels" and certain associated logos (the "Marks"). BAB has experience in and the ability to provide assistance and guidance in connection with the operation thereof. BAB grants to qualified persons franchises to own and operate BAGELS Stores ("BAGELS Franchises") selling products and services authorized and approved by BAB and utilizing BAB's business formats, systems, methods, specifications, standards, operating procedures, guidance advertising services, and the Marks;
• B. PROSPECTIVE FRANCHISEE desires to obtain a Franchise from BAB for the operation of a BAGELS Store;
• C. PROSPECTIVE FRANCHISEE has submitted to BAB an application for a BAGELS Franchise;
• D. PROSPECTIVE FRANCHISEE has received and reviewed BAB's BAGELS Franchise Disclosure Document; and
• E. BAB shall consider, subject to the terms and conditions hereof, granting a BAGELS Franchise to PROSPECTIVE FRANCHISEE.
• F. Under a separate offering and disclosure document, Franchisor, BAB Systems, Inc., operates a franchise distribution system to own and operate stores ("My Favorite Muffin Stores") for retail distribution of "My Favorite Muffin" branded muffins and Brewster's branded coffee. These Stores are operated under the trademarks and service marks "My Favorite Muffin Gourmet Muffin Bakery" or "My Favorite Muffin Your All Day Bakery Cafe," one of which is their primary identifying brand.

THEREFORE, the parties agree as follows:

• 1. PROSPECTIVE FRANCHISEE has, contemporaneously with the execution of this Preliminary Agreement, deposited with BAB the sum of Ten Thousand ($10,000.00) Dollars ("Deposit") to be applied against the initial franchise fee payable by PROSPECTIVE FRANCHISEE if a BAGELS Franchise shall subsequently be granted.
• 1. Upon execution of this Agreement, BAB will furnish PROSPECTIVE FRANCHISEE its written criteria for site selection, which must be returned to BAB upon termination of this Agreement.
• 1. It shall be the obligation of PROSPECTIVE FRANCHISEE to search for, locate, and submit in writing to BAB for approval, within sixty (60) days after execution of this Preliminary Agreement, a site suitable for the operation of a BAGELS Store acceptable to BAB within the following area: _______________________________ (the "Area").
  • a. The Area is not exclusive or protected either during the term of this Agreement or in the event a franchise is granted. BAB has the right to offer and grant a franchise to any other party within the Area. In the event BAB grants a franchise, whether a franchise for a BAGELS Franchise of a "My Favorite Muffin Store" to another party within the Area during the term of this Agreement, PROSPECTIVE FRANCHISEE may terminate this Agreement and obtain a full refund of the Deposit. In the event PROSPECTIVE FRANCHISEE enters into an Area Development Agreement with BAB, and becomes an Area Developer, he will have a protected territory, as set forth in the Area Development Agreement.
  • b. BAB has the right to withhold approval of sites, based on its standards for general location, physical and demographic characteristics of the neighborhood, traffic pattern, parking, competition, proximity to other businesses (including other BAGELS Stores), the nature of other businesses in proximity to the site, layout and other physical characteristics, rental, lease duration and other lease terms and conditions for the BAGELS Store.
  • c. If PROSPECTIVE FRANCHISEE, within the 60 day period specified in Paragraph 3 above, submits at least 1 site to BAB, which site BAB does not approve, BAB may, at any time thereafter at its sole discretion, either grant an extension to the above referenced 60 day period or terminate this Preliminary Agreement provided it shall refund PROSPECTIVE FRANCHISEE's Deposit less Three Thousand ($3,000.00) Dollars.
  • d. If PROSPECTIVE FRANCHISEE fails to submit any sites to BAB within the 60 day period specified in Paragraph 3 above, BAB may, at any time thereafter, terminate this Preliminary Agreement, in which event PROSPECTIVE FRANCHISEE shall not be entitled to any refund of the Deposit.

Source: Item 23 — RECEIPTS (FDD pages 87–319)