What happens if a site is not accepted by Big Blue Swim School?

you (or your Approved Affiliate) sign a franchise agreement for the next BIG BLUE Swim School to be constructed and developed within the Territory, we will apply the deposit related to that Swim School (which is part of the Development Fee) toward the initial franchise fee due for that Swim School (leaving only the balance of the initial franchise fee due at signing).

5. Grant of Franchises and Site Selection/Leasing Process for BIG BLUE Swim Schools.

• (a) You must locate, evaluate, and select the Swim School's site. You must give us all information and materials we request to assess each proposed Swim School site. We will not search for or select the site for you. In granting you development rights under this DRA, we are relying on your knowledge of the real estate market in the Territory and your ability to locate and access sites.
• (b) We will give you our then-current criteria for BIG BLUE Swim School sites (including, without limitation, population density and other demographic characteristics, visibility, traffic flow, competition, accessibility, parking, ingress and egress, size, and other physical and commercial characteristics) to help in the site-selection process. We will not unreasonably withhold site acceptance if, in our and our affiliates' experience and based on the factors identified above, the proposed site is not inconsistent with sites that we and our affiliates regard as favorable or that otherwise have been successful sites in the past for BIG BLUE Swim Schools. However, we have the absolute right to reject any site not meeting our criteria or to require you to acknowledge in writing that a site you have chosen, while acceptable to us, is not recommended due to its incompatibility with certain factors bearing on a site's suitability as a location for a BIG BLUE Swim School.

We will review potential BIG BLUE Swim School sites that you identify within the Territory and may, but have no obligation to, visit the Territory once (for no additional fee) to review potential sites for each BIG BLUE Swim School to be constructed and developed under this DRA. We have the right to require you to reimburse our out-of-pocket expenses for each site visit after the first per-Swim School visit. We have the right to condition our acceptance of a proposed site, or a proposed site visit, on your first sending us complete site reports and other materials (including, without limitation, photographs and digital recordings) we request. We agree to use reasonable efforts to review and accept (or not accept) sites you propose within thirty (30) days after we receive all requested information and materials. You may not proceed with a site that we have not accepted.

• (c) You (and your Approved Affiliates) do not have the right under this DRA to reject (and therefore must accept) a proposed Swim School site the location and physical and other characteristics of which, and the proposed commercial lease terms for which, were accepted by our real-estate committee (a "Qualified Site").
• (d) You also must send us for our written acceptance, which we will not unreasonably withhold, any lease or sublease that will govern your occupancy and lawful possession of each BIG BLUE Swim School site before you sign it. You may not sign any lease or sublease that we

have not accepted in writing.

Source: Item 23 — RECEIPTS (FDD pages 76–278)