How does the Black Bear Diner Addendum to the Franchise Agreement affect the overall franchise relationship?

2.1 as shown on the map set out in Exhibit A hereof;

"Development Fee" has the meaning given to such term in Section 3.1 hereof;

"Development Rights" means the rights granted to Developer to establish and operate Franchised Restaurants in the Development Area under the terms of this Development Agreement and the Franchise Agreement;

"Development Schedule" means the dates to begin operation of each Franchised Restaurant as specified in Exhibit B to this Development Agreement;

"Franchise Agreement" means the then-currently used form of the BBDI LLC franchise agreement that Franchisor is offering to new franchisees.

"Gift Shop Products" means all products featuring the Marks and other products which Franchisor has authorized for resale from the Black Bear Diner Gift Shop located within the Franchised Restaurant.

"Marks" means certain names and marks, including "Black Bear Diner," as well as other tradenames, service marks, trademarks, logos, insignias, symbols and designs as designated by Franchisor or as Franchisor may designate in the future for use with the System;

"System" means the Black Bear Diner System which consists of, among other things, a distinctive exterior and interior trade dress utilizing specially designed décor, furniture, fixtures and accessories; an on-premises gift shop known as a "Black Bear Diner Gift Shop"; recipes and menu items; food preparation methods and food products; operating standards and food, beverage and equipment specifications; operational, management and record-keeping procedures also referred to as the "Bear Necessities Quality Control Program"; advertising and marketing techniques and trade secrets and confidential information; all of which may be changed, improved, and further developed by Franchisor from time to time.

"Personal Guarantors" means those persons as specified in Section 3.3 who are required to sign the Guarantee and Assumption of Obligations in Exhibit C;

2. GRANT OF DEVELOPMENT RIGHTS

2.1 Grant

Subject to the provisions stated below, Franchisor hereby grants to Developer, pursuant to the terms and conditions of this Agreement, the right and obligation to establish and operate _____ (__) Black Bear Diner restaurants in the Development Area described in Exhibit A attached to this Development Agreement.

2.2 Exclusivity and Retained Rights

So long as Developer is in compliance with the terms of this Development Agreement, Franchisor will not, for the term of this Development Agreement, establish or operate, or license others to establish or operate a restaurant utilizing the System and the Marks within the Development Area other than to Developer pursuant to this Development Agreement; provided, however, Franchisor retains the right to:

• (i) operate and license others to operate restaurant(s) using the System and Marks at locations outside the Development Area and on such terms and conditions as Franchisor deems appropriate;
• (ii) operate and license others to operate restaurant(s) operating under names other than "BLACK BEAR DINER" at any location whether within or outside the Development Area, regardless of the proximity to any Black Bear Diner restaurant developed or under development by Developer, and on such terms and conditions as Franchisor deems appropriate;
• (iii) license others to use the Marks in connection with the selling of certain food items and ingredients, including the Gift Shop Products through alternative channels of distribution including, but not limited to, grocery stores, convenience stores, mail order and Internet sales, which may be either within or outside the Development Area; and
• (iv) engage in any activities not expressly forbidden by this Development Agreement.

3. FEES

3.1 Development Fee and Initial Franchise Fee

3.2 Other Fees

For each Franchise Agreement to be executed under the terms of the Development Agreement, Developer, as Franchisee, will be obligated to pay Royalty fees and Marketing Fund Contributions at the percentage rate as provided in the then-current Franchise Agreement for each Franchised Restaurant.

3.3 Guarantee of Performance

Each present and future: (i) shareholder of a Developer that is a corporation with at least a twenty-five percent (25%) equity interest in Developer; (ii) member of a Developer that is a limited liability company with at least a twenty-five percent (25%) equity interest in Developer; (iii) partner of a Developer that is a partnership with at least a twenty-five percent (25%) equity interest in

Developer; (iv) partner of a Developer that is a limited liability partnership with at least a twentyfive percent (25%) equity interest in Developer; (v) general partner of Developer that is a limited partnership; (vi) or managing member of a Developer that is a limited liability company; shall jointly and severally guarantee Developer's performance of each and every provision of this Agreement by executing the Guarantee in the form attached to this Agreement as Exhibit C.

4. DEVELOPMENT OBLIGATIONS

4.1 Minimum Development Obligation

Developer shall be bound by and strictly follow the Development Schedule set forth in Exhibit B of this Development Agreement. By the dates set forth under the Development Schedule, Developer shall enter into a Franchise Agreement to establish and operate Black Bear Diner restaurants in the number indicated in the Development Schedule. Developer acknowledges and agrees that the time limits and time frames set forth in and inherent in the Development Schedule shall govern Developer's obligations hereunder. Developer will enter into a separate Franchise Agreement with Franchisor pursuant to this Agreement for each Franchised Restaurant to be developed under this Agreement. Developer shall at all times continuously maintain in operation pursuant to each Franchise Agreement at least the number of Franchised Restaurants set forth in the Development Schedule.

4.2 Exercise of Development Rights

For each Black Bear Diner restaurant to be developed hereunder, Developer shall submit to Franchisor, in a form specified by Franchisor, a completed site approval package which shall include a site approval form prescribed by Franchisor, an option contract, letter of intent, term sheet, or other evidence satisfactory to Franchisor which describes Developer's favorable prospects for obtaining such site, and such other information or materials as Franchisor may reasonably require. No site shall be deemed approved unless it has been expressly approved in writing by Franchisor. Developer hereby acknowledges and agrees that approval by Franchisor of a site does not constitute an assurance, representation, or warranty of any kind, express or implied, as to the suitability of the site for the Black Bear Diner restaurant or for any other purpose. Approval by Franchisor of the site indicates only that Franchisor believes the site complies with acceptable minimum criteria established by Franchisor solely for its purposes as of the time of the evaluation. Both Franchisee and Franchisor acknowledge that application of criteria that may have been effective with respect to other sites and premises may not be predictive of potential for all sites and that, subsequent to approval by Franchisor of a site, demographic and/or economic factors, such as competition from other similar businesses, included in or excluded from criteria used by Franchisor could change, thereby altering the potential of a site. Such factors are unpredictable and are beyond the control of Franchisor. Franchisor shall not be responsible for the failure of a site approved by Franchisor to meet Developer's expectations as to revenue or operational criteria. Developer further acknowledges and agrees that its acceptance of a franchise for the operation of a Black Bear Diner restaurant at a site is based on its own independent investigation of the suitability of the site. For each Black Bear Diner restaurant to be developed hereunder, Developer shall execute a lease/sublease that complies with the applicable provisions of the Franchise Agreement, or a binding agreement to purchase the site. Franchisee acknowledges and agrees that, notwithstanding the execution of this Development Agreement and any applicable exhibits and attachments thereto, the selection and approval of a site that may become an Approved Location under a Franchise Agreement shall be governed by the Franchise Agreement and Franchisor's site review and approval procedures as set forth in Franchisor's Manual. Within 30 days after receipt of the site approval package by Franchisor, Franchisor shall deliver two (2) copies of the Franchise

Agreement along with a copy of its then current franchise disclosure document, if required by law. Immediately upon receipt of the franchise disclosure document, Developer shall return to Franchisor a signed copy of the Receipt Page of the disclosure document. Developer shall execute and deliver as instructed by Franchisor two copies of said Franchise Agreement and the balance of the Franchise Fee therefore as provided in Section 3.1 above.

4.3 Franchisor's Duties

Franchisor shall furnish to Developer site selection guidelines, including Franchisor's minimum standards for a location for the Black Bear Diner restaurant, and such site selection assistance as Franchisor may deem advisable. In response to Developer's request for site approval, Franchisor shall perform one (1) on-site evaluation of a proposed site for each Black Bear Diner restaurant to be developed hereunder. Franchisor shall perform additional on site evaluations as Franchisor may deem advisable in response to Developer's requests for site approval; provided, however, that Franchisor shall not be required to provide on-site evaluation for any proposed site(s) in addition to Franchisee's first proposed site for each Black Bear Diner restaurant. If additional on-site evaluation is deemed necessary and appropriate by Franchisor (on its own initiative or at Franchisee's request) for any Black Bear Diner restaurant to be established, Developer shall reimburse Franchisor for all reasonable expenses incurred by Franchisor in connection with such on-site evaluation visit(s), including, without limitation, the cost of travel, lodging and meals.

4.4 Conditions Precedent to Franchisor's Obligations

Franchisor shall execute the Franchise Agreement for each Black Bear Diner restaurant to be developed under this Agreement only if: (i) Developer is in compliance with and is not in default of any requirements and obligations of this Development Agreement or any other agreements between Franchisor and Developer; and (ii) in the case of each then existing Franchise Agreement, Developer, as Franchisee, is in compliance with all and is not in default of any of its obligations under the Franchise Agreement. In order to meet the Development Schedule, the Franchise Agreement must be executed by Developer and Franchisor in accordance with the Development Schedule.

Source: Item 23 — RECEIPT (FDD pages 56–243)