What are the obligations of the franchisee under the Black Bear Diner Addendum to the Franchise Agreement?

hisor 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.

4.5 No Subfranchising by Developer

Developer shall have no right under this Agreement to sublicense, subfranchise, resell, or otherwise transfer any interest in this Agreement or any Franchise Agreement.

4.6 Area Development Manager

If Developer signs a Development Agreement for five (5) or more Franchised Restaurants then Developer agrees to have an Area Development Manager to oversee the operations of all Franchised Restaurants. Developer agrees that its Development Manager: a) shall exert full-time and best efforts to the development and operation of all Black Bear Diner restaurants that Developer owns; (b) may not engage in any other business or activity, directly or indirectly, that requires substantial management responsibility or time commitments or otherwise may conflict with Developer's obligations hereunder; and (c) must complete Franchisors initial training program required of new franchisees to Franchisor's satisfaction.

5. TERM

Unless sooner terminated in accordance with the terms of this Agreement, the term of this Agreement and all Development Rights granted hereunder to Developer shall expire on the earlier to occur of the actual opening date of the last of the Black Bear Diner restaurants required to be developed pursuant to the Development Schedule or the last day of the last Development Period under the Development Schedule. At the end of the term of this Development Agreement, the exclusive Development Rights with respect to the Development Area will automatically terminate, and Developer will not have the right to renew or extend the term of this Development Agreement.

6. MARKS AND CONFIDENTIAL INFORMATION

6.1 No License Under Development Agreement

Notwithstanding any provision to the contrary under this Agreement, it is understood and agreed that this Agreement does not grant the Developer any right to use the Marks. The rights to use the Marks are granted only under the Franchise Agreement(s) entered into between Franchisor and Developer for the purpose of operating Black Bear Diner restaurants(s). Developer shall not use any Mark as part of any corporate or trade name or with any prefix, suffix, or other modifying words, terms designs, or symbols, or in any modifying words, terms designs or symbols, or in any modified form, nor may Developer use any Mark, in connection with any business or activity, other than the business conducted by Developer pursuant to Franchise Agreement(s) entered into between Developer and Franchisor, or in any other manner not explicitly authorized in writing by Franchisor.

6.2 Confidential Information

Except as hereinafter provided, Developer shall not, during the term of this Agreement or at any time thereafter, communicate, divulge, or use for the benefit of any other person or entity any Confidential Information which may be communicated to Developer or of which Developer may be apprised by virtue of Developer's activities under this Agreement or any Franchise Agreement with Franchisor. Developer may divulge such Confidential Information only to such of its employees as deemed necessary by Developer, and to other third parties with the prior written approval of Franchisor. All information which Franchisor designates as confidential shall be deemed confidential for purposes of this Agreement, except information which Developer can demonstrate came to its attention by lawful means prior to disclosure thereof by Franchisor, or which, at or after the time of disclosure by Franchisor to Developer, had become or later becomes a part of the public domain, through publication or communication by others. At Franchisor's request, Developer shall require its employees and any other person to whom Developer wishes to disclose any Confidential Information of Franchisor to execute covenants that they will maintain the confidentiality of such information.

7. TRANSFERS

7.1 By Franchisor

This Development Agreement and all rights hereunder can be assigned and transferred by Franchisor and, if so, shall be binding upon and inure to the benefit of Franchisor's successors and assigns; provided, however, that with respect to any assignment resulting in the subsequent performance by the assignee of the functions of Franchisor, the assignee shall assume the

obligations of Franchisor hereunder and Franchisor shall have no liability for the performance of any obligations contained in this Agreement after the effective date of such transfer or assignment.

7.2 By Developer

• 7.2.1 If Developer is a corporation, limited liability company, partnership, or limited liability partnership, each principal of Developer with at least a ten percent (10%) equity ownership interest in Developer ("Principal"), and the interest of each Principal in Developer, is identified in Exhibit C hereto. Developer represents and warrants that its owners are as set forth on Exhibit C attached to this Agreement, and covenants that it will not permit the identity of such owners, or their respective interests in Developer, to change without complying with this Agreement. Franchisor shall have the right to designate any person or entity which owns a direct or indirect interest in Developer as a Principal, and Exhibit C shall be so amended automatically upon notice thereof to Developer. Throughout the term of this Agreement, Franchisor shall have a continuing right to designate as a Principal any person or entity that owns a direct or indirect interest in Developer.
• 7.2.2 This Agreement has been entered into by Franchisor in reliance upon and in consideration of the individual or collective character, reputation, skill, attitude, business ability, and financial capacity of Developer or, if applicable, its Principals who will actively and substantially participate in the development, ownership and operation of the Black Bear Diner restaurants. Accordingly, except as otherwise may be permitted herein, neither Developer nor any of Developer's Principals shall directly or indirectly sell, assign, transfer, convey, give away, pledge, mortgage, or otherwise encumber any direct or indirect interest in this Agreement or in all or substantially all of Developer's assets, voluntarily or involuntarily, in whole or in part, by operation of law or otherwise (a "Transfer"), without Franchisor's prior written consent, which consent may be withheld for any reason whatsoever in Franchisor's sole subjective judgment.
• 7.2.3 If Developer is a business entity, each of the following shall be deemed to be a Transfer of this Agreement: (i) the sale, assignment, transfer, conveyance, gift, pledge, mortgage, or other encumbrance of 10% or more in the aggregate, whether in one or more transactions, of the assets, capital stock, membership interests or voting power of Developer, by operation of law or otherwise; (ii) the issuance of any securities by Developer which itself or in combination with any other transaction(s) results in the Principals existing as of the Effective Date, owning 75% or less of the outstanding shares, membership interests or voting power of Developer as constituted as of the date hereof; (iii) if Developer is a partnership, the withdrawal, death or legal incapacity of a general partner or limited partner owning 10% or more of the voting power, property, profits or losses, or partnership interests of the partnership, or the admission of any additional general partner or the transfer by any general partner of any of its partnership rights in the partnership; (iv) the death or legal incapacity of any Principal owning 10% or more of the capital stock, voting power, or partnership rights of Developer; and (v) any merger, stock redemption, consolidation, reorganization, recapitalization or other transfer control of the Developer, however effected.
• 7.2.4 Developer shall not in any event have the right to pledge, encumber, hypothecate or otherwise give any third party a security interest in this Agreement in any manner whatsoever without the express prior written permission of Franchisor, which permission may be withheld for any reason whatsoever in Franchisor's sole subjective judgment.

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