eserve the goodwill of the System and the Proprietary Marks. Any defined terms not otherwise defined herein shall have the meaning as set forth in the

Franchisor's Franchise Disclosure Document.

G. Developer understands and acknowledges the importance of Franchisor's uniformly high standards of quality and service and the necessity of operating the Bakeries in strict conformity with Franchisor's quality control standards and specifications.

NOW, THEREFORE, the parties agree as follows:

1. DEVELOPMENT RIGHTS AND OBLIGATIONS, FRANCHISE AGREEMENT AND INITIAL FRANCHISE FEE

• 1.1. We grant you the right, and you undertake the obligation, pursuant to the terms and conditions of this Agreement, to develop _____________ (___) Bakeries, solely within the territory defined in Exhibit A to this Agreement (the "Development Area"). The Bakeries will be located only at the specific locations we approve in writing pursuant to Section 4.1 below. The Bakeries will be developed in accordance with the schedule set forth in Exhibit B to this Agreement (the "Development Schedule"). Exhibit A, the Development Area and Exhibit B the Development Schedule are incorporated herein as if fully set forth in this Agreement.

• 1.2. To exercise your development rights, you must execute a separate Bruegger's Franchise Agreement ("Franchise Agreement") with us for each Bakery to be developed, in accordance with Section 4.1 below. The initial franchise fee payable for each Bakery is Thirty Thousand and No/100 Dollars ($30,000) ("Initial Franchise Fee"). A portion of the Development Fee paid in accordance with Section 3 below will be applied against the Initial Franchise Fee for each Bakery, until the Development Fee is exhausted, as follows: We will apply Ten Thousand Dollars ($10,000 of the Development Fee paid by you toward the Initial Franchise Fee for the first three Bakeries that you open under your Development Agreement. Additional portions of the Development Fee will be applied to subsequent Initial Franchise Fees upon the signing of each subsequent Franchise Agreement at the rate of Five Thousand Dollars ($5,000) per Bakery, with the balance of the Initial Franchise Fee of Thirty Thousand Dollars ($30,000) payable when you sign each subsequent Franchise Agreement. All amounts collected shall be deemed fully earned immediately upon receipt and shall be non-refundable.

• 1.3. If you fail to open a Bakery within the time period specified in the Development Schedule, or if fewer than the required number of Bakeries are in operation on any deadline specified in the Development Schedule, we will have the option to terminate this Agreement by written notice to you. Our rights under this Section 1.3 will be in addition to any other remedy we may have for failure to meet the Development Schedule.

• 1.4. This Agreement does not grant you any right to use the Proprietary Marks or the System. All rights to use the Proprietary Marks and the System are granted solely under the terms of the Franchise Agreement. You acknowledge that you will have no right or power under this Agreement or under any Franchise Agreement to sub-franchise any other person or legal entity to use the Proprietary Marks or the System.

• 1.5. While this Agreement is in effect, we will not establish Bakeries or franchise others to establish Bakeries within the Development Area, subject to the rights reserved in Sections 1.6 and 1.7 below.

• 1.6. We and our affiliates retain the rights, despite anything to the contrary in Section 1.5 and regardless of the proximity to or effect on any Bakery that you operate:

• 1.6.1. To own, acquire, establish, operate and franchise or license others to operate Bakeries located outside of the Development Area;

• 1.6.2. To own, acquire, establish, operate, and franchise or license others to operate outlets at Non-Traditional Locations under the Bruegger's name or any other name, whether inside or outside of the Development Area. "Non-Traditional Location" means a facility where the primary function is not a Bakery business, such as (but not limited to) a performing arts center, arena, stadium, shopping mall, department store, retail store, wholesale club, grocery store, supermarket, casino, amusement park, fairground, college or university, factory, hospital, penal institution, military base, airport, turnpike, limited access highway rest stop, or other transportation facility;

• 1.6.3. To develop, manufacture, have manufactured, market, sell and distribute, at retail or wholesale, and license others to manufacture, sell or distribute, packaged food products or any other goods or services under the Bruegger's mark or any other name or mark, through any channel of distribution other than a Bakery, including but not limited to the Internet, supermarkets, specialty food stores, convenience stores, wholesale clubs and retail food stores, anywhere in the world;

Source: Item 22 — CONTRACTS (FDD page 61)