• 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.

4. SITE SELECTION AND ACCEPTANCE

• 4.1. At your own expense, you must identify and obtain a site for each Bakery to be developed hereunder. Before acquiring a site by lease or purchase, you must submit to us information and materials about the proposed site including, without limitation, the lease and the lease terms, the landlord's contact information, the land acquisition terms, demographic criteria and preliminary site plans showing building orientation, pad size, parking layout and other information, as we may reasonably request to evaluate the site. Information for each Bakery and the request for approval should be submitted to us by the date set forth in the Development Schedule. Within 30 days after we receive all requested information and materials, we will accept or reject the proposed site in our sole discretion. Please understand that our approval of this site does not guarantee that a Bakery operated at the site will be successful or that it will achieve a certain sales volume or level of profitability. Our approval means only that the proposed site meets our minimum criteria for a Bruegger's Bagel Bakery.
• 4.2. If we approve the proposed site, after we receive all of the required information from you necessary to prepare the Franchise Agreement, including the physical address of the site, we will issue the Franchise Agreement and the site will be known as the "Premises" referred to in the Franchise Agreement. You must return the executed Franchise Agreement, along with a completed set of all required exhibit documents within 30 days, of your receipt of the Franchise Agreement or we can withdraw our acceptance of the site. The terms of the Franchise Agreement shall govern the development, build-out and opening of the Bakery. The development time frame shall be governed by this Agreement. Concurrently with the Franchise Agreement you and your owners must execute and deliver a general release (substantially in the form of the Release attached to the Franchisor's Franchise Disclosure Document) of any and all claims against us and our affiliates, officers, directors, employees, agents, successors and assigns, subject to any limits imposed by applicable law. No site will be deemed accepted unless we have accepted it in writing. You must pay us the balance of the Franchise Fee when you execute and return the Franchise Agreement for the approved site.

Source: Item 22 — CONTRACTS (FDD page 61)