What are the obligations of a Burros Fries franchisee regarding pre-opening purchases/leases (Item 9) and how do the restrictions on suppliers (Item 8) affect these obligations?

arding us or the System whatsoever.

For a Burros & Fries Business, you are obligated to purchase and/or lease kitchen equipment, furniture and fixtures, technology items (as described above) software, signage, uniforms and an inventory of products and supplies for the operation of your Business. It is estimated that all your initial expenditures from us, our affiliates or the vendors that we specify and/or approve that meet our standards and specifications will represent approximately 45%-55% of your total initial purchases. It is anticipated that during the operation of your Business, required purchases from us, our affiliates or the vendors that we specify or approve (not including your lease, royalties or labor costs) are estimated to be approximately 90%-95% of your total monthly purchases in the continuing operation of your Business (this depends on the size of your Business the amount of inventory you purchase and sales volume).

We do not provide material benefits (for example renewal or additional franchises) to you based solely on your use of designated or approved sources. We do not belong or require you to belong to any purchasing or distribution cooperatives, although we retain the right to establish them and to require your membership therein.

When you open a location for your franchise under a lease, per the Franchise Agreement, you must submit the proposed lease to us for approval before it is signed. We have the option to require that the lease (i) be collaterally assigned to us by a collateral assignment agreement in a form and substance reasonably acceptable to us in order to secure performance of your liabilities and obligations to us or (ii) contain the following terms and conditions:

1. The lessor must agree that without its consent, the lease and your right, title and interest under the lease may be assigned by you to our designee or us (provided such assignment shall not relieve you of your

• obligations under the lease or cause us or our designee to have any obligations or liability under the lease).
• 1. The lessor must provide written notice to us (at the same time it gives such notice to you) of any default by you under the lease and we must have, after the expiration of the period during which you may cure such default, an additional 15 days to cure, at our sole option, any such default and, upon the curing of such default, the right to enter upon the leased premises and assume your rights under the lease as if the lease had been assigned by you to us.
• 1. You are required to furnish copies of all insurance policies required by the Franchise Agreement and by the lease, to us, or such other evidence of insurance coverage and payment of premiums as we request or permit or under the lease.

Before you open your Business for operation, you must obtain the insurance coverage for the Business as specified below. The insurance coverage must be maintained during the term of the Franchise Agreement and provide evidence of insurance to us that insurance has been obtained from a responsible carrier or carriers acceptable to us.

• 1. General Liability Insurance, including broad form contractual liability, broad form property damage, personal injury, advertising injury, completed operations and fire damage coverage, in the amount of $2,000,000 per occurrence and aggregate;
• 1. "All Risks" or "Special Form" replacement cost coverage for the full cost of replacement of the Business premises and all other property in which we may have an interest with no coinsurance clause;
• 1. Business and personal property casualty insurance that covers you for damages or losses to the Business with a minimum policy limit of $1,000,000 per occurrence or an amount that covers the assets of the Business;
• 1. Product liability insurance that covers you for damages that result in injury from products that you provide with a minimum policy limit of $2,000,000 per occurrence and $4,000,000 aggregate or an amount we reasonably specify;
• 1. Employer liability insurance that covers you and your Business against claims made by employees for work-related bodily injury or disease, other than liability imposed on you and your Business by workers' compensation law;
• 1. Workers' Compensation insurance in amounts provided by applicable law or, if permissible under applicable law, any legally appropriate alternative providing substantially similar compensation to injured workers, subject to the conditions set forth in the Franchise Agreement.