In this task, you're given a passage that represents a legal contract or clause between multiple parties. Your job is to write questions that ask the basic details corresponding to the legal contracts or clauses. Avoid questions that can be answered correctly without actually understanding the paragraph, and which might have multiple answers. The answer to each question should be unambiguous.
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Question: FRANCHISE AGREEMENT                                                   TABLE OF CONTENTS

1.       INTRODUCTION AND DEFINITIONS.......................................1          1.A.     INTRODUCTION..............................................1          1.B.     DEFINITIONS...............................................3

2.       GRANT OF FRANCHISE RIGHTS..........................................7          2.A.     GRANT OF FRANCHISE........................................7          2.B.     PRINCIPAL OWNERS' GUARANTY................................7          2.C.     TERRITORIAL RIGHTS........................................8          2.D.     RESERVATION OF RIGHTS.....................................8          2.E.     OPTION TO DEVELOP OTHER SITES WITHIN THE TERRITORY........9          2.F.     TERM OF FRANCHISE.........................................9

3.       OTHER DISTRIBUTION METHODS........................................10          3.A.     SPECIAL DISTRIBUTION ARRANGEMENTS........................10

4.       FRANCHISE AND OTHER FEES..........................................10          4.A.     INITIAL FRANCHISE FEE....................................10          4.B.     DEFERRAL OF FRANCHISE FEE................................10          4.C.     ROYALTY FEE..............................................10          4.D.     ADVERTISING FUND FEE.....................................11          4.E.     TRANSFER FEE.............................................11          4.F.     FEES FOR ADDITIONAL FRANCHISES...........................11          4.G.     FEES FOR RENEWAL OF FRANCHISE............................12          4.H.     PAYMENT BY ELECTRONIC FUNDS TRANSFER.....................12          4.I.     LATE CHARGE AND INTEREST. ...............................12

5.       RENEWAL OF FRANCHISE TERM.........................................13          5.A.     FRANCHISEE'S RIGHT TO A SUCCESSOR FRANCHISE..............13          5.B.     RELEASES.................................................14          5.C.     NOTICES..................................................15

6.       TRADEMARKS AND LIMITATIONS........................................15          6.A.     OWNERSHIP OF MARKS.......................................15          6.B.     DISCONTINUANCE OF USE OF MARKS...........................16          6.C.     CORPORATE NAME...........................................16          6.D.     TERMINATION..............................................17          6.E.     TRADEMARK ENFORCEMENT....................................17          6.F.     USE OF SERVICE MARK......................................17

7.       SELECTION OF FRANCHISE LOCATION...................................18          7.A.     SITE SELECTION...........................................18          7.B.     LEASE....................................................18          7.C.     RELOCATION...............................................20

8.       DEVELOPMENT OF UNIT...............................................21          8.A.     UNIT DESIGN SPECIFICATIONS AND CONSTRUCTION PLANS........21          8.B.     DEVELOPMENT OF THE UNIT..................................21          8.C.     EQUIPMENT, FIXTURES, FURNISHINGS, AND SIGNS..............22          8.D.     EXCEPTIONS TO EQUIPMENT OR FURNISHINGS...................22          8.E.     CONSTRUCTION ASSISTANCE..................................23          8.F.     LIMITATION ON LIABILITY..................................23

9.       UNIT OPENING......................................................24          9.A.     COMMENCEMENT OF OPERATIONS...............................24

10.      FRANCHISEE TRAINING...............................................24          10.A.    INITIAL TRAINING.........................................24          10.B.    EMPLOYEE TRAINING........................................25          10.C.  ON-SITE TRAINING...........................................26          10.D.    COMPANY GROWTH...........................................26          10.E.    RETRAINING PROGRAMS......................................26          10.F.    OTHER GUIDANCE...........................................26

11.      ADVERTISING AND OTHER PROMOTIONS..................................27          11.A.    PROVIDING OF ADVERTISING MATERIALS.......................27          11.B.    CONTROL OF ADVERTISING PROGRAMS AND CONCEPTS.............27          11.C.    SEGREGATION OF ADVERTISING FUND..........................28          11.D.    SUSPENSION OF ADVERTISING FUND FEES......................29          11.E.    FRANCHISEE'S REQUIRED ADVERTISING EXPENDITURES...........29          11.F.    USE OF TRADEMARK REFERENCES AND APPROVAL...............                                     OF FRANCHISEE'S MARKETING..............29

12.      ADHERENCE TO UNIFORM STANDARDS....................................30          12.A.    STANDARDS AND OPERATIONS MANUAL..........................30          12.B.    CONFIDENTIALITY OF OPERATIONS MANUAL.....................32          12.C.    INCORPORATION OF OPERATIONS MANUAL INTO AGREEMENT........32          12.D.    MODIFICATIONS/UPDATES OF OPERATIONS MANUAL...............33

13.      UNIT IMAGE AND OPERATION..........................................33          13.A.    CONDITION AND APPEARANCE OF UNIT.........................33          13.B.  UNIT MENU..................................................35          13.C.    ADHERENCE TO APPROVED ITEMS..............................35          13.D.    EXCEPTION PROCESS........................................36          13.E.  PROMOTIONAL ALLOWANCES.....................................37

14.      FRANCHISEE OPERATIONS.............................................37          14.A.    MANAGEMENT...............................................37          14.B.  SUFFICIENT WORKING CAPITAL.................................38          14.C.  FILING OF OPERATIONS AND SALES REPORTS.....................38          14.D.    EMPLOYEE DRESS AND CUSTOMER SERVICE......................38





         14.E.  COMPLIANCE WITH LAWS AND GOOD BUSINESS PRACTICES...........38          14.F.    PAYMENT OF TAXES.........................................39          14.G.    SALE OF PRODUCT..........................................39          14.H.    COOPERATION..............................................39          14.I.    INSURANCE................................................39          14.J.    SUGGESTED RETAIL PRICES..................................40

15.      ACCOUNTING, REPORTS AND FINANCIAL STATEMENTS......................41          15.A.  ESTABLISHMENT OF ACCOUNTING SYSTEM.........................41          15.B.   MAINTENANCE OF RECORDS....................................41

16.      AUDITS AND INSPECTIONS............................................42          16.A.    AUDITS...................................................42          16.B.    RIGHT OF ENTRY AND INSPECTION............................42

17.      TRANSFER, ASSIGNMENT AND REPURCHASE. .............................43          17.A.  BY PRETZEL TIME............................................43          17.B.  BY FRANCHISEE..............................................43          17.C.  CONDITIONS FOR APPROVAL OF TRANSFER........................44          17.D.    TRANSFER TO A WHOLLY-OWNED CORPORATION...................45          17.E.  FORMATION OF A CORPORATION.................................46          17.F.  DEATH OR DISABILITY OF FRANCHISEE..........................47          17.G.    PRETZEL TIME'S FIRST RIGHT OF REFUSAL....................47          17.H.    PUBLIC OR PRIVATE OFFERINGS..............................48

18.      TERMINATION OF AGREEMENT BY FRANCHISEE............................49          18.A.  FRANCHISEE'S RIGHT TO TERMINATE............................49

19.      DEFAULT AND TERMINATION...........................................50          19.A.  EXACT AND COMPLETE PERFORMANCE REQUIRED....................50          19.B.    DEFAULT AND RIGHT TO CURE................................50          19.C.  EXTENSION OF NOTICE........................................50          19.D.  REPEATED BREACHES..........................................50          19.E.    EVENTS OF DEFAULT - 30 DAYS NOTICE - CURABLE DEFAULTS....51          19.F.    EVENTS OF DEFAULT - IMMEDIATE TERMINATION - NO                   RIGHT TO CURE............................................53

20.      RIGHTS AND OBLIGATIONS OF PRETZEL TIME AND FRANCHISEE UPON TERMINATION            OR EXPIRATION OF THE FRANCHISE..................................56          20.A.  AMOUNTS OWED...............................................56          20.B.    DISCONTINUANCE OF MARKS..................................56          20.C.    RETURN OF MATERIALS......................................57          20.D.    TELEPHONE COMPANY........................................57          20.E.    CONFIDENTIAL INFORMATION.................................58          20.F.    LEASING..................................................58          20.G.    COVENANT NOT TO COMPETE..................................58          20.H.  PRETZEL TIME'S RIGHT TO PURCHASE ASSETS OF THE UNIT........59

21.      RELATIONSHIP OF THE PARTIES/INDEMNIFICATION.......................60          21.A.    EXCLUSIVE RELATIONSHIP...................................60          21.B.  NO LIABILITY FOR ACTS OF OTHER PARTY.......................61          21.C.    TAXES....................................................61          21.D.    INDEMNIFICATION..........................................62          21.E.  INDEPENDENT CONTRACTOR.....................................62

22.      PROTECTION OF TRADE SECRETS.......................................63          22.A.  CONFIDENTIAL INFORMATION...................................63          22.B.  DISCLOSURE OF IDEAS AND NEW PROCEDURES.....................64

23.      ENFORCEMENT.......................................................65          23.A.    UNAVOIDABLE DELAYS.......................................65          23.B.    RIGHTS OF PARTIES ARE CUMULATIVE.........................65          23.C.    WAIVER OF OBLIGATIONS....................................65          23.D.    CONTINUING OBLIGATIONS...................................66          23.E.    INVALID OR UNENFORCEABLE PROVISIONS......................66          23.F.  INJUNCTIVE RELIEF..........................................66          23.G.    APPLICABLE LAW...........................................67          23.H.    ENTIRE STATUS OF AGREEMENT...............................67          23.I.    AMENDMENT OF AGREEMENT...................................67          23.J.    HEIRS, SUCCESSORS AND ASSIGNS............................67          23.K.    CONDITIONS AND CONTINGENCIES.............................67          23.L.    WAIVER BY PRETZEL TIME...................................68          23.M.    COSTS AND EXPENSES OF ENFORCEMENT........................68          23.N.    RIGHTS OF PARTIES ARE CUMULATIVE ........................69          23.O.    WAIVER OF JURY TRIAL.....................................69          23.P.  WAIVER OF PUNITIVE DAMAGES.................................69          23.Q.  EXCLUSIVE JURISDICTION.....................................69          23.R.    LIMITATIONS OF CLAIMS....................................69

24.      ACKNOWLEDGMENTS AND REPRESENTATIONS...............................70

25.      CONSTRUCTION......................................................70          25.A.    HEADINGS.................................................70          25.B.  TERMINOLOGY................................................70          25.C.    COUNTERPARTS.............................................71          25.D.  REASONABLENESS.............................................71

26.      SECURITY AGREEMENT................................................70          26.A.    SECURITY INTEREST........................................71          26.B.  DEFAULT REMEDIES UNDER U.C.C...............................72

27.      NOTICES...........................................................72          27.A.    DELIVERY OF NOTICES......................................72





EXHIBITS

         FRANCHISE ACKNOWLEDGMENTS AND REPRESENTATIONS            STATEMENT        . . . . . . . . . . . . . . . . . . . . . . .. A

         PRINCIPAL OWNER, OTHER OWNERS, DESIGNATED PRINCIPAL            OWNERS, UNIT AND MANAGER, SUPERVISING OWNERS AND INITIAL            CAPITALIZATION           . . . . . . . . . . . . . . . .. . . . B

         PERMITTED COMPETITIVE BUSINESSES, FORM DEVELOPMENT            AGREEMENT (FOR SINGLE-UNIT FRANCHISES), IDENTITY OF           DEVELOPER AND DATE OR DEVELOPMENT AGREEMENT               . . . .C

         OWNER'S AND GUARANTOR'S UNDERTAKING AND ASSUMPTION OF                  OBLIGATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . D

         AUTHORIZATION AGREEMENT FOR PREARRANGED PAYMENTS (DIRECT DEBITS). E

         UNIT SITE AGREEMENT               . . . . . . . . . . . . . . .   F

         COLLATERAL ASSIGNMENT OF TELEPHONE NUMBERS AND LISTINGS       . . G

         MUTUAL CONFIDENTIALITY AGREEMENT                            . .  .H

         TCBY YOGURT PRODUCTS ADDENDUM                        . . . . . .  I

FRAN.AGT 6.5.96

         SATELLITE UNIT ADDENDUM            . . . . .  . . . . . . . . .   J

         RELEASE AGREEMENT                  .  .  . . . . . . . . . . . .  K

         THIRD PARTY ASSIGNMENT AGREEMENT            . . . . . . . . .     L

         SUBLEASE                   .  .  . . . . . . . . . . . . . . .    M

         COLLATERAL ASSIGNMENT OF LEASE              . . . . . . . . .     N

                               PRETZEL TIME, INC.                                FRANCHISE AGREEMENT

         This  agreement is made and entered into this day of , 19  (hereinafter referred  to  as  Effective  Date)  by  and  between  Pretzel  Time,  Inc.,  a Pennsylvania   corporation   with  its  principal  place  of  business  at  4800 Linglestown Road, Suite 202,  Harrisburg,  Pennsylvania  17112 trading and doing business  as  Pretzel  Time  (hereinafter  referred  to  as  Pretzel  Time)  and Franchisee (as defined below) who hereby agrees to the following:

Franchisee:

,

a

,

with its principal address at:

         NOW  THEREFORE,   in  consideration  of  the  mutual  covenants  herein contained,  and  intending  to be legally  bound  hereby,  the parties  agree as follows:

1.       INTRODUCTION AND DEFINITIONS.

         1.A.     INTRODUCTION.

         Pretzel Time and its  Affiliates  (as defined below) have developed and continue to develop methods of operating food service businesses,  including the food  service  business  referred to in this  Agreement  as a Pretzel  Time Unit (defined  below),  which  feature  Products  (defined  below)  for off  premises consumption.  Pretzel Time has established  quality  products and services which will  continue to be a unique  benefit to Pretzel Time and its  Franchisees.  In addition to off-premises dining, Pretzel Time may, in its sole discretion, offer to a Pretzel  Time Unit the right to offer  TCBY  frozen  yogurt  and other TCBY yogurt  products.  Pretzel  Time  Units  operate  at  locations  that  feature a distinctive  food  service  format and Trade Dress  (defined  below) and utilize distinctive  business formats,  specifications,  employee selection and training programs,  signs, equipment,  layouts, unit fronts, operation systems,  recipes,





methods,  procedures,  designs  and  marketing  and  advertising  standards  and formats,  all of which  Pretzel  Time may  modify  from time to time in its sole discretion  (the Pretzel Time System).  Pretzel Time operates,  and franchises certain  qualified  persons and entities to license and grants the  privildge to operate, Pretzel Time Units using the Pretzel Time System and the Marks (defined below).

         Pretzel Time has  developed and perfected a System for providing to the public, at retail, in an efficient manner, a variety of distinctive, hand-rolled soft pretzels,  pretzel-related  products (such as pretzel dogs), beverages, and complimentary  pretzel  toppings.  These  Products and services which comprise a part of the Pretzel  Time System are  delineated  and set forth in detail in the Pretzel Time Operations Manual (hereinafter  Operations Manual). These Pretzel Time Units,  which may include stores,  carts, and kiosks, are known as Pretzel Time Units.

         Franchisee  acknowledges  and agrees that  Pretzel  Time has expended a considerable  amount of time and effort in  developing  and refining the recipes for, the methods of preparation of, the Products.  Pretzel Time may from time to time modify such recipes and methods of preparation, which may include requiring Franchisee  to prepare  pretzels and other  Products  from scratch  mixes and to purchase  prepared food  products from Pretzel Time or an approved  Pretzel Time Affiliate.  Pretzel Time and its Affiliates  currently operate and will continue to operate  Pretzel Time Units  offering and selling the Products.  Pretzel Time franchises  others to operate Pretzel Time Units and other outlets  offering and selling the Products.  Pretzel Time owns, uses,  promotes and franchises certain trade names, trademarks,  service marks and other commercial symbols,  including the trade and service marks,  Pretzel Time and  associated  logos,  which have gained and continue to gain public  acceptance  and goodwill,  and may hereafter create, use and franchise  additional  trademarks,  service marks and commercial symbols in conjunction with the operation of Pretzel Time Units.

         The distinguishing  characteristics of the Pretzel Time System include, but are not limited to, the following:

                  (a) The Pretzel Time trade name and in combination  with other          commercial  symbols owned by Pretzel Time with a color scheme  pattern,          Unit design,  insignia,  slogans,  coordinating  Pretzel Time's overall          operation, retail facilities,  advertising, training, and other related          matters;

                  (b) A developed  marketing  concept and uniform  procedure for          the operation of a Pretzel Time Unit,  including  stylized  designs and          display  facilities  to provide  the  highest  quality of Pretzel  Time          pretzels,  soft  beverages,  toppings and other  Pretzel  Time-approved          products; and

                  (c) Rules of  operation  and a  procedure  for  operating  and          training Franchisees, managers and employees.

         Franchisee  recognizes the benefits to be derived from being identified with and  licensed by Pretzel  Time,  and being able to utilize the Pretzel Time System of retailing  Pretzel Time  Products  and related  products,  service and trademarks which Pretzel Time makes available to its Franchisees. Franchisee has applied  for a  franchise  to operate a Pretzel  Time Unit at the Site  (defined below). Franchisee's application and the Site have been approved by Pretzel Time in reliance upon all of the  representations  made in such  application  and the Franchisee's  Acknowledgments and Representations  Statement, a copy of which is attached hereto as Exhibit A, which shall be executed by Franchisee concurrently with this  Agreement.  Franchisee  desires to operate a Pretzel  Time  Franchise pursuant  to the  provisions  hereof  and  at the  Site  specified  herein,  and Franchisee has had a full and adequate  opportunity to be thoroughly  advised of the terms and conditions of this Franchise Agreement by legal counsel of its own choosing.

         1.B.     DEFINITIONS.

         For  purposes  of this  Agreement,  the  terms  listed  below  have the following meanings: Other terms used in this Agreement are defined and construed in the context in which they occur.

         Affiliate  - Any person or legal entity that  directly or  indirectly owns or  controls  Pretzel  Time,  that  is  directly  or  indirectly  owned  or controlled by Pretzel  Time, or that is under common  control with Pretzel Time. For purposes of this  definition,  control  means the power to direct or cause the direction of the management and policies of an entity.

         Cart - It is a type of Pretzel Time Unit which is  free-standing  and sells Pretzel Time pretzels and other Pretzel  Time-approved  Products which are produced  or  manufactured  at a  co-existing  Kiosk  (defined  below)  or Store (defined below) situated in the Territory.

     Competitive  Business  - A business or  enterprise,  other than a Pretzel Time Unit,  that:  (1) Offers food products  which are the same as or similar to the  products  for  consumer  consumption  off  premises  or other  distribution channels;  or (2) Grants or has granted franchises or licenses or establishes or has  established  joint  ventures  for the  development  and/or  operation  of a business or an enterprise described in the foregoing clause (1).

         Controlling  Interest - An interest,  the ownership of which empowers the holder  thereof to exercise a  controlling  influence  over the  management, policies  or  personnel  of an entity on any issue and shall  prevent  any other person, group, combination,  or entity from blocking voting control on any issue or exercising any veto power. If a limited  partnership,  a general  partnership interest or such percentage of limited partnership interests as shall permit the





replacement or removal of any general  partner.  Without limiting the generality of the  foregoing,  ownership  of forty  percent  (40%) or more of the equity or voting  securities  of a  corporation  or ownership  of any general  partnership interest in a  partnership  or joint  venture  shall be deemed  conclusively  to constitute a  Controlling  Interest in the  corporation,  partnership,  or joint venture, as the case may be.

         Area  Developer's  Agreement  -  Agreement  pursuant to which an area developer  is granted the right to develop one (1) or more Pretzel Time Units in a geographic area in which the Unit is located.

         Franchisee  - The  party  to whom the  Franchise  is  granted  by the Franchisor,  Pretzel Time, Inc. The term is applicable to one or more persons, a corporation or a partnership,  as the case may be. If two or more persons are at any time the Franchisee hereunder,  their obligations and liabilities to Pretzel Time shall be joint and several. References to Franchisee and assignee which are applicable to an individual or individuals  shall mean the Owner (defined below) or Principal  Owners (defined  below) of the equity or operating  control of the Franchisee or the assignee,  if the  Franchisee or the assignee is a corporation or partnership.

         Net  Revenues  - For  purposes  of  this  Agreement,  the  term  Net Revenues  includes all gross sums, monies and other  consideration  received by Franchisee  of every kind and nature from sales and services  made in, upon,  or from any and all retail  Units  operated by  Franchisee  under the Pretzel  Time Marks in his  Territory,  whether  upon credit or for cash,  without  reserve or deduction for inability or failure to collect,  less all refunds and allowances, if any,  given in good faith to  customers,  and any sales,  use or excise taxes which are separately  stated and which Franchisee pays to any federal,  state or local tax authority.

         Immediate  family - (1) The spouse of a person;  and (2) the  natural and  adoptive  parents and natural and  adopted  children  and  siblings of such person and their spouses;  and (3) the natural and adoptive  parents and natural and adopted  children  and  siblings of the spouse of such  person;  and (4) any other member of the household of such person.

         Interest  - Eighteen  percent  (18%) per annum for the number of days overdue or the highest applicable rate allowed by law.

         Kiosk - Is a type of  Pretzel  Time  Unit,  which is a  free-standing enclosed area located within the common area of a mall which can manufacture and sell Pretzel Time pretzels and other Pretzel Time-approved  Products without the co-existence of a Pretzel Time Store within the territory.

         Marks - The  trademarks,  service marks,  logos and other  commercial symbols which Pretzel Time authorizes Franchisee to use to identify the services and/or products offered by Pretzel Time Units, including the mark Pretzel Time and the Trade Dress  (defined  below);  provided that such  trademarks,  service marks,  logos,  other  commercial  symbols  and the Trade  Dress are  subject to modification  and  discontinuance  at Pretzel  Time's  sole  discretion  and may include additional or substitute  trademarks,  service marks, logos,  commercial symbols and Trade Dress as provided in this Agreement.

         Owner - Each person or entity  holding  direct or indirect,  legal or beneficial Ownership Interests (defined below) in Franchisee and each person who has other direct or indirect property rights in Franchisee,  this Agreement, the Franchise or the Unit and as designated  in Exhibit B attached and  incorporated herein.

         Ownership Interests - In relation to a: (i) corporation, the legal or beneficial ownership of shares in the corporation;  (ii) partnership,  the legal or beneficial ownership of a general or limited partnership  interest;  or (iii) trust, the ownership of a beneficial interest of such trust.

         Permanent Disability - A mental or physical disability, impairment or condition  that is  reasonably  expected  to prevent or  actually  does  prevent Franchisee or an Owner of a Controlling  Interest in Franchisee from supervising the management and operation of the Unit for a period of six (6) months from the onset of such disability, impairment or condition.

         Permitted  Competitive  Business  - A business  which  constitutes  a Competitive  Business  and is  disclosed  in  Exhibit  C which  shall be made by Franchisee  and  Owners  as of the date of this  agreement  provided  that  such business does not offer hard or soft pretzels, or yogurt on its menu.

         Pretzel Time Unit  -  A food service business that:

                  (1) offers  Products  for consumer  consumption  off-premises,          provided  that  Pretzel  Time,  may in its sole  discretion,  authorize          and/or require such business to offer TCBY yogurt products  pursuant to          a  Yogurt  Product  Addendum  (defined  below)  or to  operate  Special          Distribution  Arrangements pursuant to a Special Distribution Agreement          (defined below); and

                  (2) operates using the Pretzel Time System and the Marks; and

                  (3) is either  operated by Pretzel Time or its  Affiliates  or          pursuant to a valid franchise from Pretzel Time.

         Pretzel Time Units are of three types: stores, carts, and kiosks.

         Principal Owner  - Each Owner which:





                  (1)  is a general partner in Franchisee; or

                  (2) has a direct or indirect equity interest:

                           (a) in  Franchisee  of twenty  percent  (20%) or more                            (regardless of whether such Owner is entitled to vote                            thereon); or

                           (b)  in any Pretzel Time unit; or

                  (3) is  designated  as a Principal  Owner in Exhibit B of this Agreement.

         Products - Products approved or required by Pretzel Time from time to time in its sole  discretion for sale at or from Pretzel Time Units,  including, without  limitation,  hand-rolled  soft pretzels of various  flavors  including, without limitation,  chocolate chip, raisin,  honey-wheat,  and cinnamon, frozen pretzels  and  other  pretzel-related  products  and  toppings,  frozen  yogurt, beverages, and other Pretzel Time-approved products, provided that the foregoing products are subject to  modification or  discontinuance  in Pretzel Time's sole discretion from time to time and may

include additional or substitute products.

         Site - The  location of the Pretzel  Time Unit as  described  in this Agreement. The term refers to the inside of the four walls of the Unit premises.

         Special Distribution Agreement - A separate agreement whereby Pretzel Time  authorizes  a  Franchisee  of a  Pretzel  Time  Unit to  operate a Special Distribution  Arrangement  at a  Special  Distribution  Location  designated  by Pretzel Time.

         Special Distribution  Arrangement - The sale of Products at or from a Special  Distribution  Location  (defined  below),  whether or not by or through on-premises food service  facilities or concessions,  pursuant to Pretzel Time's standards and  specifications for such sales, which Pretzel Time may change from time to time in its sole discretion.

         Special Distribution  Location - A facility or location,  which as by way of example and without limitation,  a school,  hospital,  office, work site, military facility, grocery store, convenience store, supermarket,  entertainment or sporting facility or event, bus or train station,  park, toll road or limited access highway  facility,  shopping mall or other similar  facility,  at or from which  Pretzel  Time,  in its sole  discretion,  authorizes  the  operation of a Special Distribution  Arrangement pursuant to a Special Distribution  Agreement, which facility may be located within or outside the Territory.

         Store - Is a traditional in-line Pretzel Time Unit where Pretzel Time Products  are  produced  and  sold  to  customers  at  retail  for  off-premises consumption.

         Territory  - The geographic area described in this Agreement.

         Trade  Dress - The unit  design,  decor and image which  Pretzel Time authorizes  and requires  Franchisee to use in connection  with the operation of Pretzel Time Units,  as it may be revised and further  developed by Pretzel Time or its Affiliates from time to time and as further described in the Manuals.

         Transfer - The voluntary, involuntary, direct or indirect assignment, sale, gift, pledge, mortgage, hypothecation, encumbrance or other disposition by Franchisee (or any of its Owners) or by operation of law of:

         (1)  Any interest in this Agreement;

         (2)  A Controlling Interest in Franchisee; or

         (3) Any interest in the Unit, equipment, furnishings or fixtures.

         A Transfer shall also be deemed to include a merger or consolidation of Franchisee  with  any  other  entity,  the  issuance  of  additional  securities representing,  or convertible into, an Ownership  Interest in Franchisee and any Transfer as a result of death  (subject to this Section),  divorce,  insolvency, corporate or  partnership  dissolution  proceedings or otherwise by operation of law.

Unit - The Pretzel Time Unit which  Franchisee is franchised to operate at the Site pursuant to this Agreement.

         Yogurt  Product  Addendum  - The form of  addendum  to the  Franchise Agreement used by Pretzel Time attached  hereto as Exhibit I from time to time to authorize or require, in its sole discretion,  a franchisee of a Pretzel Time Unit to offer TCBY frozen yogurt and other TCBY frozen yogurt products.

2.       GRANT OF FRANCHISE RIGHTS.

         2.A.     GRANT OF FRANCHISE.

         Pretzel  Time hereby  grants to  Franchisee  and  Franchisee  agrees to undertake,  during the term of this  Agreement and upon the terms and conditions stated in this Agreement, the right, license and privilege to operate,  conduct,





and do business  and to use certain  trade  names,  trademarks,  service  marks, logos,  and other  commercial  symbols,  including  Pretzel Time (referred to as Marks) solely and  exclusively for the operation of one retail  franchise Unit (referred to as Franchise), which is in the form of a (Store/Kiosk/Cart),  and to sell  those  Products  known as  Pretzel  Time  pretzels  and  other  Pretzel Time-approved   menu  items  and  Products   further   described  in  Section  2 (hereinafter Products) in accordance with the provisions of this Agreement and in accordance with rules,  standards,  systems,  and procedures as prescribed by Pretzel Time which may be changed,  improved and further  developed from time to time,  (hereinafter  Pretzel  Time  System),  at one (1) location  only,  such location to be

 (hereinafter Site).

         Pretzel  Time  will not,  as long as this  Agreement  is in effect  and Franchisee  is not in default,  enfranchise  or operate any other  Pretzel  Time Franchise  within the following  enclosed  mall or building  except as otherwise provided herein (hereinafter  referred to as Territory):  none. Franchisee has no territory other than the actual store location.  Franchisee acknowledges that Franchisee  has no rights  outside of the actual store location and that Pretzel Time has the right to sell certain  frozen  products as Pretzel Time desires and Pretzel  Time may conduct  Pretzel  Time's  business as Pretzel  Time so desires without hinderance from Franchisee.

         Franchisee  shall not  conduct  the  business of the Unit from any Site other  than  the  Site  specified,  except  as  otherwise  provided  under  this Agreement.  The form of addendum to the Franchise Agreement used by Pretzel Time is  attached  hereto  as  Exhibit  J to be  used  from  time  to time to add a satellite unit pursuant to the Satelite Unit Addendum.

         2.B.     PRINCIPAL OWNERS' GUARANTY.

         Franchisee shall cause all Principal Owners,  and their spouses,  as of the Effective Date to execute and deliver to Pretzel Time concurrently with this Agreement,  and all persons or entities which become Principal Owners, and their spouses,  thereafter to execute and deliver to Pretzel Time promptly thereafter, the  Owner's  and  Guarantor's  Undertaking  and  Assumption  of  Obligations, attached hereto as Exhibit D, or such other agreement as Pretzel Time prescribes from time to time,  undertaking  to be bound  jointly and  severally  by, and to guarantee the payment and  performance  of, all  provisions  of this  Agreement. Franchisee shall furnish to Pretzel Time, at any time upon request, in such form as Pretzel Time may require,  a list of its  shareholders or partners (of record and beneficially) reflecting their respective interests in Franchisee.

         2.C.     TERRITORIAL RIGHTS.

         Except as  otherwise  provided  in this  Agreement  and  provided  that Franchise  is in full  compliance  with  this  Agreement,  Pretzel  Time and its Affiliates  will  not  during  the  term  of this  Agreement  operate  or  grant franchises  for the operation of Pretzel Time Units within the  Territory  other than the Franchise granted to Franchisee pursuant to this Agreement.  Franchisee acknowledges  that  Franchisee  shall  have no  right  to any  Territory  unless Franchisee  and  Pretzel  Time have  entered  into a separate  Area  Developer's Agreement. Franchisee shall have no exclusive Territory based on this Agreement.

         2.D.     RESERVATION OF RIGHTS.

         Except as expressly limited by Section 2.C., Pretzel Time (on behalf of itself,  its Affiliates and its designees)  retains all rights,  in its sole and exclusive discretion,  to offer to sell the Products and services authorized for Pretzel Time Units under the Marks  hereinafter  described in Section 6 or other trade names, trademarks, service marks and commercial symbols through similar or dissimilar  channels of distribution and national  accounts and pursuant to such terms and  conditions  as Pretzel Time deems  appropriate.  Pretzel Time and its Affiliates  retain the right to offer for sale and sell, and franchise others to offer for sale and sell,  any other  Products or services  under the Marks and own and  operate  and grant to others  the right to operate  Pretzel  Time Units solely or in conjunction with TCBY stores or other snack food businesses at such locations  and on such  terms  and  conditions  as  Pretzel  Time,  in its  sole discretion,  deems appropriate.  Such Products shall include, but not be limited to, soft pretzels,  frozen pretzels and other pretzel-related  products,  frozen yogurt and other Pretzel Time-approved Products and such methods of distribution may include,  but shall not be limited to, sales at sports  arenas and stadiums, amusement  parks,   department  stores,   airports,  toll  road  travel  plazas, hospitals, office buildings, schools and colleges and other Non Traditional Unit venues  as  well  as  sales  to  wholesalers  and/or  distributors  for  resale. Notwithstanding  the foregoing,  Pretzel Time reserves the right both within and outside the  Territory  (if any) to sell at wholesale  all Products and services which comprise a part of the Pretzel Time System.

         FRANCHISEE  ACKNOWLEDGES  AND AGREES THAT PRETZEL TIME HAS THE RIGHT TO PLACE UNITS AT ANY LOCATION,  EXCEPT AS LIMITED BY THIS  AGREEMENT,  AT ITS SOLE DISCRETION  AND  WITHOUT  REGARD TO THE IMPACT UPON THE  FRANCHISEE'S  BUSINESS. FRANCHISEE  ACKNOWLEDGES  THAT  ABSENT A SEPARATE  AREA  DEVELOPER'S  AGREEMENT, PRETZEL  TIME  HAS THE  RIGHT  TO  PLACE  UNITS  AT ANY  LOCATION,  AT ITS  SOLE DISCRETION, AND WITHOUT REGARD TO THE IMPACT UPON THE FRANCHISEE'S BUSINESS.

         Franchisee  acknowledges that because complete and detailed  uniformity under many varying  conditions  may not be possible or  practical,  Pretzel Time specifically reserves the right and privilege,  at its sole discretion and as it may deem in the best  interests of all  concerned in any specific  instance,  to





vary standards for any Franchisee based upon the peculiarities of the particular Site,  landlords'  requirements,  business potential,  or other conditions which Pretzel  Time deems to be of  importance  to the  successful  operation  of such Franchisee's business.

         2.E.     OPTION TO DEVELOP OTHER SITES WITHIN THE TERRITORY.

         If Franchisee  seeks to add a different type of Pretzel Time Unit, such as a kiosk or a cart,  within the Territory,  then  Franchisee must seek Pretzel Time's  approval by  notifying  Pretzel  Time,  in  writing,  that he desires to develop  and  operate  other  units,  including  a cart  or  kiosk,  within  the Territory.  If Pretzel  Time has fully  negotiated  a lease  agreement  for such location,  then  Franchisee  shall (1) obtain the  consent  of the  landlord  to execute such lease and execute such lease,  if applicable;  (2) execute  Pretzel Time's then current form of Satellite Unit Addendum  (containing  Pretzel Time's then  current  fees  and  expense  requirements)  and such  ancillary  documents (including guarantees) as are then customarily used by Pretzel Time in the grant of franchises for Pretzel Time Units as modified for use in connection  with the Site, as necessary, and (3) pay Pretzel Time's reasonable out-of-pocket expenses incurred in locating such additional  Site and negotiating the lease  agreement, all within ten (10) business days after Pretzel Time's delivery to Franchisee of the lease agreement and the franchise documents.

         If Franchisee  timely notifies  Pretzel Time in writing that Franchisee desires to develop and operate an additional  Pretzel Time Unit, such as a kiosk or cart,  within its Territory and Pretzel Time has not fully negotiated a lease agreement for such location, then Franchisee will have thirty (30) days in which to negotiate and deliver to Pretzel Time a lease agreement for such site in form for execution.  If Pretzel Time  disapproves  the lease agreement for failure to meet  Pretzel  Time's  requirements,  Franchisee  will have ten (10) days within which to negotiate  and deliver to Pretzel Time a revised  lease  agreement  for such  location  in form for  execution.  If  Pretzel  Time  approves  the  lease agreement  for such  location  as  meeting  Pretzel  Time's  requirements,  then Franchisee  will (1) execute  such lease  agreement;  (2) execute the  franchise documents;   and  (3)  pay  Pretzel  Time's  reasonable  out-of-pocket  expenses incurred,  if any, in locating such  additional  Site and  negotiating the lease agreement,  all within ten (10) business days after Pretzel  Time's  delivery to Franchisee of the lease agreement and the franchise documents.

         2.F.     TERM OF FRANCHISE.

         The term of this Agreement shall commence on the Effective Date of this Agreement  and shall expire  twenty (20) years from the  effective  date of this Agreement.  References in this  Agreement to the term of this Agreement mean the initial term and any renewal term.

3.       OTHER DISTRIBUTION METHODS.

         3.A.     SPECIAL DISTRIBUTION ARRANGEMENTS.

         Franchisee  acknowledges  and agrees that (1) Franchisee is not granted any rights to operate Special  Distribution  Arrangements  within or outside the Territory  pursuant to this agreement;  and (2) the right to operate or grant to others the right to operate  Special  Distribution  Arrangements  is reserved to Pretzel Time;  and (3) Pretzel Time has no obligation to offer to Franchisee the right to operate Special Distribution Arrangements;  and (4) Pretzel Time or its designees  may instead  operate or grant to others the right to operate  Special Distribution Arrangements within and/or outside the Territory.

4.       FRANCHISE AND OTHER FEES.

         4.A.     INITIAL FRANCHISE FEE.

         The initial franchise fee is Twenty-Five Thousand Dollars ($25,000.00). Upon execution of this Agreement by Franchisee,  Franchisee shall pay to Pretzel Time, in consideration  of the franchise  granted herein,  Twenty-Five  Thousand Dollars  ($25,000.00)  payable by certified  check or cashier's  check in United States currency due upon execution of the Franchise Agreement. The franchise fee is fully  earned  by  Pretzel  Time  upon the  payment  in full  thereof  and is nonrefundable   (except  as   specifically   provided  in  this   agreement)  as consideration for expenses incurred by Pretzel Time in furnishing assistance and services to Franchisee  and for Pretzel  Time's lost or deferred  opportunity to franchise others,  and not as compensation for the use of the copyrighted works, Marks or Trade Dress. Franchisee acknowledges and agrees that this franchise fee is reasonable. The fee is not reduced if Pretzel Time is unable to obtain a TCBY Franchise.  An  additional  $1,000 is payable by Franchisee to Pretzel Time as a Yogurt Fee if Yogurt Product is included in the Franchise.

         4.B.     DEFERRAL OF FRANCHISE FEE.

         Payment of the initial  franchise fee is deferred for  franchises to be located in Minnesota and for Minnesota  residents until the franchise Unit opens at which time the franchise fee must be paid in full to Pretzel Time.  Franchise fees for Maryland  residents  and  franchises  to be located in Maryland will be escrowed  until the unit is  opened.  There may be other  stores in which  state administrators have required fees or royalties to be deferred or escrowed.

         4.C.     ROYALTY FEE.





         Franchisee,  in  partial  consideration  of the  grant of a  franchise, agrees to pay to Pretzel  Time a  continuing  Royalty of seven  percent  (7%) of Franchisee's  net  revenues  (as  defined  in  Section  1) on a weekly  basis as specified in this  Section;  provided  only 4% Royalty  shall be payable on TCBY frozen yogurt and other TCBY frozen yogurt products.  The Royalty is not uniform as to  all  franchisees,  it is  fully  earned,  and  is  nonrefundable  in  any circumstance.  Franchisee  shall pay weekly by electronic  funds  transfer (ACH) without offset,  defalcation,  credit or deduction of any nature to Pretzel Time the royalty fee, the advertising  fund fee and all other amounts due and payable on each Wednesday for the immediately  preceding week. The Royalty shall be paid by electronic funds transfer from Franchisee's  general operating  account.  The Royalty is paid,  in part,  to  compensate  Pretzel  Time for  various  services provided  to  Franchisee  after the Unit opens,  including,  but not limited to, quality, service, and cleanliness inspections. Pretzel Time, upon written notice to  Franchisee,  shall  have the right to  change  the  timing  of  Franchisee's payments of Royalty  Fees and  Advertising  Fund Fees due under this  Agreement. Franchisee  shall not subordinate to any other  obligation his obligation to pay the Royalty Fee or any other fee or charge hereunder.

         4.D.     ADVERTISING FUND FEE.

         Franchisee  agrees to pay on a weekly basis to Pretzel Time, as partial consideration  for the grant of the Franchise,  an  Advertising  Fund Fee of one percent  (1%) of Net revenues  for the  preceding  week as defined in Section 1. Franchisee  herein  acknowledges that the Advertising Fund Fee is not uniform as to all franchisees.  The Advertising Fund Fee is fully earned and nonrefundable. The  Advertising  Fund Fee shall be paid by electronic  funds  transfer from the Franchisee's  general  operating  account on Wednesday of each week based on the preceding week's Net revenues.

         4.E.     TRANSFER FEE.

         If Franchisee desires to assign his rights under the Franchise to a new franchisee,  Franchisee  (Assignor of the  Franchise),  agrees to pay to Pretzel Time a transfer  fee equal to the  greater of SIX  THOUSAND  TWO  HUNDRED  FIFTY DOLLARS  ($6,250.00) or the then current  transfer fee being paid by franchisees upon the assignment, gift, bequeath or transfer of ownership of the Franchise to cover administrative costs and expenses. The transfer fee is non-refundable. The fee shall be due and payable by the current  Franchisee to Pretzel Time five (5) days prior to the transfer of the Franchise to the assignee.  Additionally,  the assignee  of the  Franchisee  shall pay  Pretzel  Time an  additional  amount of Twenty-Five  Thousand Dollars  ($25,000.00) (plus $1,000.00 if Yogurt Product is included),  for any  additional  units that are not existing  stores or the then current initial franchisee fee for traditional Pretzel Time Units.

         4.F.     FEES FOR ADDITIONAL FRANCHISES.

          In the event that Franchisee  meets Pretzel Time's  qualifications  to open  additional  Franchises at sites  acceptable to both Franchisee and Pretzel Time,  which  approval is at the sole  discretion of Pretzel  Time,  the initial franchisee  fee shall be the greater of FIVE THOUSAND  DOLLARS  ($5,000.00)(plus $1,000.00 if Yogurt  Product is included) or the then current fee for additional franchises set by Pretzel Time, at its sole discretion. The decision to grant an additional  franchise  location shall be in the sole  discretion of Pretzel Time and at no time does Pretzel Time promise or guarantee that additional franchises will be offered  or  approved.  Such  decisions  will be made on a  case-to-case basis,  based on  factors  including,  but not  limited to the  availability  of suitable locations,  quality of standards maintained in the Franchisee's current Units,   the  impact  of  additional   locations  upon  the  operations  of  the Franchisee's  current Units, the geographical  distance between the Franchisee's existing and proposed  location,  the business  plan of Pretzel  Time,  national contracts  with  major  corporations,  the  population  of  the  area  near  the prospective  site,  the quality of the site,  and other  economic  and  business factors.  Under no  circumstances  is  Franchisee  entitled to demand or require Pretzel Time to grant to Franchisee a Franchise or a similar variation thereof.

         4.G.     FEES FOR RENEWAL OF FRANCHISE.

         Franchisee  agrees that in consideration of the grant of the Successor Franchise  (defined in Section 5.A.),  Franchisee shall pay the current renewal fee as of the  date of  renewal  and  execute  a  general  release  in the  form prescribed  by Pretzel Time in  accordance  with Section 5.B. The renewal fee is due and payable thirty (30) days prior to the renewal day.

         4.H.     PAYMENT BY ELECTRONIC FUNDS TRANSFER.

         Franchisee agrees to pay all Royalties,  Advertising Fund Fees, amounts due Pretzel Time for purchases by Franchisee from Pretzel Time or its Affiliates and other amounts which  Franchisee  owes to Pretzel Time via  electronic  funds transfer from Franchisee's general account,  which shall be initiated by Pretzel Time and any transfer fees shall be paid by Franchisee  every  Wednesday for the preceding week based upon the Net Revenues.  Franchisee herein agrees to execute and complete all necessary  documentation required by Pretzel Time to permit the wire transfer to Pretzel Time (in the form attached  hereto as Exhibit E or such other form as Pretzel Time shall accept). Under this procedure, Franchisee shall authorize  Pretzel  Time to initiate  debit  entries  and/or  credit  correction entries  to  Franchisee's   general  operating  bank  account  for  payments  of Royalties,  Advertising Fund Fees and other amounts payable under this Agreement and any late or interest  charges due thereon.  Franchisee  shall make the funds





available to Pretzel Time for  withdrawal by  electronic  transfer no later than one day prior to the due date for payment therefor.  The Royalty and Advertising Fund Fees amount actually  transferred from Franchisee's  account shall be based on the Unit's Net Revenues  indicated on the reports  submitted by Franchisee as required  hereunder.  If Franchisee  has not reported the Unit's Net Revenues to Pretzel  Time  for any week as  required  herein,  then  Pretzel  Time  shall be authorized  to  debit  Franchisee's  account  in an  amount  equal  to the  fees transferred from Franchisee's  account for the last reporting period for which a report of the Unit's Net  Revenues  was  provided  to Pretzel  Time as  required hereunder.  If,  at any  time,  Pretzel  Time  determines  that  Franchisee  has under-reported the Unit's Net Revenues, or underpaid Royalty or Advertising Fund Fees or other  amounts  due  hereunder,  Pretzel  Time  shall be  authorized  to initiate  immediately a debit to Franchisee's  account in the appropriate amount in  accordance  with the foregoing  procedure,  plus interest as provided for in this  Agreement.  Any  overpayment  shall be  credited to  Franchisee's  account through a credit  effective  as of the first week after  Franchisee  and Pretzel Time  determine  that such credit is due.  Notwithstanding  any  designation  by Franchisee, Pretzel Time shall have the sole discretion to apply any payments by Franchisee to any past  indebtedness  of Franchisee  for Royalty or  Advertising Fund Fees,  purchases from Pretzel Time and/or its  Affiliates,  interest or any other indebtedness,  including,  without  limitation,  payment of rental sums in arrears for the Unit.

         4.I.     LATE CHARGE AND INTEREST.

         To compensate Pretzel Time for the increased  administrative expense of handling late payments,  Pretzel Time may charge Franchisee a $50.00 late charge for each delinquent payment.  All Royalty and Advertising Fund Fees, amounts due for  purchases by  Franchisee  from Pretzel  Time or its  Affiliates,  and other amounts  which  Franchisee  owes to Pretzel  Time or its  Affiliates  shall bear interest  after  their due date at a rate equal to the  lesser of: (1)  eighteen percent (18%) per annum for the number of days which such payment is due; or (2) the highest  applicable  legal rate  permitted  by  applicable  law.  Franchisee acknowledges  that this  Section  shall  not  constitute  Pretzel  Time's or its Affiliates' agreement to accept such payments after they are due or a commitment by Pretzel  Time or its  Affiliates  to extend  credit to or  otherwise  finance operation of the Unit.  Notwithstanding  the  provisions  of this Section  4.I., Franchisee  acknowledges and agrees that his failure to pay all amounts when due shall constitute grounds for termination of this Agreement.

5.       RENEWAL OF FRANCHISE TERM.

         5.A.     FRANCHISEE'S RIGHT TO A SUCCESSOR FRANCHISE.

         Upon the expiration of the initial term of this  Agreement,  Franchisee shall  have the one time  right to obtain a  successor  franchise  to  operate a Pretzel  Time Unit at the Site (a  Successor  Franchise)  for a single term of five (5) years  immediately  following the expiration of the initial term of the Franchise upon giving Pretzel Time six (6) months notice prior to the expiration of the then current term if:

         (1) Franchisee and its Owners have complied with this Agreement and any          amendment  during the initial  term of this  Agreement  in all material          respects; and

         (2) Franchisee  maintains  possession of the Site and agrees to remodel          and/or expand the Unit, add or replace equipment, furnishings, fixtures          and signs and  otherwise  modify  the Unit to bring it into  compliance          with   specifications  and  standards  then  applicable  under  new  or          Successor Franchises for Pretzel Time Units; or if Franchisee is unable          to maintain  possession  of the Site, or if, in the judgment of Pretzel          Time,  the Unit should be  relocated,  Franchisee  secures a substitute          site approved by Pretzel Time and agrees to develop  expeditiously such          substitute  site in compliance with  specifications  and standards then          applicable  under new or successor  franchises  for Pretzel Time units;          and

         (3) Pretzel  Time has not given notice of its election not to renew six          (6) months  prior to the  expiration  of the  initial  twenty (20) year          term; and

         (4)  Franchisee  is not in default of any material term or condition of          the lease  agreement,  or any other agreement  between Pretzel Time and          Franchisee; and

         (5) Franchisee executes Pretzel Time's then current Franchise Agreement          and  other  ancillary  agreements  required  and being  offered  to new          Franchisees on the date of renewal, which agreements shall supersede in          all respects this  Agreement and the terms of which may differ from the          terms of this Agreement,  including,  without limitation,  Royalty Fees          and  Advertising  Fund  Fees,  other  fees  and  charges,   performance          criteria,  and a provision which allows Pretzel Time and its Affiliates          to reserve  the right,  both within and  outside of the  Territory,  to          offer and sell at wholesale or retail, through channels of distribution          distinct  from  those  of a  Franchise,  Products  and  services  which          comprise,  or may in the  future  comprise a part of the  Pretzel  Time          System, which Products may be resold at retail to the general public by          such entities; and

         (6) Franchisee is in full  compliance  with Pretzel  Time's  Operations Manual; and

         (7) On renewal,  Franchisee  agrees to pay the current renewal fee, the          Royalty and  Advertising  Fund fees specified in Pretzel Time's current





         Franchise  Agreement then being offered new  Franchisees on the date of          renewal; and

         (8) Franchisee shall execute general releases,  in form satisfactory to          Pretzel  Time,  of any and all  claims  against  Pretzel  Time  and its          Affiliates and their officers, directors, employees, agents, successors          and assigns arising under this Agreement; and

         (10)   Franchisee   has  complied  with  Pretzel  Time's  then  current          qualification and training requirements.

         Following receipt of Franchisee's election to renew, Pretzel Time shall provide Franchisee with an execution copy of the form of Franchise  Agreement to be entered into for the renewal  term.  If the  Franchisee  does not execute and return the renewal Franchise Agreement within thirty (30) days of receipt,  then Franchisee  shall be deemed to have  withdrawn  its notice of renewal,  and this Agreement shall terminate at the end of the current term.

         Pretzel Time may, at its option, with reasonable cause and upon written notice,  elect not to renew the Franchise  Agreement.  Pretzel Time shall notify Franchisee  of the  nonrenewal  not  less  than  six  (6)  months  prior  to the expiration  of the term of this  Agreement.  If  applicable  law  requires  that Pretzel Time give longer  notice to  Franchisee  prior to the  expiration of the term than is specified in the Franchise Agreement,  the Franchise Agreement will remain in effect on a  month-to-month  basis until the requisite notice has been given.

         5.B.     RELEASES.

         Franchisee  and its Owners  shall  execute  general  releases,  in form satisfactory  to Pretzel Time (the  general form of which is attached  hereto as Exhibit K), of any and all claims against  Pretzel Time and its Affiliates and their  respective  shareholders,   officers,   directors,   employees,   agents, successors and assigns. Failure by Franchisee and its Owners to sign and deliver to Pretzel  Time,  such  agreements  and releases  within thirty (30) days after delivery  thereof to Franchisee shall be deemed an election by Franchisee not to obtain a Successor Franchise.

         5.C.     NOTICES.

         Franchisee  shall give Pretzel  Time written  notice of its election to obtain a Successor  Franchise not more than twelve (12) months and not less than six (6) months prior to the expiration of this Agreement. Pretzel Time agrees to give Franchisee, written notice, not more than thirty (30) days after receipt of Franchisee's notice of (a) Pretzel Time's  determination  whether or not it will grant Franchisee a Successor  Franchise  pursuant to this Section and/or (b) any deficiencies  in  Franchisee's  operation  of the Unit (or any other  failure to comply  with the terms of this  Agreement)  which could  cause  Pretzel  Time to refuse to grant a  Successor  Franchise.  Such notice  shall state what  actions Franchisee  must take to correct  the  deficiencies  and shall  specify the time period in which such  deficiencies  must be  corrected.  Pretzel Time shall give Franchisee written notice of a decision not to grant a Successor Franchise based upon  Franchisee's  failure to cure  deficiencies not less than ninety (90) days prior to the expiration of the initial term of this Agreement. Such notice shall state the reasons for Pretzel Time's refusal to grant a Successor Franchise.  In the event Pretzel Time fails to give  Franchisee (a) notice of  deficiencies  in the Unit or in Franchisee's operation of the Unit, within thirty (30) days after receipt of Franchisee's timely election to obtain a Successor Franchise,  or (b) notice of Pretzel  Time's  decision not to grant a Successor  Franchise at least ninety (90) days prior to the expiration of the term of this Agreement,  Pretzel Time  may  extend  the term of this  Agreement  for  such  period  of time as is necessary in order to provide Franchisee reasonable time to cure deficiencies or to provide ninety (90) days notice of Pretzel Time's  determination not to grant a Successor  Franchise.  The grant of a Successor Franchise shall be conditioned upon Franchisee's continued compliance with all the terms and conditions of this Agreement until the date of expiration.

6.       TRADEMARKS AND LIMITATIONS.

         6.A.     OWNERSHIP OF MARKS.

          Franchisee  acknowledges  that Pretzel Time is the owner of all right, title  and  interest  together  with  all  the  goodwill  in and  to the  Marks. Franchisee  acknowledges  that his right to use the Marks is derived solely from this  Agreement  and is limited to his  conduct of  business  pursuant to and in compliance with this agreement and all applicable standards,  specifications and operating  procedures Pretzel Time prescribes from time to time during its term. Franchisee  shall not have nor assert any right,  title or  interest  in Pretzel Time's Marks or any goodwill of Pretzel Time. Franchisee agrees that he will not register  such  trade  name or marks in his own name or that of any other  firm, person  or  corporation.  The  following  Marks  are  currently  authorized  for Franchisee's use in the Franchised Business as follows:

         Pretzel TimeJ          Pretzel Time Stylized7          Pretzel Time Clock DesignJ          Pretzel Time StorefrontJ          Fitness with a twist.J

         Franchisee  acknowledges  and recognizes  Pretzel  Time's  interest and exclusive   right  to  the   concepts  of  the  Pretzel   Time  System  and  its distinguishing characteristics, including the name and style of the unique decor





of the Pretzel Time  stylized  literature,  display and  promotional  materials, marketing methods, operating procedures, training program and the manufacture of Pretzel Time Products. Pretzel Time makes no representation or warranty, express or implied,  as to the use, exclusive  ownership,  validity or enforceability of the Marks. Pretzel Time reserves the right to develop other trademarks,  service marks,  copyrights  and patents for use in other  businesses.  Pretzel  Time and Franchisee  acknowledge  and agree that it is not required to defend  Franchisee against  a claim  against  his use of  Pretzel  Time  Marks.  Pretzel  Time  may reimburse  Franchisee for his liability and reasonable  costs in connection with defending Pretzel Time's registered  trademarks provided Franchisee has notified Pretzel Time immediately when he learned about the infringement or challenge.

         Franchisee  agrees to use  Pretzel  Time's  trade name and Marks as the sole trade  identification  of the Unit and in connection  with, and exclusively for the  promotion  and conduct of the  Franchise as provided  hereunder  and in accordance with instructions,  rules, and procedures  prescribed by Pretzel Time from  time  to  time  with  respect  thereto.   Notwithstanding  the  foregoing, Franchisee  shall identify  himself as the independent  owner of the Unit in the manner  prescribed  by Pretzel Time.  Franchisee  agrees to give such notices of trademark  and service  mark  registrations  as Pretzel  Time may specify and to obtain such business name registrations as may be required under applicable law. Franchisee  shall not at any time during the term of this Agreement or after its termination, contest the validity or ownership of any of the Marks or assist any other person in contesting the validity or ownership of the Marks.

         6.B.     DISCONTINUANCE OF USE OF MARKS.

         If it becomes advisable at any time, in Pretzel Time's sole discretion, for Pretzel Time or the Unit to modify or  discontinue  use of any Mark,  and/or use of one or more  additional or substitute  trade names,  trademarks,  service marks, or other commercial symbols,  Franchisee shall comply with Pretzel Time's directions  within a reasonable time after notice to Franchisee by Pretzel Time. Neither  Pretzel Time nor its Affiliates  shall have any obligation to reimburse Franchisee for any expenditures  made by Franchisee to modify or discontinue the use of a Mark or to adopt  additional  marks or  substitutes  for a discontinued Mark, including, without limitation, any expenditures relating to advertising or promotional  materials or to compensate  Franchisee for any goodwill  related to the discontinued Mark.

         6.C.     CORPORATE NAME.

         Franchisee  agrees not to use any Mark or trade name of Pretzel Time or any part thereof or with any prefix,  suffix or other  modifying  words,  terms, designs,  or symbols or in any modified  form as part of any  corporate or trade name  nor  shall  Franchisee  use any  Mark in  connection  with the sale of any unauthorized  product or service or in any other manner not expressly authorized in writing by Pretzel Time.

         6.D.     TERMINATION.

         Immediately  upon the  termination  of this  Agreement,  the Franchisee agrees to cease and forever  abstain  from using the Pretzel Time trade name and Marks and return to Pretzel Time all documents, manuals,  instructions,  display items and the like bearing the aforesaid trade names or any of the Marks.

         6.E.     TRADEMARK ENFORCEMENT.

         Pretzel  Time shall  police and enforce its rights with  respect to its trademarks  and other  proprietary  aspects of the Pretzel  Time System with the cooperation of Franchisee,  and shall bring  appropriate  actions or proceedings against infringers or other unlawful users at its sole expense.

         Franchisee  agrees to  immediately  notify  Pretzel  Time of any claim, demand or suit based upon or arising from or of any attempt by any other person, firm or corporation to use Pretzel Time's trademarks, service marks, copyrights, trade secrets,  or Systems licensed hereunder or colorable  variation thereof in which Pretzel Time has a proprietary interest. Pretzel Time will take the action it thinks  appropriate.  In the event Pretzel Time undertakes any prosecution of litigation or defense  relating to the  proprietary  Marks  licensed  hereunder, Franchisee  agrees to execute any and all  documents and do such acts and things as may in Pretzel  Time's  opinion,  be  necessary  to carry out such defense or prosecution.  Franchisee  agrees  that  Pretzel  Time has the  right to  control administrative proceedings or litigation with respect to this issue.

         Franchisee  agrees to participate  and cooperate in the  prosecution of any action to prevent the infringement,  imitation, illegal use or misuse of the Marks and  agrees  to be named as a party in any such  action  if  requested  by Pretzel  Time.  Pretzel  Time  agrees to bear the  legal  expenses  incident  to Franchisee's  participation in such action,  except for the cost of Franchisee's personal legal counsel if Franchisee  elects to be represented by counsel of his own choosing.

         6.F.     USE OF SERVICE MARK.

         Except  with the prior  written  consent  of Pretzel  Time,  Franchisee agrees not to infringe upon, use or imitate Pretzel Time's System, or any of its distinguishing  characteristics,  and  further  agrees not to cause or allow any other person to infringe upon, use or imitate  Pretzel Time's System,  or any of its  distinguishing  characteristics.  Franchisee  agrees to use and display the Marks at all times only in  accordance  with the quality  control  standards set forth in this  Agreement and in the Operations  Manual.  During the term of this Agreement, and renewal term, if any, Franchisee will operate the Unit only under the Marks . Franchisee  will use or display the Marks only within the designated Territory.  Franchisee  will cause a sign  bearing the name  Pretzel  Time which meets Pretzel Time's  specifications for color, design and size, to be installed





on the outside of the retail Unit.  Franchise  shall not, at any time during the term of this  Agreement or after its  termination  or expiration use any Mark in connection with the sale of any unauthorized  product or service or in any other manner not expressly authorized in writing by Pretzel Time.

7.       SELECTION OF FRANCHISE LOCATION.

         7.A.     SITE SELECTION.

         Franchisee  shall be  responsible  for leasing a suitable  site for the Franchise  subject to Pretzel  Time's  approval.  Pretzel  Time agrees to assist Franchisee  in locating and securing a location for the unit which is acceptable to both Pretzel Time and Franchisee.  Franchisee  shall submit to Pretzel Time a list of desired locations on the Location Agreement attached hereto as Exhibit W or if Pretzel  Time  directs on a form  prepared  by Pretzel  Time and  attached hereto as Exhibit F, and  Pretzel  Time shall  contact the  appropriate  leasing representatives to determine the availability of sites at those locations. After obtaining  information from appropriate  leasing  representatives,  Pretzel Time shall notify Franchisee  whether or not the sites made available to Pretzel Time are  acceptable  by Pretzel  Time.  In the event  that a site for the  franchise cannot be located  which is  acceptable  and  suitable to both  Pretzel Time and Franchisee  within One Hundred Twenty (120) days,  then the Franchise  Agreement shall be terminated and all franchise fees paid by Franchisee shall be refunded.

         Pretzel  Time  shall  approve  the site for the unit in  reliance  upon information furnished and representations made by Franchisee with respect to the size, appearance, and other physical characteristics of the site, photographs of the site, demographic characteristics,  traffic patterns, competition from other businesses in the area,  and other  commercial  characteristics.  Pretzel Time's approval of the site  indicates  only that Pretzel Time  believes  that the site falls  within  acceptable  criteria  established  by Pretzel Time as of the time period  encompassing the evaluation.  Franchisee  agrees that Pretzel Time shall not be responsible for the failure of a franchise, site and/or premises approved by Pretzel  Time to meet  expectations  as to potential  revenue or  operational criteria.  Franchisee acknowledges and agrees that his acceptance of a Franchise for the  operation of a Unit in the  Territory  is based on his own  independent investigation of the suitability of the mall location.

         Franchisee  acknowledges  that Pretzel Time's  approval of the lease or sublease  for the Unit does not  constitute  a guarantee  or warranty by Pretzel Time, express or implied, of the successful operation or profitability of a Unit operated at the designated Site. Such approval  indicates only that Pretzel Time believes  that the Unit and the terms of the lease fall  within  the  acceptable criteria  established  by Pretzel  Time as of the time period  encompassing  the evaluation.

         7.B.     LEASE.

         Pretzel  Time and  Franchisee  further  agree that  Pretzel  Time shall negotiate  the  basic  economic  terms  of the  lease in  consultation  with the Franchisee.  Franchisee  agrees to  execute  a letter  of  intent  for the lease premises  which  outlines the basic economic terms of the lease and return it to Pretzel  Time within five (5) days of receipt of same.  Franchisee  acknowledges and agrees that he is  responsible  for reviewing the terms of the agreement and making  any  necessary  changes  to the lease  agreement.  Franchisee  shall not execute any lease  agreement  without the prior approval of Pretzel Time,  which shall be conditioned  upon inclusion of terms in the lease acceptable to Pretzel Time and at Pretzel Time's option shall contain such provisions,  including, but not limited, to:

          (1). Notice to Pretzel  Time of,  and  Pretzel  Time's  right to cure,                Franchisee's default under the lease provided,  however,  that if                Pretzel  Time  cures any such  default,  the total  amount of all                costs and payments incurred by Pretzel Time in effecting the cure                shall be immediately due and owing to Pretzel Time by Franchisee;

          (2). Franchisee's  right to  assign  his  interest  under the lease or                sublease  to Pretzel  Time  without the  lessor's or  sublessor's                consent;

          (3). Allowing  Franchisee  to  transfer  the lease to Pretzel  Time or                another  approved  franchisee in the event that Franchisee  sells                his  business (a copy of the form of the third  party  assignment                agreement that  Franchisee and the  prospective  purchaser  would                sign is attached hereto as Exhibit L);

          (4). Authorizing  and requiring the Lessor or sublessor to disclose to                Pretzel Time, upon its request,  sales and other information that                Franchisee furnishes to the lessor or sublessor; and

          (5). Providing  that  Pretzel  Time (or one of its  Affiliates  or its                Assignee) shall have the right (but not the obligation) to assume                the lease or sublease:

                  (i) Upon termination of this Agreement by Pretzel Time or upon                   expiration of this Agreement (unless a Successor  Franchise is





                  granted to Franchisee), or

                  (ii) If  Franchisee  fails to exercise any options to renew or                   extend the lease or sublease or,

                  (iii) If Franchisee commits a default that gives the lessor or                   sublessor the right to terminate the lease or sublease, or

                  (iv)  If  Pretzel  Time  or  one  of  its  Affiliates  or  its                   designee/assignee purchases the Unit.

          (6). A provision allowing sampling in front of the retail Unit;

          (7). A provision  that the premises are to be used  exclusively  for a                Pretzel Time Unit only; and

          (8). A provision which permits alterations to the premises in a good          and workman-like manner by Franchisee as required by Pretzel Time.

         Franchisee further agrees to execute and return the lease and any other riders,  guaranties or sureties  required by the Landlord  within seven (7) days from receipt of the same and no later than sixty (60) days after signing of this Agreement.  If any lease  expires  prior to the  expiration  of this  Agreement, Franchisee  will be  required to arrange  any  necessary  lease for the Unit and Pretzel Time shall have the right to approve the terms of the renewal  lease for the Unit prior to Franchisee's execution thereof. Franchisee agrees that he will not execute a lease or sublease which Pretzel Time has  disapproved.  Franchisee shall  deliver a copy of the signed  lease to Pretzel  Time for the Unit  within five (5) business days after its full execution.  The copy shall be complete and include copies of all signature pages and exhibits.

         A copy of the form of the sublease  that  Franchisee  shall execute (if Pretzel Time is the tenant  pursuant to the lease) is attached hereto as Exhibit M. A copy of the form of the  collateral  assignement  of lease that  Franchisee shall execute (if  Franchisee  is the tenant  pursuant to the lease) is attached hereto as Exhibit N.

         Franchisee  shall be  responsible  for all terms and  conditions of the lease covering the franchise  location,  including any required security deposit and  prepaid  rent.  Franchisee  agrees  to pay the Unit  rent  directly  to the landlord at the rate and terms  specified in the primary lease between  landlord and Franchisee. Rent is generally paid monthly on the first day of the month and is  non-refundable.  Franchisee  agrees  that the Unit  shall be used  only as a Pretzel Time franchise.

         If  Franchisee  fails to obtain  lawful  possession of an approved Site (through a lease or assignment) within sixty (60) days after delivery of Pretzel Time's approval of the Site, Pretzel Time, may, in its sole discretion, withdraw approval of such Site at any time.

         7.C.     RELOCATION.

         In the event that  Franchisee's  lease is  terminated,  with or without fault of  Franchisee,  if the Site is damaged,  condemned or otherwise  rendered unusable as a Pretzel Time Unit in accordance with this Agreement, or if, in the judgment of Pretzel Time and  Franchisee,  there is a change in the character of the location of the Site sufficiently  detrimental to his business  potential to warrant its relocation,  Pretzel Time will not unreasonably  withhold permission for  relocation  of the  Unit  to  another  Site,  which  meets  Pretzel  Time's then-current  site  criteria,  subject to the rights of  existing  Pretzel  Time franchisees  under their  franchise  agreements  with Pretzel  Time.  Franchisee acknowledges  and agrees that Pretzel Time is under no  obligation  to approve a relocation of the Franchise.  However,  upon written approval from Pretzel Time, Franchisee may relocate the Franchise to another  location.  Such approval shall not be granted unless  Franchisee is in compliance with all terms and conditions of this  Agreement  and  Franchisee  has the  financial  resources  available to relocate the Unit and construct a new and  comparable  Unit according to Pretzel Time's then current design  standards.  Any such  relocation of the Franchise is subject to Pretzel Time's prior  approval of the new Unit  location.  Relocation shall be at  Franchisee's  sole expense and Pretzel Time shall have the right to charge  Franchisee  for  any and all  costs  incurred  by  Pretzel  Time,  and a reasonable  fee  for  its  services,  in  connection  with  any  such  approval, evaluation  and  relocation  of the  Franchise.  The Unit  shall  re-open at the replacement  Site as soon as  reasonably  practicable  but in no event more than ninety (90) days after the closing of the original location.

8.       DEVELOPMENT OF UNIT.

         8.A.     UNIT DESIGN SPECIFICATIONS AND CONSTRUCTION PLANS.

         Franchisee  shall be responsible  for  constructing  and developing the Unit,  including payment of all costs.  Pretzel Time shall furnish to Franchisee prototypical plans and  specifications  for the Unit,  reflecting Pretzel Time's requirements for dimensions,  interior design and decor, layout, image, building materials,  color scheme, exterior and interior finishes,  fixtures,  equipment, furnishings, and signs.

         Franchisee shall promptly after obtaining  approval of the Site for the Franchise:

         (1).  cause to be prepared by a Pretzel  Time  approved  architect  and





         submit for approval by Pretzel Time a site survey and any modifications          to Pretzel Time's basic  architectural plans and specifications for the          Pretzel Time Unit  (including  requirements  for  dimensions,  exterior          design,  materials,  interior design and layout,  equipment,  fixtures,          furniture,  signs and decorating)  required for the construction of the          Franchise at the Site leased  therefor.  Franchisee shall have all such          modifications   approved  by  Pretzel   Time  and  prior  to  obtaining          permitting;

         (2). insure that such plans and  specifications  comply with applicable          ordinances,  building  codes,  and permit  requirements  and with lease          requirements  and  restrictions  and all modification to Pretzel Time's          basic plans and  specifications are modified to the extent necessary to          comply with local  ordinances and state laws,  building  codes,  permit          requirements, lease restrictions and federal law; and

         (3).  Franchisee  shall also submit all revised or as built plans and          specifications  during the course of such  construction upon request of          Pretzel Time.  Franchisee  agrees to pay for any and all architect fees          and pay the architectural fees for the architect to review, approve and          modify the plans.

         8.B.     DEVELOPMENT OF THE UNIT.

         Pretzel  Time shall have the right to approve any  contractor  hired by Franchisee  to develop the Unit.  Within  one-hundred  twenty  (120) days of the execution of the Franchise Agreement, Franchisee agrees, at his sole expense, to do or cause to be done the following with respect to developing the Unit:

          (1). Familiarizing   himself  with  the  physical   condition  of  the                property, local laws, ordinances and          other requirements in connection with the construction of the Unit;

          (2). Secure all financing required to develop and operate the Unit;

          (3). Obtain all required building,  utility, sign, health, sanitation,                business,  environmental  and other permits and licenses required                for construction and operation of the Unit;

          (4). Extending all utilities to the Site and constructing all required                improvements to the Unit and decorate the Unit in compliance with                plans and specifications Pretzel Time approves within four to six                weeks  of  possession  of the  Site  and two  days  prior  to the                commencement date set forth in the lease for the Unit;

          (5). Purchase   and  install  all  required   fixtures,   furnishings,                equipment  and signs  required for the Unit  (provided,  however,                that Pretzel Time shall have the right,  in its sole  discretion,                to install all required  signs at the Unit at  Franchisee's  sole                expense);

          (6). Purchase  an  opening  inventory  of  Products,   materials,  and                supplies;

          (7). In  accordance  with  Pretzel  Time's  standard   specifications,                Franchisee  shall totally equip,  ready and inventory the Site at                its sole cost for opening to the public two (2) days prior to the                opening date specified in the lease; and

          (8). Franchisee  agrees  that it will not  open the Unit for  business                without Pretzel Time's prior approval and training.

         8.C.     EQUIPMENT, FIXTURES, FURNISHINGS, AND SIGNS.

         Franchisee agrees to use in developing and operating the Unit only such fixtures,  furnishings,  equipment, and signs that Pretzel Time requires and has approved for Pretzel Time Units as meeting its  specifications and standards for quality, design, appearance, function and performance. Franchisee further agrees to place or display at the Unit only such signs, emblems,  lettering,  logos and display  materials  that  Pretzel  Time  approves in writing  from time to time; provided,  however,  that  Pretzel  Time  shall  have  the  right,  in its  sole discretion,  to install  all  required  signs at the Unit at  Franchisee's  sole expense.  Franchisee shall purchase or lease approved brands, types or models of fixtures,  furnishings,  equipment and signs only from  suppliers  designated or approved by Pretzel Time (which may include Pretzel Time and/or its Affiliates). Franchisee  further agrees that all fixtures,  furnishings and equipment used in connection  with the operation of the Unit shall be free and clear of all liens, claims and  encumbrances  whatsoever,  except  with  respect to any such  liens, claims or  encumbrances  asserted by Pretzel Time or third party  purchase money security interests.

         8.D.     EXCEPTIONS TO EQUIPMENT OR FURNISHINGS.

         If Franchisee proposes to purchase any brand or type of construction or decorating material, fixture, equipment,  furniture or sign not then approved by Pretzel  Time,  or any such item from a supplier  which is not then  approved by Pretzel Time,  Franchisee shall first notify Pretzel Time, in writing, and shall submit  to  Pretzel   Time,   upon  its  request,   sufficient   specifications, photographs,  drawings and other  information or samples for a determination  by Pretzel  Time of  whether  such  brand  or type of  construction  or  decorating material, fixture, equipment, furniture or sign complies with its specifications and standards or such supplier meets Pretzel Time's approved supplier  criteria, which  determination  shall be made and  communicated  in writing to  Franchisee within a reasonable time.  Additionally,  Franchisee shall pay all fees for said





testing and be responsible for acquiring and submitting  equipment necessary for such testing.

         8.E.     CONSTRUCTION ASSISTANCE.

         Upon request by Franchisee and without  liability,  Pretzel Time agrees to provide construction assistance to Franchisee in one or more of the following areas:

          (1). Assist  Franchisee in finding an architect  for the  construction                and development of the Unit;

          (2). Assist  Franchisee  in  finding  a  general  contractor  for  the                construction and development of the Unit; and

          (3). Respond to a  reasonable  amount of questions  from  Franchisee's                contractor  relating to construction  and development of the Unit                in accordance with the requirements of Pretzel Time.

         8.F.     LIMITATION ON LIABILITY.

         Pretzel Time shall not be liable to Franchisee,  the contractor, or any other person,  and Franchisee  waives all claims for liability or damages of any type  whatsoever  (whether  direct,  indirect,  incidental,   consequential,  or exemplary),  on account of the  rendition  of any  services  by Pretzel  Time in accordance  with  this  Section,  except  to the  extent  caused  by  the  gross negligence  or  intentional  misconduct  of  Pretzel  Time,  and  then  any such liability  or damages  shall be limited to five  thousand  dollars  ($5,000.00). Without  limiting the generality of the  foregoing,  Pretzel Time shall not have liability  with  respect  to any of the  following,  all of  which  are the sole responsibility of Franchisee:

          (1). if   construction   of  the  Unit  does  not  fully  satisfy  the                requirements  (if  any)  of  the  landlord,  the  architect,  the                contractor,  and any governmental  agency having  jurisdiction or                does not fully satisfy the criteria  established  by Pretzel Time                for construction and development of Pretzel Time Units;

          (2). if the Unit improvements are not structurally  sound or free from                defects or deficiencies;

          (3). if there are any construction delays or cost overruns; or

          (4). if  there  are  any  disputes  with  any  landlord,   contractor,                subcontractor,  architect,  supplier or governmental  agency with                respect to any aspect of the design, construction,  provision, or                equipping of the Unit.

9.       UNIT OPENING.

         9.A.     COMMENCEMENT OF OPERATIONS.

         Franchisee shall commence operation of the Franchise the earlier of: 1) one  hundred  fifty (150) days after the  execution  of this  Agreement;  (2) as specified in the lease for the Site; or (3) as otherwise required or approved in writing by Pretzel Time. Failure to open the Unit within the aforementioned time period shall  result in the  termination  of this  Franchise  Agreement  and all franchise fees paid by Franchisee shall be nonrefundable.  Franchisee agrees not to open the Unit for business until the following has occurred:

          (1). Pretzel  Time  approves  the  Unit  pursuant  to its  Pre-Opening                Checklist;

          (2). Pre-opening  training of Franchisee  and Unit  personnel has been                completed to Pretzel Time's satisfaction;

          (3). The  initial  franchise  fee and all  other  amounts  then due to                Pretzel Time have been paid in full;

         (4).  Pretzel  Time has been  furnished  with  copies of all  insurance          policies  required  by  this  Agreement,  or  such  other  evidence  of          insurance  coverage and payment of premiums as Pretzel  Time  requests;          and

     (5) Franchisee has executed Pretzel Time's wire transfer agreement.

         Franchisee  agrees  to open the  Unit for  business  on or  before  the opening date specified in the lease if it has the  Landlord's  approval and only after Pretzel Time notifies Franchisee that the conditions set forth in Sections 8 and 9 have been satisfied.

10.      FRANCHISEE TRAINING.

         10.A.    INITIAL TRAINING.

         Franchisee  acknowledges and agrees that, while Pretzel Time's training program will provide  Franchisee  with the  fundamental  knowledge  necessary to operate a unit,  Franchisee  cannot  expect  success  unless he devotes his best personal efforts to the business and exercises good business judgment in dealing with customers,  suppliers, and employees.  Prior to the Unit's opening, Pretzel Time shall  furnish an initial  training  program on the  operation of a Pretzel Time Unit which shall take place at Pretzel Time's  headquarters  in Harrisburg, Pennsylvania,  or at a location  which will  provide the best  training  for the





Franchisee,  which may or may not be close to Pretzel Time's  headquarters.  The Franchisee agrees that he and his Unit Manager shall attend the initial training session held four (4) to eight (8) weeks prior to the Unit's  projected  opening date. Pretzel Time will not charge for the initial training of the Franchisee or if a corporation or partnership,  the Principal Owners of the Franchisee and the Unit  Manager.  All  incidental  expenses  relative  to the  required  training, including  travel  expenses,  hotel/motel  expenses,  and  meals  shall  be  the responsibility  of  the  Franchisee  while  attending  training.  Prior  to  the commencement  of the  operation  of the Unit,  the  manager  of the Unit  (Unit Manager) and the  Franchisee or if a corporation or  partnership,  one Owner of the Franchisee as identified in Exhibit B, who will be personally overseeing the Unit shall attend and  successfully  complete the Pretzel Time initial  training program to the satisfaction of Pretzel Time.

         The  Franchisee  and his  Unit  Manager  must  satisfactorily  complete Pretzel  Time's  training as  determined  by Pretzel  Time, in its sole opinion, before  Franchisee is allowed to operate the Franchise.  If Pretzel Time, in its sole discretion, determines that Franchisee is unable to satisfactorily complete the  training  program,  Pretzel  Time  shall have the right to  terminate  this Agreement and no franchise fees shall be refunded.  The initial training program shall cover material aspects of the operation of a Pretzel Time Unit,  including financial   controls,   employee  relations,   food  preparation,   service  and operational techniques,  sampling, recipes and cooking procedures, marketing and public  relations,  cleanliness and maintenance  procedures,  and maintenance of Pretzel  Time  System  standards.  Franchisee  shall  receive  one  copy  of the Operations Manual, which cannot be reproduced, in whole or in part. In the event that  the  Franchisee's  copy  is  lost  destroyed  or  significantly   damaged, Franchisee  shall be  obligated  to obtain from Pretzel  Time,  at  Franchisee's expense a replacement copy of the Operations Manual.

         10.B.    EMPLOYEE TRAINING.

         Pretzel  Time may  provide  to  Franchisee,  at  Franchisee's  request, guidance in the selection of a Unit Manager and may provide periodic evaluations of  Franchisee's  Unit,  Managers  and  employees,  but  without  any  liability therefore to Pretzel Time. Franchisee shall hire all employees of the franchise, be exclusively  responsible for the terms of their employment and  compensation, and  implement a training  program for  employees of the  franchise.  Franchisee agrees  to  maintain  a staff  of  trained  employees  to  operate  the  Unit in compliance with Pretzel Time's standards.

         In the event the Unit Manager ceases to hold such full-time position at the  Unit,  Franchisee  shall  have  thirty  (30)  days in  which to  appoint  a substitute  or  replacement  Unit  Manager,  who must  attend  and  successfully complete,  to  Pretzel  Time's  satisfaction  the  initial  training  program as specified  above within sixty (60) days after  employment  as Unit  Manager.  If Pretzel  Time in its sole  discretion  determines  that the Unit  Manager or any subsequently  appointed Unit Manager has failed to  satisfactorily  complete the initial  training  program or any  additional  or  refresher  training  program, Franchisee  agrees to  immediately  hire a substitute  Unit Manager and promptly arrange  for such  person  to  complete  the  initial  training  program  to the satisfaction  of Pretzel Time.  Franchisee  agrees to notify Pretzel Time of any new  Unit  Managers  for the  Unit  within  seven  (7)  business  days of  their employment.  In the event  Franchisee  operates more than one (1) Unit, at least one (1)  trained and  competent  Unit  Manager  referred to above shall act as a full-time manager in each Territory. Franchisee shall keep Pretzel Time informed at all times of the identity of any Unit Manager(s) of the Unit.

         All Unit  Managers  of the Unit must  have  successfully  completed  an initial training program as specified by Pretzel Time at the sole expense of the Franchisee, including, but not limited to, salary and incidental travel expenses attendant to any training provided by Pretzel Time. Franchisee and Unit Managers who  successfully  complete  training will receive a Training  Certificate  from Pretzel Time.  Pretzel Time shall make training  available to Franchisee's  Unit Manager during Pretzel Time's regularly  scheduled training course. In no event, will  Pretzel Time be under any  obligation  to provide  individual  training to Franchisee's  Unit  Managers.  Franchisee  agrees that each Unit  Manager  shall participate at Franchisee's  expense in Pretzel Time's initial  training program and all other mandatory  training  programs which may subsequently be offered by Pretzel Time.

         10.C.  ON-SITE TRAINING.

         Additionally,   Pretzel   Time  will   provide   on-site   training  at Franchisee's  business  location for a period of five (5) days,  generally to be commenced  immediately  prior to  Franchisee's  day of opening and continued the first three (3) days of operation.  Franchisee  herein agrees to notify  Pretzel Time,  in writing,  of his opening  date  twenty (20) days prior  thereto.  This training  will include all  functions  required for the proper  operation of the franchise.

         Should Franchisee  request  additional  assistance from Pretzel Time in order to facilitate  the opening of the  Franchise,  and should Pretzel Time, in its discretion,  deem it necessary,  feasible and appropriate to comply with the request or should Pretzel Time determine that  additional  training is required, Franchisee  shall  reimburse  Pretzel Time at Pretzel  Time's then current daily training  service fee, for the expense of Pretzel Time providing such additional assistance and for its training  related  expenses,  which may include,  travel, room and board.

         10.D.    COMPANY GROWTH.

         Throughout  the  term of  this  Agreement,  Pretzel  Time  may  provide Franchisee  with  information  on company  growth and  operations as well as new





techniques developed to reduce costs and/or enhance sales or profits.

         10.E.    RETRAINING PROGRAMS.

         Pretzel  Time shall  provide  re-training  programs  at a  location  of Pretzel Time's choice from time to time for  experienced  franchisees  and their managers and/or employees.  Pretzel Time may charge fees for refresher  training courses  for  previously  trained  and  experienced  managers.  Fees for special programs will be based upon Pretzel Time's actual costs and attendance  shall be required. Attendance at retraining programs or seminars shall be at Franchisee's sole expense,  provided,  however,  that attendance will not be required at more than two (2) such  programs  in any  calendar  year and shall  not  collectively exceed ten (10) business days in duration during any calendar year.

         10.F.    OTHER GUIDANCE.

         Pretzel  Time may  advise  Franchisee  from  time to time of  operating problems of the Unit which come to Pretzel Time's attention and, at Franchisee's request but without any liability  therefore to Pretzel Time, Pretzel Time shall furnish to Franchisee guidance in connection with:                             (i)  Methods,  standards,   specifications  and  operating  procedures                utilized by Pretzel Time Units;

          (ii) Purchasing  required  fixtures,  furnishings,  equipment,  signs,                Products, materials and supplies;

          (iii) Advertising and Promotional programs;

          (iv) Employee training; and

          (v)  Administrative, bookkeeping, accounting and general operating and                management procedures.

Such guidance shall, in Pretzel Time's  discretion,  be furnished in the form of Pretzel  Time's  Operations  Manual,  bulletins  and  other  written  materials, electronic computer messages,  telephone  conversations  and/or consultations at Pretzel Time's offices or at the Unit. Pretzel Time will make no separate charge to  Franchisee  for  such  operating  assistance  as  Pretzel  Time  customarily provides.  From time to time, Pretzel Time may make special assistance  programs available to  Franchisee,  however,  Franchisee  will be required to pay the per diem fees and charges that Pretzel Time  establishes  from time to time for such special assistance programs.

11.      ADVERTISING AND OTHER PROMOTIONS.

         11.A.    PROVIDING OF ADVERTISING MATERIALS.

         Franchisee  and Pretzel Time agree and  recognize  the value of uniform advertising to the goodwill and public image of Pretzel Time Units. Pretzel Time has  instituted  and  maintains and  administers  an  advertising  fund for such advertising  or  public  relations   programs  as  Pretzel  Time,  in  its  sole discretion,  may deem  necessary  or  appropriate  to  advertise  or promote the Pretzel Time System,  nationally or regionally.  Pretzel Time will  periodically provide Franchisee with programs,  promotional  concepts,  and other information designed to enhance the operation of the  Franchise.  In addition,  Pretzel Time may  provide  optional  special  promotions  from time to time  which will be at Franchisee's cost, which may be mandatory. At its initial opening, Pretzel Time, at  Franchisee's  expense,  shall  designate  and supply an initial  quantity of forms,  literature,   display,  and  promotional  materials.  Pretzel  Time,  in consideration of the Advertising Fund Fee, shall periodically provide Franchisee with  camera  ready  advertising  materials.   Multiple  copies  of  advertising materials will be furnished to Franchisee for an additional  fee,  including any related shipping, handling and storage charges.

         11.B.    CONTROL OF ADVERTISING PROGRAMS AND CONCEPTS.

         Pretzel Time shall direct all such programs,  with sole discretion over the creative concepts, materials,  endorsements, and media used therein, and the placement  and  allocation  thereof.   The  manner,   media  and  cost  of  such advertising,  public  relations  and  promotional  mailings  shall be solely and completely  within the  discretion of Pretzel Time.  Pretzel Time shall have the right to determine, in its sole discretion,  the target and market areas for the development  and  implementation  of such  programs.  Pretzel  Time may  expend, disburse and use funds from the Advertising  Fund, in its sole  discretion,  for the following purposes:

                  (1) The  creation  and  development  of nonlocal  advertising,          promotional campaigns,  and public relations to promote and enhance the          value of the Service  Marks and the  business  of all the Pretzel  Time          retail establishments;

                  (2) Payments to Pretzel Time of such reasonable sums as may be          necessary  for actual  costs of  advertising  production,  direct  mail          purchases, and other media marketing tools;

                  (3) Payment of salaries and  benefits  for staff  personnel in          the  marketing  and  public  relations  department  as  well  as  other          administrative  costs and overhead expenses of the department  incurred          by Pretzel Time;

                  (4) The  costs of  employing  advertising,  marketing,  public          relations and promotion  agencies to assist in preparing and conducting          media programs and activities and supporting public  relations,  market





         research and other advertising, promotion and marketing activities;

                  (5) Market  research  expenditures  related to the development          and evaluation of the effectiveness of advertising and sales promotion;          and

                  (6)  Costs  of  organizing   and  providing   facilities   for          international, national, or regional franchisee conferences.

         Franchisee  understands and  acknowledges  that the Advertising Fund is intended to maximize  recognition  of the Marks and  patronage  of Pretzel  Time Units.  Although  Pretzel Time will endeavor to utilize the Advertising  Fund to develop   advertising  and  marketing   materials  and  programs  and  to  place advertising that will benefit all Pretzel Time Units, Pretzel Time undertakes no obligation to ensure that  expenditures by the Advertising  Fund in or affecting any geographic area are  proportionate or equivalent to the contributions to the Advertising Fund by Pretzel Time Units operating in that geographic area or that any  Pretzel  Time  Units  will  benefit   directly  or  in  proportion  to  its contribution  to the  Advertising  Fund from the  development of advertising and marketing materials or the placement of Advertising.

         11.C.    SEGREGATION OF ADVERTISING FUND.

         Pretzel  Time  herein   agrees  to   administratively   segregate   the Advertising  Fund on its books and  records.  Fees paid by  Franchisee  into the advertising  fund  shall  not  under any  circumstance  be used for the  general operating  expenses of Pretzel Time but shall and will be used  exclusively  for advertising  as outlined  herein.  Pretzel  Time may spend in any fiscal year an amount greater or less than the aggregate  contributions  of the  franchisees to the fund in that  year and  Pretzel  Time  may  make  loans to the fund  bearing reasonable  interest  to cover  any  deficits  of the fund and cause the fund to invest any surplus for future use by the fund. It is anticipated,  and it is the intent of Pretzel Time that all  contributions to the Fund shall be expended for advertising  and  promotional  purposes during Pretzel Time's fiscal year within which  contributions  are made.  Any monies not  expended  in the fiscal year in which they were  contributed  shall be applied and used for Fund expenses in the following year.

                   11.D. SUSPENSION OF ADVERTISING FUND FEES.

         Pretzel  Time  reserves  the right to  suspend  contributions/fees  and operations of the  Advertising  Fund for one or more  periods,  and the right to terminate the  Advertising  Fund, upon thirty (30) days' prior written notice to Franchisee.  All unspent monies on the date of termination  shall be distributed to Pretzel Time's  franchisees and Pretzel Time, its Affiliates and designees in proportion to their  respective  contributions  to the Advertising Fund upon the same terms and  conditions set forth herein upon thirty (30) days' prior written notice Franchisee.

         11.E.    FRANCHISEE'S REQUIRED ADVERTISING EXPENDITURES.

         In addition to any contributions by Franchisee to the Advertising Fund, Franchisee is required to spend on marketing and related programs such amount as is  required  pursuant  to the terms and  conditions  of  Franchisee's  lease or sublease.  Franchisee  acknowledges  such amounts will vary from lease to lease, and therefore, all Pretzel Time Unit franchisees will not be obligated to expend the same amount on local advertising and marketing of the Unit.

         11.F.    USE OF TRADEMARK REFERENCES AND APPROVAL                   OF FRANCHISEE'S MARKETING.

         Franchisee further agrees that all advertising, promotion and marketing by Franchisee shall be completely clear and factual and not misleading and shall conform to the highest  standards of ethical  marketing and  promotion  policies which may be prescribed from time to time by Pretzel Time.  Franchisee agrees to use the  registration  symbol of R within a circle (7 ) in connection with its use of the Marks.  Franchisee  agrees to refrain  from any business or marketing practice  which may be  injurious  to the  business of Pretzel Time and the good will associated with the Marks and other Pretzel Time Units.  Prior to their use by  Franchisee,  all  press  releases,  literature,  and  samples  of all  local advertising, marketing, point-of-purchase, and related materials not prepared or previously  approved  by Pretzel  Time shall be  submitted  to Pretzel  Time for approval,  which shall not be unreasonably  withheld.  If written disapproval is not received within twenty (20) days from the date of receipt by Pretzel Time of such  materials,  Pretzel Time shall be deemed to have  approved the  materials. Franchisee  agrees not to use  promotional or advertising  materials  which have been  disapproved  by Pretzel Time or that have not been approved for use within the preceding twelve months.

         In  addition,  any  pamphlets,  brochures,  cards or other  promotional materials  offering  free Products may only be used if prepared by Pretzel Time, unless  otherwise  approved  in  advance by Pretzel  Time.  Notwithstanding  the foregoing, Pretzel Time will give favorable consideration to Franchisee's use of free product cards developed by Franchisee, if the cards clearly state that they may only be  redeemed  at Pretzel  Time Units  owned by  Franchisee.  Franchisee agrees to list and advertise the Franchise in the regular white pages  telephone directories distributed within Franchisee's metropolitan area.

         Franchisee  agrees to distribute and display at Franchisee's  location, literature,  display and promotional  materials  including  special  promotional materials  as  Pretzel  Time may from  time to time make  available.  Franchisee agrees that only those advertising,  promotional  materials,  or items which are authorized  by  Pretzel  Time in  writing  prior to use  shall be used,  sold or





distributed,  and no  alternate  display or use of the Pretzel Time Service Mark shall be made without the prior written permission of Pretzel Time.  Replacement or updated literature, display,  point-of-purchase and promotional materials may be obtained from Pretzel Time for a fee including shipping.

12.      ADHERENCE TO UNIFORM STANDARDS.

         12.A.    STANDARDS AND OPERATIONS MANUAL.

         Franchisee  acknowledges  and agrees that the  operation of the Pretzel Time Unit in accordance with the specifications, standards, operating procedures and rules Pretzel Time prescribes for the operation of Pretzel Time Units is the essence of this Agreement and is essential to preserve the goodwill of the Marks and all  Pretzel  Time  Units.  Franchisee  agrees to operate his Unit in strict compliance and adhere to Pretzel Time's Unit design,  signage,  interior  decor, equipment and  inventory  requirements  and rules and  standards and  procedures (hereinafter  referred to as Standards) set forth in any Operations  Manual or Training  Manual,  as periodically  modified and supplemented by Pretzel Time in its  discretion  during the term of this  Agreement  (Operations  Manual)  and acknowledges that the same are reasonable,  necessary and essential to the image and success of each Unit and the  Pretzel  Time System and agrees to comply with all such  requirements  and  procedures.  The  Operations  Manual shall  contain mandatory and suggested specifications,  standards and operating procedures that Pretzel Time prescribes from time to time for Pretzel Time Units and information relating to Franchisee's other obligations under this Agreement.  The Operations Manual  sets forth  Standards  regulating  and  relating  to  certain  important obligations  on  the  part  of  franchisees   and  sanctions  in  the  event  of noncompliance  with such  obligations.  Pretzel Time may regulate,  designate or approve any one or more of the following with respect to the Pretzel Time Unit:

         (1) Design, layout, decor, appearance and lighting;  periodic and daily          maintenance,  cleaning  and  sanitation;  replacement  of  obsolete  or          worn-out  fixtures,  furnishings,  equipment and signs; use of interior          and exterior signs,  emblems,  lettering and logos and the illumination          thereof;

         (2) Types,  models,  brands,  maintenance  and  replacement of required          equipment, fixtures, furnishings and signs;

         (3) Approved,  disapproved and required  Products and other items to be offered for sale;

         (4) Designated and approved  suppliers  (including  Pretzel Time and/or          its Affiliates) of equipment, fixtures,  furnishings,  signs, Products,          materials and supplies;

         (5)      Use and operation of an approved point of sale register;

         (6) Payment of vendors;  terms and  conditions  of sale and delivery of          and payment for  Products,  materials,  supplies and  services  sold by          Pretzel Time, its Affiliates or unaffiliated suppliers;

         (7) Marketing,  advertising  and  promotional  activities and materials required or authorized for use;

          (8)  Use of the Marks;

          (9)  Qualifications,  training,  dress,  appearance  and  staffing  of                employees;

          (10) Minimum hours of operation;

          (11) Participation  in market  research  and  testing  and Product and                service development programs prescribed by Pretzel Time;

          (12) Management  by Unit  Managers  who  have  successfully  completed                Pretzel Time's initial training program; communication to Pretzel                Time of the  identities  of such Unit  Managers;  replacement  of                managers whom Pretzel Time determines to be unqualified to manage                the  Pretzel  Time  Unit;  and  other  matters  relating  to  the                management of the Pretzel Time Unit and its management personnel;

          (13) Use of a designated  computer  hardware  and software  system and                equipment  with  telecommunications  capability,   including  the                procedures for providing sales information of the Unit to Pretzel                Time;

          (14) Bookkeeping,  accounting,  data  processing  and  record  keeping                systems and forms,  methods,  formats,  content and  frequency of                reports to Pretzel Time of sales, revenues, financial performance                and  condition;  operational  information;  tax returns and other                operating   and   financial   information,    including   without                limitation, audited yearly financial statements;

          (15) Types,  amounts,  terms and conditions and approved  underwriters                and          brokers of public, product, business interruption, crime loss, fire and          other  required  insurance  coverage;  Pretzel Time's rights under such          policies as an  additional  named  insured;  required or  impermissible          insurance contract  provisions;  assignment of policy rights to Pretzel          Time; Pretzel Time's right to obtain insurance coverage for the Unit at          Franchisee's  expense if Franchisee fails to obtain required  coverage;          Pretzel Time's right to defend claims;  and similar matters relating to





         insured and uninsured claims;

          (16) Compliance with applicable laws;  obtaining required licenses and                permits;  adherence to good business  practices;  observing  high                standards  of  honesty,   integrity,  fair  dealing  and  ethical                business  conduct in all dealings with  customers,  suppliers and                Pretzel   Time  and  its   Affiliates   and/or   designees;   and                notification  of Pretzel  Time in the event any  action,  suit or                proceeding  is commenced  against  Franchisee  or relating to the                Unit; and

          (17) Regulation of such other elements and aspects of the  appearance,                operation  of and conduct of business  by,  Pretzel Time Units as                Pretzel  Time   determines   from  time  to  time,  in  its  sole                discretion,  to be required to preserve or enhance the  efficient                operation, image or goodwill of Pretzel Time Units and the Marks.

         12.B.    CONFIDENTIALITY OF OPERATIONS MANUAL.

         Pretzel Time will make  available to Franchisee  during the term of the Franchise (1) copy of the Operations  Manual by loaning a copy of the Operations Manual to Franchisee. Franchisee acknowledges and agrees that all manuals loaned to Franchisee contain  confidential and proprietary  material and information of Pretzel  Time  provided  to  Franchisee  is to be  used  by  Franchisee  only in connection  with the  operation of the  franchised  Unit and other  Pretzel Time Units. The Operations Manual contains trade secrets and confidential information and will  remain the  property  of Pretzel  Time and shall be  returned to it on termination of this Agreement.  Franchisee  covenants not to reveal the contents of the Operations  Manual to  unauthorized  persons.  Franchisee may not, at any time,  copy the Operations  Manual,  in whole or in part,  either  physically or electronically. In the event Franchisee's copy of the Operations Manual is lost, destroyed or significantly damaged, Franchisee shall be obligated to obtain from Pretzel Time, at Pretzel Time's then applicable  charge,  a replacement  copy of the Operations Manual.

         12.C.    INCORPORATION OF OPERATIONS MANUAL INTO AGREEMENT.

         The  Operations  Manual's  specifications,   standards,  and  operating procedures  communicated to Franchisee in writing shall be deemed a part of this Agreement and are  incorporated  herein by  reference.  Such  Operations  Manual provisions and all reasonable  modifications shall be binding upon Franchisee to the same extent as if set forth verbatim in this Franchise  Agreement,  and such provisions  may be  changed  from  time to time by  Pretzel  Time,  in its  sole discretion,  provided that changes are  reasonably  designed to enhance  Pretzel Time's  Products,  the Pretzel  Time  System,  or  franchise  operation  and are uniformly  applied  with  respect  to all  franchisees.  Any  administrative  or financial  Section set forth in the  Operations  Manual shall be in addition to, and not in derogation or limitation  of, any right or remedy  granted to Pretzel Time  under  the  Franchise  Agreement,  the  Operations  Manual,  or any  other document,  or  otherwise  available  to  Pretzel  Time,  at  law  or in  equity, including,  without limitation,  the right to terminate a franchise in the event of certain defaults or delinquencies.

         12.D.    MODIFICATIONS/UPDATES OF OPERATIONS MANUAL.

          Franchisee  understands  and agrees  that the  Pretzel  Time System is constantly  being  modified  and  improved,  and  that  such  modifications  and improvements  require  changes  from time to time in the  system of  operations. Franchisee  further  agrees  to  accept  and  comply  with  such  modifications, revisions,  and additions to the Pretzel Time System and Operations Manual which Pretzel Time in the good faith exercise of its judgment believes to be desirable and reasonably necessary in the time period indicated by Pretzel Time.

         Franchisee  agrees  that  Standards  may be  periodically  modified  by Pretzel  Time and that such  modifications  may  obligate  Franchisee  to invest additional capital in the Unit and/or incur higher operating costs. Pretzel Time will not obligate  Franchisee to invest  additional  capital at a time when such investment cannot in Pretzel Time's reasonable  judgment be amortized during the remaining term of this  Agreement.  Franchisee  hereby agrees that standards and specifications  prescribed  from  time  to  time in the  Operations  Manual,  or otherwise  communicated  to  Franchisee  in  writing  or  electronically,  shall constitute provisions of this Agreement as if fully set forth herein.

13.      UNIT IMAGE AND OPERATION.

         13.A.    CONDITION AND APPEARANCE OF UNIT.

         Franchisee agrees that:

                  (1) neither the Unit nor the Site will be used for any purpose          other than the operation of a Pretzel Time Unit in full compliance with          this Agreement or other agreements with Pretzel Time; and

                  (2)  Franchisee  will maintain the condition and appearance of          the Unit, its equipment, furnishings, fixtures, and signs in accordance          with the  specifications  and standards of Pretzel Time and  consistent          with  the  image  of a  Pretzel  Time  Unit  as a  first-class,  clean,          sanitary,  attractive and efficiently  operated food service  business;          and

                  (3)  Franchisee  will  perform  such  maintenance  (including,          without limitation,  maintenance  procedures and routines which Pretzel          Time  prescribes  from  time  to  time)  with  respect  to  the  decor,





         equipment, fixtures,  furnishings,  vehicles, and signs of the Unit and          the Site,  as may be required or directed by Pretzel  Time from time to          time to maintain such condition,  appearance,  and efficient operation,          including, without limitation:

          (a)  continuous  and thorough  cleaning and sanitation of the interior                and exterior of the Unit;

          (b)  thorough repainting and redecorating of the interior and exterior                of the Unit and/or the Site at reasonable intervals;

          (c)  interior and exterior repair of the Unit and/or Site; and

          (d)  repair or replacement of damaged, worn out or obsolete                   furnishings,  equipment,  fixtures  and signs,  provided  that                   Pretzel  Time  will not  require  Franchisee  to  replace  any                   obsolete equipment unless Pretzel Time has initiated a program                   to  replace  such  equipment  as it becomes  necessary  in its                   company-owned Pretzel Time Units; and

                  (4) Franchisee  will not make any material  alterations to the          Site or to the appearance of the Unit as originally developed,  without          prior approval in writing by Pretzel Time; and

                  (5) Upon notice from Pretzel  Time,  Franchisee  shall remodel          and conform  Franchisee's  building design, Trade Dress, color schemes,          and  presentation  of Marks to Pretzel Time's then current public image          within a  reasonable  amount of time,  which  shall not  exceed six (6)          months.  Such a remodeling may include extensive  structural changes to          the Unit  fixtures and  improvements  as well as such other  changes as          Pretzel Time may direct and Franchisee  shall  undertake such a program          promptly upon notice from Pretzel Time;  provided the remodeling  shall          not be  required  until  such time as  Pretzel  Time has  commenced  or          completed a similar  program in at least fifty  percent  (50%) of those          Pretzel Time Units owned and operated by Pretzel Time. This requirement          shall not apply in the  event  notice  from  Pretzel  Time is  received          during the last year of the term hereof or the term of any agreement by          virtue of which Franchisee occupies the Unit.

         In addition to Pretzel Time's rights to terminate this Agreement as set forth herein,  if Franchisee  does not maintain the condition and  appearance of the Unit as herein  required,  Pretzel  Time,  may,  upon not less than ten (10) days'  written  notice  (or, in cases of health or  sanitation  hazards or other public endangerment, immediately on oral or written notice) to Franchisee:

          (i)  arrange  for  the  necessary  cleaning  or  sanitation,   repair,                remodeling, upgrading, painting or decorating; or

          (ii) replace the necessary fixtures, furnishings, equipment, signs.

         If Franchisee  fails or refuses to initiate  within ten (10) days after receipt  of  a  notice  that  the  general  state  of  repair,  appearance,  and cleanliness of your store does not meet Pretzel Time's standards, and thereafter continue in good faith and with due  diligence a bona fide  program to undertake and complete required  maintenance or refurbishing,  Pretzel Time has the right, but is not  obligated,  to enter upon the  premises  of the Unit and effect such maintenance and  refurbishing on Franchisee's  behalf,  and Franchisee shall pay the entire cost thereof to Pretzel Time on demand.

         13.B.  UNIT MENU.

         Franchisee  agrees that the Unit shall offer for sale all  Products and no other  products,  which Pretzel Time, in its sole  discretion,  may authorize and/or require from time to time for the Unit.  Franchisee  agrees that the Unit shall not offer for sale or sell any  Products  or  services at or from the Unit which have not been  approved in writing by Pretzel Time or use the Site or Unit for any purpose  other than the  operation  of a Pretzel  Time Unit.  Franchisee agrees that the Unit shall not sell any  Products at, from or away from the Site until Pretzel Time, in its sole discretion,  has approved the same, provided the foregoing  shall not limit  Franchisee  to sample in front of the lease  line as limited in  Franchisee's  lease.  Pretzel Time  reserves the right to change the types of  authorized  Products and require  Franchisee to offer to sell and sell the  new,  modified  or  substituted  Products.  Pretzel  Time may  develop  new Products,  methods  of  operations,  and  standards  and may  provide  you  with information about developments.  Franchisee also acknowledges and agrees that if Pretzel Time requires the Unit to use new or  substitute  products not currently offered at Pretzel  Time  Units,  Franchisee  agrees to offer such  Products  in compliance  with  Pretzel  Time's   specifications,   standards  and  procedures prescribed in the  Operations  Manuals or otherwise in writing and to diligently pursue  obtaining  any  permits  and  take  such  actions  (including,   without limitation,  constructing  improvements  and  acquiring  fixtures,  furnishings, equipment,  supplies, and materials) required to offer such Products. Franchisee acknowledges  and  understands  that such  modifications  to the  Products to be offered  by the Unit  may  require  Franchisee  to incur  additional  costs  and expenses to operate the Unit, including, without limitation, the purchase and/or lease of additional or substitute furnishings,  furniture, fixtures or equipment and Franchisee agrees to incur such expenses in connection therewith.

         13.C.    ADHERENCE TO APPROVED ITEMS.





         The  reputation  and goodwill of all Pretzel Time Units are based upon, and can only be maintained by, the sale of  distinctive,  high-quality  Products and the  presentation,  packaging  and service of Products in an  efficient  and appealing  manner.  Pretzel  Time has  developed  and shall  continue to develop certain  proprietary food products which will be prepared by or for Pretzel Time according to Pretzel Time's recipes and formulas. Pretzel Time has developed and shall continue to develop  standards and  specifications  for fresh  hand-rolled pretzels, frozen pretzels,  pretzel toppings,  beverages and other healthy snack food  products,   materials  and  supplies   incorporated  in  or  used  in  the preparation, baking, or serving of Products authorized by Pretzel Time. The need for quality and quantity control in the Products offered for sale at the Unit is acknowledged  by  Franchisee.  All  Products  offered by  Franchisee  must be of uniform  quality and quantity  and offered for sale to the public in  accordance with Pretzel Time's  specifications  as set forth in Pretzel  Time's  Operations Manual and as may be amended from time to time.

         Pretzel  Time has  approved  and shall  review and  continue to approve suppliers and  distributors  of the  foregoing  Products,  supplies,  materials, equipment,  fixtures  and  machines  that  meet  Pretzel  Time's  standards  and requirements  including,  without  limitation,  quality,  quantity and portions, prices,  output requirements,  distribution methods and locations,  standards of service, financial capability,  customer service and other criteria.  Franchisee agrees that minimum standards for items of inventory,  Products,  machines,  and equipment  may  be  recognized  by  brand  name  rather  than  by  technical  or engineering description.

         Franchisee  agrees  that  it  will  use  all  equipment  and  Products, including, without limitation, food products,  smallwares,  equipment, and paper products as designated by Pretzel Time and shall purchase Pretzel Time's private label  food  products,   materials,  supplies  and  proprietary  food  products, ingredients,  spices, sauces, mixes,  beverages,  materials and supplies used in the  preparation of Products  developed by or for Pretzel Time or its Affiliates whether or not pursuant to a special recipe or formula or bearing the Marks only from Pretzel  Time,  its  Affiliates  or  non-affiliated  sources  designated by Pretzel Time.  Franchisee  further agrees to purchase only from distributors and suppliers  approved  or  required by Pretzel  Time.  Franchisee  agrees that the approved Products, equipment, smallwares, and inventory used on the premises may alter from time to time as Pretzel Time reasonably deems  necessary.  Franchisee agrees to offer for sale only those  Products  approved  by Pretzel  Time and no others without the prior written approval of Pretzel Time. Franchisee shall not, after receipt in writing of any modification of an approved or required supplier or distributor,  manufacturer  of equipment,  products,  materials,  supplies or other items  reorder any product  from any  supplier or  distributor  that is no longer  approved.  Pretzel Time may approve or require a single  distributor  or supplier  for any  Products,  materials or supplies and may approve or require a distributor or supplier only as to certain products, materials and supplies, and such approval may be temporary pending a further  evaluation of such distributor or supplier by Pretzel Time. Pretzel Time may concentrate  purchases with one or more distributors or suppliers to obtain lower prices and/or advertising support and/or  services for the benefit of Pretzel Time, the Pretzel Time System and/or Pretzel Time Units.

         Pretzel Time will loan to Franchisee a list of approved  brand Products for use during the term of this  Franchise  Agreement  at the  initial  training session.  Franchisee  agrees to not copy the list.  Franchisee will,  during the term of this Agreement and after its  termination  or  expiration,  maintain the list  and its  contents  in  strict  confidence,  and  upon  the  expiration  or termination of this Franchise Agreement,  whichever is earlier, will immediately return it to Pretzel Time.  Pretzel Time shall promptly provide  Franchisee with any  amendments to the  designated  list of inventory of available  Products and supplies to be carried and sold at Franchisee's  location.  Franchisee  shall at all times  maintain an adequate  inventory of approved  Products  sufficient  in quality and variety to realize the full potential of the Unit.

         13.D.    EXCEPTION PROCESS.

         If   Franchisee   proposes  to  purchase   materials  or  supplies  not theretofore  approved by Pretzel Time as meeting its  specifications,  or from a supplier or  distributor  not  previously  approved by Pretzel Time,  Franchisee shall first notify Pretzel Time and request  Pretzel  Time's  approval using the special exception form provided to Franchisee in its Operations  Manual, and pay any reasonable fees that Pretzel Time designates therefor.  Further,  Franchisee agrees to use all forms  specified and developed by Pretzel Time for  requesting any exceptions in products or suppliers.  Pretzel Time may require submission of sufficient information and samples to determine whether such materials, supplies or suppliers meet its specifications as well as financial  information regarding the  supplier.  Pretzel Time will advise  Franchisee  within a  reasonable  time whether such

materials or supplies meet its specifications.  Pretzel Time does not maintain a formal criteria for approving materials,  supplies or suppliers.  All approvals, disapprovals  and  revocations of approval of suppliers will be  communicated to Franchisee,  in writing,  and shall be in the sole  discretion  of Pretzel Time. Franchisee  must  comply  with  the  following  conditions  in  order  to seek a substitution for a Pretzel Time approved Product:

                  (1) Franchisee  shall submit a written request to Pretzel Time





                  for approval of a non-approved supplier or product;

                  (2)  Franchisee  and  supplier  shall  demonstrate  to Pretzel                   Time's  reasonable  satisfaction that it is able to supply the                   commodity  which  meets  Pretzel  Time's   specifications   to                   Franchisee; and

                  (3)  The  supplier   shall   demonstrate   to  Pretzel  Time's                   reasonable  satisfaction that the supplier is of good standing                   in the  business  community  with  respect  to  its  financial                   soundness and the  reliability  of its product and service and                   shall  request  in  writing  to  Pretzel  Time to be  named an                   approved supplier.

         13.E.  PROMOTIONAL ALLOWANCES.

         Franchisee  acknowledges  and agrees that Pretzel Time may, in its sole discretion,  collect  and  retain all  allowances,  benefits,  credits,  monies, payments  or  rebates   (collectively   Promotional   Rebates),   whether  for promotional,  advertising  or other  purposes,  offered to Franchisee or Pretzel Time or its Affiliates by manufacturers,  suppliers and distributors  based upon Franchisee's  purchases of Products or other products and materials.  Franchisee assigns to Pretzel  Time or its designee all of  Franchisee's  right,  title and interest  in and to any and  all  such  Promotional  Allowances  and  authorizes Pretzel  Time or its  designee to collect any such  Promotional  Allowances  for remission to the general operating funds of Pretzel Time.

14.      FRANCHISEE OPERATIONS.

         14.A.    MANAGEMENT.

         Franchisee agrees that he will at all times faithfully,  honestly,  and diligently  perform his obligations  hereunder,  that he will continuously exert his best efforts and shall  continually  train and  supervise  his  personnel to Pretzel Time's  reasonable  standards,  in  furtherance  of the mutual  business interests of both Pretzel Time and Franchisee and that he will not engage in any other business or activity that may conflict with his obligations  hereunder.  A Unit  shall be under  the  direct,  on-premises  supervision  of a  trained  and competent  Franchisee  or a  trained  and  competent  employee  acting as a Unit Manager  at  all  times.  Franchisee  shall  remain  active  in  overseeing  the operations of the Unit  conducted  under the  supervision  of such Unit Manager. Pretzel  Time shall have the right to deal with the Unit  Manager and  assistant managers on matters  pertaining to the  day-to-day  operations of, and reporting requirements  for the Unit.  Franchisee shall be required to notify Pretzel Time within seven (7) business days of changing Unit Managers.  Franchisee shall hire all employees of the Unit and shall be exclusively  responsible for the terms of their  employment and compensation and for the proper training of such employees in the operation of the Unit.

         If the Unit at any time is not being  managed by you or a Unit  Manager who shall have satisfactorily completed Pretzel Time's training program, Pretzel Time is  authorized,  but is not  required to  immediately  appoint a Manager to maintain  the  operations  of the Unit for you.  Pretzel  Time has the  right to change a reasonable fee for such management  services,  not to exceed our costs, and to cease to provide such  management  services at any time.  Pretzel  Time's right to manage a Unit and obtain  reimbursement  for costs also  applies in the event of your death or disability.

         14.B.  SUFFICIENT WORKING CAPITAL.

         Franchisee shall maintain an adequate sales force to serve properly all customers,  and shall  carry at all times a stock of  merchandise  of such size, character,  quality and price to produce the maximum return to Franchisee and so as to produce all of the gross  revenue  which may be produced by such manner of operation.

         14.C.  FILING OF OPERATIONS AND SALES REPORTS.

         Franchisee's  net revenues and operational  analysis are to be reported on or before Tuesday at 12:00 P.M.  Eastern  Standard Time (or Eastern  Daylight Savings  Time) or any other  time  reasonably  designated  by Pretzel  Time,  to Pretzel Time on forms  designated by Pretzel Time for the immediately  preceding week.  If the gross sales report is not submitted as herein  specified,  Pretzel Time may, at its option,  charge a late fee of $50.00 to Franchisee.  There will only be one late fee for each late report.

         14.D.    EMPLOYEE DRESS AND CUSTOMER SERVICE.

         The  presentation  of an uniform  image is  essential  to a  successful franchise  system.  Franchisee  shall cause all  employees of  Franchisee  while working  at the  franchise  location  to dress  appropriately  (in the  specific uniform  approved and  designated  by Pretzel  Time) in keeping with the Pretzel Time image,  as Pretzel Time may designate  from time to time, to present a neat and clean  appearance  and to render  confident  and  courteous  service  to the Franchise's customers.

         14.E.  COMPLIANCE WITH LAWS AND GOOD BUSINESS PRACTICES.

         Franchisee  shall secure and maintain in force in his name all required licenses,  permits,  and  certificates  relating to the conduct of his  business pursuant to this  Agreement.  Franchisee  will  conduct the  Franchise in strict compliance  with  all  applicable  laws,  ordinances,   regulations,  and  other requirements  of any federal,  state,  county,  municipal  or other  government, including,   without  limitation,  those  laws  and  regulations  pertaining  to preparation,  purchase  and  handling of food  products,  occupational  hazards,





health,  safety and sanitation,  worker's compensation  insurance,  unemployment insurance,  and  withholding  and payment of all taxes.  While  Pretzel Time may advise  Franchisee  as  a  courtesy  on  any  applicable  laws,  ordinances,  or regulations,  Pretzel Time  undertakes  no duty to do so and  Franchisee  hereby acknowledges  it is Franchisee's  sole duty to inquire  regarding and concerning all laws,  ordinances,  and  regulations  affecting  the Unit,  its  operations, employees and Franchisee.

         Franchisee shall in all dealings with its customers, suppliers, Pretzel Time, and public officials adhere to high standards of honesty,  integrity, fair dealing and ethical conduct.  Franchisee  agrees to refrain from any business or advertising  practice which may be injurious to the business of Pretzel Time and the goodwill associated with the Marks and other Pretzel Time Units.

         Franchisee  shall notify  Pretzel  Time within three (3) business  days after the commencement of any action, suit, proceeding or issuance of any order, writ, injunction, award or court decree which may adversely affect the operation or financial  condition of Franchisee or the unit or immediately  notify Pretzel Time of any notice of health or sanitation violation.

         14.F.    PAYMENT OF TAXES.

         Franchisee  shall be  solely  responsible  for  payment  of all  taxes, including, but not limited to, real estate, sales, payroll,  franchise,  income, personal  property,  and gross  receipts taxes which are assessed as a result of Franchisee's operation of the Franchise.

         14.G.    SALE OF PRODUCT.

         Franchisee agrees not to sell or offer to sell any materials, supplies, or  inventory  used in the  preparation  of any of the  Products  other  than to Pretzel  Time and that he shall  not  sell,  dispense,  give  away or  otherwise provide without Pretzel Time's prior written consent any product except by means of retail sales in the  franchise  location.  Franchisee  may only sell finished Products  and may not sell any Products to any person or entity  purchasing  the Products for resale.  Notwithstanding  the foregoing,  Franchisee may offer free samples of  Products  at or  directly  in front of the Unit to retail  customers only.

         14.H.    COOPERATION.

         Franchisee  agrees that he shall  cooperate with Pretzel Time in taking any action, or refraining from any action, which in the judgment of Pretzel Time is  necessary or desirable to promote and enhance the quality of the products of the Franchise location, the service provided by the Franchisee,  or the image of the Franchise in the community.

         14.I.    INSURANCE.

         Franchisee shall maintain at Franchisee's expense, in form, amounts and with insurers  satisfactory  to Pretzel Time,  which  insurers must have an A.M. Best  Company  rating of A- or better and naming  Pretzel  Time an  additional insured,  insurance  against all types of public  liability with personal injury coverage and property damage coverage. In addition to coverage as aforesaid such insurance  shall  include  coverages as set forth in the  Operations  Manual and shall contain a provision  obligating  all insurers to provide a written  notice Pretzel Time of any  cancellation  or  modification  of coverage at least thirty (30) days prior to the effective date of such modification or cancellation.

         The insurance afforded by the policy or policies  respecting  liability shall  not be  limited  in any  way by  reason  of any  insurance  which  may be maintained  by  Pretzel  Time.  Within  sixty  (60) days of the  signing of this Agreement,  but in no event later than the date on which Franchisee  acquires an interest in the real  property  (by lease or  purchase) on which it will develop and operate the Franchise,  a Certificate of Insurance  showing  compliance with the foregoing  requirements shall be furnished by Franchisee to Pretzel Time for approval.  Such certificate shall state that said policy or policies will not be canceled or altered  without at least thirty (30) days prior  written  notice to Pretzel Time and shall reflect proof of payment of premiums. Maintenance of such insurance  and the  performance  by  Franchisee  of the  obligations  under this Section shall not relieve Franchisee of liability under the indemnity  provision set forth in this  Agreement.  Minimum  limits as required above may be modified from time to time, as conditions require by written notice to Franchisee.

         Should  Franchisee not procure and maintain such insurance  coverage as required  by Pretzel  Time,  Pretzel  Time  shall have the right and  authority, without any obligation to do so, immediately procure such insurance coverage and to charge same to Franchisee,  which charges  together with a reasonable fee for expenses incurred by Pretzel Time in connection with such procurement,  shall be payable by Franchisee immediately upon notice.

         Franchisee  shall fully  cooperate  with Pretzel Time in its efforts to obtain  such  insurance  policies,  promptly  execute  all forms or  instruments required to obtain or maintain such insurance policies, allow inspections of the Unit or vehicles  which are  required to obtain and maintain  insurance  and pay Pretzel Time on demand for any costs or premiums.

         14.J.    SUGGESTED RETAIL PRICES.

         Pretzel  Time  may  from  time to time  advise  or  offer  guidance  to Franchisee  relative to prices for Products  offered for sale by Franchisee that in Pretzel Time's judgment  constitute good business practice.  Franchisee shall not be  obligated  to accept any such advice or guidance and shall have the sole right  to  determine  and to sell  products  at any  price  that it  determines.





Whenever Pretzel Time recommends a retail price, such  recommendations are based on Pretzel  Time's  experience  concerning  all factors that enter into a proper price, but such recommendation is in no manner binding on Franchisee and no such advice or guidance  shall be deemed or construed to impose upon  Franchisee  any obligation  to charge any  fixed,  minimum  or  maximum  prices for any  product offered for sale by the Franchise.  Pretzel Time reserves the right to advertise retail  prices of Pretzel Time  Products,  provided  that such retail prices are qualified as suggested. The parties understand and agree that such advertising shall not be  construed  as  requiring  Franchisee  to adhere to such prices but Franchisee shall have complete freedom to establish retail prices.

15.      ACCOUNTING, REPORTS AND FINANCIAL STATEMENTS.

         15.A.  ESTABLISHMENT OF ACCOUNTING SYSTEM.

         Franchisee  shall  establish at his own expense a complete and accurate bookkeeping,  accounting,  record keeping and data processing system prepared in accordance with generally accepted  accounting  principles and conforming to the requirements and formats that Pretzel Time prescribes from time to time. Pretzel Time shall provide  Franchisee with forms on which to maintain certain sales and operational  data.  Franchisee  shall furnish to Pretzel Time on said forms that Pretzel Time prescribes from time to time:

         (i) On Tuesday of each week,  a report on the Unit's net  revenues  and          sales and operations for the previous week;

         (ii) Every six calendar month period,  a balance sheet and a profit and          loss statement for the Unit for the previous  semi-annual  period and a          year to-date  statement  of  financial  condition as of the end of such          previous period; and

         (iii) Within  thirty (30) days after  Franchisee's  year end, an annual financial report.

The reports  required in Section 15.A. (ii) and (iii) if not audited,  should be signed  by the  Franchisee  or its  financial  officer,  attesting  that (1) the reports are true and accurate,  (2) they are prepared in accordance with GAPP on a basis  consistent  with prior periods,  (3) they fully describe and completely disclose the information sought, and (4) the signer has made diligent efforts to ascertain the truth and completeness of the information.

         15.B.   MAINTENANCE OF RECORDS.

         Franchisee  agrees, at all times, he shall keep and maintain  adequate, accurate,  true, and proper records, books, reports, data, and accounts relative to the  franchise  in the English  language  and in  accordance  with  generally accepted accounting principles, and retain the records for a period of three (3) years  after  the date they  were  prepared,  from  which  there may be  readily determined the  information  required in the operating  reports to be filed with Pretzel Time. Such records include, without limitation, daily cash reports, cash receipts  journal  and general  ledger,  cash  disbursements  journal and weekly payroll register,  monthly bank statements and daily deposit slips and cancelled checks;  tax returns,  supplier  invoices,  dated cash  register  tapes,  weekly inventories, sales reports, financial statements and tax returns.

         Franchisee hereby authorizes  Pretzel Time to utilize the data supplied by  Franchisee  under this  Section  in any  publication,  discovery  statement, Offering  Circular,  or  advertisements  related  to the sale of  Franchises  or related  entities  by Pretzel  Time,  anywhere,  at any time,  without  specific compensation therefor.

16.      AUDITS AND INSPECTIONS.

         16.A.    AUDITS.

         Pretzel  Time or its  designee  shall have the right at any time during business  hours and without prior notice to  Franchisee,  to inspect,  audit and copy or the right to cause to be  inspected,  audited and copied,  the  business records,  bookkeeping and accounting  records,  sales and income tax records and returns and other records of the Franchised Business,  including but not limited to,  daily  cash  reports,  cash  receipts  journal  and  general  ledger,  cash disbursements  journal and weekly payroll register,  monthly bank statements and daily deposit slips and cancelled checks; tax returns,  supplier invoices, dated cash register tapes, weekly inventories, sales reports, financial statements and tax returns and the books and records of any  corporation or  partnership  which holds the Franchise  including the personal financial records and tax returns of the Franchisee during and after the term of the Franchise Agreement.  Franchisee agrees to maintain on the premises  all sales and  operational  information  for four weeks.

         Any such  inspection  or audit will take place at a time which will not interfere with  Franchisee's  normal business.  Franchisee shall fully cooperate with Pretzel Time's representatives and independent accountants hired by Pretzel Time to conduct any such inspection or audit.  If Pretzel Time deems  necessary, Franchisee shall deliver to Pretzel Time or its designated  agents copies of all bookkeeping  records not already in the  possession of Pretzel  Time,  including customer  records,  cash  register  tapes,  sales and  purchase  records and tax records,  to enable Pretzel Time or its representative or designee to adequately audit Franchisee's  gross sales.  Franchisee hereby waives any right to withhold tax records relative to the Franchise as privileged information. Each report and





financial  statement  shall be signed and verified by  Franchisee  in the manner Pretzel Time prescribes.  Pretzel Time reserves the right to require  Franchisee to have audited or reviewed financial statements prepared on an annual basis.

         In the event  that an audit  discloses  that  Franchisee's  actual  net revenues exceed  Franchisee's  reported net revenues by two percent (2%) or more for any thirty day  period,  Franchisee  is  obligated  to pay to Pretzel  Time, within  fifteen (15) days after receipt of the  inspection or audit report,  the royalty of seven percent (7%) and the  Advertising  Fund Fee of one percent (1%) of the amount of such  understatement  plus interest from the date such payments were originally due. The audit will be conducted at the expense of Pretzel Time, provided that if an audit  disclosed an  understatement  of two percent (2%), as described above,  Franchisee will bear the cost of the audit,  including without limitation,  the charges of attorneys  and any  independent  accountants,  their travel   expenses,   room  and  board,   and   compensation  of  Pretzel  Time's representatives  and  independent  accountants.  Providing  that in no case will Franchisee be obligated to pay more than ten thousand dollars ($10,000) for such inspection  or audit  costs.  The  foregoing  remedies  shall be in  addition to Pretzel Time's other remedies and rights under this Agreement or applicable law.

         16.B.    RIGHT OF ENTRY AND INSPECTION.

         To determine  whether  Franchisee  and the Unit are complying with this Agreement and with all Pretzel Time's  standards and operations as prescribed by Pretzel Time,  Pretzel Time or its designated agents shall have the right at any reasonable time and without prior notice to Franchisee to:

         a.  Inspect the Unit;

         b. Observe,  photograph  and video tape the Unit's  operations for such          consecutive or intermittent periods as Pretzel Time deems necessary;

         c. Remove  samples of any  Products,  materials or supplies for testing and analysis;

         d.  Interview personnel of the Unit;

         e.  Interview customers of the Unit; and

         f. Inspect and copy any books,  records and  documents  relating to the          operation  of the Unit.  Franchisee  agrees  to  cooperate  fully  with          Pretzel Time in connection with any such inspections, observations,  photographing,  video  taping,  Product  removal and  interviews. Franchisee  shall present to his customers  such comment or evaluation  forms as Pretzel Time periodically  prescribes and shall  participate  and/or request his customers  to  participate  in any surveys  performed by or on behalf of Pretzel Time. At the conclusion of his inspection,  Pretzel Time's field  representative shall prepare a written report which shall contain all of his  observations  and conclusions.  If the field representative  determines that a condition amounting to a default of this Agreement has occurred or exists,  this conclusion shall be promptly communicated to Franchisee and Pretzel Time.

17.      TRANSFER, ASSIGNMENT AND REPURCHASE.

         17.A.  BY PRETZEL TIME.

         This Agreement is fully transferable by Pretzel Time and shall inure to the benefit of any  assignee,  transferee  or other legal  successor  to Pretzel Time's interest  herein.  If Pretzel Time's assignee will perform any of Pretzel Time's obligations under this Agreement,  then that assignee must be financially capable of performing  those  obligations and the assignee must expressly assume and agree to perform  them.  Franchisee  agrees that Pretzel Time shall have the right,  from time to time, to delegate the  performance of any portion or all of its obligations and duties under this Agreement.

         17.B.  BY FRANCHISEE.

         Franchisee  understands  and  acknowledges  that the  rights and duties created by this Franchise Agreement are personal to Franchisee (or if Franchisee is a  corporation  or  partnership,  to its  Owners) and that  Pretzel  Time has granted the Franchise to Franchisee in reliance upon Pretzel Time's  perceptions of the individual or collective character,  skill, aptitude,  attitude, business ability and  financial  capacity of  Franchisee  (or its  Owners).  Accordingly, Franchisee agrees no Transfer shall be made without Pretzel Time's prior written approval.  Any Transfer  without such approval shall constitute a breach of this Agreement  and shall be void and of no  effect.  Pretzel  Time's  consent to the assignment  shall  neither  constitute  a  novation  or change  in  Franchisee's obligations under this agreement,  nor constitute a waiver of any claims Pretzel Time may have  against  Franchisee  (or its  Owners)  nor be  deemed a waiver of Pretzel Time's right to demand the transferee's exact compliance with all of the terms or conditions of this Agreement.

         17.C.  CONDITIONS FOR APPROVAL OF TRANSFER.

         If  Franchisee  is in full  compliance  with this  Agreement  (and,  if Franchisee is a corporation or  partnership,  its Owners are in full  compliance with this Agreement),  Pretzel Time shall not unreasonably withhold its approval of a Transfer that meets all of the following requirements:

         (1) The  transferee  and its  Owners  must  meet  Pretzel  Time's  then          applicable  standards for Pretzel Time Unit  franchisees  and must have          had sufficient business experience,  aptitude,  and financial resources          to operate the Unit;





         (2) Franchisee has paid such royalty,  advertising  fund fees,  amounts          owed for purchases by Franchisee  from Pretzel Time and its  Affiliates          and all other amounts owed to Pretzel Time or its  Affiliates and third          party  creditors and shall have  submitted to Pretzel Time all required          reports and statements;

         (3)  Franchisee or the  transferee has paid Pretzel Time's then current          transfer fee to defray expenses  Pretzel Time incurs in connection with          the  transfer,  except that if the  proposed  Transfer  is, to or among          Owners of Franchisee, this provision shall not apply;

         (4) The  Transferee  and/or its Unit  Manager  have  agreed to complete          Pretzel  Time's  training  program to Pretzel Time's  satisfaction  and          prior to the date of transfer;

         (5) The  Transferee  has  agreed  to be bound by all of the  terms  and          conditions of this Agreement and executes a current Franchise Agreement          and other franchise documents, a sublease agreement,  if any, and other          documents required by Pretzel Time;

         (6) Franchisee  (and its  transferring  Owners) have executed a general          release,  in form  satisfactory  to Pretzel Time, of any and all claims          against Pretzel Time and its Affiliates and their officers,  directors,          employees and agents;

         (7) Pretzel Time has approved the material terms and conditions of such          Transfer,  including,  without limitation,  that the price and terms of          payment are not so burdensome as to affect  adversely the  transferee's          operation of the Unit; provided,  however, that Pretzel Time's approval          of such Transfer does not ensure the transferee's  success as a Pretzel          Time Unit  franchisee,  nor should  the  transferee  rely upon  Pretzel          Time's  approval  of such  Transfer in  determining  whether to acquire          Franchisee's  Pretzel Time Unit; (8) If Franchisee  (and/or its Owners)          finances  any  part of the  sale  price  of the  transferred  interest,          Franchisee  and/or its Owners have agreed that all  obligations  of the          transferee  under or pursuant to any  promissory  notes,  agreements or          security  interests  reserved by Franchisee or its Owners in the assets          of the Unit or the Premises shall be  subordinate  to the  transferee's          obligations  to pay royalty and service  fees and other  amounts due to          Pretzel  Time and its  Affiliates  and  otherwise  to comply  with this          Agreement;

         (9) Franchisee (and its Owners) have executed a noncompetition covenant          in favor of Pretzel Time and the transferee agreeing that, for a period          of twelve (12) months commencing on the effective date of the Transfer,          Franchisee,  its  Owners  and  members  of the  immediate  families  of          Franchisee  and each of its Owners will not hold any direct or indirect          interest  as  a  disclosed  or  beneficial  owner,  investor,  partner,          director,  officer manager,  employee,  consultant,  representative  or          agent, or in any other capacity,  in a Competitive  Business located or          operating  within  three (3) miles of the Unit,  and  within  three (3)          miles of any other Pretzel Time Unit;

         (10) If consent is required, the lessor of the Premises consents to the          assignment or sublease of the Premises to the transferee;

         (11)  Franchisee  has complied with all of its  obligations  to Pretzel          Time, its Affiliates,  suppliers,  and distributors,  and Franchisee is          not in default under this Agreement or any other Agreement with Pretzel          Time or Pretzel Time's Affiliates;

         (12)  All  improvements,  including  refurbishings,   remodelings,  new          equipment must be made prior to the Transfer; and

         (13)  Franchisee  (and its Owners) has agreed that he will not directly          or  indirectly  at any time or in any manner  (except  with  respect to          Pretzel Time Units owned and operated by Franchisee)  identify  himself          or any  business  as a current or former  Pretzel  Time  Unit,  or as a          franchisee,  licensee or dealer of Pretzel Time or its Affiliates,  use          any Mark, any colorable imitation thereof or other indicia of a Pretzel          Time Unit in any manner or for any  purpose or utilize  for any purpose          any tradename,  trade or service mark or other  commercial  symbol that          suggests or indicates a connection or association  with Pretzel Time or          its Affiliates.

         17.D.    TRANSFER TO A WHOLLY-OWNED CORPORATION.

         Notwithstanding Section 17.B., if Franchisee is in full compliance with this  Agreement,  Franchisee may transfer this Agreement to a corporation  which conducts no business  other than the Pretzel  Time Unit and in which  Franchisee maintains management control and owns and controls one hundred percent (100%) of the equity  and  voting  power of all  issued  and  outstanding  capital  stock. Transfers of shares of such  corporation  will be subject to the  provisions  of Section 17.C.(2) and 17.C.(8).  Notwithstanding anything to the contrary herein, Franchisee  shall  remain  personally  liable  under  this  Agreement  as if the Transfer to such  corporation had not occurred.  The articles of  incorporation, by-laws and other organizational documents of such corporation shall recite that the issuance and  assignment of any interest  therein is restricted by the terms of Section 17 of this Franchise Agreement,  and all issued and outstanding stock certificates  of such  corporation  shall bear a legend reciting or referring to the restrictions hereof.

         17.E.  FORMATION OF A CORPORATION.





         In the event,  Franchisee  desires to form a  corporation  for the sole purpose of acting as a  Franchisee  under this  Agreement,  in  addition  to the conditions  imposed under Section 17, the following terms and conditions must be complied with, unless otherwise agreed in writing by Pretzel Time:

                  (1) Franchisee  must be the owner of the majority  interest in                   the  voting  stock  of  the   corporation  and  the  principal                   executive officer thereof;

                  (2)  Franchisee's  shareholders  shall enter into an agreement                   under seal with Pretzel Time, on Pretzel Time's standard form,                   guaranteeing  the  full  payment  of the  corporation's  money                   obligations to Pretzel Time as individual  surety and agreeing                   to be bound  individually  by the  non-competition  obligation                   stated herein; and

                  (3) Franchisee and all shareholders  must continue to meet its                   obligations  under  the  noncompetition   provisions  of  this                   Agreement.

         In  the  event   Franchisee  or  its  successor  is  a  corporation  or partnership or similar entity, it is agreed as follows:

                  (1) That the  Articles  of  Incorporation  and  By-Laws or the                   Partnership  Agreement,  shall  reflect  that the issuance and                   transfer of voting stock or other ownership  interest therein,                   is restricted by the terms of this Agreement. Franchisee shall                   furnish  Pretzel  Time at the  time of the  execution  of this                   Agreement or of assignment to the  corporation  or partners of                   Franchisee, a written agreement stating that no stockholder or                   partner  will  sell,  assign  or  transfer  voluntarily  or by                   operation  of law  any  securities  of  Franchisee,  or  other                   ownership  interest  in  Franchisee,  to any  person or entity                   other than existing shareholders or partnership, to the extent                   permitted  hereunder,  without  the prior  written  consent of                   Pretzel Time.  All securities  issued by Franchisee  will bear                   the  following  legend  which  shall be  printed  legibly  and                   conspicuously  on each stock  certificate or other evidence of                   Ownership Interest:

                    The  transfer of these  securities  is subject to the terms                     and  conditions of a Franchise  Agreement with Pretzel Time,                     Inc.  dated , 199____.  Reference is made to said  Agreement                     and to  the  restrictive  provisions  of  the  Articles  and                     By-laws or Shareholders or Partnership Agreement.

                  (2) That if Franchisee or a successor,  is a corporation,  the                   majority of the capital stock thereof shall not at any time or                   in the  aggregate  be sold,  assigned,  pledged,  mortgaged or                   transferred without the prior written consent of Pretzel Time.

                  (3) Franchisee  represents and warrants that its Owners are as                   set  forth  on  Exhibit  B  attached  to  this  Agreement  and                   covenants that it will not vary from that ownership  structure                   without the prior written approval of Pretzel Time.

         17.F.  DEATH OR DISABILITY OF FRANCHISEE.

         Upon the death or Permanent  Disability of Franchisee or, if Franchisee is a  corporation  or  partnership,  the  Owner  of a  Controlling  Interest  in Franchisee, the executor, administrator, conservator, guardian or other personal representative  of such  person  shall  transfer  Franchisee's  interest in this Agreement or such interest in  Franchisee  to a third party  approved by Pretzel Time.  Such  disposition  of this  Agreement  or  such  interest  in  Franchisee (including,  without  limitation,  transfer by bequest or inheritance)  shall be completed  within a reasonable  time, not to exceed six (6) months from the date of death or  Permanent  Disability,  and shall be  subject  to all the terms and conditions  applicable to Transfers contained in Section 17.B. and 17.C. Failure to transfer the interest in this Agreement or such interest in Franchisee within said period of time shall constitute a breach of this Agreement.

         17.G.    PRETZEL TIME'S FIRST RIGHT OF REFUSAL.

          If  Franchisee  (or its Owners)  shall at any time  determine to sell, assign or transfer for consideration  this Agreement or an Ownership Interest in Franchisee  or the Unit,  Franchisee  (or its Owners)  shall obtain a bona fide, executed  written offer and earnest  money deposit from a responsible  and fully disclosed purchaser (including lists of the Owners of record and beneficially of any corporate  offeror and all general and limited  partners of any  partnership offeror and, in the case of a publicly-held  corporation or limited partnership, copies of the most current annual and quarterly  reports) and shall  immediately submit to Pretzel  Time a true and  complete  copy of such  offer,  which  shall include  details of the payment  terms of the proposed  sale and the sources and terms of any financing for the proposed purchase price. To be a valid, bona fide offer, the proposed purchase price shall be denominated in a dollar amount.  The offer must apply only to an interest in this  Agreement,  Franchisee or the Unit and may not  include  an offer to  purchase  any  other  property  or  rights of Franchisee (or its Owners).  However,  if the offeror  proposes to buy any other property  or  rights  from   Franchisee   (or  its  Owners)  under  a  separate, contemporaneous offer, the price and terms of purchase offered to Franchisee (or its Owners) for the  interest in this  Agreement,  Franchisee  or the Unit shall reflect the bona fide price  offered  therefore  and shall not reflect any value for any other property or rights.





          Pretzel  Time  shall  have the right,  exercisable  by written  notice delivered to Franchisee  (or its Owners) within sixty (60) days from the date of delivery  of an exact copy of such  offer to  Pretzel  Time,  to  purchase  such interest for the price and on the terms and conditions  contained in such offer, provided that Pretzel Time may substitute cash for any form of payment  proposed in such offer,  Pretzel Time's credit shall be deemed equal to the credit of any proposed  purchaser and Pretzel Time shall have not less than sixty (60) days to prepare  for  closing.  Without  regard to the  representations  and  warranties demanded by the proposed  purchaser,  if any,  Pretzel Time shall be entitled to purchase such interest subject to all customary  representations  and warranties given by the  Franchisee,  seller of the assets of a business or voting stock of an  incorporated  business,  as  applicable,   including,   without  limitation, representations  and  warranties as to ownership,  condition and title to stock, and /or assets,  liens and  encumbrances  relating to the stock  and/or  assets, validity  of  contracts  and  liabilities  of the  corporation  whose  stock  is purchased and affecting the assets, contingent or otherwise.

         If Pretzel Time exercises its right of first refusal,  Franchisee  (and its Owners)  agrees that,  for a period of twelve (12) months  commencing on the date of the closing,  neither  Franchisee (nor its Owners) shall have any direct or indirect interest  (through a member of the immediate  families of Franchisee or its Owners of  otherwise)  as a  disclosed  or  beneficial  owner,  investor, partner, director, officer, employee, consultant, representative, or agent or in any other capacity in any Competitive Business located or operating within three (3) miles of the Unit,  and/or  three (3) miles of any other  Pretzel Time Unit. The  restrictions  of this Section  shall not be  applicable to the ownership of shares  of a class of  securities  listed on a stock  exchange  or traded on the over-the-counter market that represent two percent (2%) or less of the number of shares of that class of  securities  issued  and  outstanding.  If Pretzel  Time exercises its right of first refusal, Franchisee (and its Owners) further agrees that he will abide by the restrictions of Section 17.C.(13).

          If  Pretzel  Time  does not  exercise  its  right  of  first  refusal, Franchisee or its Owners may complete the sale to such purchaser pursuant to and on the exact  terms of such  offer,  subject to Pretzel  Time's  approval of the Transfer as provided in Section 17,  provided that if the sale to such purchaser is not completed  within 120 days after  delivery of such offer to Pretzel Time, or if there is a  material  change  in the terms of the sale  (which  Franchisee shall  promptly  communicate  to Pretzel  Time),  Pretzel  Time's right to first refusal shall be extended for thirty (30) days after the  expiration of such 120 day period or after the material change in the terms of the sale so communicated to Pretzel Time.

         17.H.    PUBLIC OR PRIVATE OFFERINGS.

         In the event  Franchisee (or any of its Owners)  shall,  subject to the restrictions  and  conditions  of Transfer  contained in Section 17,  attempt to raise or secure funds by the sale of securities (including,  without limitation, common or preferred stock,  bonds,  debentures or general or limited partnership interests) in Franchisee or any affiliate of Franchisee, Franchisee, recognizing that the written information may reflect upon Pretzel Time, agrees to submit any such written information used with respect thereto prior to its inclusion in any registration  statement,  prospectus or similar offering  circular or memorandum and to obtain Pretzel Time's written consent to the method of financing prior to any offering or sale of such securities. Pretzel Time's written consent pursuant to this Section  shall not imply or  constitute  Pretzel  Time's  approval  with respect to the sale of the  securities,  the  offering  literature  submitted to Pretzel  Time or any other aspect of the  offering.  No  information  respecting Pretzel  Time  shall  be  included  in  any  disclosure   document  unless  such information  has  been  furnished  by  Pretzel  Time  in  writing   pursuant  to Franchisee's  written request,  in which Franchisee states the specific purposes for  which the  information  is to be used.  Should  Pretzel  Time,  in its sole discretion, object to any reference to it or its business or to the relationship of  Franchisee  or  a  controlled  affiliate  in  such  offering  literature  or prospectus,  such  literature or  prospectus  shall not be used unless and until Pretzel Time's objections are withdrawn.  Pretzel Time assumes no responsibility whatsoever for any offering.  Franchisee  shall pay Pretzel  Time's  expenses in connection with the offering or proposed offering.

         The prospectus or other literature  utilized in any such offering shall contain the  following  language in  bold-face  type on the first  textual  page thereof:

         PRETZEL  TIME,  INC. IS NOT  DIRECTLY OR  INDIRECTLY  THE ISSUER OF THE          SECURITIES OFFERED HEREBY AND ASSUMES NO RESPONSIBILITY WITH RESPECT TO          THIS OFFERING AND/OR THE SUFFICIENCY OR ACCURACY OF THE INFORMATION SET          FORTH HEREIN,  INCLUDING ANY  STATEMENTS  WITH RESPECT TO PRETZEL TIME,          INC.  PRETZEL TIME,  INC.  DOES NOT ENDORSE OR MAKE ANY  RECOMMENDATION          WITH RESPECT TO THE INVESTMENT CONTEMPLATED BY THIS OFFERING.

         Franchisee  (and each of its Owners)  agrees to  indemnify,  defend and hold harmless Pretzel Time, its parent company, subsidiaries, and Affiliates and their officers, directors, employees and agents from any and all claims, demands and  liabilities,  and all costs and expenses  (including,  without  limitation, reasonable  attorneys' fees) incurred in defending against such claims,  demands or  liabilities,  arising  from the  offer or sale of such  securities,  whether asserted  by a  purchaser  of any such  security  or by a  governmental  agency. Pretzel  Time shall have the right (but not the  obligation)  to defend any such claims,  demands or  liabilities  and/or to  participate  in the  defense of any action to which it is named as a party.

18.      TERMINATION OF AGREEMENT BY FRANCHISEE.





         18.A.  FRANCHISEE'S RIGHT TO TERMINATE.

         If  Franchisee is in  substantial  compliance  with this  Agreement and Pretzel Time  substantially  breaches a material provision of this Agreement and (1) fails to cure such  breach  within  thirty  (30) days after  written  notice thereof is delivered to Pretzel Time or (2) if such breach cannot  reasonably be cured  within  thirty (30) days after  Pretzel  Time's  receipt of such  notice, undertake  (within  thirty (30) days after Pretzel Time's receipt of such notice and  continue  until  completion),  reasonable  efforts  to  cure  such  breach, Franchisee may terminate this Agreement. Such termination shall be effective ten (10) days after delivery to Pretzel Time of notice that such breach has not been cured and Franchisee  elects to terminate this Agreement.  A termination of this Agreement  by  Franchisee  for any reason other than a  substantial  breach of a material provision of this Agreement by Pretzel Time, and Pretzel Time's failure to cure  such  breach  as  provided  above  shall  be  deemed a  termination  by Franchisee without cause.

19.      DEFAULT AND TERMINATION.

         19.A.  EXACT AND COMPLETE PERFORMANCE REQUIRED.

         Franchisee  acknowledges that complete  performance of all the terms of this  Agreement  is  necessary  for  the  protection  of  Pretzel  Time  and its franchisees.  It is therefore agreed that complete and exact  performance by the Franchisee  of each of his  promises  contained  herein  is a  condition  to the continuance of this Franchise.

         19.B.    DEFAULT AND RIGHT TO CURE.

         If Franchisee  defaults in the  performance of any of the terms of this Agreement  or the  Operations  Manual,  Pretzel  Time,  in addition to all other remedies  available to it at law or in equity and without prejudice to any other rights or remedies,  may  immediately  terminate  this Agreement by delivering a written notice to Franchisee of any breach of this Agreement and a notice period of  forty-five  (45) days shall be given to  Franchisee,  unless such default is cured by the  Franchisee  within thirty (30) days after written  notice  thereof from Pretzel Time to Franchisee.  Notwithstanding the foregoing,  if the default is other  than a failure to pay a monetary  obligation  to Pretzel  Time or to a related  company and of a nature that more than thirty (30) days are  reasonably required to cure,  Franchisee  shall  commence  to cure the default  within said thirty (30) day period and shall proceed with such cure with due diligence  with a view to accomplishing the cure at the earliest possible moment, and within the period,  if any,  designated  by Pretzel Time as the allowable  additional  time within which the cure must be accomplished.

         19.C.  EXTENSION OF NOTICE.

         If any  applicable  law or rule  requires  a  greater  prior  notice of termination,  the prior notice required by such law or rule shall be substituted for the notice requirements herein.

         19.D.  REPEATED BREACHES.

         Further,   notwithstanding  anything  herein  elsewhere  contained,  if Franchisee shall repeatedly fail to comply with the terms of this Agreement,  or any of them,  of any nature,  even though such  failures may be cured within the applicable  grace  periods,  Pretzel Time shall have the right by written notice given to Franchisee  immediately  to declare this  Agreement  terminated,  which right shall be in addition to and without prejudice to any other right or remedy to which Pretzel Time may be entitled  under this  Agreement or otherwise  under applicable law. As used in this Agreement the term repeatedly  fail shall mean three (3) defaults within any twelve (12) month period, even if the defaults are later cured.          19.E.    EVENTS OF DEFAULT - 30 DAYS NOTICE - CURABLE DEFAULTS.

         The  occurrence of any one of the following  events shall  constitute a default under this Agreement  requiring a 30 day notice period of termination by Pretzel Time to Franchisee:

                  (i) Franchisee  fails to pay money when due to Pretzel Time as                   required  under the Franchise  Agreement,  including,  without                   limitation,  the franchise  fee, the renewal fee, the transfer                   fee, royalties, and the advertising fund fee; or

                  (ii) If Franchisee or his Unit Manager fails to satisfactorily                   complete any mandatory  training  programs (except the initial                   training  in  which  case,  the  Franchise  Agreement  can  be                   terminated upon notice) offered by Pretzel Time; or

                  (iii) If Franchisee  fails to submit to Pretzel Time financial                   or other  information  when required  under this  Agreement or                   submits a financial statement which materially understates net                   revenues; or

                  (iv) If  Franchisee  fails to develop or construct the Unit in                   accordance  with  this  Agreement;  Pretzel  Time's  plans and                   specifications  or fails to equip and furnish the  location in                   accordance with Pretzel Time's plans and specifications; or

                  (v) A final judgment against Franchisee remains unsatisfied of                   record for thirty  (30) days,  unless a  supersedeas  or other                   appeal bond has been filed; or

                  (vi) Franchisee or any of its Owners  abandons,  surrenders or





                  transfers  control of the  operation  of the Unit  without the                   prior  written  approval  of Pretzel  Time,  or  threatens  to                   abandon the same; or

                  (vii) Franchisee fails to use Pretzel Time approved  marketing                   and  promotional  materials  or  Franchisee  fails to  receive                   Pretzel  Time's prior  approval of marketing  and  promotional                   materials; or

                  (viii) Failure to obtain Pretzel Time's prior written  consent                   or  approval  where   expressly   required  by  the  Franchise                   Agreement; or

                  (ix) If Franchisee  operates the franchise in such a manner so                   as  to  affect   materially  and  adversely  the  goodwill  or                   reputation  of  Pretzel  Time  or its  System  or any  product                   manufactured by any Affiliate; or

                  (x)  Franchisee  denies  Pretzel Time the right to inspect the                   Unit or to examine or audit his books; or

                  (xi)  Franchisee  misuses  Pretzel Time's Marks or asserts any                   interest  in  Pretzel   Time's  Marks;   uses  Pretzel  Time's                   tradename  or any  part  thereof  as part to of its  corporate                   name;  does not cooperate in the  enforcement  of any Mark; or                   challenges or seeks to challenge the validity of the Marks; or

                  (xii)  Franchisee  fails to  maintain  and operate the Unit in                   accordance  with standards and  specifications  established by                   Pretzel Time as to the services or  maintenance  of inventory;                   or

                  (xiii)  Franchisee  fails to obtain  all  permits,  insurance,                   licenses and other necessary  documents for the opening of the                   Unit; or

                  (xiv)  Franchisee  fails to maintain  uniform  Unit design and                   image,  and/or  fails to  refurbish  or remodel as required by                   Pretzel Time; or

                  (xv) Franchisee attempts or does mortgage, pledge or otherwise                   assign as security the premises,  any equipment,  furnishings,                   fixtures or any interest Franchisee may have; or

                  (xvi) Conduct by  Franchisee  which is of such a nature that a                   reasonably   objective   person  would  consider  same  to  be                   deleterious  to or to reflect  unfavorably  on Pretzel Time or                   the Pretzel Time Unit System; or

                  (xvii) Failure by Franchisee to maintain a responsible  credit                   rating by failing to make prompt payment of undisputed  bills,                   invoices and  statements  from  suppliers or  distributors  of                   goods and services to the Unit; or

                  (xviii)  Failure  to  comply  with  all  of the  terms  of the                   Operations  Manual as amended from time to time, the standards                   and  specifications  required  by  Pretzel  Time or any  other                   agreement between the Franchisee and Pretzel Time; or

                  (xix) Fails to pay any federal or state income, sales or other                   taxes due on the Unit's  operations  unless  Franchisee  is in                   good faith contesting his liability for such taxes; or

                  (xx)  Franchisee  knowingly  sells any product or service that                   does not  conform to Pretzel  Time's  specifications,  uses or                   sells products other

                  than  in  strict  accordance  with  the  requirements  of  the                   Franchise  Agreement or the Operations  Manual;  fails to sell                   products  or services  approved by Pretzel  Time or deals with                   vendors and suppliers not approved by Pretzel Time.

                  (xxi) Franchisee fails to pay any subcontractor, contractor or                   other  person  to whom  money is due and  that  subcontractor,                   contractor  or other  person  demands  said money from Pretzel                   Time.

                  (xxii)  Franchisee is late in paying rent to the landlord more                   than 2 times in any twleve month period.

         19.F.    EVENTS OF DEFAULT - IMMEDIATE TERMINATION - NO RIGHT TO CURE.

         The  following  acts of  default  will  result  in  termination  of the Franchise  effective  immediately upon delivery and receipt of written notice of same to Franchisee  and with no right to cure where the grounds for  termination or cancellation are:

          (i)  Franchisee or a Owner fails to complete all phases of the initial                training program to Pretzel Time's satisfaction; or





          (ii) Franchisee  fails to  commence  operation  of the Unit within the                time specified in this Agreement; or

          (iii) Any affirmative act of bankruptcy or insolvency by                   Franchisee,  or the filing by  Franchisee  of any  petition or                   action in bankruptcy or  insolvency,  or for  appointment of a                   receiver  or  trustee,   Franchisee   admits  in  writing  his                   inability to pay his debts or an assignment by Franchisee  for                   the benefit of creditors,  or the failure to vacate or dismiss                   within  five  (5)  days  after  filing  any  such  proceedings                   commenced  against  Franchisee  by a third  party.  Franchisee                   expressly  and  knowingly  waives any rights  that he may have                   under the provisions of the  Bankruptcy  Rules and consents to                   the  termination  of this  Agreement or any other relief which                   may be sought in a complaint filed by Pretzel Time to lift the                   provisions  of the  automatic  stay of the  Bankruptcy  Rules.                   Additionally Franchisee agrees not to seek an injunction order                   from any court in any  jurisdiction  relating  to  insolvency,                   reorganization of arrangement proceedings which would have the                   effect of staying or enjoining this provision.  THIS PROVISION                   MAY  NOT BE  ENFORCEABLE  UNDER  FEDERAL  BANKRUPTCY  LAW  (11                   U.S.C.A. Sec. 101 et seq.); or

                  (iv)  Failure to cure  within  seventy-two  (72)  hours  after                   delivery  of  written  notice of default  under the  Franchise                   Agreement  which  materially  impairs the goodwill  associated                   with Pretzel  Time's trade names,  trademarks,  service marks,                   logo types or other commercial

                    symbols or the use by Franchisee of any name,  mark,  system                     insignia or symbol not authorized by Pretzel Time; or

                  (v) The conviction of Franchisee,  or any if its principals if                   it is a partnership or corporation,  of a crime related to the                   business conducted pursuant to the franchise which may tend to                   affect  adversely the goodwill or  reputation  of  Franchisee,                   Pretzel Time or its System or the  products of Pretzel  Time's                   Affiliates; or

                  (vi)  Abandonment  of the  Franchise.  For  purposes  of  this                   agreement Abandonment shall mean Franchisee's failure (other                   than with Pretzel  Time's prior written  approval) to keep the                   franchise  open and operating for business  during the minimum                   opening hours specified in this Agreement or Lease  Agreement;                   or

                  (vii) Franchisee ceases to occupy the premises. If the loss of                   possession in the result of  governmental  exercise of eminent                   domain,  destruction  of the  site,  or  termination  of lease                   (except by reason of Franchisee's fault), Franchisee may (with                   Pretzel Time's consent and subject to  availability)  relocate                   to  other  premises  in  a  comparable  location.  Failure  to                   relocate to other Pretzel  Time-approved  premises  within the                   time specified in this Agreement  after loss of possession due                   to eminent  domain,  destruction of premises or termination of                   lease without  Franchisee's  fault shall  constitute an act of                   Default with no right to cure and immediate  termination  upon                   notice; or

                  (viii) The existence of an imminent danger to public health or                   safety or fails or refuses to comply with  standards  relating                   to the  cleanliness  or sanitation of the Unit or violates any                   health, safety or sanitation,  law ordinance or regulation and                   does not correct such  noncompliance  within  forty-eight (48)                   hours after written notice thereof is delivered to Franchisee;                   or

                  (ix) The loss of the right to occupy the  premises  from which                   the  franchise  is  operated by either  Franchisee  or Pretzel                   Time; or

                    (x) Material  falsification  of business records and reports                     required by Pretzel Time; or

                  (xi)  Franchisee  (or any of its Owners) makes an  assignment,                   surrenders  or  transfers  control of the Unit's  operation in                   violation of this Agreement; or

                  (xii)  Franchisee (or any of its Owners) has made any material                   misrepresentation  or  omission  in the  application  for  the                   Franchise or in materials submitted relating to a transfer; or

                  (xiii)  Franchisee,  (or  its  Owners)  or  members  of  their                   immediate  family violate the restrictions on the operation of                   Competitive Businesses during the term of this Agreement; or

                  (xiv)  Franchisee (or any of its Owners or employees) makes an                   unauthorized  use or disclosure  of or duplicates  any copy of





                  any Confidential  Information or uses, duplicates or discloses                   any  portion of the  Operations  Manual in  violation  of this                   Agreement; or

                  (xv) Failure on two (2) or more separate  occasions within any                   period  of  twelve  (12)  consecutive  months  or on three (3)                   occasions during the term of this Agreement to submit when due                   reports or other data, information or supporting records or to                   pay when due the  Royalty  and fees or other  payments  due to                   Pretzel Time or its  Affiliates  or otherwise  fails to comply                   with this  Agreement,  whether or not such  failures to comply                   with this Agreement,  Advertising Fund Fee are corrected after                   notice thereof is delivered to Franchisee; or

                  (xvi) Fails to cure a default under this Agreement  within the                   time specified or provide proof  acceptable to Pretzel Time of                   efforts  which  are  reasonably  calculated  to  correct  such                   failure within a reasonable  time,  which shall in no event be                   more than sixty (60) days after such  notice,  if such failure                   cannot  reasonably be corrected  within twenty (20) days after                   written  notice of such  notice of  default  is  delivered  to                   Franchisee; or

                  (xvii) Franchisee terminates this Agreement without cause; or

                  (xviii) Franchisee  understates the Unit's net revenues in any                   report or financial  statement  by an amount  greater than two                   (2) percent; or

                  (xix)  Franchisee  causes or permits to exist a default  under                   the  lease or  sublease  for the Site and  fails to cure  such                   default  within the  applicable  cure  period set forth in the                   lease or sublease; or

                  (xx)  Franchisee  (or any of its Owners) fails on three (3) or                   more separate  occasions within any period of twenty-four (24)                   consecutive  months to comply with this  Agreement  whether or                   not such  failures  to comply are  corrected  after  notice of                   default  is  given,  or  failure  on two (2) or more  separate                   occasions within any period of twelve (12) consecutive  months                   to comply within the same  requirement  under this  Agreement,                   whether or not such  failures  to comply are  corrected  after                   notice of default is given.

20. RIGHTS AND  OBLIGATIONS OF PRETZEL TIME AND FRANCHISEE  UPON  TERMINATION OR EXPIRATION OF THE FRANCHISE.

         20.A.  AMOUNTS OWED.

         Unless otherwise authorized by Pretzel Time in writing, in the event of expiration or termination  of this  Agreement for any reason,  or upon the sale, transfer or  assignment  of the  Franchise by  Franchisee,  all of  Franchisee's rights  hereunder  shall  terminate  and  Franchisee  shall cease to operate the Franchise.  Franchisee agrees to pay Pretzel Time within fifteen (15) days after the effective date of termination or expiration of this Agreement, or such later date that the amounts due to Pretzel Time are  determined,  such  Royalty  Fees, Advertising  Fund Fees,  amounts owed for purchases by  Franchisee  from Pretzel Time or its  Affiliates,  interest  due on any of the  foregoing  and all  other amounts owed to Pretzel Time or its Affiliates which are then unpaid.

         Expiration or  termination  of this  Agreement for any reason shall not affect,  modify, or discharge any note, account receivable,  or debt, contingent or otherwise,  existing or arising under this Agreement, or any prior agreement, contract, or dealing between Pretzel Time and Franchisee.

         20.B.    DISCONTINUANCE OF MARKS.

         Franchisee  agrees to immediately  discontinue  all use of trade names, trademarks,  logotypes,  forms of advertising  and other  commercial  symbols of Pretzel Time, and forms of advertising indicative of Pretzel Time and cancel all assumed  name  registrations.  Franchisee  further  shall  remove or cause to be removed all signs and  structures  indicative  of a Pretzel  Time Unit and shall alter the premises occupied by Franchisee so as to distinguish the same from its former appearance and from a Pretzel Time franchise.  Further,  Franchisee shall discontinue  the use of any and all printed goods and materials using said trade names,  trademarks,  logos and other  commercial  symbols  of Pretzel  Time.  If Franchisee  refuses to comply  with the terms of this  Section 20 after  Pretzel Time  requests  compliance,  Pretzel  Time  shall  have the right to enter  upon Franchisee's  premises  without being deemed guilty of  trespassing or any other offense,  and make or cause to be made such  changes  at  Franchisee's  expense, which Franchisee agrees to pay upon demand.

         Franchisee  agrees to not directly or  indirectly at any time or in any manner (except with respect to other Pretzel Time Units owned by the Franchisee) identify himself or any business as a current or former Pretzel Time Unit, or as a franchisee,  licensee or dealer of Pretzel Time or its Affiliates.  Franchisee further  agrees to not use any Mark,  any colorable  imitation  thereof or other indicia of a Pretzel  Time Unit in any manner or for any  purpose or utilize for any purpose any trade name,  trade or service  mark or other  commercial  symbol that suggests or indicates a connection or association  with Pretzel Time or its Affiliates.  Franchisee (or any of its Owners) agrees after  termination he will not do  business  under any name or in any  manner  that  might tend to give the general  public the  impression  that he is  associated,  affiliated,  licensed, franchised by or related to Pretzel Time.  The Franchisee (or any of its Owners) may not thereafter  use any name,  logo type, or symbol  confusingly  similar to





Pretzel  Time's  Service  Mark,  logo type or symbol.  If  Franchisee  continues operating a business at the franchised  location it will exert every  reasonable effort to inform the public of his new status,  including a change of  telephone number and advertising materials.

         The Franchise granted to Franchisee  hereunder to sell Products bearing Pretzel Time's Marks does not include the right to sell or advertise for sale of Franchisee's  Franchise itself or of its business location.  No advertisement by Franchisee  or  other  public  solicitation  for  sale of his  interest  in this Agreement  may  include a  representation  of Pretzel  Time's  trademark  or any reference to Pretzel Time or its trademark system.

         20.C.    RETURN OF MATERIALS.

         Franchisee  agrees to return to  Pretzel  Time all  signs,  sign-faces, forms,  invoices,  letterhead,  and  other  materials  containing  any  Mark  or otherwise identifying or relating to a Pretzel Time Unit and allow Pretzel Time, without liability to remove all such items from the Unit. Franchisee also agrees to return all  materials  and  confidential  information  loaned to  Franchisee, including,  without limitation,  all Operations Manuals and Training Manuals and videos. Franchisee agrees to return all materials and supplies identified by the Marks in full cases or  packages  to Pretzel  Time for credit and dispose of all other materials and supplies, but not equipment,  identified by the Marks within thirty (30) days after the effective  date of  termination or expiration of this Agreement.

         20.D.    TELEPHONE COMPANY.

         Franchisee  agrees to notify the  telephone  company and all  telephone directory  publishers of the termination or expiration of Franchisee's  right to use any  telephone  and telecopy  numbers and any regular,  classified  or other telephone  directory  listings  associated  with any Mark and to  authorize  the transfer  thereof to Pretzel Time or at its direction.  Franchisee  acknowledges and agrees  that as between  him and  Pretzel  Time,  Pretzel  Time has the sole rights to and  interest in all  telephone  and  telecopy  numbers and  directory listings  associated  with any Mark.  Franchisee  authorizes  Pretzel Time,  and hereby appoints Pretzel Time and any of its officers as Franchisee's attorney in fact, to direct the telephone company and all telephone directory  publishers to transfer any telephone and telecopy numbers and directory  listings  relating to the Pretzel Time Units to Pretzel Time or at its  direction,  should  Franchisee fail or refuse to do so, and the telephone  company and all telephone  directory publishers  may accept such direction or this agreement as conclusive of Pretzel Time's  exclusive  rights in such  telephone and telecopy  numbers and directory listings  and Pretzel  Time's  authority to direct  their  transfer.  Franchisee agrees to execute a  collateral  assignment  of  telephone  numbers and listings agreement  which is attached hereto as Exhibit G. In no event shall Pretzel Time be responsible  for any charges  incurred by Franchisee and associated  with the telephone company prior to the date of transfer.

         20.E.    CONFIDENTIAL INFORMATION.

         Franchisee (and its Owners) agrees that upon  termination or expiration of this Agreement, he will immediately cease to use any Confidential Information of Pretzel Time or its Affiliates disclosed to him pursuant to this Agreement in any business or otherwise.  This  provision is also  applicable to the Owners if the Franchise is a corporation or partnership.

         20.F.    LEASING.

         If Franchisee  has leased the  premises,  Pretzel Time may, in its sole discretion  and without any  obligation to do so,  assume the lease.  Franchisee will not be entitled to any refund of the initial franchise fee,  royalties,  or Advertising Fund Fees.

         20.G.    COVENANT NOT TO COMPETE.

         Upon  termination of this  Agreement,  in accordance with its terms and conditions or by Franchisee  without cause, or upon expiration of this Agreement (unless the Franchise is renewed as provided for in this Agreement),  Franchisee and its Owners agree that for a period of TWELVE (12) months  commencing  on the effective  date of  termination  or expiration  or the date on which  Franchisee complies  with this Section,  whichever is later,  neither  Franchisee,  nor its Owners,  nor any person or entity  affiliated  with  Franchisee or  Franchisee's shareholders or partners shall have any direct or indirect  interest  (through a member of the immediate  families of Franchisee or its Owners or otherwise) as a disclosed or beneficial owner, investor,  partner, director,  officer, employee, consultant,  representative,  agent or in any other capacity in any  Competitive Business  located or operating:  (1) at the Site;  (2) within three (3) miles of the Unit;  and/or (3) within  three (3) miles of any other  Pretzel Time Unit in operation  or  under  development  on  the  effective  date  of  termination  or expiration of this  agreement for a period of one year after the  termination or expiration.  The  restrictions  of this Section  shall not be  applicable to the ownership  of shares of a class of  securities  listed  on a stock  exchange  or traded on the over-the-counter market that represent two percent (2%) or less of the  number  of shares  of that  class of  securities  issued  and  outstanding. Franchisee  and its Owners  expressly  acknowledge  that they possess skills and abilities of a general nature and have other  opportunities  for exploiting such skills. Consequently, enforcement of the covenants made in this Section will not deprive the Franchisee or its Owners or shareholders of their personal  goodwill or ability to earn a living.

The Franchise  Agreement contains a covenant not to compete which extends beyond





the termination of the franchise. Franchisee and its Owners acknowledge that the covenant  not to compete is fair and  reasonable,  and will not impose any undue hardship,  since the Franchisee (and its Owners) has other considerable  skills, experience and education  which will afford him the opportunity to derive income from other endeavors.

Neither  Franchisee  nor any of its Owners shall divert or attempt to divert any business or any customers of any Pretzel Time Unit to any  Competitive  Business or employ or seek to employ any  person who is  employed  by Pretzel  Time,  its Affiliates  or a franchisee  of Pretzel Time nor induce or attempt to induce any such person to leave said  employment  without the prior written consent of such person's employer.

         20.H.  PRETZEL TIME'S RIGHT TO PURCHASE ASSETS OF THE UNIT.

         Upon  termination of this Agreement by Pretzel Time in accordance  with its terms and  conditions or by Franchisee  without cause or upon  expiration of this  Agreement  (unless the franchise  has been  renewed),  Pretzel  Time,  its Affiliates  or  its  assignee  shall  have  the  option  (not  the  obligation), exercisable  by giving  written  notice  thereof within sixty (60) days from the date of such  expiration  or  termination,  to acquire from  Franchisee  all the assets  in the Unit  including  the  equipment,  furnishings,  signs,  leasehold improvements,  usable  inventory  of  Products,  materials,  supplies  and other tangible assets of the Unit and an assignment of the lease for the Unit. Pretzel Time  shall  have the  unrestricted  right to assign  this  option to  purchase. Pretzel Time or its assignee  shall be entitled to all customary  warranties and representations  in  connection  with its  asset  purchase,  including,  without limitation,  representations  and  warranties as to ownership,  condition of and title to assets, no liens and encumbrances on the assets,  validity of contracts and agreements and liabilities  inuring to Pretzel Time or affecting the assets, contingent or otherwise.

         (1) The purchase price for the assets of the Unit shall be equal to the greater of:

                  The sum of the book  value  of the  Unit's  assets  (including                   furnishings,  fixtures, equipment, and leasehold improvements)                   amortized on a straight-line basis over a five (5) year period                   plus the lesser of costs and the then-current wholesale market                   value of all  usable  inventory  of  Products,  materials  and                   supplies (i.e. in good and saleable condition and not obsolete                   or discontinued), or

                  The  product of the Unit's  average  cash flow for the two (2)                   most recently  completed  fiscal years  multiplied by two (2).                   Cash  flow  represents  the  Unit's  net  revenues  less all                   pretzel  unit-related  costs (i.e., cost of goods sold, labor,                   occupancy   and  other  Unit   expenses)  as  well  as  annual                   administrative  costs of ten thousand dollars ($10,000.00) and                   royalty and  service  fees,  but not  including  interest  and                   depreciation.

         (2)  Pretzel  Time and its  Affiliates  shall have the right to set off against and reduce the purchase  price by any and all amounts owed by Franchisee to Pretzel  Time and its  Affiliates.  Pretzel  Time may exclude from the assets purchased  hereunder any  equipment,  furnishings,  signs,  usable  inventory of Products,  materials  or supplies of the Unit that Pretzel Time has not approved as meeting its standards for Pretzel Time Unit,  and the purchase price shall be reduced by the  replacement  costs of such excluded  items which are required in the operation of the Unit.

         (3) The  purchase  price  shall be paid in cash at the  closing  of the purchase, which shall take place no later than ninety (90) days after receipt by Franchisee  of Pretzel  Time's notice of exercise of this option to purchase the Unit, at which time Franchisee shall deliver instruments transferring to Pretzel Time or its assignee good and merchantable  title to the assets purchased,  free and clear of all liens and encumbrances  with all sales and other transfer taxes paid by  Franchisee,  and all  licenses  or  permits  of the Unit  which  may be assigned or transferred. In the event the closing of the purchase does not occur within said ninety (90) day period because Franchisee fails to act diligently in connection therewith,  the purchase price shall be reduced by ten percent (10%). Franchisee  further agrees that the purchase  price shall be further  reduced by ten percent (10%) per month for each subsequent  month  Franchisee  fails to act diligently to consummate this  transaction.  In the event that Franchisee cannot deliver clear title to all of the purchased assets as aforesaid, or in the event there are other unresolved  issues, at Pretzel Time's option,  the losing of the sale shall be accomplished through an escrow.  Prior to closing,  Franchisee and Pretzel  Time shall  comply with the  applicable  Bulk Sales  provisions  of the Uniform Commercial Code as enacted in the state in which the Unit is located.

         (4) If Pretzel Time or its assignee  exercises this option to purchase, pending  the  closing of such  purchase,  Pretzel  Time may appoint a manager to maintain the operation of the Unit, at its option,  require  Franchisee to close the Unit during such time period  without  removing any assets.  If Pretzel Time appoints a manager to maintain the operation of the Unit pending closing of such purchase, all funds from the Unit's operation during the period of management by a  Pretzel  Time  appointed  manager  shall be kept in a  separate  fund and all expenses of the Unit, including compensation,  other costs and travel and living expenses of the Pretzel Time appointed  manager,  shall be charged to such fund. As compensation for the management services provided,  Pretzel Time shall charge such fund ten  percent  (10%) of the  Unit's net  revenues  during the period of Pretzel Time's management. Operation of the Unit during any such period shall be for and on behalf of  Franchisee,  provided  that Pretzel Time shall have a duty only to utilize its good faith  efforts and shall not be liable to Franchisee or





its Owners for any debts,  losses or obligations  incurred by the Unit or to any creditor  of  Franchisee  for any  merchandise  materials,  supplies  or service purchased by the Unit during any period in which it is managed by Pretzel Time's appointed  manager.  Franchisee  shall maintain in force all insurance  policies required for the Unit until the date of closing.

21.      RELATIONSHIP OF THE PARTIES/INDEMNIFICATION.

         21.A.    EXCLUSIVE RELATIONSHIP.

         Franchisee acknowledges and agrees that Pretzel Time would be unable to protect  Confidential  Information  against  unauthorized  use or disclosure and would be unable to  encourage  a free  exchange of ideas and  information  among Pretzel Time Units if  Franchisees  of Pretzel Time Units were permitted to hold interests in or perform services for a Competitive  Business except as specified in Exhibit C.  Franchisee  also  acknowledges  that Pretzel Time has granted the Franchise to  Franchisee  in  consideration  of and reliance  upon  Franchisee's agreement to deal  exclusively  with Pretzel Time.  Franchisee  therefore agrees that  during the term of the  Franchise  Agreement,  or the period of time which Franchisee operates a Unit under this Agreement,  whichever is shorter,  neither Franchisee  nor  any  Affiliate,  immediate  family  member,  or  in  the  event Franchisee is a corporation

any Owner thereof and member of his immediate  family or in the event  Franchise is a partnership any partner  (general or limited) thereof and any member of his immediate family, shall:

         (1) Have  any  direct  or  indirect  interest  as an  owner,  investor,          partner, director, officer, employee, consultant, representative, agent          or in  any  other  capacity  in any  Competitive  Business  located  or          operating  at the Site or within  three (3) miles of any  Pretzel  Time          Unit  in  operation  or  under  development  on the  effective  date of          termination or expiration of this Agreement, except a Pretzel Time Unit          operated by Franchisee under Franchise Agreements with Pretzel Time; or

         (2) Recruit or hire any employee who, within the immediately  preceding          six (6) month period,  was employed by Pretzel Time or any Pretzel Time          Unit operated by Pretzel Time, its Affiliates or another  franchisee or          licensee  of  Pretzel  Time,   without   obtaining  the  prior  written          permission of Pretzel Time or such franchisee.

         Notwithstanding the foregoing,  Franchisee shall not be prohibited from owning securities  listed on a stock exchange or traded on the  over-the-counter market that represents two percent (2%) or less of that class of securities.

         Covenants contained in this Section shall be construed as severable and independent,   and  shall  be  interpreted  and  applied   consistent  with  the requirements  of  reasonableness.  Any judicial  reformation of these  covenants consistent  with this  interpretation  shall be enforceable as though  contained herein  and shall not affect any other  provisions  or terms of this  Agreement. This non-compete provision may not be enforceable under the laws of your state.

         21.B.  NO LIABILITY FOR ACTS OF OTHER PARTY.

         Franchisee shall not employ any of the Marks in signing any contract or applying  for any  franchise or permit or in a manner that may result in Pretzel Time's  liability for any of Franchisee's  indebtedness or obligations,  nor may Franchisee  use the Marks in any way not  expressly  authorized by Pretzel Time. Except as expressly  authorized in writing,  neither Pretzel Time nor Franchisee shall  make  any  express  or  implied  agreements,  warranties,  guarantees  or representations  or  incur  any  debt in the  name or on  behalf  of the  other, represent that their relationship is other than Pretzel Time and franchisee,  or be obligated by or have any liability  under any  agreements or  representations made by the other that are not  expressly  authorized  in writing.  Pretzel Time shall not be  obligated  for any damages to any person or  property  directly or indirectly  arising out of the  operation of the Unit or  Franchisee's  business authorized by or conducted pursuant to this Agreement.

         21.C.    TAXES.

         Pretzel  Time shall have no  liability  for any  sales,  use,  service, occupation,  excise,  gross receipts,  income,  property or other taxes, whether levied upon Franchisee, the Unit, Franchisee's property or upon Pretzel Time, in connection with the sales made or business  conducted by Franchisee.  Payment of all such taxes shall be Franchisee's responsibility.

         21.D.    INDEMNIFICATION.

         Franchisee   agrees  to  indemnify   and  hold  Pretzel  Time  and  its subsidiaries,  Affiliates, stockholders,  directors, officers, employees, agents and assignees harmless against, and to reimburse them for, any loss,  liability, judgment  or damages  (actual or  consequential)  and all  reasonable  costs and expenses of  defending  any claim  brought  against any of them or any action in which any of them is named as a party (including, without limitation, reasonable accountants,  attorneys' and expert witness fees, costs of investigation,  court costs, other litigation expenses,  damages to Pretzel Time's reputation and good will, travel expenses) which any of them may suffer,  sustain or incur by reason of, arising from or in connection  with  Franchisee's  ownership or operation of the Unit, unless such loss, liability or damage is only due to the negligence of Pretzel  Time  (or  its  Affiliates,  subsidiaries).  Pretzel  Time's  right  to indemnity  under  this  agreement  shall  arise  notwithstanding  that  joint or concurrent  liability  may be  imposed on Pretzel  Time by  statute,  ordinance, regulation or other law.  Franchisee  acknowledges and agrees that any action or inaction by any third party which is not an  Affiliate of Pretzel Time shall not





be attributable to or constitute negligence of Pretzel Time. The indemnities and assumptions of liabilities and  obligations  herein shall continue in full force and effect  subsequent to and  notwithstanding  the expiration or termination of this Agreement.

         Pretzel Time shall notify Franchisee of any claims and Franchisee shall be given the  opportunity  to assume the  defense of the matter.  If  Franchisee fails to assume the defense  within  three (3) days of notice  thereof,  Pretzel Time may defend the action in the manner reasonably appropriate,  and Franchisee shall pay to Pretzel Time all reasonable  costs,  including  without  limitation attorney's  fees,  court  costs,  expert  witness  fees,  travel  and  telephone expenses, incurred by Pretzel Time in effecting such defense, in addition to any such sum which Pretzel Time may pay by reason of any settlement agreed to by the parties or reasonably  negotiated by Pretzel Time in the event  Franchisee fails to assume the defense, or judgment against Pretzel Time.

         21.E.  INDEPENDENT CONTRACTOR.

         It is understood and agreed by the parties hereto that Franchisee is an independent contractor and is not an agent, partner, joint venturer, or employee of  Pretzel  Time.  Pretzel  Time and  Franchisee  agree  that  nothing  in this Agreement  is  intended  to  create  a  fiduciary   relationship  between  them. Franchisee  shall have no right to bind or obligate  Pretzel Time in any way nor shall he  represent  that he has any right to do so.  Pretzel Time shall have no control over the terms and conditions of employment of Franchisee's employees.

         In all public records and in his  relationship  with other persons,  on stationery, business forms and checks, Franchisee shall indicate his independent ownership of the  franchised  Unit and that he is a franchisee  of Pretzel Time. Franchisee  shall exhibit on the premises in such places as may be designated by Pretzel  Time,  a Pretzel  Time  approved  notice  that the  franchised  Unit is operated by an  independent  operator and not by Pretzel Time or Pretzel  Time's Affiliates,  which operate company owned  franchises.  Franchisee shall take all legal  steps  such as a  fictitious  name  registration  to ensure  Franchisee's independent business status.

22.      PROTECTION OF TRADE SECRETS.

         22.A.  CONFIDENTIAL INFORMATION.

         Pretzel Time  possesses  and will further  develop and acquire  certain confidential  and  proprietary  information  and trade  secrets  relating to the operation  of  Pretzel  Time  Units,  which  includes,  but not  limited  to the following  categories  of  information,  methods,  techniques,  procedures,  and knowledge  developed or to be  developed by Pretzel  Time,  its  consultants  or contractors,  its Affiliates or its designees, and/or franchisees (Confidential Information):

         (1)  methods,   techniques,   equipment,   specifications,   standards,          policies, procedures, information, concepts and systems relating to and          knowledge  of  and  experience  in  the   development,   operation  and          franchising of Pretzel Time Units:

         (2) site selection criteria;

         (3) marketing and promotional programs for Pretzel Time Units;

         (4) recipes, ingredients,  formulas, mixes, spices, seasonings, sauces,          recipes for, and methods for the preparation,  cooking,  and serving of          the Products;

         (5)  techniques,  formats,  specifications,  systems,  procedures,  and          knowledge of and experience in the development and operation of Pretzel          Time Units;

         (6) knowledge of specifications  for and suppliers of certain Products,          materials, supplies, equipment, furnishings and fixtures;

         (7) sales data and information  concerning  inventory  requirements for          Products,  materials and supplies, and specifications for and knowledge          of suppliers of certain materials,  equipment, and fixtures for Pretzel          Time Units;

         (8) employee selection procedures, training and staffing levels;

         (9) Operations Manual and other Manuals prepared by Pretzel Time; and

         (10) information concerning Product sales, operating results, financial          performance and other financial data of Pretzel Time Units.

         Pretzel Time will disclose such parts of the  Confidential  Information as  Pretzel  Time deems  necessary  or  advisable  from time to time in its sole discretion  for the  operation  of a  Pretzel  Time  Unit to  Franchisee  during training, and in guidance and assistance furnished to Franchisee during the term of the Franchise, and Franchisee may learn or otherwise obtain from Pretzel Time additional  Confidential  Information  of  Pretzel  Time  during the term of the Franchise.  Franchisee acknowledges that the foregoing Confidential  Information is highly  confidential.  Franchisee  acknowledges  and agrees  that he will not acquire  any  interest  in  Confidential  Information,  other  than the right to utilize Confidential Information disclosed to Franchisee in the operation of the Pretzel  Time  Unit  during  the  term of this  Agreement,  and  that the use or duplication  of  any  Confidential  Information  in  any  other  business  would constitute an unfair method of competition. Franchisee, including its directors,





officers,  shareholders,  and partners agree(s) that Confidential Information is proprietary,  includes  trade  secrets  of  Pretzel  Time  and is  disclosed  to Franchisee solely on the condition that Franchisee  agrees,  and Franchisee (and its Owners) does hereby agree, that he:

         (1) shall not disclose any  information  pertaining to the Pretzel Time          System,  directly or indirectly,  to any person,  natural or corporate,          without the express prior written  consent of Pretzel Time.  Franchisee          may disclose to its Unit Manager such  information  deemed necessary to          disclose,  provided  such Unit  Manager  has  agreed to  maintain  such          information in confidence in Pretzel Time's  confidentiality  agreement          and Pretzel Time has received such executed agreement  (attached hereto          as Exhibit H);

         (2) Will not use  Confidential  Information  in any other  business  or capacity;

         (3)  Will  maintain  the  absolute   confidentiality   of  Confidential          Information during and after the term of this Agreement;

         (4) Will not make  unauthorized  copies of any portion of  Confidential          Information disclosed in written or other tangible form; and

         (5) Will adopt and implement  all  reasonable  procedures  that Pretzel          Time  prescribes  from  time  to time to  prevent  unauthorized  use or          disclosure of Confidential Information,  including, without limitation,          restrictions on disclosure thereof to his employees.

         This  confidentiality  requirement  shall  not apply in a  judicial  or administrative  proceeding  to the extent  Franchisee  is legally  compelled  to disclose such information,  provided Franchisee shall have used his best efforts and shall have afforded  Pretzel Time the  opportunity  to obtain an appropriate protective order or other assurance satisfactory to Pretzel Time of confidential treatment for the information required to be so disclosed.  This restrictions on Franchisee's  disclosure and use of the Confidential  Information shall also not apply to the  disclosure of  information,  methods,  procedures,  techniques and knowledge which are or become  generally  known in the food service  business in the Territory, other than through disclosure (whether deliberate or inadvertent) by Franchisee.

         Notwithstanding   the  foregoing  and  any  other   provision  of  this Agreement,  Franchisee may use the  Confidential  Information in connection with the operation of other Pretzel Time Units (in addition to the Unit)  pursuant to other Franchise Agreements with Pretzel Time.

         22.B.  DISCLOSURE OF IDEAS AND NEW PROCEDURES.

         Franchisee  shall  fully and  promptly  disclose to Pretzel  Time,  all ideas,  concepts,  methods  and  techniques  relating  to  the  development  and operation  of a dessert or snack food  business  conceived  or  developed by the Franchisee  and/or  Franchisee's  employees  during the term of this  Agreement. Franchisee  agrees and grants to Pretzel Time and its Affiliates a perpetual and worldwide  right to use and  authorize  other  Pretzel  Time Units or other food service businesses  operated by Pretzel Time or its Affiliates,  franchisees and designees  to  use  such  ideas,  recipes,  formulas,   concepts,  methods,  and techniques  relating to the development  and/or  operation of a dessert or snack food business.  If incorporated into the Pretzel Time System for the development and/or operation of Pretzel Time Units, such ideas, recipes, formulas, concepts, methods and techniques  shall become the sole and exclusive  property of Pretzel Time without any further consideration to Franchisee. Pretzel Time shall have no obligation to make any lump sum or on-going  payments to Franchisee with respect to any such idea, concept, method, technique or product.  Franchisee agrees that Franchisee  will not use nor will it allow any other person or entity to use any such concept,  method,  technique or product  without  obtaining  Pretzel Time's prior written approval.

23.      ENFORCEMENT.

         23.A.    UNAVOIDABLE DELAYS.

         Delays in the  performance  of any duties  hereunder  which are not the fault of, and not within the reasonable  preventive control of, the party due to perform,  including but not limited to, fire,  flood,  labor  disputes,  natural disasters, acts of God, civil disorders, riots,  insurrections,  work stoppages, slowdowns or disputes,  or other  similar  events,  shall not cause a default in said  performance,  but the parties shall extend the time of  performance  for a period of time equivalent to the length of delay,  or for such other  reasonable period of time as agreed by the parties.

         23.B.    RIGHTS OF PARTIES ARE CUMULATIVE.

         The rights of Pretzel Time and Franchisee  hereunder are cumulative and no exercise or  enforcement by Pretzel Time or Franchisee of any right or remedy hereunder  shall  preclude  the  exercise  or  enforcement  by  Pretzel  Time or Franchisee  of any  other  right  or  remedy  herein  or which  Pretzel  Time or Franchisee is entitled by law to enforce.

         23.C.    WAIVER OF OBLIGATIONS.

         Pretzel Time may by written instrument unilaterally waive or reduce any obligation  of  or  restriction  upon  Franchisee  under  this  Agreement,   and Franchisee may by written instrument unilaterally waive or reduce any obligation of or  restriction  upon  Pretzel  Time under  this  Agreement,  effective  upon delivery of written  notice  thereof to the other or such other  effective  date stated on the notice of waiver.  Whenever this Agreement requires Pretzel Time's





prior  approval  or  consent,  Franchisee  shall make a timely  written  request therefore, and such approval shall be obtained in writing. Pretzel Time makes no warranties  or  guaranties  upon  which  Franchisee  may rely,  and  assumes  no liability or  obligation  to  Franchisee,  by granting  any waiver,  approval or consent to  Franchisee,  or by reason of any  neglect,  delay,  or denial of any request therefore. Any waiver granted by Pretzel Time shall be without prejudice to any other rights Pretzel Time may have, will be subject

to continuing review by Pretzel Time, and may be revoked, in Pretzel Time's sole discretion,  at any  time  and  for  any  reason,  effective  upon  delivery  to Franchisee of ten (10) days' prior written notice.

         23.D.    CONTINUING OBLIGATIONS.

          All  obligations of Pretzel Time and Franchisee  which expressly or by their very nature survive the expiration or termination of this Agreement  shall continue  in  full  force  and  effect  subsequent  to and  notwithstanding  its expiration  or  termination  and until  they are  satisfied  or by their  nature expire.

         23.E.    INVALID OR UNENFORCEABLE PROVISIONS.

         If any provisions of this  Agreement,  or its application to any person or  circumstance,  is deemed  invalid or  unenforceable  by a court of competent jurisdiction,  then the remainder of this  Agreement or the  application of such provision  to other  persons or  circumstances  shall not be  affected  thereby, provided,  however,  that if any provision or application  thereof is invalid or unenforceable,  the court shall  substitute a suitable and  equitable  provision therefore  in order to carry out,  so far as may be valid and  enforceable,  the intent and purpose of the invalid or unenforceable provision.

         If any applicable and binding law or rule of any jurisdiction  requires a  greater  prior  notice  of the  termination  of or  refusal  to enter  into a successor Franchise  Agreement to this Agreement than is required hereunder,  or the  taking of some  other  action  not  required  hereunder,  or if,  under any applicable  and binding law or rule of any  jurisdiction,  any provision of this Agreement  or any  standard or procedure  outlined in the  Operations  Manual is invalid or unenforceable,  the prior notice and/or other action required by such law or rule shall be  substituted  for the  comparable  provisions  hereof,  and Pretzel  Time shall  have the  right,  in its sole  discretion,  to modify  such invalid or unenforceable operations procedure or standard to the extent required to be valid and enforceable.

         23.F.  INJUNCTIVE RELIEF.

         Franchisee  recognizes and  acknowledges the unique value and secondary meaning  attached to the Pretzel Time system,  its  trademarks,  service  marks, standards of operation and Pretzel Time's property.  Franchisee acknowledges and agrees that any noncompliance with the restrictive  covenants  contained herein, including  without  limitation  those provisions  pertaining to  noncompetition, confidentiality  and the improper or  unauthorized  use of Pretzel  Time's Marks will cause  irreparable  damage to Pretzel Time and its franchisees.  Franchisee therefore agrees that should it violate any restrictive covenant, or threaten to breach the  restrictive  covenants,  then Pretzel Time shall be entitled to both permanent  and temporary  injunctive  relief,  without  bond,  from any court of competent  jurisdiction  in addition to any other remedies to which Pretzel Time may be entitled,  at law or in equity,  under this agreement or otherwise  under applicable law.

         23.G.    APPLICABLE LAW.

         Except to the extent governed by the U.S. Trademark Act of 1946 (Lanham Act, 15 U.S.C.  1051 et seq.),  this Agreement,  the other agreements  referred herein,  and the offer and the sale of the  franchise  shall be  governed in all respects  and  aspects  by the  laws of the  Commonwealth  of  Pennsylvania  and expressly  excluding  the laws  pertaining  to the choice of law and conflict of laws.

         23.H.    ENTIRE STATUS OF AGREEMENT.

         This Agreement  contains the entire  agreement of the parties and there are no other oral or written  understandings or agreements  between Pretzel Time and Franchisee  relating to the subject matter of this agreement,  except as set forth in Pretzel  Time's  Offering  Circular  required by Rule under the Federal Trade  Commission  Act, a copy of which has been provided to  Franchisee  and of which   Franchisee   acknowledges   receipt,   there  are  no   representations, inducements, promises, agreements arrangements or undertakings, oral or written, between  the  parties  hereto  other than those set forth and duly  executed  in writing.  No agreement of any kind shall be binding upon either party unless and until the same has been made in writing and duly executed by both parties.

         Upon  acceptance  of this  Agreement  by  Pretzel  Time,  all  previous agreements,  contracts,  arrangements  or  understandings  of any kind,  oral or written,  relative to the franchise granted herein are cancelled, and all claims and demands  thereon are fully  satisfied.  This  agreement,  although  drawn by Pretzel Time,  shall be construed  fairly and reasonable,  and not more strictly against one party than against the other party hereto.

         23.I.    AMENDMENT OF AGREEMENT.

         This  Agreement  shall not be  modified  or  amended  except by written





agreement  executed by both parties hereto.  No oral amendment or waiver will be effective and that this provision cannot be orally amended or waived.  No waiver of default or rights will be effective unless in writing.

         23.J.    HEIRS, SUCCESSORS AND ASSIGNS.

         Subject to the provisions  hereof  relating to transfer and assignment, this Agreement is intended to and does bind the heirs, executors, administrators and successors of any or all of the parties hereto.

         23.K.    CONDITIONS AND CONTINGENCIES.

         The obligations of the parties hereunder are expressly  conditional and contingent  upon the full execution of and performance of all obligations by the parties  under this  Agreement.  This  Agreement is expressly  conditional  upon Franchisee  executing all documents  required by this Agreement  within ten (10) days of receipt of the document.  Failure by Franchisee to execute any documents shall result in the Agreement being null and void.

         In addition during Franchisee's  training,  all documents pertaining to the  franchising of Franchisee as a Pretzel Time Unit shall be held in escrow by Pretzel Time. Title in and to the Pretzel Time Unit shall not pass to Franchisee until  Franchisee  has  been  trained  as  a  Pretzel  Time  franchisee  to  the satisfaction  of Pretzel Time. If Franchisee  fails to  satisfactorily  complete Pretzel Time initial  training,  the appointment of Franchisee as a Pretzel Time franchisee  and the granting of the franchise  business to  Franchisee  shall be null and void, all documents executed between Franchisee and Pretzel Time or its designees with respect to the transaction shall be terminated and cancelled. The Franchisee acknowledges and agrees that no portion of the Franchise fee shall be refunded if Franchisee  fails to complete  Pretzel Time's initial training class to the  satisfaction  of Pretzel Time. If the  Franchisee  completes the initial training to the  satisfaction  of Pretzel  Time,  Pretzel  Time will  provide to Franchisee fully signed copies of the Franchise Agreement.

         It is  understood  and agreed by the parties  that the  granting of the franchise  and all  contracts  and  agreements  entered  into by and between the parties with respect to the Unit are specifically contingent upon the signing of a lease for the Site.  In the event that a lease for the Site cannot be obtained on or before sixty (60) days after  delivery of Pretzel  Time's  approval of the Site at no fault  or delay by  Franchisee,  then all  contracts  and  agreements entered into by Pretzel Time, and  Franchisee  shall become null and void and of no effect,  and all monies  deposited by Franchisee less a nonrefundable  fee of $2,500 shall be refunded.

         23.L.    WAIVER BY PRETZEL TIME.

         No waiver by  Pretzel  Time of any  default  or  failure  to perform by Franchisee,  or of any  breach of the  terms of this  Agreement  or no  failure, refusal or neglect of Pretzel Time to exercise any right,  option or power given it under this Agreement,  shall preclude Pretzel Time from thereafter  requiring strict  compliance or from declaring  this  Agreement and the franchise  granted herein  revoke or  terminated.  The failure of Pretzel  Time to  terminate  this Agreement upon the occurrence of one or more Acts of Default will not constitute a waiver  or  otherwise  affect  the right of  Pretzel  Time to  terminate  this Franchise  because of a continuing or subsequent  failure to cure one or more of the aforesaid events of default or any other default.

         23.M.    COSTS AND EXPENSES OF ENFORCEMENT.

         If a claim  for  amounts  owed by  Franchisee  to  Pretzel  Time or its Affiliates  is  asserted  in any  judicial or  arbitration  proceeding  or later appeal,  or if Pretzel Time is required to enforce the Franchise  Agreement in a judicial or arbitration proceeding or later appeal, the prevailing party will be entitled  to  reimbursement  of its costs  and  expenses,  including  reasonable arbitrators',  accountants'  and  legal  fees,  whether  incurred  prior  to, in preparation for or in contemplation of the filing of any written demand,  claim, action,  hearing or  proceeding  to enforce  the  obligations  of the  Franchise Agreement.  If Pretzel Time incurs  expenses in connection  with your failure to pay when due amounts  owing to Pretzel  Time,  to submit  when due any  reports, information  or  supporting  records or otherwise  to comply with the  Franchise Agreement,  including,  but not limited to legal,  arbitrators'  and  accounting fees, you are required to reimburse Pretzel Time for any such costs and expenses which it incurs.          23.N.    RIGHTS OF PARTIES ARE CUMULATIVE

         THE  RIGHTS  OF  FRANCHISEE  AND  PRETZEL  TIME ARE  CUMULATIVE  AND NO EXERCISE OR  ENFORCEMENT  BY PRETZEL TIME OR  FRANCHISEE  OF ANY RIGHT OR REMEDY HEREUNDER  SHALL  PRECLUDE  THE  EXERCISE  OR  ENFORCEMENT  BY  PRETZEL  TIME OR FRANCHISEE OF ANY OTHER RIGHT OR REMEDY TO WHICH THE PARTY IS ENTITLED.

         23.O.    WAIVER OF JURY TRIAL.

     BOTH PRETZEL TIME AND THE  FRANCHISEE  IRREVOCABLY  WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM,  WHETHER AT LAW OR IN EQUITY, BROUGHT BY EITHER PARTY.  THE PARTIES  FURTHER AGREE THAT NEITHER SHALL DEMAND A JURY TRIAL IN THE EVENT OF LITIGATION.

         23.P.  WAIVER OF PUNITIVE DAMAGES.

         EXCEPT WITH RESPECT TO  FRANCHISEE'S  OBLIGATION  TO INDEMNIFY  PRETZEL TIME, THE PARTIES WAIVE TO THE FULLEST  EXTENT  PERMITTED BY LAW ANY RIGHT TO OR CLAIM FOR ANY PUNITIVE OR EXEMPLARY DAMAGES AGAINST THE OTHER AND AGREE THAT, IN THE EVENT OF A DISPUTE  BETWEEN THEM,  THE PARTY MAKING A CLAIM SHALL BE LIMITED TO RECOVERY OF ANY ACTUAL DAMAGES IT SUSTAINS.





         23.Q.  EXCLUSIVE JURISDICTION.

         BOTH PRETZEL TIME AND  FRANCHISEE  AGREE THAT ANY ACTION ARISING OUT OF OR RELATING  TO THIS  AGREEMENT,  INCLUDING  WITHOUT  LIMITATION,  THE OFFER AND GRANTING OF THE FRANCHISE  RIGHTS  HEREUNDER  SHALL BE INSTITUTED AND MAINTAINED ONLY IN A STATE OR FEDERAL  COURT OF  GENERAL  JURISDICTION  IN DAUPHIN  COUNTY, PENNSYLVANIA  OR THE COUNTY IN WHICH PRETZEL TIME MAINTAINS ITS PRINCIPAL  PLACE OF BUSINESS.

         FRANCHISEE  IRREVOCABLY  SUBMITS TO THE  JURISDICTION OF SAID COURT AND WAIVES ANY OBJECTION  FRANCHISEE MAY HAVE TO EITHER THE JURISDICTION OR VENUE OF SUCH COURT.

         23.R.    LIMITATIONS OF CLAIMS

         EXCEPT FOR CLAIMS  BROUGHT BY PRETZEL TIME WITH REGARD TO  FRANCHISEE'S OBLIGATIONS  TO MAKE PAYMENTS TO PRETZEL TIME  PURSUANT TO THIS  AGREEMENT OR TO INDEMNIFY  PRETZEL TIME PURSUANT TO THIS  AGREEMENT,  ANY AND ALL CLAIMS ARISING OUT OF OR RELATING TO THIS  AGREEMENT  OR THE  RELATIONSHIP  OF  FRANCHISEE  AND PRETZEL  TIME  PURSUANT TO THIS  AGREEMENT  SHALL BE BARRED  UNLESS AN ACTION IS COMMENCED  WITHIN:  (1) TWO (2)  YEARS  FROM THE DATE ON WHICH  THE ACT OR EVENT GIVING  RISE TO THE  CLAIM  OCCURRED  OR (2) ONE (1) YEAR FROM THE DATE ON WHICH FRANCHISEE  OR  PRETZEL  TIME KNEW OR SHOULD  HAVE  KNOWN,  IN THE  EXERCISE  OF REASONABLE  DILIGENCE OF THE FACTS GIVEN RISE TO SUCH CLAIMS,  WHICHEVER  OCCURS FIRST.

24.      ACKNOWLEDGMENTS AND REPRESENTATIONS.

         Franchisee  acknowledges  that he has read this  Agreement  and that he understands  and accepts the terms,  conditions and covenants  contained in this Agreement as being reasonably  necessary to maintain Pretzel Time's high quality and service and the uniformity of those  standards at all Pretzel Time Units and thereby to protect and preserve the goodwill of the Marks.

         Pretzel Time  disclaims  and  Franchisee  acknowledges  that he has not received or relied upon any representations, promises, guarantees or warranties, expressed  or  implied,  made to induce the  execution  hereof or in  connection herewith which is not expressly contained herein or in the disclosure statement. More specifically,  Franchisee  acknowledges and agrees that no person acting on behalf of Pretzel Time or its affiliated  companies has made any written or oral claim,  statement,  assurance,  promise or projection of any sort  regarding the actual  or  prospective  sales,  earnings,  gross  profit  or net  profit of the franchise,  which is the subject of this agreement.  Franchisee acknowledges and agrees that Pretzel Time's officers, directors, employees and agents act only in a representative  and not in a personal capacity in connection with any of their dealings with  Franchisee.  Franchisee  recognizes that neither Pretzel Time nor any other person can guarantee  Franchisee's success in the franchised business. Franchisee  further  represents  to Pretzel  Time, as an inducement to its entry into this  Agreement,  that all statements in  Franchisee's  application for the Franchise   are  accurate  and  complete  and  that   Franchisee   has  made  no misrepresentations or material omissions in obtaining the franchise.

25.      CONSTRUCTION.

         25.A.    HEADINGS.

         The Section headings  throughout this Agreement are for the convenience and reference only of the parties and their  attorneys,  and the words contained therein shall not be held to expand,  modify,  limit, define,  amplify or aid in the interpretation, construction or meaning of this Agreement.

         25.B.  TERMINOLOGY.

         All terms and words used in this  Agreement,  regardless  of the number and gender in which they are used,  shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine,  feminine, or neuter,  as the  context  or sense of this  Agreement  or any  Section or clause herein may require,  as if such word had been fully and properly  written in the appropriate number and gender.          The  term  Franchisee  as  used  herein  is  applicable  to one or more persons,  a  corporation  or a  partnership,  as the case may be. If two or more persons are at any time Franchisee hereunder,  their obligations and liabilities to  Pretzel  Time  shall be joint and  several.  References  to  Franchisee  and assignee  which are  applicable to an individual or  individuals  shall mean the Owners of  Franchisee or the  assignee,  if the  Franchisee or the assignee is a corporation nor partnership.

         25.C.    COUNTERPARTS.

         This Agreement may be executed in one or more counterparts, any and all of which shall constitute one and the same instrument.

         25.D.  REASONABLENESS.

         Pretzel Time and  Franchisee  agree to act  reasonably  in all dealings with each other pursuant to this Agreement.  Whenever the consent or approval of either party is required or  contemplated,  the party whose  consent is required agrees not to unreasonably  withhold the same,  unless such consent is expressly subject to such party's sole discretion pursuant to the terms of this Agreement. In no event shall Pretzel Time's withholding of consent allow Franchisee a claim for money damages.

26.      SECURITY AGREEMENT.





         26.A.    SECURITY INTEREST.

         In order  to  secure  full and  prompt  payment  of the fees and  other charges to be paid by Franchisee to Pretzel Time,  and to secure  performance of the other  obligations  and covenants to be performed by Franchisee,  under this Agreement,  Franchisee hereby grants Pretzel Time a valid and effectual security interest  in,  lien  upon,  and  right of set off  against  all of  Franchisee's interest  in  the  improvements,  fixtures,  inventory,  goods,  appliances  and equipment now or hereafter owned and located at the Unit (whether annexed to the Premises or not) or used in connection with the business  conducted at the Unit, including,  without in any manner limiting the generality of the foregoing,  all machinery,  materials,  appliances and fixtures for  generating or  distributing air, water, heat,  electricity,  light, fuel or refrigeration,  for ventilating, cooling or sanitary purposes, for the exclusion of vermin or insects and for the removal  of  dust,   refuse  or  garbage;   all   engines,   machinery,   ovens, refrigerators,   freezers,  furnaces,   partitions,  doors,  vaults,  sprinkling systems, light fixtures,  fire hoses, fire brackets,  fire boxes, alarm systems, brackets,  screens,  floor tile,  linoleum,  carpets,  plumbing,  water systems, appliances,  walk-in refrigerator boxes, cabinets,  dishwashers,  stoves, set-up tables,  rolling  counters,   kitchen  ranges,  display  counters  and  shelves, humidified  cabinets,  computers and computer software,  and other equipment and installations;  all other and  further  installations  and  appliances;  all raw materials,   work  in  process,  finished  goods  and  all  inventory;  and  all replacements  thereof,  attachments,   additions  and  accessions  thereto,  and products  and  proceeds  thereof  in any  form,  including  but not  limited  to insurance proceeds and any claims against third parties for loss or damage to or destruction  of any or all of the foregoing  (collectively,  the  Collateral). Without the prior  written  consent of Pretzel Time,  Franchisee  agrees that no lien upon or security  interest in the  Collateral  or any item  thereof will be created or suffered  to be created  and that no lease will be entered  into with respect to any item of Collateral. Franchisee will not sell or otherwise dispose of any item of Collateral,  or remove any Collateral  from the Premises,  unless the same is replaced by a similar item of equal or greater value, and except for the sale of  inventory in the  ordinary  course of  business,  without the prior written  consent  of Pretzel  Time.  Franchisee  agrees to give to Pretzel  Time advance notice in writing of any proposed change in Franchisee's name,  identity or structure and not to make any such change  without the prior written  consent of Pretzel Time and compliance with the provisions of this Agreement. Franchisee agrees  to  execute  for  filing  such  financing  statements  and  continuation statements as Pretzel Time may require from time to time. Pretzel Time agrees to pay all filing  fees,  including  fees for  filing  continuation  statements  in connection with such financing statements.

         26.B.  DEFAULT REMEDIES UNDER U.C.C.

         In the event of a default by Franchisee  under this Agreement,  Pretzel Time  shall  have the  remedies  and rights  available  as a secured  party with respect to the Collateral  under the Uniform  Commercial  Code as in effect from time to time in the  state  where the  premises  are  located.  The grant of the security interest to Franchisee  pursuant to this Section shall not be construed to derogate  from or impair any other rights  which  Pretzel Time may have under this Agreement or otherwise at law or equity.

27.      NOTICES.

         27.A.    DELIVERY OF NOTICES.

         All  written  notices  permitted  or required  to be  delivered  by the provisions  of this  Agreement  or of the  Operations  Manual shall be deemed so delivered to the Franchisee:

         a.   At the time delivered by hand; or

         b.  One  business  day  after  transmission  by  facsimile,   telecopy, telegraph or other electronic system;

         c. One  business  day after being  placed in the hands of a  commercial          carrier service for next business day delivery; or

         d. Three (3) business days after placement in the United States mail by          registered or certified mail, return receipt requested, postage prepaid          and addressed to the party to be notified at the addresses listed below          or the most current  business  address of which the notifying party has          been notified.  If Franchisee  refuses delivery of the same then notice          shall be deemed delivered when refused by Franchisee.

         IF TO PRETZEL TIME:

                  Pretzel Time, Inc.                   Attn:  Martin Lisiewski, CEO                   4800 Linglestown Road, Suite 202                   Harrisburg, Pennsylvania 17112

         WITH COPIES TO:

                  Rashti and Mitchell                   Attorneys at Law                   Attn:  Timothy T. Mitchell                   4422 Ridgeside Drive                   Dallas, Texas 75244





         IF TO FRANCHISEE:

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first written above.

WITNESSES:                                           PRETZEL TIME, INC.                                                               FRANCHISOR

- -----------------------                                                               BY:

_______________________                           NAME:  ____________________

                                                 TITLE:  _____________________

WITNESSES:                                  FRANCHISEE:                                                   ----------------------------

                                                              BY:

______________________                           NAME:  _____________________

                                                TITLE:

                                              CORPORATE ACKNOWLEDGMENT

STATE OF                                        )                                                      : ' COUNTY OF                                     )

On this _____ day of ___________, 19 __, before me, (Name of Notary)

     the undersigned  officer,  personally appeared and , known personally to me to be the Presidentand Secretary,  respectively, of the above-named corporation, and that  they,  as such  officers,  being  authorized  to do so,  executed  the foregoing  instrument for the purpose therein contained,  by signing the name of the corporation for themselves as such officers.

         IN WITNESS WHEREOF I have hereunto set my hand and official seal.

                                                              (Notary Public)

My Commission Expires:

(Notary Seal)

                INDIVIDUAL OR PARTNERSHIP ACKNOWLEDGMENT

STATE OF                                        )                                                      : ' COUNTY OF                                     )

         On this _____ day of ___________, 19 __, before me,                                 (Name of Notary)

     the undersigned  officer,  personally  appeared to me personally  known and known to me to be the same  person(s)  whose  name(s)  is  (are)  signed  to the foregoing  instrument,  and acknowledged the execution  thereof for the uses and purposes therein set forth.

         IN WITNESS WHEREOF I have hereunto set my hand and official seal.

                                                              (Notary Public)

My Commission Expires:





(Notary Seal)

FRAN.AGT 6.5.96                                FRANCHISE AGREEMENT

                                 By and between

          Pretzel Time, Inc., a Pennsylvania corporation as Franchisor

                                       and

                                  , Franchisee

                                    EXHIBIT C                             TO THE OFFERING CIRCULAR                               OF PRETZEL TIME, INC.

                               FRANCHISE AGREEMENT

                                   Exhibit M

                                    Sublease

           [Substitute 2 page short form - Karen to send Tim the disk]

Answer: Highlight the parts (if any) of this contract related to Covenant Not To Sue that should be reviewed by a lawyer. Details: Is a party restricted from contesting the validity of the counterparty’s ownership of intellectual property or otherwise bringing a claim against the counterparty for matters unrelated to the contract?


Question: Exhibit 10.1    STRATEGIC ALLIANCE AGREEMENT    This Strategic Alliance Agreement (this Agreement), effective as of 15 April, 2009 (the Effective Date), is by and between Information  System Associates, Inc., a Florida Corporation whose registered office is 1151 Southwest 30th Street, Suite E, Palm City FL, 34990 (ISA) and  Rubicon Software Group plc, a company registered under the laws of England and Wales (Registered Company No. 5701810) whose registered  office is Rubicon House, Guildford Road, West End, Surrey GU24 9PW (Rubicon).    Background    WHEREAS, Rubicon desires to engage ISA as Rubicon's exclusive agent in the United States for the purposes of reselling Rubicon's  software and services;    WHEREAS, ISA desires to engage Rubicon as its software development partner and to provide various consulting services in Europe;  and    WHEREAS, ISA and Rubicon desire to enter into this Agreement for the purpose of granting ISA the right to distribute such products  and services and Rubicon to supply such services.    NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as hereinafter set forth.    1. DEFINITIONS.      1.1 Confidential Information shall mean all non-public information of a Party, which is disclosed to the other Party hereunder, including,  without limitation, trade secrets, technical information, business information, sales information, marketing information, customer-buying patterns,  algorithms, customer and potential customer lists and identities, product sales plans, sublicense agreements, inventions, developments,  discoveries, software, know-how, methods, techniques, formulae, data, processes and other trade secrets and proprietary ideas, whether or not protectable under patent, trademark, copyright or other areas of law, and any other information marked as proprietary  or confidential at the  time of disclosure. Notwithstanding the foregoing, Confidential Information shall not include any information that (a) was or has become  publicly available without restriction through no fault of the receiving Party or its employees or agents; (b) is received without restriction from a  third party that, to the best knowledge of the receiving Party, did not have an obligation of confidentiality to the disclosing Party; (c) was  rightfully in possession of the receiving Party without restriction prior to its disclosure by the other Party; or (d) was independently developed by  employees of the receiving Party that had no knowledge of or access to such information, as evidenced by written records of the receiving Party.     1.2 Contract Services shall mean various software development and implementation services to be provided by Rubicon as described in  one or more Statement(s) of Work (SOW) that reference this Agreement in a form substantially similar to that set forth in Exhibit A.     1.3 Day Rate shall mean the daily rate at which Rubicon will provide services to ISA or ISA Clients. The Day Rate for each type of service  provided will be as per the rate card set out in Exhibit C, such rates to be subject to annual review by the Parties on the anniversary of this  Agreement provided that such rates may be reviewed on an ad hoc basis at any time should the Parties become aware of specific information  which impacts on the validity or feasibility of the Day Rate.     1.4 Commission Rate shall mean the commission rate which will be used to calculate any amount which Rubicon will pay to ISA after the  provision of Rubicon Offerings to ISA Clients as set forth in Exhibit D, such rates to be subject to annual review by the Parties on the anniversary  of this Agreement provided that such rates may be reviewed on an ad hoc basis at any time should the Parties become aware of specific  information which impacts on the validity or feasibility of the Commission Rate.     1.5 Documentation shall mean the printed and/or electronic materials relating to the Rubicon Offerings, including, but not limited to,  user's manuals and technical manuals as may be provided by Rubicon to ISA.     1.6 Due Diligence Services shall have the meaning set forth in Section 3.3, below.     1.7 End User shall mean a party that obtains a license to use the Rubicon Offerings from ISA or a customer of ISA under the terms and  conditions set forth herein.     1.8 Intellectual Property shall mean any and all trade secrets, patents, copyrights, trademarks, service marks, trade names, domain names,  trade dress, URLs, brand features, know-how and similar rights of any type under the laws of any applicable governmental authority, including,  without limitation, all applications and registrations relating to any of the foregoing..     1.9  ISA Client shall mean: (i) an entity to which Rubicon provides services pursuant to Section 3, below; and (ii) an entity that ISA has  consulted with before or during the Term regarding the provision of goods or services.     1.10 Notice shall have the meaning ascribed thereto in Section 11.5.     1.11 Parties shall mean ISA and Rubicon.     1.12 Rubicon Offerings shall mean (i) the software programs described in Exhibit B, (as may be updated from time to time) in object code  format, and including all corrections, updates, modifications and enhancements to such software that may be provided to ISA by Rubicon from  time to time; and (ii) software development services.     1.13 Term shall have the meaning ascribed thereto in Section 6.1.     1.14 Share Subscription Agreement shall mean the agreement in the agreed form between ISA and Rubicon whereby ISA shall subscribe  for shares in Rubicon.     2. ISA RESELLER SERVICES.





   2.1 Rubicon hereby grants to ISA during the Term (as defined below) and subject to the exclusions described in 2.4 below an exclusive, non-transferable license in the United States to market, sell, use, display, perform, sublicense and distribute the Rubicon Offerings, the  Documentation and, subject to Section 2.2, any upgrades thereto, subject to the conditions set forth in this Agreement. As used in this Section  2.1, the terms market, sale, sell, distribute, and sublicense shall mean the sale of a license having a term of at least one year to an End  User pursuant to which the End User may use, perform and display the Rubicon Offerings and the Documentation. This license is granted to ISA  for the marketing, sale and distribution of the Rubicon Offerings and the Documentation to End Users for their internal use only.     2.2 Rubicon hereby grants to ISA during the Term and subject to the exclusions described in 2.4 below an exclusive, non-transferable  license in the United States to grant licenses to use, display, perform and distribute the Rubicon Offerings and the Documentation to other  resellers, including, but not limited to, distributors, Original Equipment Manufacturers, system integrators and Value-Added Resellers, for further  sale and distribution to End Users for their use as described above, subject to the conditions set forth in this Agreement.     2.3 The license grants described in Sections 2.1 and 2.2 shall include all upgrades to the Rubicon Offerings and the Documentation.  Rubicon shall promptly notify ISA of each such upgrade to the Rubicon Offering and the Documentation which will be available to ISA under this  Agreement.     2.4 The exclusive licenses described in Sections 2.1 and 2.2 shall not include customer agreements, sales of Rubicon Offerings and/or  Documentation which arise through customer marketing and distribution arrangements which are in place between Rubicon and third parties at the  date hereof. Rubicon agrees not to enter into any additional agreement to sell Rubicon Offerings or Documentation or additional distribution  arrangements with third parties in the United States from the date hereof without the prior written approval of ISA, which approval shall not be  unreasonably withheld.     3. RUBICON SERVICES.      3.1 Subject to the terms and conditions of this Agreement, Rubicon shall provide the Contract Services, as agreed between ISA to  Rubicon in the relevant SOW, to ISA's reasonable satisfaction. The Contract Services shall be performed at the facilities and location reasonably  designated by ISA (with appropriate agreements in place to ensure reasonable reimbursement to Rubicon of out-of-pocket expenses). Upon  written request of ISA, Rubicon shall provide biweekly written reports describing the progress made in performing the Contract Services since the  preceding report, and the progress expected to be made in the next succeeding period.     3.2 ISA may, at any time, request reasonable additions, deletions, or revisions in the Contract Services by delivering a change order to  Rubicon. Upon receipt of a change order from ISA, Rubicon shall notify ISA of any price revisions which are associated with the change order and  if ISA agree to the revised charges, the parties shall proceed with the Contract Services as revised. All such Contract Services shall be executed  under the terms and conditions of this Agreement and the applicable SOW (as revised by the change order). If any change order causes an  increase or decrease in the cost of the Services to be performed or scheduled completion date or expenses incurred or to be incurred by Rubicon,  an equitable adjustment will be made by mutual agreement.     3.3 From time to time and as agreed between ISA and Rubicon, Rubicon shall provide due diligence services regarding the software and  other technology issues of potential merger and acquisition, joint venture or other strategic partner companies (a Target Company) that may be  identified by ISA (the Due Diligence Services). In connection with any such Due Diligence Services, Rubicon agrees that it shall abide by the  reasonable terms of any third party confidentiality agreement that may be entered into by ISA with any such Target Company on the same terms  as are applicable to ISA. Rubicon's fees for such due diligence services (the Due Diligence Fees) shall be at agreed upon rates which shall not  exceed the Day Rate. ISA agrees to reimburse Rubicon upon provision of valid receipts for Rubicon's reasonable out-of-pocket expenses incurred  in the provision of the Due Diligence Services.     4. COMMERCIAL TERMS.     4.1 ISA Fees. In consideration of the services set forth in Section 2, ISA will sell or market the Rubicon Offerings at pre agreed list prices,  and shall receive a commission on the gross revenues paid for the Rubicon Offerings less VAT if applicable of the Commission Rate; provided,  however, that in the event that Rubicon proposes to charge at other than the Day Rate for the software development the Parties shall use all  reasonable endeavours to agree an equitable adjustment to the Commission Rate.     4.2 Rubicon Fees.     4.2.1 In consideration of the Contract Services, Rubicon will receive payment as set forth in an SOW of its undisputed invoices (or  its pro rata share) that it has submitted to ISA immediately following receipt of payment by ISA from the ISA Client.     4.2.2 In consideration of the Due Diligence Services, ISA shall pay to Rubicon the Due Diligence Fees within 30 days of receipt  from Rubicon of an invoice and any previously requested supporting documentation, including time charges.     4.2.3 In addition to the payments set forth in sections 4.2.1 and 4.2.2, above, ISA will pay Rubicon 30% of ISA's profits (defined as  gross revenues less costs directly incurred in the generation of such revenues) on projects for which Rubicon has provided Contract Services  after ISA has recouped any directly attributable start-up costs with respect to such project up to a cumulative maximum of £100,000 of such costs  associated with all such projects from the date of this agreement.     4.3 Target Revenues. ISA confirms that its current intention is to try and procure that Rubicon's total gross revenues less VAT if  applicable relating to the provision of services to ISA Clients or to clients referred to Rubicon by ISA will exceed £1million per annum. The Parties  acknowledge that any failure by ISA to procure such revenues for Rubicon will not constitute a breach of this Agreement and ISA will have no  liability for any such failure or otherwise in connection with this clause 4.3.     4.4 Payment terms. Each party shall account to the other on a monthly basis in respect of all sales and revenue received, and payments  shall be made within 30 days of receipt of a properly valid invoice.     4.5 Audits. Each Party shall retain the financial records relating to all payments owed and/or paid under this Agreement for a period of six  years from the date such payment obligation arose.     4.6 Purchase of Rubicon Shares. This Agreement is conditional upon ISA and Rubicon entering into the Share Subscription Agreement.





5. INTELLECTUAL PROPERTY.     5.1 ISA's Intellectual Property. As between ISA and Rubicon, all right, title and interest in and to Intellectual Property which is created  by or provided by ISA, including, without limitation, as they may be part of or incorporated into any Contract Service or otherwise used by  Rubicon, all goodwill associated therewith and the copyright and all other Intellectual Property rights inherent in or appurtenant to the foregoing  are and shall be and shall remain the sole property of ISA. Rubicon acknowledges that neither it nor any other persons or entities will by virtue of  this Agreement acquire any ownership interest in the Intellectual Property of ISA, or the Intellectual Property rights inherent in or appurtenant to  any of the foregoing, or any associated goodwill and that its rights thereunder are strictly limited to those specifically granted in this Agreement. Rubicon shall not contest ownership by ISA of any of the foregoing. No right, license, release or other right is granted by implication, estoppel or  otherwise by ISA to Rubicon or any of Rubicon's affiliates except for the rights and licenses expressly granted under this Agreement. Except for  the rights and licenses expressly granted under this Agreement, ISA reserves all rights to the Intellectual Property of ISA, including, without  limitation, translation rights, rights of modification and rights to source code.     5.2 Works-for-hire.     5.2.1 As regards Intellectual Property created by Rubicon, Rubicon acknowledges and agrees that those Works, as defined below,  shall belong exclusively to ISA subject to payment in accordance with clause 4.2. Works means, collectively, any work product (of any type),  software, developments, processes, improvements, and all works of authorship, in whole or in part, whether patentable or not and whether  copyrightable or not created as services provided directly to ISA or on behalf of ISA by Rubicon, which (i) are conceived or made by Rubicon, its  employees, contractors, consultants or agents during the Term and relate directly to the business in which ISA and Rubicon(during the Term by ISA) are, had been or were proposing to be engaged in; or (ii) are conceived or made by Rubicon, its employees, contractors, consultants or  agents during or after the Term and are made through the use of any ISA Confidential Information, or which result from any work performed by  Rubicon, its employees, contractors, consultants or agents for ISA. It is agreed that the terms under which Rubicon agrees to work with ISA,  including the Day Rate, reflect and will reflect any value or potential value of Intellectual Property created by Rubicon on behalf of ISA.     5.2.2 Rubicon shall make full and prompt disclosure to ISA of all Works as they are made (whether or not conceived or made jointly  with others). To the extent copyrightable, all Works shall be deemed to be works for hire and ISA shall be deemed to be the author thereof under  the U.S. Copyright Act. With respect to Works that do not constitute works for hire,  Rubicon, its employees, contractors, consultants and  agents do hereby assign to ISA or its designee all of their respective right, title and interest in and to such Works and all related patents, patent  applications, copyrights and copyright applications and does hereby agree that these obligations are binding upon their respective assigns,  executors, administrators and other legal representatives. Rubicon, its employees, contractors, consultants and agents do hereby waive all claims  to moral rights to the Works. During the Term and continuing thereafter, Rubicon does hereby agree to take all such further reasonable actions on  its own behalf and with respect to its employees, contractors, consultants and agents, including without limitation, the execution and delivery of  copyright applications, patent applications, declarations, oaths, formal assignments, assignments of priority rights, and powers of attorney, which  ISA may deem necessary or desirable in order to protect its rights and interests in and to the Works. If ISA is unable, after reasonable effort, to  secure any necessary signature on any such documents, any executive officer of ISA shall be entitled as agent and attorney-in-fact to execute  such documents.     5.3 Rubicon's Intellectual Property. As between ISA and Rubicon, all right, title and interest in and to the Rubicon Offerings and, subject  to the provisions of Section 5.2, any other Intellectual Property of Rubicon, including, without limitation, as used by Rubicon or ISA hereunder, all  goodwill associated therewith and the copyright and all other Intellectual Property rights inherent in or appurtenant to the foregoing are and shall  be the sole property of Rubicon. ISA acknowledges that, except as otherwise set forth herein, neither it nor any other persons or entities will by  virtue of this Agreement acquire any ownership interest in such Intellectual Property, or the Intellectual Property rights inherent in or appurtenant  to any of the foregoing, or any associated goodwill and that its rights thereunder are strictly limited to those specifically granted in this  Agreement. ISA shall not contest ownership by Rubicon of any of the foregoing. No license, release or other right is granted by implication,  estoppel or otherwise by Rubicon to ISA or any of ISA's affiliates except for the rights and licenses expressly granted under this Agreement.  Except for the rights and licenses expressly granted herein, Rubicon reserves all rights to the Rubicon Service Offerings, including, without  limitation, translation rights, rights of modification and rights to source code.     6. TERM AND TERMINATION; WITHDRAWAL.     6.1 Term. Unless terminated sooner, the term of this Agreement shall begin on the Effective Date and continue for three (3) years  thereafter (the Initial Term) and shall automatically renew for additional one (1) year terms on the terms and conditions set forth herein (each a  Renewal Term and collectively, the Term) unless either party gives the other Party Notice of its intention to terminate this Agreement ninety  (90) days before the end of the Initial Term or Renewal Term, if any.     6.2 Termination.     6.2.1 For Cause. Either Party may serve Notice to the other Party to terminate this Agreement immediately in the event any material  breach of a material provision of this Agreement by such other Party remains uncured 30 days in the case of a breach of a payment obligation, or  45 days for all other material breaches, after notice of such breach was received by such other Party.     6.2.2 For Bankruptcy. Either Party may terminate this Agreement immediately upon Notice to the other Party in the event the other  Party (a) permanently ceases operations, (b) becomes or is declared insolvent or bankrupt, (c) is the subject of any proceeding related to its  liquidation or insolvency (whether voluntary or involuntary) that is not dismissed within 90 calendar days or (d) makes an assignment for the  benefit of creditors.     6.2.3 For Contesting Intellectual Property Rights. Either Party may terminate this Agreement upon ten Business Day's Notice to  the other Party in the event the other Party contests or challenges to a material degree any of the other Party's Intellectual Property rights referred  to in Sections 5.1, and 5.3, respectively.     7. NON-COMPETITION.     7.1 During the period beginning on the Effective Date and ending on the later of (i) the end of the Initial Term and (ii) the date falling two  years after completion of the most recent services provided by Rubicon under clause 7 (the Non-Competition Period) and in the ISA Geographic  Area, as defined below, Rubicon agrees not to in any capacity, engage or have a financial interest in any ISA Competing Business, as defined  below, or provide managerial, supervisory, administrative, or financial services relating to any ISA Competing Business, including making available  any information or funding to any such ISA Competing Business. Further, during the Non-Competition Period, Rubicon shall not solicit any





employee of ISA or any employee of any ISA Client. If a court determines that the foregoing restrictions are too broad or otherwise unreasonable  under applicable law, including with respect to time or space, the court is hereby requested and authorized by the Parties to revise the foregoing  restrictions to include the maximum restrictions allowable under applicable law. Rubicon acknowledges, however, that the Parties have negotiated  this Section and that the time limitations, the limitation on activities and the geographic limitations are reasonable in light of the circumstances  pertaining to ISA and this transaction. ISA Competing Business means any person or entity of any type whatsoever engaged in the business of providing data centre audit and data centre optimization services. ISA Geographic Area means worldwide.     7.2 During the period beginning on the Effective Date and ending on the later of (i) the end of the Initial Term and (ii) the date falling two  years after completion of the most recent services provided by Rubicon under clause 7 (the Non-Competition Period)  and in the Rubicon  Geographic Area, as defined below, ISA agrees not to in any capacity, engage or have a financial interest in any Rubicon Competing Business, as  defined below, or provide managerial, supervisory, administrative, or financial services relating to any Rubicon Competing Business, including  making available any information or funding to any such Rubicon Competing Business. Further, during the Non-Competition Period, ISA shall not  solicit any employee of Rubicon or any employee of any Rubicon Client. If a court determines that the foregoing restrictions are too broad or  otherwise unreasonable under applicable law, including with respect to time or space, the court is hereby requested and authorized by the Parties  to revise the foregoing restrictions to include the maximum restrictions allowable under applicable law. ISA acknowledges, however, that the Parties have negotiated this Section and that the time limitations, the limitation on activities and the geographic limitations are reasonable in light of the circumstances pertaining to Rubicon and this transaction. Rubicon Competing Business  means any person or entity of any type  whatsoever engaged in the business of providing software development services for clients. Rubicon Geographic Area means Europe.     7.3 In the event that ISA wishes to carry out any software development work of any nature during the Non-Competition Period, it will  notify Rubicon of the same and allow Rubicon the opportunity to pitch for such work.        8. CONFIDENTIALITY.     8.1 Confidentiality Obligations. Except as permitted elsewhere under this Agreement, each Party agrees (a) to take Reasonable Steps (as  defined below) to receive and maintain the Confidential Information of the other Party in confidence, (b) to take Reasonable Steps (as defined  below) not to disclose such Confidential Information to any third parties other than with the written consent of the disclosing Party and (c) to  promptly notify the other Party upon learning of any law, rule, regulation or court order that purports to compel disclosure of any Confidential  Information of the other Party and to reasonably cooperate with the other Party in the exercise of the other Party's right to protect the  confidentiality of such Confidential Information, including, but not limited to, seeking to dispute the cause of such disclosure and/or to receive confidential treatment for the Confidential Information disclosed as a result of such cause. Neither Party shall use all or any part of the Confidential  Information of the other Party for any purpose other than to perform its obligations, or the exercise of such Party's rights and licenses, under this  Agreement. Each Party shall (i) limit access to any Confidential Information of the other Party received by it to its employees, contractors,  consultants and agents who have a need-to-know in connection with the performance of such Party's obligations, or the exercise of such Party's rights, under this Agreement; and (ii) advise such employees, contractors, consultants and agents of the confidential nature thereof and of the  obligations set forth in this Agreement and similarly bind them in writing. Each Party shall be responsible for any breaches of the obligations of  confidentiality and restricted use set forth herein by any employee, contractor, consultant or agent to whom such Party disclosed any Confidential  Information of the other Party. As used herein, Reasonable Steps means using at least the same degree of care that the receiving Party uses to  protect its own Confidential Information, and, in any event, no less than reasonable care.      8.2 Exclusions. Nothing contained herein shall prevent a Party from disclosing Confidential Information pursuant to any applicable law or  by a governmental order, decree, regulation, rule, process or court order; provided, however, that such Party complies with the notice provisions  of Section 8.1(c) to the extent permissible under applicable laws, rules, regulations or court orders. Such disclosure shall not of itself alter the  status of such information hereunder for all other purposes as Confidential Information.     8.3 Provisions of this Agreement. Each Party agrees that the provisions of this Agreement shall be treated as Confidential Information  and that no reference shall be made thereto without the prior written consent of the other Party (which consent shall not be unreasonably  withheld) except (a) to its accountants, banks, financing sources, lawyers and other professional advisors, provided that such parties undertake in  writing (or are otherwise bound by rules of professional conduct) to keep such information strictly confidential, (b) in connection with the enforcement of this Agreement, (c) in connection with a merger, acquisition or proposed merger or acquisition, or (d) pursuant to joint press  releases prepared in good faith or (e) as permitted under Section 8.2. The Parties will consult with each other, in advance, with regard to the terms  of all proposed press releases, public announcements and other public statements with respect to the transactions contemplated hereby.     8.4 Termination. Upon termination of this Agreement, all Confidential Information shall be returned to the disclosing Party or destroyed  unless otherwise specified or permitted elsewhere under this Agreement or as otherwise mutually agreed upon by the Parties. The confidentiality  obligations contained in this Section 8 shall survive termination of this Agreement for a period of three years.     8.5 Injunction. Each Party acknowledges and agrees that the provisions of this Section 8 are reasonable and necessary to protect the  other Party's interests in its Confidential Information, that any breach of the provisions of this Section 8 may result in irreparable harm to such  other Party, and in such event the exact amount of damages is now and will be difficult to ascertain and the remedies at law for any such failure  would not be reasonable or adequate. Accordingly, in the event of any breach or threatened breach of the provisions of this Section 8 by a Party  hereto, the other Party, in addition to any other relief available to it at law, in equity or otherwise, shall be entitled to seek temporary and permanent  injunctive relief restraining the breaching Party from engaging in and/or continuing such conduct, without the necessity of proving actual  damages or posting a bond or other security. Further, the prevailing Party in any such injunctive action shall be entitled to payment from the other  Party of the reasonable attorneys' fees and costs incurred in such proceeding.     9. REPRESENTATIONS AND WARRANTIES.     9.1 By ISA. ISA hereby represents, covenants and warrants to Rubicon that:     9.1.1 It has the corporate power to enter into this Agreement;     9.1.2 It has the right to perform its obligations this Agreement;     9.1.3 When executed and delivered by it, this Agreement will constitute a legal, valid and binding obligation of it, enforceable  against it in accordance with this Agreement's provisions;





9.1.4 ISA shall perform all services required to be performed by ISA under this Agreement in a professional manner and all ISA  personnel assigned to provide such services shall be duly qualified to provide such services; and     9.1.5 While at Rubicon's facilities, all ISA employees, contractors, consultants and agents shall observe and follow Rubicon's  reasonable work rules, policies and standards as the same are communicated to ISA or such persons in writing, including, without limitation, those  rules, policies and standards of Rubicon relating to security of and access to its facilities and to its telephone systems, electronic mail systems and  computer systems. ISA shall cooperate with Rubicon in promptly removing from the Rubicon premises any of such persons who violates any of  the foregoing work rules, policies or standards of Rubicon.     9.2 By Rubicon. Rubicon hereby represents, covenants and warrants to ISA that:     9.2.1 It has the corporate power to enter into this Agreement;     9.2.2 It has the right to perform its obligations this Agreement;     9.2.3 When executed and delivered by it, this Agreement will constitute a legal, valid and binding obligation of it, enforceable  against it in accordance with this Agreement's provisions;     9.2.4 Rubicon shall perform all services required to be performed by Rubicon under this Agreement in a professional manner and all  Rubicon personnel assigned to provide such services shall be duly qualified to provide such services; and     9.2.5 While at ISA's facilities, all Rubicon employees, contractors, consultants and agents shall observe and follow ISA's  reasonable work rules, policies and standards as the same are communicated to Rubicon or such persons in writing, including, without limitation,  those rules, policies and standards of ISA relating to security of and access to its facilities and to its telephone systems, electronic mail systems  and computer systems. Rubicon shall cooperate with ISA in promptly removing from the ISA premises any of such persons who violates any of  the foregoing work rules, policies or standards of ISA.     10. DISCLAIMER OF WARRANTY, LIMITATION OF LIABILITY AND INDEMNIFICATION.     10.1 Disclaimer of Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, ISA AND RUBICON HEREBY DISCLAIM  ALL WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT TO ANY AND ALL ISA AND RUBICON SERVICES  RESPECTIVELY, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR  PURPOSE, TITLE AND NON-INFRINGEMENT.      10.2 Limitation of Liability. EXCEPT IN CONNECTION WITH A BREACH BY EITHER PARTY OF SECTION 8, NEITHER PARTY WILL  BE LIABLE FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL, EXEMPLARY, PUNITIVE OR INCIDENTAL DAMAGES ARISING OUT OF OR  RELATED TO THIS AGREEMENT, HOWEVER CAUSED AND UNDER ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE), EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. ISA SHALL NOT BE LIABLE FOR ANY LOSS OF DATA, OR  ANY INTERRUPTION OF OR DELAY IN PROVIDING THE SERVICES. EXCEPT IN CONNECTION WITH A BREACH BY EITHER PARTY OF SECTION 8, EACH PARTY'S LIABILITY FOR DAMAGES HEREUNDER (OTHER THAN IN RESPECT OF ANY CLAIM FOR MONIES DUE)  SHALL NOT EXCEED £200,000.     10.3 Indemnification by Rubicon. Rubicon shall indemnify and hold harmless ISA and its officers, directors, employees and agents from  and against any and all losses, claims, damages, liabilities, obligations, judgments, awards, costs, expenses (including reasonable attorneys' fees)  and disbursements, including without limitation, the costs, expenses and disbursements, as and when incurred, of preparing or defending any  action, suit, proceeding or investigation asserted by a third party (Losses), caused by, based upon, arising out of or in connection with a claim  by a third party that the Rubicon Offerings infringe a 3rd party's exiting intellectual property rights or due to the gross negligence, recklessness or  intentional misconduct on the part of Rubicon or its affiliates or its officers, directors, employees, agents, consultants or users.     10.4 Indemnification by ISA. ISA shall indemnify and hold harmless Rubicon and its officers, directors, employees and agents from and  against any and all losses, claims, damages, liabilities, obligations, judgments, awards, costs, expenses (including reasonable attorneys' fees) and  disbursements, including without limitation, the costs, expenses and disbursements, as and when incurred, of preparing or defending any action,  suit, proceeding or investigation asserted by a third party (Losses), caused by, based upon, arising out of or in connection with ISA's role in the  provision of the Rubicon Offerings or the gross negligence, recklessness or intentional misconduct on the part of ISA or its affiliates or its officers,  directors, employees, agents, consultants or users.     10.5 Indemnitee Obligations. Each person seeking to be reimbursed, indemnified, defended and/or held harmless under Sections 10.3 or  10.4 (each, an Indemnitee) shall (a) provide the Party obliged to indemnify such Indemnitee with prompt written notice of any claim, suit,  demand or other action for which such Indemnitee seeks to be reimbursed, indemnified, defended or held harmless (each, a Claim), which notice  shall include a reasonable identification of the alleged facts giving rise to such Claim; (b) grant such Party reasonable authority and control over  the defense and settlement of any such Claim; and (c) reasonably cooperate with such Party and its agents in defense of any such Claim, at such  Party's cost. Each Indemnitee shall have the right to participate in the defense of any Claim for which such Indemnitee seeks to be reimbursed,  indemnified, defended or held harmless, by using attorneys of such Indemnitee's choice, at such Indemnitee's expense. Notwithstanding anything  to the contrary herein, any settlement of a Claim for which any Indemnitee seeks to be reimbursed, indemnified, defended or held harmless under this Section 10 shall be subject to the prior written approval of such Indemnitee, such approval not to be unreasonably withheld, conditioned or  delayed.     10.6 Essential Part of Bargain. The Parties acknowledge that the disclaimers and limitations set forth in this Section 10 are an essential  element of this Agreement between the Parties and that the Parties would not have entered into this Agreement without such disclaimers and  limitations.     11. MISCELLANEOUS.     11.1 Governing Law and Jurisdiction. This Agreement shall be governed by and interpreted under the laws of the State of Florida, USA,.  The state and federal courts in the jurisdiction in which Palm City, Florida is located shall have non- exclusive jurisdiction for the purposes of  adjudicating any controversy or claim between the parties concerning any breach or alleged breach of this Agreement or performance or  nonperformance of any obligation under this Agreement, save that the parties agree that any dispute or claim concerning either clause 8  Confidentiality or clause 5 Intellectual Property may be raised in any appropriate jurisdiction where the breach or alleged breach has occurred.





   11.2 No Assignment. Neither Party shall transfer, assign or cede any rights or delegate any obligations hereunder, in whole or in part,  whether voluntarily or by operation of law, without the prior written consent of the other Party, which consent may be withheld at the other Party's  reasonable business discretion; provided, however, that in connection with a merger, sale or transfer of substantially all of the assets or stock of  one of the Parties that Party may provide for the assignee to be bound by the terms hereof. This Agreement shall inure to the benefit of, and shall  be binding upon, the Parties and their respective successors and permitted assigns.     11.3 Good Faith. The Parties undertake to act in good faith, consistent with their respective rights and obligations set forth in this  Agreement.     11.4 Independent Contractors. In connection with this Agreement, each Party is an independent contractor. This Agreement does not,  and shall not be construed to, create an employer-employee, agency, joint venture or partnership relationship between the Parties. Neither Party  shall have any authority to act for or to bind the other Party in any way, to alter any of the provisions of any of the other Party's standard forms of  invoices, sales agreements, warranties or otherwise, to warrant or to execute agreements on behalf of the other, or to represent that it is in any way  responsible for the acts, debts, liabilities or omissions of the other Party.     11.5 Notices. All notices, reports, payments and other communications required or permitted to be given under this Agreement (each, a  Notice) shall be in writing and shall be given either by personal delivery against a signed receipt, by express delivery using an internationally  recognized express courier, or by email (with confirmation of receipt). All Notices shall be properly addressed as follows, or to such other addresses as may be specified in a Notice given hereunder:     If to ISA: with a copy to:    Attn: Joseph Coschera Attn: Daniel J. Dugan, Esq.

1151 SW 30th St., Spector Gadon & Rosen, P.C.

Palm City, Florida 34990 1635 Market St., 7th Floor

joe_coschera@isa-inc.net Phila., PA 19103  ddugan@lawsgr.com    If to Rubicon: with a copy to:    Attn: Alistair Hancock Attn: Andrew Kirby  Rubicon House Rubicon House  Guildford Road Guildford Road  West End, Surrey GU24 9PW West End, Surrey, GU24 9PW     A Notice shall be deemed to be effective upon personal delivery or, if sent via overnight delivery, upon receipt thereof. A Notice sent via email is  deemed effective on the same day (or if such day is not a Business Day, then on the next succeeding Business Day) if the confirmation that such  email was received by the other Party is received before 5:00 p.m. prevailing Eastern time and on the next day (or if such day is not a Business Day,  then on the next succeeding Business Day) if the confirmation that such email was received by the other Party is received on or after 5:00 p.m.  prevailing Eastern time.    11.6 Amendment or Modification. No subsequent amendment, modification or waiver of any of the provisions of this Agreement shall be  effective unless in writing and signed by the Parties.     11.7 Entire Agreement. This Agreement sets out the entire agreement between the Parties with respect to the subject matter of this  Agreement and supersedes all prior agreements, proposals, arrangements and communications, whether oral or written, with respect to the subject  matter hereof.     11.8 Severability. If any provision of this Agreement is held by a tribunal of competent jurisdiction to be illegal, invalid, or otherwise  unenforceable in any relevant jurisdiction, then to the fullest extent permitted by law (a) the same shall not affect the other provisions of this  Agreement, (b) such provision shall be deemed modified to the extent necessary in the tribunal's opinion to render such provision enforceable,  and the rights and obligations of the Parties shall be construed and enforced accordingly, preserving to the fullest extent the intent and agreements of the Parties set forth herein and (c) such finding of invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of such provision in any other relevant jurisdiction.     11.9 No Waiver. Failure to enforce any provision of this Agreement is not a waiver of future enforcement of that or any other provision. No provision of this Agreement will be deemed waived and no breach excused unless such waiver or excuse is in writing and signed by the Party  against whom enforcement of such waiver or excuse is sought.     11.10 Survival. Sections 5, 7, 8, 10 and 11; any payment obligations of the Parties hereunder accrued prior to the date of termination; and  any other provision herein expressly surviving termination or necessary to interpret the rights and obligations of the Parties in connection with the  termination of this Agreement will survive the termination of this Agreement.     11.11 No Third Party Beneficiaries. Except as set forth in Sections 10.3 and 10.4, nothing in this Agreement is intended to confer  benefits, rights or remedies unto any person or entity other than the Parties and their permitted successors and assigns. Without limiting the  generality of the foregoing, the clients, customers, shareholders or End Users shall not be deemed to be third party beneficiaries of this Agreement  or have any other contractual relationship with ISA by reason of this Agreement.     11.12 Captions and Construction. The headings appearing at the beginning of the Sections contained in this Agreement have been  inserted for identification and reference purposes only and shall not be used to determine the construction or interpretation of this Agreement. The nomenclature of the defined terms in this Agreement shall only be used for the construction of this Agreement, and are not to be used for any  other purpose, including, but not limited to, interpretation for accounting purposes. The parties acknowledge that both ISA and Rubicon  participated in the drafting of this Agreement and agree that any rule of law or legal decision that may or would require interpretation of any  alleged ambiguities in this Agreement against the party that drafted it has no application and is expressly waived.     11.13 Further Assurances. Each Party shall perform such acts, execute and deliver such instruments and documents, and do all such  other things as may be reasonably necessary to accomplish the transactions contemplated in this Agreement.





   11.14 Language. This Agreement is in the English language only, which language shall be controlling in all respects, and all versions  hereof in any other language hereof shall be for accommodation only and shall not be binding upon the Parties. All communications and notices to  be made or given pursuant to this Agreement shall be in the English language. All words used in this Agreement will be construed to be of such  gender or number as the circumstances require. Unless otherwise expressly provided, the word including does not limit the preceding word or  terms.     11.15 Force Majeure. Neither Party shall be held to be in breach of this Agreement by reason of a force majeure event, including, but not  limited to, act of God, delay in transportation, fire, flood, earthquake, storm, war, act of a public enemy, civil commotion or any law, rule, regulation,  order or other action by any public authority or any other matter reasonably beyond a Party's control (a Force Majeure Event). To the extent  failure to perform is caused by such a force majeure event, such Party shall be excused from performance hereunder so long as such event  continues to prevent such performance, and provided the non-performing Party takes all reasonable steps to resume full performance.     11.16 Compliance with Laws. Each Party shall comply with all prevailing laws, rules and regulations and obtain all necessary approvals,  consents and permits required by the applicable agencies of the government of the jurisdictions that apply to its activities or obligations under  this Agreement.     11.17 Public Announcements. Any public announcement or similar publicity with respect to this Agreement or the transactions  contemplated hereby shall be issued only after consultation with the other party hereto regarding the content of any such announcement or  publicity. The parties recognize that, as publicly traded companies, such consultations will be constrained by applicable requirements relating to  the disclosure of material information on the part of such party under applicable securities laws.     11.18 Execution in Counterparts, Facsimiles. This Agreement may be executed in one or more counterparts, each of which shall be  deemed an original and all of which together shall constitute one and the same instrument. This Agreement shall become binding when any one or  more counterparts hereof, individually or taken together, bear the signatures of both Parties hereto. For the purposes hereof, a facsimile copy of  this Agreement, including the signature pages hereto, shall be deemed an original.     IN WITNESS WHEREOF, the Parties to this Agreement by their duly authorized representatives have executed this Agreement as of the date first  written above.     Information Systems Associates, Inc. Rubicon Software Group plc  By: /s/ Joseph P. Coschera By /s/ Alistair C. Hancock:  Name: Joseph P. Coschera Name: Alistair C. Hancock  Title: President and CEO Title: CEO

Answer: Highlight the parts (if any) of this contract related to Third Party Beneficiary that should be reviewed by a lawyer. Details: Is there a non-contracting party who is a beneficiary to some or all of the clauses in the contract and therefore can enforce its rights against a contracting party?


Question: Exhibit 10.2

CERTAIN INFORMATION (INDICATED BY ASTERISKS) HAS BEEN OMITTED FROM THIS DOCUMENT BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED.

Zogenix Inc.

and

Nippon Shinyaku Company Ltd.

Distributorship Agreement

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Table of Contents

Article 1. Definitions Article 2. Grant of Rights 2.1 Grant of Rights to Distributor 2.2 Sub-distribution by Distributor 2.3 Supply of Product for Distributorship 2.4 No Other Rights; Other Limitations 2.5 Non-Compete Covenant 2.6 No Activities Outside the Territory or Field Article 3. Governance 3.1 Joint Steering Committee 3.2 Expenses 3.3 Alliance Managers 3.4 Scope of Governance Article 4. Development and Regulatory Activities 4.1 Nonclinical and Clinical Studies and CMC Requirements 4.2 Regulatory Activities 4.3 Distributor's Right to Use and Reference 4.4 Zogenix's Right to Use and Reference 4.5 Adverse Event Reporting 4.6 Drug Safety and Pharmacovigilance System including Global Safety Database 4.7 Regulatory Audit 4.8 Use of Subcontractors 4.9 Recalls 4.1 Development Expenses Article 5. Commercialization; Supply: Trademarks 5.1 Commercialization of the Product. 5.2 Supply 5.3 Trademark Rights 5.4 Commercial Expenses Article 6. Payments 6.1 Upfront Payment 6.2 Funding to Support Development of The Product 6.3 Regulatory Milestones 6.4 Sales Milestones 6.5 Supply Payments Article 7. Payments, Books and Records 7.1 Payment Method

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7.2 Currency Conversion 7.3 Taxes 7.4 Records 7.5 Audits 7.6 Late Payments Article 8. Confidentiality 8.1 Confidential Information 8.2 Exceptions 8.3 Permitted Disclosures 8.4 Confidentiality of this Agreement and its Terms 8.5 Public Announcements 8.6 Publication 8.7 Prior Non-Disclosure Agreements 8.8 Equitable Relief Article 9. Intellectual Property Ownership and Enforcement 9.1 Ownership of Intellectual Property 9.2 Zogenix Patent Prosecution and Maintenance 9.3 Infringement by Third Parties 9.4 Third Party Intellectual Property Rights 9.5 Patent Term Restoration 9.6 Patent Marking 9.7 Zogenix Trademarks 9.8 Product Trademarks Article 10. Representations, Warranties and Covenants; Limitation of Liability 10.1 Mutual Representations, Warranties and Covenants 10.2 Representations, Warranties and Covenants of Distributor 10.3 Representations and Warranties of Zogenix 10.4 Disclaimer 10.5 Limitation of Liability Article 11. Indemnification 11.1 Indemnification of Zogenix 11.2 Indemnification of Distributor 11.3 Procedure 11.4 Insurance Article 12. Term and Termination 12.1 Term 12.2 Termination 12.3 Rights on Termination 12.4 Exercise of Right to Terminate 12.5 Damages; Relief 12.6 Accrued Obligations; Survival

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Article 13. Dispute Resolution 13.1 Objective 13.2 Resolution by Executives 13.3 Arbitration Article 14. General Provisions 14.1 Governing Law 14.2 Force Majeure 14.3 Assignment 14.4 Severability 14.5 Notices 14.6 Entire Agreement; Amendments 14.7 Headings 14.8 Independent Contractors 14.9 Waiver 14.1 Cumulative Remedies 14.11 Waiver of Rule of Construction 14.12 Interpretation 14.13 No Third Party Beneficiaries 14.14 English Language 14.15 Counterparts 14.16 Further Actions

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List of Exhibits

Exhibit 1.70 Unlabeled Drug Product Exhibit 1.74 Zogenix ZX008 Patents as of the Effective Date Exhibit 2.3 Material Terms of Supply Agreement Exhibit 4.2(a) The initial version of the Regulatory Plan Exhibit 8.5(a) Press Release Exhibit 9.7 Zogenix Trademarks Exhibit 9.8 Product Trademarks Exhibit 10.2(b) Form of Compliance Certification

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DISTRIBUTORSHIP AGREEMENT

This DISTRIBUTORSHIP AGREEMENT (Agreement) is entered into as of March 18, 2019 (the Effective Date) by and between ZOGENIX, INC., having a place of business at 5959 Horton Street, Suite 500, Emeryville, California 94608( Zogenix) and Nippon Shinyaku Company, Ltd., having a place of business at 14, Nishinosho-Monguchi-cho, Kisshoin, Minami-ku, Kyoto 601-8550, Japan (Distributor). Zogenix and Distributor may be referred to individually as a Party and collectively as the Parties.

RECITALS

WHEREAS, Zogenix is developing its proprietary fenfluramine product, known as Fintepla®.

WHEREAS, Zogenix wishes to commercialize such product through a distributor that will promote, market, sell and distribute such product within the Territory;

WHEREAS, Distributor has the ability to promote, market, sell and distribute such product within the Territory for the treatment of Dravet syndrome and Lennox-Gastaut syndrome and any additional indications approved in the Territory, and wishes to be Zogenix's exclusive distributor of such product for such indications within the Territory, and Zogenix is willing to grant to Distributor such exclusive distribution rights on the terms and conditions set forth in this Agreement; and

WHEREAS, Zogenix agrees to manufacture (or have manufactured) and sell to Distributor such product for such commercialization activities in the Territory, on the terms and conditions set forth in this Agreement and in a separate supply agreement to be entered into by the Parties.

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Zogenix and Distributor hereby agree as follows:

ARTICLE 1. DEFINITIONS

1.1 Affiliate of a Party means any entity that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with such Party, as the case may be, but for only so long as such control exists. As used in this Section 1.1, control means (a) to possess, directly or indirectly, the power to direct the management or policies of an entity, whether through ownership of voting securities, or by contract relating to voting rights or corporate governance; or (b) direct or indirect beneficial ownership of more than fifty percent (50%) (or such lesser percentage which is the maximum allowed to be owned by a foreign corporation in a particular jurisdiction) of the voting share capital or other equity interest in such entity.

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1.2 Alliance Manager has the meaning set forth in Section 3.3.

1.3 Annual Report has the meaning set forth in Section 6.5(c).

1.4 Applicable Laws means the applicable provisions of any and all national, supranational, regional, state and local laws, treaties, statutes, rules, regulations, administrative codes, industry codes, guidance, ordinances, judgments, decrees, directives, injunctions, orders or permits (including Regulatory Approvals) of or from any court, arbitrator, Regulatory Authority or governmental agency or authority having jurisdiction over or related to the subject item, including the FCPA, export control, embargo, trade sanction and data privacy laws, regulations, rules and licenses, and other laws and regulations pertaining to domestic or international corruption, commercial bribery, fraud, embezzlement or money laundering.

1.5 Business Day means a day other than a Saturday, Sunday, any public holiday, or any bank holiday in the United States or Japan.

1.6 Change of Control means any (a) direct or indirect acquisition of assets of a Party (i) equal to fifty percent (50%) or more of the fair market value of a Party's consolidated assets, or (ii) to which fifty percent (50%) or more of a Party's net revenues or net income on a consolidated basis are attributable, or (iii) representing substantially all of the properties or assets related to a Party's obligations under this Agreement, (b) direct or indirect acquisition by a Person, or group of Persons acting in concert, of fifty percent (50%) or more of the voting equity interests of a Party, (c) tender offer or exchange offer that if consummated would result in any Person, or group of Persons acting in concert, beneficially owning fifty percent (50%) or more of the voting equity interests of a Party, (d) merger, consolidation, other business combination or similar transaction involving a Party, pursuant to which any Person would own fifty percent (50%) or more of the consolidated assets, net revenues or net income of a Party, taken as a whole, or which results in the holders of the voting equity interests of a Party immediately prior to such merger, consolidation, business combination or similar transaction ceasing to hold fifty percent (50%) or more of the combined voting power of the surviving, purchasing or continuing entity immediately after such merger, consolidation, business combination or similar transaction, (e) liquidation or dissolution (or the adoption of a plan of liquidation or dissolution) of a Party, or (f) declaration or payment of an extraordinary dividend (whether in cash or other property) by a Party, where the amount of the dividend or the in specie property which is the subject of the dividend would otherwise come within the application of any of clauses (a)-(e) above, in all cases where such transaction is to be entered into with any Person other than the other Party.

1.7 CMC means chemistry, manufacturing and controls.

1.8 Commercialization means all activities directed to marketing, promoting, advertising, exhibiting, distributing (including storage for distribution or inventory), detailing, selling, (and offering for sale or contracting to sell), or otherwise commercially exploiting the Product in the Field in the Territory.

1.9 Commercialization Plan has the meaning set forth in Section 5.1(b).

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1.10 Commercially Reasonable Efforts means, with respect to a Party's specific obligations under this Agreement, that level of efforts and resources, [***]. Commercially Reasonable Efforts requires that the applicable Party: (i) [***], (ii) [***], and (iii) [***].

1.11 Confidential Information has the meaning set forth in Section 8.1.

1.12 Confidentiality Agreement means that certain Mutual Confidential Disclosure Agreement, dated June 21, 2018, between Zogenix and Distributor.

1.13 Control (including any variations such as Controlled and Controlling) means, with respect to any Information, Data, Patent or other intellectual property rights, possession by a Party of the ability (whether by ownership or grant of rights, other than pursuant to this Agreement) to grant to the other Party the applicable access or other right under this Agreement without violating the terms of an agreement with a Third Party.

1.14 Data means any and all scientific, technical or test data pertaining to the Product in the Field that is generated by or under the authority of Distributor or its Affiliates, Sub-distributors or other subcontractors or by or under the authority of Zogenix or Zogenix ex-Territory Distributors before or during the Term, including research data, clinical pharmacology data, CMC data (including analytical and quality control data and stability data), preclinical data, clinical data and all submissions made in association with an IND or MAA filed in or outside the Territory with respect to the Product in the Field, in each case to the extent such data either (a) is Controlled by Zogenix on the Effective Date or (b) comes within a Party's Control during the Term.

1.15 Development means all activities directed to research, non-clinical and preclinical studies and trials, CMC Data collection, clinical studies and trials, Investigator Initiated Studies, toxicology studies, publication and presentation of study results, preparation and submission to Regulatory Authorities of an MAA concerning the Product, interacting with Regulatory Authorities prior to and following Regulatory Approval of the Product, and Product pricing negotiations and decisions concerning the Product.

1.16 Disclosing Party has the meaning set forth in Section 8.1.

1.17 Distribution Term means the period commencing on the first Regulatory Approval of the Product in the Territory and continuing until [***], or if this Agreement is terminated earlier pursuant to Article 12, the effective date of such termination.

1.18 Distributor Invention has the meaning set forth in Section 9.1(b)(i).

1.19 Executives has the meaning set forth in Section 3.1(d).

1.20 FCPA means the U.S. Foreign Corrupt Practices Act (15 U.S.C. § 78dd-1 et seq.), as amended.

1.21 FDA means the Food and Drug Administration, or any successor agency thereto

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having the administrative authority to regulate the marketing of human pharmaceutical products in the United States.

1.22 Field means the Indications of treatment for the Product in the Territory.

1.23 First Commercial Sale means the first bona fide, arm's-length sale of the Product in the Field in the Territory following Regulatory Approval of the Product in the Field in the Territory.

1.24 Fiscal Quarter means a period of three (3) consecutive months during a Fiscal Year beginning on and including April 1st, July 1st or October 1st or January 1st.

1.25 Fiscal Year means a year that starts from April 1st and ends on March 31st.

1.26 Fully-Burdened Manufacturing Cost means the costs incurred by Zogenix that are directly attributable to and reasonably allocated to the manufacture and delivery of the Product to Distributor. Fully-Burdened Manufacturing Costs shall include the following: [***].

1.27 Generic Product means a pharmaceutical product that (a) [***]; (b) [***]; (c) [***]; and (d) [***].

1.28 IFRS means international financial reporting standards, as may be amended from time to time.

1.29 IND means any Investigational New Drug application, as defined in Title 21 of the Code of Federal Regulations, on file with the FDA before the commencement of clinical trials of the Product in humans, or any comparable filing with any Regulatory Authority.

1.30 Indemnitee has the meaning set forth in Section 11.3.

1.31 Indemnitor has the meaning set forth in Section 11.3.

1.32 Indication means the treatment of Dravet syndrome, Lennox-Gastaut syndrome, [***] during the Distribution Term.

1.33 Indirect Losses means any damages or other losses involving, but only to the extent of, any loss of profits, diminution in value, or incidental, indirect, consequential, special or punitive damages.

1.34 Information means information, ideas, inventions, discoveries, concepts, formulas, practices, procedures, processes, methods, knowledge, know-how, trade secrets, technology, inventories, machines, techniques, development, designs, drawings, computer programs, skill, experience, documents, apparatus, results, clinical and regulatory strategies, documentation, information and submissions pertaining to, or made in association with, filings with any Regulatory Authority, data, including pharmacological, toxicological and clinical data, analytical and quality control data, manufacturing data and descriptions, patent and legal data,

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market data, financial data or descriptions, specifications and the like, in written, electronic or other form, now known or hereafter developed, whether or not patentable.

1.35 Invention means any new and useful process, article of manufacture, composition of matter, formulation or apparatus, or any improvement thereof, discovery or finding, whether or not patentable, as determined in accordance with the patent laws of the United States of America.

1.36 Japan GAAP means Japan generally accepted accounting principles, as may be amended from time to time.

1.37 Joint Steering Committee or JSC has the meaning set forth in Section 3.1.

1.38 Losses has the meaning set forth in Section 11.1.

1.39 MAA means a marketing authorization application or equivalent application, and all amendments and supplements thereto, filed with a Regulatory Authority.

1.40 MAH means a marketing authorization holder of the Product in the Field in the Territory.

1.41 MHLW means the Japanese Ministry of Health, Labor and Welfare.

1.42 Net Price means, for any Fiscal Year, the unit price of the Product in the Territory in the Field calculated by dividing the aggregate Net Sales for the Product in the Territory in such Fiscal Year by the total number of units of the Product sold by or on behalf of Distributor or its Affiliate or Sub-distributor in the Territory in such Fiscal Year.

1.43 Net Sales means, with respect to any period of time, the gross amounts invoiced for sales or other dispositions of the Product in the Territory by or on behalf of Distributor or its Affiliates or Sub-distributors to Third Parties (other than Sub- distributors) during such period, less the value added taxes levied on or measured by the billing amount for the Product to the extent included in the gross invoiced sales price for the Product or otherwise directly paid or incurred by Distributor or its Affiliates or Sub-distributors, as applicable, with respect to the sale or other disposition of the Product, less the following deductions to the extent actually allowed, paid, incurred or accrued during the applicable period, calculated in accordance with Japan GAAP or IFRS (consistently applied):

[***]

Net Sales shall be calculated in accordance with Japan GAAP or IFRS, consistently applied in the Territory and shall be consistent with net sales reported in Distributor's audited financial statements. If net sales reported in Distributor's audited financial statements include discounts for products sold in combination or bundled with other products, these discounts will not be included in the calculation of Net Sales of the Product.

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Sales of a Product for use in conducting clinical trials of the Product in the Territory in order to obtain Regulatory Approval of the Product in the Territory shall be excluded from Net Sales calculations for all purposes.

Upon any sale or other disposition of the Product for any consideration other than exclusively monetary consideration on bona fide arm's-length terms, for purposes of calculating Net Sales under this Agreement, the Product shall be deemed to be sold exclusively for money at the average sales price during the applicable reporting period generally achieved for the Product in the Field in the Territory when the Product is sold alone and not with other products.

Distributor and its Affiliates and Sub-distributors shall not sell the Product in combination with or as part of a bundle with other products, or offer packaged arrangements to customers that include the Product, in such a manner as to disproportionately discount the selling price of the Product as compared with the weighted-average discount applied to the other products, as a percent of the respective list prices (or if not available, a good faith estimate thereof) of such products and the Product prior to applying the discount.

1.44 NHI means the Japanese national health insurance system, or its successor system.

1.45 NHI Price means the reimbursement price of the maximum daily dose of Product for purposes of the NHI.

1.46 NHI Price Listing means the listing of the NHI Price by Central Social Insurance Medical Council (Chuikyo) of the MHLW.

1.47 Out-of-Pocket Costs and Expenses means the costs and expenses incurred by one or both Parties (as applicable) that are directly attributable to and reasonably allocated to a specified project, program or task. Out-of-Pocket Costs and Expenses shall include payments made to third parties such as contract research organizations and investigators and the fully burdened cost of drug product. Out-of-Pocket Costs and Expenses shall not include a Party's employee costs.

1.48 Patent means (a) any patent, certificate of invention, application for certificate of invention, priority patent filing and patent application, and (b) any renewal, division, continuation (in whole or in part) or request for continued examination of any of such patent, certificate of invention and patent application, and any patent or certificate of invention issuing thereon, and any reissue, reexamination, extension, restoration by any existing or future extension or restoration mechanism, division, renewal, substitution, confirmation, registration, revalidation, revision and addition of or to any of the foregoing.

1.49 Person means any individual, corporation, partnership, limited liability company, trust or other entity.

1.50 Pharmacovigilance Agreement has the meaning set forth in Section 4.5.

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1.51 PMDA means the Japanese Pharmaceuticals and Medical Devices Agency, and local counterparts thereto, and any successor agency(ies) or authority thereto having substantially the same function.

1.52 Product means Zogenix's proprietary fenfluramine product, known as Fintepla®, or any drug product containing a salt, enantiomer, or polymorph of fenfluramine.

1.53 Product Invention has the meaning set forth in Section 9.1(b)(i).

1.54 Product Trademark has the meaning set forth in Section 9.8(a).

1.55 Public Official or Entity means (a) any officer, employee (including physicians, hospital administrators or other healthcare professionals), agent, representative, department, agency, de facto official, representative, corporate entity, instrumentality or subdivision of any government, military or international organization, including any ministry or department of health or any state-owned or affiliated company or hospital, or (b) any candidate for political office, any political party or any official of a political party.

1.56 Transfer Price has the meaning set forth in Section 6.5(a).

1.57 Receiving Party has the meaning set forth in Section 8.1.

1.58 Regulatory Approval means any and all approvals (except NHI Price Listing), licenses, registrations, or authorizations of Regulatory Authorities in the applicable regulatory jurisdiction that are necessary for the manufacture, use, storage, import, transport and/or sale of a pharmaceutical product in such regulatory jurisdiction.

1.59 Regulatory Authority means any national, regional, state or local regulatory agency, department, bureau, commission, council or other governmental entity whose review and/or approval is necessary for the manufacture, packaging, use, storage, import, export, distribution or promotion of a pharmaceutical product in the applicable regulatory jurisdiction, including the PMDA in the Territory. If governmental approval is required for pricing or reimbursement by national health insurance (or its local equivalent), Regulatory Authority shall also include any national, regional, state or local regulatory agency, department, bureau, commission, council or other governmental entity whose review and/or approval of pricing or reimbursement is required.

1.60 Regulatory Filings means all applications, approvals, licenses, notifications, registrations, submissions and authorizations made to or received from a Regulatory Authority in connection with the development, manufacture or commercialization of a pharmaceutical product, including any INDs, MAAs and Regulatory Approvals.

1.61 Regulatory Plan has the meaning set forth in Section 4.2(a).

1.62 SEC means the U.S. Securities and Exchange Commission or any successor agency.

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1.63 Sub-distributor means any Person other than Distributor or its Affiliates that Distributor appoints to market, promote, offer for sale, sell, import or distribute the Product in the Field in the Territory, beyond the mere right to purchase the Product from Distributor or its Affiliates for end use.

1.64 Supply Agreement has the meaning set forth in Section 5.2.

1.65 Territory means Japan.

1.66 Third Party means any governmental authority or Person other than Zogenix, Distributor and their respective Affiliates.

1.67 Third Party Claims has the meaning set forth in Section 11.1.

1.68 Trademark means any word, name, symbol, color, designation or device or any combination thereof, including any trademark, trade dress, brand mark, service mark, trade name, brand name, logo or business symbol, whether or not registered, as determined in accordance with the trademark laws of the Unites States of America.

1.69 United States or U.S. means the United States of America, including its territories and possessions and the District of Columbia.

1.70 Unlabeled Drug Product means [***].

1.71 Zogenix ex-Territory Distributor means a licensee, collaborator or distributor engaged by Zogenix or any of its Affiliates to market, promote or sell the Product outside the Territory.

1.72 Zogenix Indemnitees has the meaning set forth in Section 11.1.

1.73 Zogenix Know-How means all Information and Data that Zogenix Controls as of the Effective Date or during the Term, which Information is necessary or reasonably useful to file for, obtain or maintain Regulatory Approval or to market, promote, sell, offer for sale or import the Product in the Field in the Territory.

1.74 Zogenix Patents means all Patents that Zogenix Controls as of the Effective Date or during the Term, which Patents would be infringed, absent a license, by the use, sale, offer for sale or import of the Product in the Field in the Territory, including any Patents issuing from the applications listed in Exhibit 1.74.

1.75 Zogenix Technology means the Zogenix Know-How and Zogenix Patents.

1.76 Zogenix Trademark has the meaning set forth in Section 9.7.

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ARTICLE 2. GRANT OF RIGHTS

2.1 Grant of Rights to Distributor. Subject to the terms and conditions of this Agreement, Zogenix hereby appoints Distributor, and Distributor accepts appointment, as the exclusive distributor (even as to Zogenix) of the Product in the Field in the Territory during the Term, and grants to Distributor the exclusive rights to maintain Regulatory Approval of (while Distributor is the MAH Party), package, promote, market, offer for sale, sell, import and distribute the Product in the Field in the Territory during the Term. The Parties agree that the rights granted in this Section 2.1 do not grant any right or license to, and Distributor shall not, supply, sell, offer for sale or otherwise dispose of or provide access to the Product in the Territory unless and until the Product obtains Regulatory Approval in the Field in the Territory.

2.2 Sub-distribution by Distributor. Distributor shall not have the right to (a) appoint any Sub-distributors for the Product in the Field in the Territory or (b) otherwise subcontract any sales, marketing, distribution or promotional activities with respect to the Product in the Field in the Territory, including to any contract sales organization, in each case, except with the prior written approval of Zogenix. If Zogenix grants such approval, in accordance with this Section 2.2 and Section 4.8, any Sub- distributor agreement shall be in writing and, with the exception of the financial terms, on substantially the same terms as this Agreement, to the extent applicable to the Sub-distributor's activity, and shall provide for the assignment of all Data generated by such Sub-distributors to Distributor, and the right for Distributor to terminate such agreement immediately in the event of any violation by such Sub-distributor of the FCPA or other Applicable Laws. Distributor shall be responsible for the acts or omissions of its Sub-distributors under any Sub-distributors agreement, including any such act or omission that would constitute a breach hereunder. In the event of any such breach by a Sub-distributor of its obligations to comply with the FCPA or other Applicable Laws, Distributor shall immediately terminate the applicable Sub-distributor agreement(s), unless otherwise agreed to by Zogenix in writing. Within [***] after execution thereof, Distributor shall provide Zogenix with a full and complete copy of each Sub- distributor agreement (provided that Distributor may redact any confidential information contained therein that is not relevant to compliance with this Agreement).

2.3 Supply of Product for Distributorship. Zogenix shall supply (or have supplied) to Distributor, in accordance with the terms set forth on Exhibit 2.3, and Distributor shall purchase exclusively from Zogenix, Distributor's and its Affiliates' and Sub- distributors' Unlabeled Drug Product requirements of the Product for sale by Distributor or its Affiliates or Sub-distributors in the Territory in the Field, subject to and under the provisions of Section 5.2 and the Supply Agreement. Distributor shall purchase all such amounts of Unlabeled Drug Product of the Product for sale by Distributor supplied by Zogenix under the payment provisions of Section 6.5 and Article 7. Notwithstanding the foregoing, upon the reasonable request of Distributor, Zogenix will provide Product free of charge to Distributor to the extent necessary for Distributor to meet its analytical testing obligations hereunder.

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2.4 No Other Rights; Other Limitations. Except for the rights expressly granted in this Agreement, Zogenix retains all rights under the Zogenix Technology and with respect to the Product, including the exclusive right to manufacture and sell the Product to Distributor, to develop the Product, and to promote, market and sell the Product outside the Territory, and all rights with respect to the Product outside the Field in the Territory. No rights shall be deemed granted by one Party to the other Party under this Agreement by implication, estoppel or otherwise. Distributor agrees not to use any Zogenix Technology except as necessary to file for and maintain Regulatory Approval of, promote, market, sell, offer for sale, distribute and import the Product in the Field in the Territory during the Term in accordance with the terms of this Agreement and the Supply Agreement. Without limiting the foregoing, Distributor agrees that in no event shall Distributor or its Affiliates manufacture or have manufactured the Product, or purchase the Product from any party other than Zogenix pursuant to the Supply Agreement. Without limiting the foregoing, Distributor further acknowledges that it has no right to and agrees that it will not perform any studies of the Product or allow its Affiliate or any Third Party to perform any studies of the Product (including any investigator-initiated studies) except with the prior written approval of Zogenix, which Zogenix may withhold in its sole discretion.

2.5 Non-Compete Covenant. During the Term, without the prior written approval of Zogenix, Distributor shall not, and shall cause its Affiliates not to, either directly or indirectly, file for Regulatory Approval of, promote, market, offer for sale, sell, import or distribute in the Territory any product containing fenfluramine or any salt, enantiomer, or polymorph of fenfluramine, or any product for [***].

2.6 No Activities Outside the Territory or Field. Distributor shall not, and shall cause its Affiliates and Sub-distributors not to, (a) actively seek customers for the Product outside the Territory or the Field, (b) establish or maintain a branch office, warehouse, or distribution facility for the Product outside the Territory, (c) engage in any advertising or promotional activities relating to the Product directed to customers outside the Territory or directed to any use outside the Field, or (d) solicit orders from any prospective purchaser with its principal place of business located outside the Territory. If Distributor receives any order from a prospective purchaser outside the Territory, Distributor shall not accept any such order but shall immediately refer that order to Zogenix.

ARTICLE 3. GOVERNANCE

3.1 Joint Steering Committee. The Parties shall establish a joint steering committee (the Joint Steering Committee or JSC) to oversee the activities of the Parties pursuant to this Agreement.

(a) Composition. The JSC will be comprised of [***] members appointed by Distributor and [***] members appointed by Zogenix, which members shall be senior level employees or representatives of each Party with decision-making authority. Each Party will

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notify the other Party of its initial JSC members within [***] after the Effective Date. The Parties, through the JSC, may change the number of JSC members as long as an equal number of members from each of Distributor and Zogenix is maintained. Each Party may change its JSC members at any time by written notice to the other Party, which may be delivered at a scheduled meeting of the JSC. Any member of the JSC may designate a substitute to attend and perform the functions of that member at any meeting of the JSC. Zogenix shall appoint one (1) of its members as chair, whose role shall be to convene and preside at meetings of the JSC, but the chair shall not be entitled to prevent items from being discussed or to cast any tie-breaking vote. Each Party may, with the consent of the other Party, such consent not to be unreasonably withheld or delayed, invite non-member, non-voting representatives of such Party to attend meetings of the JSC.

(b) Responsibilities. The JSC shall be responsible for oversight of the Parties' activities under this Agreement with respect to filing for, obtaining and maintaining Regulatory Approval and commercializing (including commercial supply to Distributor and marketing and sales) the Product in the Field in the Territory. Without limiting the foregoing, the JSC shall:

(i) review, discuss and approve the Regulatory Plan, including all amendments thereto;

(ii) review, discuss and approve the Commercialization Plan, including all amendments thereto;

(iii) periodically review, discuss and assess the progress and results of the Parties under the Regulatory Plan and Commercialization Plan to ensure, to the extent reasonably practical, compliance with obligations under this Agreement;

(iv) periodically discuss the status of the development and commercialization of the Product in the Field outside the Territory;

(v) review Distributor's binding and non-binding forecasts for the Product and monitor the production capacity of Zogenix and its Third Party manufacturers;

(vi) periodically review Distributor's and Zogenix's pharmacovigilance policies and procedures;

(vii) facilitate the exchange of Data between the Parties; and

(viii) perform such other duties as are specifically assigned by the Parties to the JSC in this Agreement.

(c) Meetings. The JSC will hold meetings at such frequency as determined by the JSC members, but no less than twice every calendar year. Such meetings may be in person, via videoconference, or via teleconference; provided, that no fewer than two (2) JSC

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meetings each calendar year prior to First Commercial Sale shall be in-person unless the Parties otherwise agree. The location of in-person JSC meetings will alternate between Zogenix's offices and Distributor's offices, unless the Parties otherwise agree. At least [***] prior to each JSC meeting, each Party shall provide written notice to the other Party of agenda items proposed by such Party for discussion or decision at such meeting, together with appropriate information related thereto. Reasonably detailed written minutes will be kept of all JSC meetings and will reflect material decisions made at such meetings. Meeting minutes will be prepared by each Party on an alternating basis and sent to each member of the JSC for review and approval within [***] after a meeting. Minutes will be deemed approved unless a member of the JSC objects to the accuracy of such minutes within [***] of receipt.

(d) Decisions. The JSC may make decisions with respect to any subject matter that is within the JSC's responsibilities. Subject to this Section 3.1(d), all decisions of the JSC shall be made by unanimous vote, with Zogenix and Distributor each having, collectively, among its respective members, one (1) vote in all such decisions. If the JSC cannot reach consensus with regard to any matter to be decided by the JSC within [***] after such matter has been brought to the JSC's attention, then such matter shall be referred to the Chief Executive Officer of Zogenix and the Director, Member of the Board of Distributor (the Executives) for resolution. If the Executives cannot resolve the issue within [***] after the matter has been brought to their attention then:

(i) Subject to good faith consideration of the views of Distributor, Zogenix shall have the tie-breaking vote on all matters to be decided by the JSC relating to [***]; provided, however, [***]; and

(ii) Subject to good faith consideration of the views of Zogenix and to Section 3.1(d)(iii), Distributor shall have the tie-breaking vote on all matters to be decided by the JSC relating to [***]; provided, however, [***]; and

(iii) Subject to good faith consideration of the views of Zogenix and Section 12.2(g), Distributor shall have the tie-breaking vote on the decision of [***], unless otherwise mutually agreed between the Parties; and

(iv) Subject to good faith consideration of the views of Distributor, Zogenix shall have the tie-breaking vote on all matters other than the decisions set forth in Section 3.1(d)(ii) and (iii) to be decided by the JSC that may affect commercialization outside the Territory; provided, however, that Zogenix shall not have power to amend or waive compliance with this Agreement or the Commercialization Plan.

(e) Discontinuation of JSC Participation. The activities to be performed by the JSC relate solely to governance under this Agreement, and are not intended to be or involve the delivery of services. The JSC will continue to exist until the Parties mutually agreeing to disband the JSC. Once the Parties mutually agree to disband the JSC, the JSC shall have no further obligations under this Agreement and, thereafter, each Party shall designate a contact person for the exchange of information under this Agreement, and decisions of the JSC shall be

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decisions as between the Parties, subject to the decision-making authority under Section 3.1(d) and other terms and conditions of this Agreement.

3.2 Expenses. Each Party shall bear all its own costs, including expenses incurred by the members nominated by it, in connection with its members' JSC representation and meetings.

3.3 Alliance Managers. Promptly after the Effective Date, each Party shall appoint an individual to act as the alliance manager for such Party (the Alliance Manager). Each Alliance Manager will be permitted to attend meetings of the JSC as non-voting participants. The Alliance Managers will be the primary contact for the Parties regarding the activities contemplated by this Agreement and shall facilitate all such activities hereunder. Each Party may replace its Alliance Manager with an alternative representative at any time with prior written notice to the other Party. Any Alliance Manager may designate a substitute to temporarily perform the functions of that Alliance Manager.

3.4 Scope of Governance. Notwithstanding the creation of the JSC, each Party shall retain the rights, powers and discretion granted to it hereunder, and the JSC shall not be delegated or vested with rights, powers or discretion unless such delegation or vesting is expressly provided herein or the Parties expressly so agree in writing. The JSC shall not have the power to amend or modify this Agreement, and no decision of the JSC shall be in contravention of any terms and conditions of this Agreement. It is understood and agreed that issues to be formally decided by the JSC are only those specific issues that are expressly provided in this Agreement to be decided by the JSC. In no event shall the JSC have any decision-making authority with respect to matters relating to the Product outside the Territory or outside the Field. For clarity, any decision of an Executive made in resolution of a dispute of the JSC pursuant to Section 3.1(d) shall be treated as decisions of the JSC for purposes of this Agreement. It is understood between the Parties that under no circumstances are the activities to be performed by the JSC intended or allowed to violate any Applicable Laws (including but not limited to any competition and/or antitrust law).

ARTICLE 4. DEVELOPMENT AND REGULATORY ACTIVITIES

4.1 Nonclinical and Clinical Studies and CMC Requirements. Promptly after the Effective Date, the JSC will discuss what nonclinical or clinical Development studies or CMC requirements are required to obtain Regulatory Approval of the Product for the treatment of Dravet syndrome and Lennox-Gastaut syndrome or would otherwise be useful for the Commercialization of the Product in the Field in the Territory, and if Zogenix agrees that such Development activities should be conducted, Zogenix will be responsible for conducting or having conducted all such Development activities. All non-clinical and clinical studies and CMC requirements completed or initiated by Zogenix as of the Effective Date or any such non-clinical and clinical studies and CMC requirements that are described in the initial version of Regulatory Plan, shall be conducted at Zogenix's own cost and expense, except for Distributor's payment

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obligations under Section 6.2 and as otherwise expressly set forth herein. Any additional Territory-specific Development activities not set forth in the initial version of the Regulatory Plan, including those conducted at the suggestion or requirement of the MHLW or at [***] incurred by the Parties while conducting such Territory-specific Development activities. For clarity, Distributor shall have no right to conduct any Development activities for the Product unless otherwise agreed by Zogenix, and Zogenix shall have and retain all rights, in its sole discretion, to conduct any Development activities for the Product in the Territory outside the Field or any Development activities outside the Territory.

4.2 Regulatory Activities.

(a) Regulatory Plan. All regulatory Development activities with respect to the Product in the Field in the Territory will be conducted in accordance with a comprehensive regulatory plan (as amended in accordance with this Agreement, the Regulatory Plan) which sets forth [***]. The initial version of the Regulatory Plan prepared by Zogenix and agreed to by Distributor will be attached to this Agreement as Exhibit 4.2(a) [***]. Any changes and updates to the Regulatory Plan must be approved by the JSC, subject to the decision-making procedures set forth in Section 3.1(d). As between the Parties, Zogenix will have the sole right and obligation to conduct (itself or through an Affiliate or Third Party) nonclinical and clinical studies concerning the Product in the Field in or for the Territory. Zogenix shall provide updates to the JSC concerning its progress under the Regulatory Plan and copies of final nonclinical and clinical study reports following completion of such Development studies. The JSC shall discuss such activities, including any updates on the progress and results thereof provided by Zogenix. During the Term, Zogenix shall use Commercially Reasonable Efforts to Develop the Product in the Field in the Territory in accordance with the Regulatory Plan and the terms of this Agreement.

(b) Global Clinical Studies for New Indications. In the event that Zogenix intends to conduct a global (including the Territory) clinical trial of the Product for indications other than Dravet syndrome and Lennox-Gastaut syndrome (a Global Study), Zogenix will provide a summary of such Global Study to Distributor for review. In the event Distributor agrees to participate in a Global Study, Zogenix (or its designee) will be responsible for conducting such Global Study, including in the Territory, [***].

(c) Conduct of Regulatory Activities. Subject to Section 4.2(d), Zogenix shall be the marketing authorization holder for the Product in the Territory, and Zogenix shall be deemed the MAH Party and Distributor deemed the Non-MAH Party for purposes of this Agreement. Zogenix shall use Commercially Reasonable Efforts to [***]. In addition, Zogenix shall use Commercially Reasonable Effort to ensure [***] shall have the capabilities and obtain the necessary licenses for filing an MAA for the Product in the Territory in advance of the planned MAA submission date in the initial version of Regulatory Plan.

(i) Regulatory Approval Activities. Zogenix will be responsible for filing for and obtaining Regulatory Approval of the Product in the Field in the Territory. In connection with such activities, Zogenix shall be responsible for preparing and filing INDs and

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other necessary Regulatory Filings and for communicating with Regulatory Authorities in the Territory, except as otherwise mutually agreed to by the Parties in writing. Zogenix shall be responsible for preparing, filing and obtaining Regulatory Approval of the Product in the Field in the Territory, all in accordance with the Regulatory Plan. Zogenix shall ensure that the Distributor is involved in the planning and conduct of all such activities and the decisions with respect thereto, including discussions with any Regulatory Authority and any decisions regarding the labeling of the Product in the Field in the Territory. Zogenix shall consider in good faith all input provided by the Distributor with respect to such regulatory approval activities. In connection with such activities, Zogenix shall: (i) timely inform the Distributor of any scheduled meetings with Regulatory Authorities in the Territory with respect to the Product in the Field as soon as practicable in order to allow the Distributor time to convey its opinion on the matter and (ii) use all reasonable efforts to ensure that the Distributor is afforded the opportunity to participate in such meetings. Zogenix shall keep the Distributor regularly and fully informed of the preparation, Regulatory Authority review and approval of submissions and communications with Regulatory Authorities with respect to the Product in the Field in the Territory. In particular, Zogenix shall promptly provide the Distributor with copies of all material documents, information and correspondence received from or provided to a Regulatory Authority with respect to the Product in the Field in the Territory and, upon reasonable request, with copies of any other documents, reports and communications from or to any Regulatory Authority relating to the Product in the Field in the Territory, as well as written summaries of all material oral communications with a Regulatory Authority with respect to the Product in the Field in the Territory.

(ii) Post-Approval Regulatory Activities. Following the filing of the MAA for the Product in the Territory, Zogenix and Distributor shall collaborate in good faith concerning a pricing negotiation strategy for the Product. Following Regulatory Approval of the Product in the Field in the Territory, Zogenix will be responsible for negotiating and obtaining initial pricing approval for the Product with the applicable Regulatory Authority in accordance with such strategy. The MAH Party shall use Commercially Reasonable Efforts to maintain Regulatory Approval for the Product in the Field in the Territory. The MAH Party shall be responsible for all interactions with Regulatory Authorities with respect to the Product in the Field in the Territory during the Term and maintaining Regulatory Approval of the Product in the Field in the Territory. In connection with such activities, the MAH Party shall: (i) timely inform the Non-MAH Party of any scheduled meetings with Regulatory Authorities in the Territory with respect to the Product in the Field as soon as practicable in order to allow the Non-MAH Party time to convey its opinion on the matter and (ii) use all reasonable efforts to ensure that the Non-MAH Party is afforded the opportunity to participate in such meetings. The MAH Party shall keep the Non-MAH Party regularly and fully informed of the preparation of submissions and communications with Regulatory Authorities with respect to the Product in the Field in the Territory. In particular, the MAH Party shall promptly provide the Non-MAH Party with copies of all material documents, information and correspondence received from or provided to a Regulatory Authority with respect to the Product in the Field in the Territory and, upon reasonable request, with copies of any other documents, reports and communications from or to any Regulatory Authority relating to the Product in the Field in the Territory, as well as written

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summaries of all material oral communications with a Regulatory Authority with respect to the Product in the Field in the Territory.

(A) Post-Marketing Surveillance Studies. The MAH Party shall be responsible for conducting any post-marketing surveillance studies, including those required by the MHLW or Applicable Law, that are required to maintain the MAA. The MAH Party shall ensure that Non-MAH Party is involved in the planning and conduct of all such post-approval activities and the decisions with respect thereto, including discussions with any Regulatory Authority and any decisions regarding any post-marketing surveillance studies with respect to, the Product in Field in the Territory. The MAH Party shall consider in good faith all input provided by Zogenix with respect to such regulatory activities. The MAH Party shall be responsible for filing any post-marketing surveillance studies with the MHLW.

(B) Post-Approval Clinical Studies. Zogenix shall be responsible for conducting any post- approval clinical study that is requested upon or after approval or otherwise required by the MHLW as a condition of or to maintain the MAA approval. [***] shall bear [***] the total Out-of-Pocket Costs and Expenses incurred by the Parties while conducting any such post-approval clinical study that is for the Territory. Zogenix shall ensure that Distributor is involved in the planning and conduct of all such post-approval clinical studies and the decisions with respect thereto, including discussions with any Regulatory Authority and any decisions regarding any post-approval clinical study with respect to, the Product in Field in the Territory. Zogenix shall consider in good faith all input provided by the Distributor with respect to such post-approval clinical study. The MAH Party shall be responsible for filing any post-approval clinical studies with the MHLW.

(C) Risk Management Plan. Zogenix shall be responsible for filing the initial risk management plan, if any, and approving any subsequent changes thereto. The MAH Party shall be responsible for conducting or having conducted any risk management plan requested or required by the MHLW. The Distributor shall support and implement the risk management plan and cooperate with Zogenix, and the Parties shall share and discuss the results and data generated from any risk management plan required by MHLW. The Distributor shall collaborate with Zogenix to ensure global alignment and consistency with the safety specifications, pharmacovigilance planning and risk management commitments and activities.

(d) Transfer of Marketing Authorization. Zogenix shall be the marketing authorization holder of the Product in the Territory for the [***] following Regulatory Approval of the Product in the Territory. Thereafter, Zogenix shall transfer the marketing authorization for the Product in the Territory to Distributor within [***] following [***], unless delayed or prohibited by a Regulatory Authority or Applicable Law or otherwise agreed by the Parties. Upon the transfer of the marketing authorization of the Product in the Territory to Distributor, then Distributor shall be deemed the MAH Party for purposes of this Agreement and Zogenix shall be deemed the Non-MAH Party.

(e) Ownership of Regulatory Information. The Parties acknowledge and agree that Zogenix shall retain the full unfettered ownership of the Data and drug dossier

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submitted to the PMDA for the Regulatory Approval (including but not limited to safety & efficacy data, clinical data package, drug formulation and method of administration). Notwithstanding the foregoing, if Zogenix asks Distributor to solely conduct any additional Territory-specific Development activities which are urgently required by the MHLW for the MAA in the Territory, Distributor shall retain co-ownership with Zogenix of any Data generated solely by Distributor. Distributor hereby grants Zogenix an irrevocable, perpetual, royalty-free, fully paid-up, exclusive license with the right to grant sublicenses to use such Data solely generated and co-owned by Distributor outside of the Territory and a co-exclusive license in the Territory upon expiration or termination of the Agreement.

(f) Regulatory Cooperation. Each Party shall cooperate in good faith with any reasonable requests for assistance from the other Party with respect to obtaining or maintaining Regulatory Approval of the Product in and outside the Territory, including by providing to the other Party all Information in its possession and Control that is requested by, or needed to respond to inquiries of, a Regulatory Authority with respect to the Product.

4.3 Distributor's Right to Use and Reference. Distributor shall have the right to reference and use all Data and Regulatory Filings (including all Regulatory Approvals) for the purpose of fulfilling Distributor's obligations set forth in this Agreement. For clarity, in accordance with Section 4.2(b), [***].

4.4 Zogenix's Right to Use and Reference. In the event that Distributor is responsible for filing for and obtaining Regulatory Approval of the Product in the Field in the Territory or Distributor otherwise is the holder of the Regulatory Approval for the Product in the Territory, Zogenix and its Affiliates and Zogenix ex-Territory Distributors shall have the royalty-free right to reference and use all Data and Regulatory Filings (including all Regulatory Approvals), including all data contained or referenced therein, provided by or to Distributor under this Article 4, such reference and use in connection with filing for, obtaining and maintaining Regulatory Approval and commercializing the Product outside the Territory and in the Territory outside the Field. Distributor shall, on written request by Zogenix, provide, or shall cause its applicable Affiliate to provide, to Zogenix and to any specified Regulatory Authority a letter, in the form reasonably required by Zogenix, acknowledging and confirming that Zogenix and its Affiliates and/or Zogenix ex-Territory Distributors, as applicable, have the rights of reference to any such Regulatory Filing (including any such Regulatory Approval) for all purposes consistent with the Development, Regulatory Approval and commercialization of the Product outside the Territory and in the Territory outside the Field. Distributor shall not, and shall cause its Affiliates not to, transfer or disclose any Regulatory Filings (including any Regulatory Approval) relating to the Product in the Territory to any Third Party without the prior written consent of Zogenix, and in any such permitted transfer Distributor shall require the transferee to acknowledge in writing to Zogenix, Zogenix's (and its Affiliates' and Zogenix ex-Territory Distributors') rights of reference to and right to use all such Regulatory Filings (including Regulatory Approvals) as provided in this Section 4.3.

4.5 Adverse Event Reporting. The MAH Party shall be responsible for the timely

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reporting of all relevant adverse drug reactions/experiences, Product quality, Product complaints and safety data relating to the Product in the Field to the appropriate Regulatory Authorities in the Territory, all in accordance with Applicable Laws and requirements of Regulatory Authorities in the Territory. Zogenix (or its Affiliate, or Zogenix ex-Territory Distributors) shall be responsible for the timely reporting of all relevant adverse drug reactions/experiences, Product quality, Product complaints and safety data relating to the Product to the appropriate Regulatory Authorities outside the Territory. The details of such reporting shall be set forth in a pharmacovigilance agreement (as may be amended, the Pharmacovigilance Agreement), which will be agreed to by the Parties prior to the First Commercial Sale in the Territory. The Pharmacovigilance Agreement shall include, without limitation, governance provisions that set forth a process for communication and escalation, where necessary, of safety issues, label changes, and the like. Zogenix shall have the right to share any and all information received from Distributor under this Section 4.5, or the Pharmacovigilance Agreement, with Zogenix's Affiliates and Zogenix ex-Territory Distributors. The Pharmacovigilance Agreement shall identify the responsibilities of each Party regarding the information to be exchanged and the timeframes for such exchange, regulatory reporting, literature review, risk management, and labeling. Prior to executing the Pharmacovigilance Agreement, the Parties agree to work together in good faith to coordinate regarding pharmacovigilance activities with respect to the Product in the Field, including by exchanging Distributor's standard operating procedures and other Information relevant to such pharmacovigilance activities.

4.6 Drug Safety and Pharmacovigilance System including Global Safety Database. Zogenix shall maintain a global system for monitoring and management of the risks associated with the Product. This system will provide signal management as well as the collection, identification, evaluation, and management of individual case safety reports and cumulative reports. As part of this pharmacovigilance system, Zogenix shall maintain the global safety database with respect to the Product, which shall serve as the reference database for all responses to safety queries and aggregate safety reports and be the main source for individual case safety report processing. Each Party shall cooperate, and shall cause its Affiliates, Sub-distributors and Zogenix ex-Territory Distributors, as applicable, to cooperate, in implementing and adhering to a pharmacovigilance mutual alert process with respect to the Product to comply with Applicable Laws, as set forth in the Pharmacovigilance Agreement. Notwithstanding anything to the contrary in this Agreement, Zogenix shall have final decision making authority over all issues that implicate global safety.

4.7 Regulatory Audit. Each Party shall notify the other Party within [***] of receipt of any notice of a MHLW audit of any of such Party or its Affiliate or subcontractor with respect to the Product in the Territory. Notwithstanding the foregoing, if a Party is subject to an unannounced audit from the MHLW or receives a notice of an imminent audit from the MHLW, in each case with respect to the Product in the Territory, such Party shall notify the other Party promptly, but in any event within [***]. Such other Party shall have the right to have its or its Affiliates' or its subcontractors' employees or consultants participate in any audits or other inspections to the extent permitted by Applicable Law. To the extent permitted by Applicable Law, the audited Party shall provide the other Party with the copies of any resulting document or

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action pertaining to the Product in the Territory that results from such audit within [***] of their receipt.

4.8 Use of Subcontractors. To the extent that Distributor performs any of its regulatory or commercial activities under this Agreement through one or more subcontractors (including a Sub-distributor), if and as permitted under the terms of this Agreement, Distributor shall ensure that (a) none of Zogenix's rights hereunder are diminished or otherwise adversely affected as a result of such subcontracting, (b) the subcontractor assigns to Distributor all Distributor Inventions and all data generated by such subcontractor that, if Controlled by Distributor, would be included in the definition of Data, (c) the subcontractor undertakes in writing obligations of confidentiality and non-use regarding Confidential Information and compliance with the FCPA and other Applicable Laws that are substantially the same as those undertaken by the Parties pursuant to Article 8 and Section 10.2, (d) the subcontractor does not have an adverse history or reputation, (e) the use of the subcontractor will not cause the Zogenix Indemnitees to be in violation of the FCPA or any other Applicable Laws, and (f) the use of the subcontractor will not cause reputational harm to the Zogenix Indemnitees. In the event that Distributor performs any of its regulatory activities hereunder through a subcontractor, Distributor will at all times be fully responsible for the performance and payment of such subcontractor.

4.9 Recalls.

(a) In the event that the MHLW issues a request or orders a recall or takes similar action in connection with the Product in the Territory, or in the event either Party determines that an event, incident, or circumstance has occurred that may result in the need for a voluntary withdrawal of the Product in the Territory, the Party notified of such recall or desiring such voluntary withdrawal shall, within [***], advise the other Party thereof by telephone (and confirm by electronic mail or facsimile). Regarding any recall order or request from the MHLW, the Parties shall, to the extent practicable, discuss and endeavor to agree upon a plan for recalling the affected Product. Regarding any request for a voluntary withdrawal, the Parties shall discuss and endeavor to agree upon whether to voluntarily withdraw the Product in the Territory, and each Party shall review and consider in good faith all information provided by the other Party in connection with such discussion, including any assessment of safety and whether to withdraw the Product.

(b) For all recalls requested or ordered by the MHLW, the MAH Party shall have the sole authority and responsibility to make all decisions with respect to such recall, subject to good faith consideration of the views of the non-MAH Party. For all voluntary withdrawals concerning quality defects, such as compliance, foreign substances, tampering and labeling defects, the MAH Party shall have the sole authority and responsibility to make all decisions with respect to such withdrawal, subject to good faith consideration of the views of non-MAH party. For all voluntary withdrawals concerning efficacy or safety, Zogenix shall have the sole authority and responsibility to make all decisions with respect to such withdrawal, subject to good faith consideration of the views of the Distributor.

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(c) Distributor shall be responsible for conducting any such recall or withdrawal, shall use Commercially Reasonable Efforts to minimize the expenses of any such recall or withdrawal and shall keep Zogenix fully informed of all actions taken in conducting such recall or withdrawal. If a recall or withdrawal is due to Zogenix's negligence, willful misconduct or breach of this Agreement, Zogenix shall reimburse Distributor for all of the reasonable costs and expenses actually incurred by Distributor in connection with such recall or withdrawal, including, but not limited to, costs of personnel expenses of Distributor's sales representatives, fees for consultation with the Regulatory Authority in the Territory and travel expenses for consultation, and its actual reasonable Out-of-Pocket Costs and Expenses incurred while retrieving Product already delivered to customers, costs and expenses Distributor is required to pay for notification, shipping and handling charges, and such other costs as may be reasonably related to the recall or withdrawal. If a recall or withdrawal is due to Distributor's negligence, willful misconduct or breach of this Agreement, Distributor shall reimburse Zogenix for all the reasonable costs and expenses described above actually incurred by Zogenix in connection with such recall or withdrawal, including administration of the recall and such other actual costs as may be reasonably related to the recall or withdrawal in the Territory. If a recall or withdrawal results from a cause other than the negligence in the Territory, willful misconduct or breach of this Agreement of or by Distributor or Zogenix, the parties hereto [***]. Prior to any reimbursements pursuant to this Section, the party claiming any reimbursement shall provide the other party with reasonably acceptable documentation of all reimbursable costs and expenses. Neither Party will be liable to the other for Indirect Losses in connection with any recall or withdrawal pursuant to this Section.

4.10 Development Expenses. Unless expressly stated otherwise, each Party shall bear its own Out-of-Pocket Costs and Expenses and any employee and overhead expenses incurred while performing its obligations under this Article 4.

ARTICLE 5. COMMERCIALIZATION; SUPPLY: TRADEMARKS

5.1 Commercialization of the Product.

(a) Distributor Responsibilities. Distributor shall have the exclusive right to market, promote, sell, offer for sale, import, package and otherwise Commercialize the Product in the Field in the Territory, at its sole cost and expense, in accordance with Applicable Laws and the Commercialization Plan and subject to the terms and conditions of this Agreement. Without limiting the foregoing, Distributor will have the exclusive right and responsibility in the Field in the Territory for the following:

(i) designing the Commercialization strategy and tactics for the Product, subject to JSC approval of the Commercialization Plan;

(ii) undertaking all promotional activities for the Product;

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(iii) establishing and implementing post-marketing surveillance studies for the Product in the Territory as required or recommended by a Regulatory Authority;

(iv) receiving, accepting and filling orders for the Product from customers;

(v) warehousing and distributing the Product to customers;

(vi) controlling invoicing, order processing and collection of accounts receivable for sales of the Product;

(vii) recording sales of the Product in the Territory in its books of account for sales; and

(viii) providing results of sales of the Product in the Territory for purposes of periodic safety reports and exposure estimates.

Distributor shall provide updates regularly to the JSC relating to Commercialization activities for the Product in the Field in the Territory.

(b) Commercialization Plan. Distributor shall be responsible for the creation and implementation of an annual plan for the Commercialization of the Product in the Field in the Territory, which shall identify proposed plans to address potential challenges with respect to Commercialization of the Product in the Field in the Territory (the Commercialization Plan). The Commercialization Plan shall set forth in reasonable detail the major Commercialization activities planned for the Product in the Territory for the applicable period, including [***]. Distributor shall prepare and submit to the JSC the initial Commercialization Plan no later than [***] after MAA filing for the Product in the Field in the Territory for review and approval by the JSC in accordance with the decision-making procedures set forth in Section 3.1(d). Distributor shall submit subsequent updated Commercialization Plans to the JSC on an annual basis on or before the end of each Fiscal Year for review and approval by the JSC. Through the JSC, Distributor shall regularly consult with and provide updates to Zogenix regarding the Commercialization strategy for and the Commercialization of the Product in the Field in the Territory.

(c) Diligence. During the Term, Distributor shall use Commercially Reasonable Efforts to market, promote, sell, offer for sale, import, package, distribute and otherwise commercialize the Product in the Field in the Territory in accordance with the Commercialization Plan and the terms of this Agreement. Without limiting the foregoing, Distributor shall Submit the first purchase order of the Product in the Field in the Territory to Zogenix within [***], achieve First Commercial Sale of the Product in the Field in the Territory as soon as reasonably practicable after the Product is first available for delivery to Distributor in the Territory, and use Commercially Reasonable Efforts to timely accomplish all the activities set forth in the Commercialization Plan.

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(d) Distributor's Diligence Failure.

(i) After [***] of the First Commercial Sale of the Product in the Territory, if Zogenix reasonably believes that Distributor has failed to achieve or maintain the diligence obligations set forth in Section 5.1(c), Zogenix shall provide written notice thereof to Distributor requesting a detailed written response concerning such failure and Distributor shall provide such detailed written response to Zogenix within [***] of the date of Zogenix's request. Zogenix's notice shall specify in reasonable detail the facts and circumstances constituting Zogenix's reasons for reaching such a determination. Following Zogenix's receipt of Distributor's response, the Parties shall promptly, and in any event within [***], discuss in good faith Distributor's obligations and its proposed actions to cure its failure to achieve its diligence obligations. Where remedy is possible and reasonably acceptable to Zogenix, Distributor shall use its Commercially Reasonable Efforts to start substantive steps within [***] of the date of Zogenix's notice to Distributor. If Distributor (A) fails to provide a detailed written response to Zogenix within [***] of the date of Zogenix's notice to Distributor, or (B) fails to use its Commercially Reasonable Efforts to start substantive steps to remedy such failure [***] of the date of Zogenix's notice to Distributor, Zogenix shall have the right, [***] effective upon written notice thereof by Zogenix to Distributor, to (1) [***] or (2) [***].

(ii) Any failure of Distributor to achieve the diligence obligations set forth in Section 5.1(c) shall not be considered Distributor's diligence failure as described in Section 5.1(d)(i) or a breach of this Agreement to the extent such failure was caused by (A) Zogenix's inability or failure to supply Product in accordance with the terms of the Supply Agreement, (B) any changes to the Regulatory Plan approved by the JSC in accordance with Section 4.2(a), or (C) any changes to the Commercialization Plan approved by the JSC in accordance with Section 5.1(b).

(iii) This Section 5.1(d) shall not limit any other remedies or damages that Zogenix may have or seek under this Agreement or Applicable Laws.

5.2 Supply. The Parties acknowledge and agree that Zogenix shall retain all rights to make and have made the Product in and for the Territory. Promptly after the Effective Date, the Parties shall commence negotiating a supply agreement containing reasonable and customary terms for an agreement of such type, governing Zogenix's supply of the Product to Distributor for sale in the Field in the Territory in accordance with the terms of this Agreement (as may be amended, the Supply Agreement), and shall use reasonable efforts to enter into the Supply Agreement within [***] after the Effective Date. Zogenix shall supply, or cause to be supplied, Product to Distributor in accordance with the Supply Agreement, and Distributor shall purchase all of its and its Affiliates' and Sub-distributors' requirements for the Product under the Supply Agreement. Distributor shall pay to Zogenix the Transfer Price for Product supplied under the Supply Agreement in accordance with Section 6.5.

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5.3 Trademark Rights.

(a) Product Trademarks. Subject to the terms and conditions of this Agreement, Zogenix hereby grants to Distributor an co-exclusive, royalty-free, limited right under the Product Trademarks solely to promote, market, sell, offer for sale, import, package and distribute the Product in Field in the Territory in accordance with the terms of this Agreement.

(b) Zogenix Trademarks. Subject to the terms and conditions of this Agreement, Zogenix hereby grants to Distributor a non-exclusive, royalty-free, limited right under the Zogenix Trademarks solely to promote, market, sell, offer for sale, import, package and distribute the Product in Field in the Territory in accordance with the terms of this Agreement.

5.4 Commercial Expenses. Unless expressly stated otherwise, each Party shall bear its own Out-of-Pocket Costs and Expenses and all employee and overhead expenses incurred while performing its obligations under this Article 5.

ARTICLE 6. PAYMENTS

6.1 Upfront Payment. Distributor shall pay to Zogenix, upon the receipt of the invoice from Zogenix after the Effective Date, a non-refundable, non-creditable upfront payment of Seven Million Five Hundred Thousand U.S. Dollars (US $7,500,000), which upfront payment shall consist of [***] in consideration for the exclusive right to distribute Product in the Territory for the treatment of Dravet syndrome and [***] in consideration for the exclusive right to distribute Product in the Territory for the treatment of Lennox-Gastaut syndrome. Distributor shall pay such payment to Zogenix within [***] of receipt of the invoice.

6.2 Funding to Support Development of The Product. Distributor shall pay to Zogenix Twelve Million Five Hundred Thousand U.S. Dollars (US $12,500,000) for support of Zogenix's global nonclinical and clinical Development studies concerning the Product for Dravet syndrome and Lennox-Gastaut syndrome as it relates to Regulatory Approval of the Product in the Territory. For clarity, the Six Million Five Hundred Thousand U.S. Dollar (US $6,500,000) payment is intended to support studies previously conducted by Zogenix and that will be included in the MAA for the Territory. The remaining Six Million U.S. Dollars (US 6,000,000) in payments are intended to support those studies conducted by Zogenix and indicated as being paid for by Zogenix under the initial Regulatory Plan during [***] after the Effective Date, and such payments will be made [***]. The five (5) Development payments pursuant to this Section 6.2 will be made according to the following schedule:

(a) Within [***] after the Effective Date, a non-refundable, non-creditable one-time payment of [***];

(b) Within [***] after the Effective Date, a non-refundable, non-creditable

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one-time payment of [***];

(c) On the [***] of the Effective Date, a non-refundable, non-creditable one-time payment of [***];

(d) On the [***] of the Effective Date, a non-refundable, non-creditable one-time payment of [***]; and

(e) On the [***] of the Effective Date, a non-refundable, non-creditable one-time payment of [***].

For clarity, each of the foregoing payments to be made by Distributor to Zogenix shall be payable within [***] of receipt of the invoice therefor from Zogenix. In the event that Zogenix terminates the Development the Product in the Territory for both Dravet syndrome and Lennox-Gastaut syndrome prior to the due date for any of the foregoing payments any such payment whose due date is after such termination shall no longer be due and payable to Zogenix.

6.3 Regulatory Milestones. Distributor shall pay to Zogenix the non-refundable, non-creditable milestone payments as set forth in this Section 6.3. Upon the occurrence of each milestone event in this Section 6.3 Zogenix shall issue an invoice to Distributor for the amount of the milestone payment corresponding to such achieved milestone event, and Distributor shall pay to Zogenix such invoiced amount within [***] of its receipt from Zogenix.

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Regulatory Milestone Event Milestone Payment [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***]

Each milestone payment set forth above shall be payable only once for the Product. For clarity, the total regulatory milestone payments set forth in this Section shall not exceed: (a) [***] if [***]; (b) [***] if [***]; and (c) [***].

6.4 Sales Milestones. For each Fiscal Quarter in which aggregate annual Net Sales first reach a threshold indicated in the table below, Distributor shall inform Zogenix within [***] that the aggregated annual Net Sales first reached such threshold. Zogenix shall issue an invoice to Distributor for the applicable milestone payment, and Distributor shall pay such invoice within [***] of its receipt from Zogenix:

Annual Net Sales Level Milestone Payment

First Fiscal Year in which aggregate annual Net Sales of the Product in the Field in the Territory exceed [***] [***]

First Fiscal Year in which aggregate annual Net Sales of the Product in the Field in the Territory exceed [***] [***]

First Fiscal Year in which aggregate annual Net Sales of the Products in the Field in the Territory exceed [***] [***]

The milestone payments set forth in this Section 6.4 shall be additive, such that if all three (3)

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milestone events are achieved in the same Fiscal Year, Distributor shall pay to Zogenix all three (3) milestone payments.

6.5 Supply Payments.

(a) Transfer Price. During the Distribution Term, and in addition to the consideration provided pursuant to Sections 6.1, 6.2, 6.3, and 6.4, for all Product supplied by Zogenix to Distributor under purchase orders submitted pursuant to the Supply Agreement in a particular Fiscal Year, Distributor shall pay to Zogenix a transfer price per unit of Product supplied (the Transfer Price) equal to the sum of (i) [***] of the Fully-Burdened Manufacturing Cost per unit of Product for such Fiscal Year, (ii) [***] of aggregate annual Net Sales for such Fiscal Year, and (iii) the applicable markup percent of the applicable aggregate Net Price for such Fiscal Year, which markup percent is determined based on the incremental amount of Product ordered in such Fiscal Year as set forth below, as may be adjusted pursuant to Section 6.5(b):

Amount of Product Supplied per Fiscal Year Net Price Markup

For the portion of Product supplied less than or equal to the equivalent of [***] in Net Sales in such Fiscal Year [***]

For the portion of Product supplied in excess of the equivalent of [***] in Net Sales and less than or equal to the equivalent of [***] in Net Sales in such Fiscal Year [***]

For the portion of Product supplied in excess of the equivalent of [***] in Net Sales and less than or equal to the equivalent of [***] in Net Sales in such Fiscal Year [***]

For the portion of Product supplied in excess of the equivalent of [***] in Net Sales in such Fiscal Year [***]

The Net Sales equivalent described in the left column of the table above is calculated by determining the total number of units ordered in the applicable Fiscal Year and multiplying such number by the Net Price for such Fiscal Year.

Following the expiration of the Distribution Term and during the remaining Term of this Agreement, for all Product supplied by Zogenix to Distributor under purchase orders submitted pursuant to the Supply Agreement in a particular Fiscal Year, Distributor shall pay to Zogenix the Transfer Price per unit of Product supplied shall be equal to the sum of (i) [***] of the Fully-Burdened Manufacturing Cost per unit of Product for such Fiscal Year, and (ii) [***] of aggregate annual Net Sales for such Fiscal Year.

(b) Estimates. No later than [***] before the beginning of each Fiscal Year, starting with the Fiscal Year in which the First Commercial Sale is anticipated to occur, the Parties shall discuss in good faith and agree on a reasonable estimate of the Net Price for the Product for such Fiscal Year, which estimate will be based on a reasonable approximation of the aggregate Net Sales of Product to be recognized by Distributor and its Affiliates during such Fiscal Year. The agreed Net Price will be used to calculate the Transfer Price initially invoiced by Zogenix and payable by Distributor for the total number of units of the Product ordered by

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and delivered to Distributor under the Supply Agreement during such Fiscal Year.

(c) Reports. Within [***] after the end of each of the first three Fiscal Quarters in a Fiscal Year, starting with the Fiscal Quarter in which the First Commercial Sale occurs, Distributor shall deliver to Zogenix a report setting forth: (i) the total Net Sales of the Product in the Territory during such Fiscal Quarter, (ii) the detailed and total deductions from gross amounts invoiced to arrive at such Net Sales, (iii) the number of units of the Product sold in the Territory during such Fiscal Quarter and (iv) gross amounts invoiced for such sales. Within [***] after the end of each Fiscal Year, starting with the Fiscal Year in which the First Commercial Sale occurs, Distributor shall deliver to Zogenix a report setting forth: (A) the total Net Sales of the Product in the Territory during such Fiscal Year, (B) the detailed and total deductions from gross amounts invoiced to arrive at such Net Sales, (C) the number of units of the Product sold in the Territory during such Fiscal Year, (D) the gross amounts invoiced for such sales, (E) the calculation of actual Net Price for such Fiscal Year, (F) the total amount invoiced by Zogenix and paid by Distributor to Zogenix under the Supply Agreement for the total number of units of the Product ordered by and delivered to Distributor during such Fiscal Year, based on the estimated Net Price for such Fiscal Year, (G) the total amount actually owed to Zogenix for the total number of units of the Product ordered by and delivered to Distributor during such Fiscal Year based on the actual Net Price and (H) the difference between the amounts in clauses (F) and (G) (each such report, an Annual Report).

(d) True-Up. For each Annual Report, if the amount in clause (G) of such Annual Report exceeds the amount in clause (F), then Distributor shall pay the amount in clause (H) to Zogenix concurrently with its delivery of such Annual Report to Zogenix. Otherwise, if the amount in clause (G) is less than the amount in clause (F), the amount in clause (H) will be credited against the subsequent payment(s) due from Distributor to Zogenix (or if no further payments will be due, paid by Zogenix to Distributor within [***] after Zogenix's receipt of such Annual Report from Distributor). In no event shall the effective Transfer Price for the Product in a Fiscal Year exceed [***] of the aggregate annual Net Sales of the Product in the Field in the Territory for such Fiscal Year.

ARTICLE 7. PAYMENTS, BOOKS AND RECORDS

7.1 Payment Method. All amounts specified to be payable under this Agreement are in United States dollars and shall be paid in United States dollars. All payments under this Agreement shall be made by bank wire transfer in immediately available funds to an account designated in writing by the payee Party or by such other means as directed by such Party in writing. Payments hereunder will be considered to be made as of the day on which they are received by the payee Party's designated bank.

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7.2 Currency Conversion. For the purpose of calculating any sums due under this Agreement and determining the annual Net Sales levels in Section 6.5, conversion shall be made to U.S. dollars by using the arithmetic mean of the exchange rates for the purchase of United States dollars as published in The Wall Street Journal, Eastern Edition, for each Business Day in the Fiscal Quarter to which such calculations relate.

7.3 Taxes. Any taxes imposed on Distributor or with respect to Distributor's business operations or activities hereunder, including any value added taxes, consumption, transfer, sales, use or other such taxes relating to the transactions contemplated herein, shall be borne by Distributor, and Distributor shall timely pay, and indemnify and hold harmless, Zogenix from and against all such taxes, including any penalties or interest associated therewith. If Distributor is required by Applicable Law to deduct and withhold taxes from a payment due and payable to Zogenix hereunder (excluding national, state or local taxes based on income to Zogenix), Distributor shall: (a) promptly notify Zogenix of such requirement; (b) make such required deduction and withholding from the corresponding payment; (c) pay to the relevant Governmental Authority the full amount required to be so deducted and withheld; and (d) promptly forward to Zogenix an official receipt or other documentation reasonably acceptable to Zogenix evidencing such payment to such Governmental Authority(ies). The Parties acknowledge and agree that it is their mutual objective and intent to minimize, to the extent feasible under the Applicable Laws, any taxes payable in connection with this Agreement, and shall reasonably cooperate each other in good faith in accordance with Applicable Laws to minimize any Taxes in connection with this Agreement, including provision of any tax forms and other information that may be reasonably necessary in order for the paying Party not to withhold tax or to withhold tax at a reduced rate under an applicable bilateral income tax treaty.

7.4 Records. Distributor shall keep, and require its Affiliate and Sub-distributors to keep, complete, fair and true books of accounts and records for the purpose of (a) determining the amounts payable to Zogenix pursuant to this Agreement and the Supply Agreement and (b) ensuring that Distributor and its Affiliates and Sub-distributors do not otherwise cause any Zogenix Indemnitees to be in violation of the FCPA or other Applicable Laws. Such books and records shall be kept for such period of time required by Applicable Laws, but no less than three (3) years following the end of the Fiscal Year to which they pertain. Such records shall be subject to inspection in accordance with Section 7.5.

7.5 Audits. Upon reasonable prior written notice, Distributor shall permit an independent, certified public accountant selected by Zogenix and reasonably acceptable to Distributor, which acceptance will not be unreasonably withheld or delayed, to audit or inspect those books or records of Distributor and its Affiliates and Sub-distributors that relate to Net Sales for the sole purpose of verifying: (a) the payments due hereunder and payments due under the Supply Agreement; (b) the withholding taxes, if any, required by Applicable Laws to be withheld; and (c) Distributor's compliance with Sections 10.1 and 10.2. Such accountant will disclose to Zogenix only the amount and accuracy of payments reported and actually paid or otherwise payable under this Agreement or the Supply Agreement, and will send a copy of the report to Distributor at the same time it is sent to Zogenix. Prompt adjustments (including

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interest under Section 7.6 for underpaid amounts) shall be made by the Parties to reflect the results of such audit. Such inspections may be made no more than once each Fiscal Year (unless an audit or inspection reveals a material inaccuracy in reports made under this Agreement, in which case it may be repeated within such Fiscal Year), and during normal business hours, with reasonable efforts to minimize disruption of Distributor's normal business activities. Inspections conducted under this Section 7.5 shall be at the expense of Zogenix, unless a variation or error producing an underpayment in amounts payable exceeding [***] of the amount paid for a period covered by the inspection is established, in which case all reasonable costs relating to the inspection for such period shall be paid by Distributor. Absent manifest error, the accountant's report will be final and binding on the Parties.

7.6 Late Payments. In the event that any payment due under this Agreement or the Supply Agreement is not made when due, the payment shall accrue interest from the date due at a rate per annum equal to [***] above the U.S. Prime Rate (as set forth in The Wall Street Journal, Eastern U.S. Edition) for the date on which payment was due, calculated daily on the basis of a 365-day year, or similar reputable data source; provided that in no event shall such rate exceed the maximum legal annual interest rate. The payment of such interest shall not limit a Party from exercising any other rights it may have as a consequence of the lateness of any payment.

ARTICLE 8. CONFIDENTIALITY

8.1 Confidential Information. Except to the extent expressly authorized by this Agreement or otherwise agreed in writing by the Parties, the Parties agree that during the Term and for [***] thereafter, the receiving Party (the Receiving Party) shall keep confidential and shall not publish or otherwise disclose or use for any purpose other than as provided for in this Agreement or the Supply Agreement any Information or materials furnished to it or its Affiliates by or on behalf of the other Party (the Disclosing Party) or its Affiliates pursuant to this Agreement, the Supply Agreement, the Confidentiality Agreement or any other written agreement between the Parties or their Affiliates, in any form (written, oral, photographic, electronic, magnetic, or otherwise), including all information concerning the Product and any other technical or business information of whatever nature (collectively, Confidential Information of the Disclosing Party). All Zogenix Technology (including, without limitation, all Product Inventions and Data) shall be deemed the Confidential Information of Zogenix. Distributor Inventions shall be deemed the Confidential Information of Distributor. Joint Inventions shall be deemed the Confidential Information of each of Zogenix and Distributor. Each Party may use the Confidential Information of the other Party only to the extent required to accomplish the purposes of this Agreement or the Supply Agreement (including to exercise its rights or fulfill its obligations under this Agreement or the Supply Agreement). Each Party will use at least the same standard of care as it uses to protect proprietary or confidential information of its own (but in no event less than reasonable care) to ensure that its employees, agents, consultants and other representatives do not disclose or make any unauthorized use of the

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Confidential Information of the other Party. Each Party will promptly notify the other upon discovery of any unauthorized use or disclosure of the Confidential Information of the other Party.

8.2 Exceptions. Notwithstanding Section 8.1 above, the obligations of confidentiality and non‑use shall not apply to information that the Receiving Party can prove by competent written evidence: (a) is now, or hereafter becomes, through no act or failure to act on the part of the Receiving Party or any of its Affiliates, generally known or available; (b) is known by the Receiving Party or any of its Affiliates, other than under an obligation of confidentiality to the Disclosing Party, at the time of receiving such information; (c) is hereafter lawfully furnished to the Receiving Party or any of its Affiliates by a Third Party, which Third Party did not receive such information directly or indirectly from the Disclosing Party under an obligation of confidence; (d) is independently discovered or developed by the Receiving Party or any of its Affiliates without the use of Confidential Information belonging to the Disclosing Party; or (e) is the subject of a written permission to disclose provided by the Disclosing Party.

8.3 Permitted Disclosures. Notwithstanding the provisions of Section 8.1, the Receiving Party may disclose Confidential Information of the Disclosing Party as expressly permitted by this Agreement or if and to the extent such disclosure is reasonably necessary in the following instances:

(a) filing or prosecuting Patents as permitted by this Agreement;

(b) prosecuting or defending litigation as permitted by this Agreement;

(c) complying with applicable court orders, governmental regulations, applicable subpoenas or reasonable requests issued by governmental authorities in relation to compliance with the FCPA and other Applicable Laws;

(d) in the case of Zogenix, disclosure under terms of confidentiality no less stringent than under this Agreement to potential or actual Zogenix ex-Territory Distributors;

(e) disclosure to its and its Affiliates' contractors, employees and consultants, in each case who need to know such information for filing for, obtaining and maintaining Regulatory Approvals and Commercialization of Product in the Territory in accordance with this Agreement and manufacturing and supplying of Product in accordance with the Supply Agreement (or, in the case of disclosures by Zogenix, who need to know such information for the Development, manufacture and commercialization of the Product outside the Field or Territory), on the condition that any such Third Parties agree to be bound by confidentiality and non-use obligations that are no less stringent than those confidentiality and non-use provisions contained in this Agreement; and

(f) disclosure to Third Parties in connection with due diligence or similar investigations by such Third Parties, and disclosure to potential Third Party investors in confidential financing documents, provided, in each case, that any such Third Party agrees to be

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bound by confidentiality and non-use obligations that are no less stringent than those confidentiality and non-use provisions contained in this Agreement.

Notwithstanding the foregoing, in the event a Party is required to make a disclosure of the other Party's Confidential Information pursuant to Section 8.3(b) or (c), it will, except where impracticable, give reasonable advance notice to the other Party of such disclosure and use efforts to secure confidential treatment of such information at least as diligent as such Party would use to protect its own confidential information, but in no event less than reasonable efforts. In any event, the Parties agree to take all reasonable action to avoid disclosure of Confidential Information hereunder.

8.4 Confidentiality of this Agreement and its Terms. Except as otherwise provided in this Article 8, each Party agrees not to disclose to any Third Party the existence of this Agreement or the terms of this Agreement without the prior written consent of the other Party, except that each Party may disclose the terms of this Agreement that are not otherwise made public as contemplated by Section 8.5 as permitted under Section 8.3.

8.5 Public Announcements.

(a) As soon as practicable following the Effective Date, the Parties may each issue a press release in English and/or Japanese, in the form attached hereto as Exhibit 8.5(a), announcing the existence of this Agreement. Except as required by Applicable Laws (including disclosure requirements of the SEC or any stock exchange on which securities issued by a Party or its Affiliates are traded), neither Party shall make any other public announcement concerning this Agreement or the subject matter hereof without the prior written consent of the other, which shall not be unreasonably withheld or delayed; provided that each Party may make any public statement in response to questions by the press, analysts, investors or those attending industry conferences or financial analyst calls, or issue press releases, so long as any such public statement or press release is not inconsistent with prior public disclosures or public statements approved by the other Party pursuant to this Section 8.5 and does not reveal non‑public information about the other Party; and provided further that Zogenix may make public statements regarding the results of Development and Commercialization activities in the Territory. In the event of a public announcement required by Applicable Laws, to the extent practicable under the circumstances, the Party making such announcement shall provide the other Party with a copy of the proposed text of such announcement sufficiently in advance of the scheduled release to afford such other Party a reasonable opportunity to review and comment upon the proposed text.

(b) The Parties will coordinate in advance with each other in connection with the filing of this Agreement (including redaction of certain provisions of this Agreement) with the SEC or any stock exchange on which securities issued by a Party or its Affiliate are traded, and each Party will use reasonable efforts to seek confidential treatment for the terms proposed to be redacted; provided that each Party will ultimately retain control over what information to disclose to the SEC or other applicable government body, and provided further that the Parties will use their reasonable efforts to file redacted versions with any governing bodies which are consistent with redacted versions previously filed with any other governing bodies. Other than

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such obligation, neither Party (nor its Affiliates) will be obligated to consult with or obtain approval from the other Party with respect to any filings to the SEC or any other government body governing a stock exchange.

(c) Except as expressly permitted in this Agreement or as required by Applicable Laws, neither Party may use the other Party's trademarks, service marks or trade names, or otherwise refer to or identify that other Party in marketing or promotional materials, press releases, statements to news media or other public announcements, without the other Party's prior written consent, which that other Party may grant or withhold in its sole discretion.

8.6 Publication. At least [***] prior to Distributor or its Affiliates or Sub-distributors publishing, publicly presenting, and/or submitting for written or oral publication a manuscript, presentation, abstract, marketing document or the like that includes Information relating to the Product that has not been previously published, Distributor shall provide to Zogenix's Alliance Manager a draft copy thereof for Zogenix's review (unless Distributor is required by Applicable Laws to publish such Information sooner, in which case Distributor shall provide such draft copy to Zogenix's Alliance Manager as much in advance of such publication as possible). Distributor shall consider in good faith any comments provided by Zogenix during such [***] period, and in the event that Zogenix raises any concerns the matter shall be raised at the JSC; provided that Distributor shall, at Zogenix's reasonable request, cease such proposed publication or remove therefrom any information requested by Zogenix. The contribution of each Party shall be noted in all publications or presentations by acknowledgment or co-authorship, whichever is appropriate.

8.7 Prior Non-Disclosure Agreements. As of the Effective Date, the terms of this Article 8 shall supersede any prior non-disclosure, secrecy or confidentiality agreement between the Parties (or their Affiliates) dealing with the subject of this Agreement, including the Confidentiality Agreement, but excluding any terms of the Supply Agreement. Any information disclosed under such prior agreements shall be deemed disclosed under this Agreement.

8.8 Equitable Relief. Given the nature and value of the Confidential Information and the competitive damage and irreparable harm that would result to a Party upon unauthorized disclosure, use or transfer of its Confidential Information to any Third Party, the Parties agree that monetary damages may not be a sufficient remedy for any breach of this Article 8. If the Receiving Party becomes aware of any breach or threatened breach of this Article 8 by the Receiving Party or a Third Party to whom the Receiving Party disclosed the Disclosing Party's Confidential Information, the Receiving Party promptly shall notify the Disclosing Party and cooperate with the Disclosing Party to regain possession of its Confidential Information and prevent any further breach. In addition to all other remedies, a Party shall be entitled to seek specific performance and injunctive and other equitable relief as a remedy for any breach or threatened breach of this Article 8 without furnishing proof of actual damages or posting a bond.

ARTICLE 9.

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INTELLECTUAL PROPERTY OWNERSHIP AND ENFORCEMENT

9.1 Ownership of Intellectual Property.

(a) Zogenix Technology. Zogenix shall retain all right, title and interest in and to the Zogenix Technology.

(b) Inventions and Intellectual Property Rights.

(i) Ownership. Zogenix shall own the entire right, title and interest in and to any and all Inventions discovered, developed, identified, made, conceived or reduced to practice solely by or on behalf of Zogenix under or in connection with this Agreement, including in the course of conducting regulatory activities or Commercialization of the Product in the Field in the Territory, whether or not patented or patentable, together with any and all intellectual property rights in any such Inventions, including Patents that claim or disclose any such Inventions (collectively, the Product Invention). Distributor shall own the entire right, title and interest in and to any and all Inventions discovered, developed, identified, made, conceived or reduced to practice solely by Distributor or its Affiliates or Sub-distributors or its other subcontractors in the Territory and under or in connection with this Agreement, including in the course of conducting regulatory activities or Commercialization of the Product in the Field in the Territory, whether or not patented or patentable, together with any and all intellectual property rights in any such Inventions, including Patents that claim or disclose any such Inventions (collectively, the Distributor Invention). Zogenix and Distributor shall each own an undivided right, title, and interest in and to any and all Inventions discovered, developed, identified, made, conceived or reduced to practice jointly by or on behalf of Zogenix under or in connection with this Agreement and by Distributor or its Affiliates or Sub-distributors or its other subcontractors in the Territory and under or in connection with this Agreement (Joint Invention). In the event that either Zogenix or Distributor intends to file a patent application containing a Joint Invention, such Party shall promptly notify the other Party of such intention and shall provide a draft of any such patent application to such other Party [***] before filing such patent application with any patent office and the Parties shall negotiate in good faith concerning the terms and conditions of a joint patent agreement.

(ii) Disclosure, License. Distributor shall, and shall cause its Affiliates and Sub-distributors and other subcontractors to, promptly disclose any Distributor Inventions to Zogenix in writing promptly following its discovery, development, identification, making, conception or reduction to practice by the Distributor, its Affiliates, Sub-distributors or other subcontractors. Distributor hereby grants Zogenix an irrevocable, perpetual, world-wide, royalty-free, fully paid-up, non-exclusive license with the right to grant sublicenses under such Distributor Inventions and any patents or patent applications claiming or disclosing such Distributor Inventions. In the event that Distributor intends to file a patent application containing Distributor Inventions, Distributor shall promptly notify Zogenix of such intention and shall provide a draft of any such patent application to Zogenix at least [***] before filing such patent application with any patent office. Distributor shall have the sole right to file for patent protection for such Distributor Inventions only if Zogenix does not provide a written objection

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within [***] of being provided with a draft of such patent application.

(c) Personnel Obligations. Prior to receiving any Confidential Information or beginning work under this Agreement, Distributor shall ensure that each employee, agent or contractor of Distributor or its Affiliates or Sub-distributors shall be bound in writing by non-disclosure and Invention assignment obligations that are consistent with the obligations of the Parties in Article 8 and this Article 9, including obligations to: (a) promptly report any invention, discovery, process or other intellectual property right; (b) assign to Distributor or Zogenix all of his, her or its right, title and interest in and to any invention, discovery, process or other intellectual property right; (c) cooperate in the preparation, filing, prosecution, maintenance and enforcement of any patent and patent application; (d) perform all acts and sign, execute, acknowledge and deliver any and all documents required for effecting the obligations and purposes of this Agreement; and (e) abide by the obligations of confidentiality and non-use set forth in Article 8. It is understood and agreed that such non-disclosure and invention assignment agreements need not reference or be specific to this Agreement.

9.2 Zogenix Patent Prosecution and Maintenance. During the term of this Agreement, Zogenix shall use Commercially Reasonable Efforts to prepare, file, prosecute (including any reissues, re-examinations, post-grant proceedings, requests for patent term extensions, interferences, and defense of oppositions), at Zogenix's sole discretion and cost. If there is any material change in Zogenix Patents specified in Exhibit 1.74, Zogenix shall provide Distributor with updated information concerning the Zogenix Patent in a timely manner.

9.3 Infringement by Third Parties.

(a) Notice. In the event that either Zogenix or Distributor becomes aware of any infringement or threatened infringement by a Third Party in the Territory of any Zogenix Patents, it shall notify the other Party in writing to that effect. Any such notice shall include evidence to support an allegation of infringement or threatened infringement by such Third Party.

(b) Control of Action. Each Party shall share with the other Party all information available to it regarding such alleged or threatened infringement by a Third Party. Zogenix shall have the sole right, but not the obligation, to bring and control any action or proceeding with respect to alleged or threatened infringement by a Third Party in the Territory of any Zogenix Patent at Zogenix's cost and expense. If Zogenix elects to commence a suit to enforce the applicable Zogenix Patent against such infringements, then Distributor shall have the right to join such enforcement action, if permitted by Applicable Law, upon notice to Zogenix and be represented by a counsel of its own choice at its own cost and expense. Zogenix shall keep Distributor reasonably informed of any such actions or proceedings and consider in good faith any comments or requests made by Distributor, and the Parties shall cooperate and consult with each other in strategizing regarding any such action or proceeding, provided that Zogenix shall control and have the right to make all final decisions (regardless of whether or not Distributor is a party to such action or proceeding) regarding all matters in the preparation and conduct of any such action or proceeding. Each Party shall cooperate fully with the other Party with respect to actions or proceedings under this Section 9.3, including being joined as a party

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plaintiff in any such action or proceeding and providing access to relevant documents and other evidence and making its employees available at reasonable business hours, with the costs of such cooperation to be included as shared costs for actions or proceedings brought hereunder.

(c) Recoveries. Any monetary recovery resulting from actions or proceedings under this Section 9.3 will be allocated as follows: each of Distributor and Zogenix first will be reimbursed, out of such recovery, for its reasonable and verifiable costs and expenses with respect to such action or proceeding (such reimbursement to be pro-rata based on the Parties' relative costs and expenses if the recovery is not sufficient to reimburse both Parties fully) with any remainder being (i) allocated [***] if[***] or (ii) allocated [***] if [***].

9.4 Third Party Intellectual Property Rights.

(a) If either Party becomes aware of a Patent in the Territory owned by a Third Party that it believes will, or may, be infringed by the manufacture, importation, Development or Commercialization of the Product in the Field in the Territory as contemplated by this Agreement, such Party shall notify the other Party of such Patent. The Parties then shall discuss the matter and seek in good faith to agree on whether the Parties should take a license under such Patent, and if so, on what terms; provided, that if the Parties are unable to agree after a reasonable period, [***], of good faith discussions, then Zogenix shall have the right to obtain such a license on such terms as it determines in its sole discretion and at its own cost and expense. Provided, however, in the event that Zogenix elects not to seek or fails to obtain a license under such Patent, Distributor shall have the right to obtain such a license with prior written notice to Zogenix.

(b) Each Party shall promptly notify the other Party in writing of any allegation by a Third Party that the activity of either Party pursuant to this Agreement or the Supply Agreement infringes or may infringe the intellectual property rights of such Third Party. Zogenix shall have the sole right to control any defense of any such claim involving alleged infringement of Third Party rights, at Zogenix's sole cost and expense and by counsel of its own choice; provided however that Distributor may participate in the defense, at its own expense, to be represented in any such action by counsel of its own choice. In any event, Zogenix agrees to keep Distributor reasonably informed of all material developments in connection with any such action. Zogenix agrees not to settle such infringement or make any admissions or assert any position in such action in a manner that would materially adversely affect the rights or interest of Distributor, without the prior written consent of Distributor, which shall not be unreasonably withheld, delayed or conditioned. Neither Party shall enter into any settlement or compromise of any action under this Section 9.4 which would in any manner alter, diminish, or be in derogation of the other Party's rights under this Agreement without the prior written consent of such other Party, which shall not be unreasonably withheld, delayed or conditioned.

9.5 Patent Term Restoration. At the request of Zogenix, the Parties shall cooperate with each other in obtaining patent term restoration, extensions and/or any other extensions of the Zogenix Patents as available under Applicable Laws, subject to Zogenix's rights under Section 9.2. Zogenix shall bear the cost for such patent term restoration and/or any other

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extensions of the Zogenix Patent.

9.6 Patent Marking. Distributor shall, and shall require its Affiliates and Sub-distributors to, mark all Product sold in the Territory (in a reasonable manner consistent with industry custom and practice and Applicable Law) with appropriate patent numbers or indicia to the extent permitted by Applicable Laws, if such markings impact recoveries of damages or equitable remedies available with respect to infringements of patents.

9.7 Zogenix Trademarks. All packaging, promotional materials, package inserts, and labeling for the Product in the Field in the Territory shall bear, free of charge, one or more house Trademarks chosen and owned by Zogenix, including the Zogenix name and logo set forth in Exhibit 9.7 (each, a Zogenix Trademark). Zogenix or its Affiliates shall own all right, title, and interest in and to all Zogenix Trademarks, all corresponding trademark applications and registrations thereof, and all common law rights thereto. Zogenix shall, at Zogenix's sole expense, have sole control over the registration, prosecution, maintenance, enforcement and defense of the Zogenix Trademarks. All goodwill of the business associated with or symbolized by the Zogenix Trademarks shall inure to the benefit of Zogenix. Distributor acknowledges Zogenix's exclusive ownership of the Zogenix Trademarks and agrees not to take any action inconsistent with such ownership. Distributor shall provide Zogenix with samples of any advertising and promotional materials in original language that incorporate the Zogenix Trademarks prior to distributing such materials for use. Distributor shall comply with reasonable policies provided by Zogenix from time to time to maintain the goodwill and value of the Zogenix Trademarks. Distributor shall not, and shall cause its Affiliates not to, (i) use, seek to register, or otherwise claim rights in any Trademark that is confusingly similar to, misleading or deceptive with respect to, or that materially dilutes, any of the Zogenix Trademarks, or (ii) knowingly do, cause to be done, or knowingly omit to do any act, the doing, causing or omitting of which endangers, undermines, impairs, destroys or similarly affects, in any material respect, the validity or strength of any of the Zogenix Trademarks (including any registration or pending registration application relating thereto) or the value of the goodwill pertaining to any of the Zogenix Trademarks.

9.8 Product Trademarks.

(a) Selection and Ownership of Product Trademarks. All packaging, promotional materials, package inserts, and labeling for the Product in the Field in the Territory shall bear one or more Trademarks that pertain specifically to the Product, including the Trademarks in existence as of the Effective Date as set forth in Exhibit 9.8 (each, a Product Trademark). If the Product Trademarks in existence as of the Effective Date are not eligible for trademark protection or for use in connection with the Product in the Field in the Territory or if the Parties agree that alternative or additional Trademarks may be beneficial, Distributor may investigate appropriate Trademarks for the Product in the Territory. If the Parties identify and agree on alternative or additional Trademarks for the Product in the Territory, Zogenix shall use Commercially Reasonable Efforts to register such Trademark(s) for the Product in the Field in the Territory. Zogenix or its Affiliates shall own all right, title, and interest in and to all Product

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Trademarks, all corresponding trademark applications and registrations thereof, and all common law rights thereto. All goodwill of the business associated with or symbolized by the Product Trademarks shall inure to the benefit of Zogenix. Distributor acknowledges Zogenix's exclusive ownership of the Product Trademarks and agrees not to take any action inconsistent with such ownership.

(b) Maintenance and Prosecution of Product Trademarks. Zogenix shall, at Zogenix's sole expense, control the registration, prosecution and maintenance of the Product Trademarks in the Territory; provided, that Zogenix shall keep Distributor reasonably informed of Zogenix's actions with respect thereto and shall consider in good faith any reasonable comments made by Distributor with respect thereto.

(c) Use of Product Trademarks. Distributor shall promote, market, sell, offer for sale, import, distribute and otherwise commercialize the Product in the Field in the Territory only under the Product Trademarks. Distributor shall provide Zogenix with samples of any advertising and promotional materials that incorporate the Product Trademarks prior to distributing such materials for use. Distributor shall comply with reasonable policies provided by Zogenix from time to time to maintain the goodwill and value of the Product Trademarks. Distributor shall not, and shall cause its Affiliates not to, (i) use, seek to register, or otherwise claim rights in the Territory in any Trademark that is confusingly similar to, misleading or deceptive with respect to, or that materially dilutes, any of the Product Trademarks, or (ii) knowingly do, cause to be done, or knowingly omit to do any act, the doing, causing or omitting of which endangers, undermines, impairs, destroys or similarly affects, in any material respect, the validity or strength of any of the Product Trademarks (including any registration or pending registration application relating thereto) or the value of the goodwill pertaining to any of the Product Trademarks.

(d) Enforcement of Product Trademarks. Zogenix shall have the first right, but not the obligation, at Zogenix's expense, to enforce and defend the Product Trademarks in the Territory, including (i) defending against any alleged, threatened or actual claim by a Third Party that the use of the Product Trademarks in the Territory infringes, dilutes or misappropriates any Trademark of that Third Party or constitutes unfair trade practices, or any other claims that may be brought by a Third Party against a Party in connection with the use of or relating to Product Trademarks in the Territory with respect to the Product and (ii) taking such action as Zogenix deems necessary against a Third Party based on any alleged, threatened or actual infringement, dilution or misappropriation of, or unfair trade practices or any other like offense relating to, the Product Trademarks in the Territory by a Third Party. If Zogenix elects not to enforce or defend the Product Trademarks in any such instance, then Zogenix shall promptly so notify Distributor and Distributor shall have the right, but not the obligation, at its expense, to do so. Each Party shall provide to the other Party all reasonable assistance requested by such first Party in connection with any such action, claim or suit under this Section 9.8(d), including allowing such first Party access to such other Party's documents and to such other Party's personnel who may have possession of relevant information.

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(e) Distributor's Housemarks. In addition to the Product Trademarks, Distributor shall have the right to brand the Product in the Territory with those trademarks of Distributor that are associated with Distributor's name or identity and are pre-approved in writing by Zogenix (Distributor Housemarks). Distributor shall own all rights in the Distributor Housemarks, and all goodwill in the Distributor Housemarks shall accrue to Distributor. Distributor and its Affiliates and Sub-distributor shall not use any trademarks, other than the Zogenix Trademarks, Product Trademarks and the approved Distributor Housemarks, in connection with the Commercialization of the Product in the Field in the Territory, without the prior written consent of Zogenix.

ARTICLE 10. REPRESENTATIONS, WARRANTIES AND COVENANTS; LIMITATION OF LIABILITY

10.1 Mutual Representations, Warranties and Covenants. Each Party hereby represents and warrants to the other Party, as of the Effective Date, as follows:

(a) Duly Organized. Such Party is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, is qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the conduct of its business or the ownership of its properties requires such qualification and failure to have such would prevent such Party from performing its obligations under this Agreement.

(b) Due Authorization; Binding Agreement. The execution, delivery and performance of this Agreement by such Party have been duly authorized by all necessary corporate action. This Agreement is a legal and valid obligation binding on such Party and enforceable in accordance with its terms and does not: (i) to such Party's knowledge and belief, violate any law, rule, regulation, order, writ, judgment, decree, determination or award of any court, governmental body or administrative or other agency having jurisdiction over such Party; nor (ii) conflict with, or constitute a default under, any agreement, instrument or understanding, oral or written, to which such Party is a party or by which it is bound.

(c) Consents. Such Party has obtained, or is not required to obtain, the consent, approval, order or authorization of any Third Party, or has completed, or is not required to complete, any registration, qualification, designation, declaration or filing with any Regulatory Authority or governmental authority in connection with the execution and delivery of this Agreement and the performance by such Party of its obligations under this Agreement.

(d) No Conflicting Grant of Rights. Such Party has the right to grant the rights contemplated under this Agreement and has not, and will not during the Term, grant any right to any Third Party that would conflict with the rights granted to the other Party hereunder.

(e) Debarment. Such Party is not debarred or disqualified under the United

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States Federal Food, Drug and Cosmetic Act or comparable Applicable Laws in the Territory and it does not, and will not during the Term, employ or use the services of any Person who is debarred or disqualified, in connection with activities relating to the Product. In the event that either Party becomes aware of the debarment or disqualification or threatened debarment or disqualification of any Person providing services to such Party, including the Party itself and its Affiliates or Sub-distributors, that directly or indirectly relate to activities under this Agreement, such Party shall immediately notify the other Party and shall cease employing, contracting with, or retaining any such person to perform any services under this Agreement.

(f) Comply with Applicable Laws. In the performance of its obligations hereunder, such Party shall comply and shall cause its and its Affiliates' employees and contractors to comply with all Applicable Laws.

(g) Anti-Corruption. Such Party shall not, directly or indirectly through Third Parties, pay, promise or offer to pay, or authorize the payment of, any money or give any promise or offer to give, or authorize the giving of anything of value to a Public Official or Entity or other Person for purpose of obtaining or retaining business for or with, or directing business to, any Person, including, without limitation, Zogenix or Distributor. Without any limitation to the foregoing, such Party has not and shall not directly or indirectly promise, offer or provide any corrupt payment, gratuity, emolument, bribe, kickback, illicit gift or hospitality or other illegal or unethical benefit to a Public Official or Entity or any other Person.

(h) Accuracy of Materials. All due diligence materials that such Party has provided and will provide to the other Party were and will be to the knowledge of such Party accurate, truthful, and complete at the time such materials are provided to the other Party, and such Party has not and will not intentionally omit any material facts requested by the other Party.

(i) Notification for Violation of Applicable Laws. Such Party shall immediately notify the other Party if it has any information or suspicion that there may be a violation of the FCPA or any other Applicable Law in connection with the performance of this Agreement or the sale of the Product in the Territory.

(j) No Pubic Officials. No owner, shareholder (direct or beneficial), officer, director, employee, third-party representative, agent, or other individual with any direct or indirect beneficial interest in such Party or its Affiliates or, to its knowledge, in its Sub-distributors or other contractors, or any immediate family relation of any such Person (collectively, Interested Persons), is a Public Official or Entity. Such Party shall notify the other Party immediately if during the Term (i) any Interested Person becomes a Public Official or Entity or (ii) any Public Official or Entity acquires a legal or beneficial interest in it or its Affiliate or, to its knowledge, in its Sub-distributors or other subcontractors.

10.2 Representations, Warranties and Covenants of Distributor. Distributor represents, warrants, and covenants to Zogenix that:

(a) in the performance of its obligations hereunder, Distributor shall comply

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and shall cause its and its Affiliates' and Sub-distributors' employees and contractors to comply with Applicable Law and Distributor's compliance policies, complete copies of which will be provided to Zogenix before the launch of the Product in the Territory;

(b) during the Term, Distributor agrees that:

(i) Zogenix will have the right, upon reasonable prior written notice and during Distributor's regular business hours, to audit Distributor's and its Affiliates' books and records by an independent certified public accounting firm of recognized international standing, and Distributor shall ensure that Zogenix has the right to audit its Sub-distributors' and subcontractors' books and records, to investigation potential violations of any of the representations, warranties or covenants in this Section 10.2, the FCPA or other Applicable Laws or Distributor's compliance policies. Such audit may be made no more than once each Fiscal Year (unless an audit reveals a violation under this Agreement, in which case an additional audit may be conducted within such Fiscal Year);

(ii) Distributor will certify to Zogenix annually in writing or otherwise upon Zogenix's written request, under the form set forth in Exhibit 10.2(b) attached hereto, Distributor's compliance with the representations, warranties and covenants in this Section 10.2, the FCPA and other Applicable Laws and Distributor's compliance policies;

(iii) Distributor will inform Zogenix promptly of any changes in its business that would change any of its representations, warranties or covenants in this Section 10.2;

(iv) Zogenix shall have the right to suspend or terminate the supply of Product under the Supply Agreement and to terminate this Agreement if there is credible evidence that Distributor or its Affiliate or Sub-distributor may have violated any of the representations, warranties or covenants in this Section 10.2 the FCPA or other Applicable Laws or Distributor's compliance policies.

10.3 Representations and Warranties of Zogenix. Zogenix represents, warrants and covenants to Distributor that:

(a) Zogenix will inform Distributor promptly of any changes in its business that would change any of its representations, warranties or covenants in this Section 10.3; and

(b) as of the Effective Date, Zogenix has not received written notice of any pending or threatened claims or actions alleging that the Development or Commercialization of the Product in the Field infringes or would infringe the Patents of any Third Party in the Territory.

10.4 Disclaimer. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE SUPPLY AGREEMENT, NEITHER PARTY MAKES ANY REPRESENTATIONS OR EXTENDS ANY WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, AND

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EACH PARTY EXPRESSLY DISCLAIMS ALL IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR USE, NON-INFRINGEMENT, VALIDITY AND ENFORCEABILITY OF PATENTS, OR THE PROSPECTS OR LIKELIHOOD OF DEVELOPMENT OR COMMERCIAL SUCCESS OF THE PRODUCT.

10.5 Limitation of Liability. NEITHER PARTY SHALL BE ENTITLED TO RECOVER FROM THE OTHER PARTY ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES IN CONNECTION WITH THIS AGREEMENT; provided however, that this Section 10.5 shall not be construed to limit (a) either Party's right to special, incidental or consequential damages for the other Party's breach of Article 8 or (b) either Party's indemnification rights or obligations under Article 11.

ARTICLE 11. INDEMNIFICATION

11.1 Indemnification of Zogenix. Distributor shall indemnify, defend and hold harmless Zogenix and its Affiliates and their respective directors, officers, employees and agents (the Zogenix Indemnitees), from and against any and all losses, liabilities, damages, penalties, fines, costs and expenses (including reasonable attorneys' fees and other expenses of litigation) (Losses) incurred by any Zogenix Indemnitee resulting from any claims, actions, suits or proceedings brought by a Third Party (Third Party Claims) to the extent arising from, or occurring as a result of: (a) the registration, use, handling, storage, import, offer for sale, sale or other disposition of the Product in the Territory by or on behalf of Distributor or its Affiliates; (b) the negligence or willful misconduct of any Distributor Indemnitees in connection with Distributor's performance of its obligations or exercise of its rights under this Agreement; or (c) any breach of any representations, warranties or covenants of Distributor in this Agreement, except to the extent such Third Party Claims fall within the scope of the indemnification obligations of Zogenix set forth in Section 11.2 or arise out of the breach by Zogenix of any of the terms of the Supply Agreement.

11.2 Indemnification of Distributor. Zogenix shall indemnify, defend and hold harmless Distributor and its Affiliates and their respective directors, officers, employees and agents (the Distributor Indemnitees), from and against any and all Losses incurred by any Distributor Indemnitee resulting from any Third Party Claims to the extent arising from, or occurring as a result of: (a) the manufacture, use, handling, storage, import, offer for sale, sale or other disposition of the Product outside the Territory by or on behalf of Zogenix or its Affiliates; (b) the negligence or willful misconduct of any Zogenix Indemnitees in connection with Zogenix's performance of its obligations or exercise of its rights under this Agreement; or (c) any breach of any representations, warranties or covenants of Zogenix in this Agreement, except to the extent such Third Party Claims fall within the scope of the indemnification obligations of Distributor set forth in Section 11.1 or arise out of the breach by Distributor of any of the terms of the Supply Agreement.

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11.3 Procedure. A Party that intends to claim indemnification under this Article 11 (the Indemnitee) shall promptly notify the indemnifying Party (the Indemnitor) in writing of any Third Party Claim, in respect of which the Indemnitee intends to claim such indemnification, and the Indemnitor shall have sole control of the defense and/or settlement thereof. The Indemnitee may participate at its expense in the Indemnitor's defense of and settlement negotiations for any Third Party Claim with counsel of the Indemnitee's own selection. The indemnity arrangement in this Article 11 shall not apply to amounts paid in settlement of any action with respect to a Third Party Claim, if such settlement is effected without the consent of the Indemnitor, which consent shall not be withheld or delayed unreasonably. The failure to deliver written notice to the Indemnitor within a reasonable time after the commencement of any action with respect to a Third Party Claim shall only relieve the Indemnitor of its indemnification obligations under this Article 11 if and to the extent the Indemnitor is actually prejudiced thereby. The Indemnitee shall cooperate fully with the Indemnitor and its legal representatives in the investigation of any action with respect to a Third Party Claim covered by this indemnification.

11.4 Insurance. Each Party, at its own expense, shall maintain product liability and other appropriate insurance (or self- insure) in an amount consistent with industry standards during the Term. Each Party shall provide a certificate of insurance (or evidence of self-insurance) evidencing such coverage to the other Party upon written request.

ARTICLE 12. TERM AND TERMINATION

12.1 Term. This Agreement shall commence on the Effective Date and shall remain in effect until September 1, 2045, unless earlier terminated by either Party pursuant to this Article 12 (the Term).

12.2 Termination.

(a) Mutual Agreement. The Parties may terminate this Agreement by mutual written agreement.

(b) Distributor Convenience. At any time following the expiration of the Distribution Term (as defined in Section 1.17), the Distributor may terminate this Agreement at will upon [***] prior written notice to Zogenix.

(c) Zogenix Convenience. At any time following the expiration of the Distribution Term, Zogenix may terminate this Agreement at will upon [***] prior written notice to Distributor.

(d) Material Breach. If either Party believes in good faith that the other is in material breach of its obligations hereunder, then the non-breaching Party may deliver written

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notice of such breach to the other Party, and the allegedly breaching Party shall have [***] from receipt of such notice to dispute the validity of such breach. For all breaches of this Agreement, the allegedly breaching Party shall have [***] from the receipt of the initial notice to cure such breach. If the Party receiving notice of breach fails to cure the breach within such [***] period, then the non-breaching Party may terminate this Agreement in its entirety effective on written notice of termination to the other Party. Notwithstanding the foregoing, (a) if such material breach (other than a payment breach), by its nature, is curable, but is not reasonably curable within the [***] period, then such period shall be extended if the breaching Party provides a written plan for curing such breach to the non-breaching Party and uses Commercially Reasonable Efforts to cure such breach in accordance with such written plan; provided, that no such extension shall exceed [***] without the consent of the non-breaching Party.

(e) Diligence. Zogenix shall have the right to terminate this Agreement pursuant to Section 5.1(d).

(f) Bankruptcy. A Party shall have the right to terminate this Agreement upon written notice to the other Party upon the bankruptcy, dissolution or winding up of such other Party, or the making or seeking to make or arrange an assignment for the benefit of creditors of such other Party, or the initiation of proceedings in voluntary or involuntary bankruptcy, or the appointment of a receiver or trustee of such other Party's property, that is not discharged within [***].

(g) Commercial Viability. In the event that prior to launch of the Product in the Field in the Territory (i) either Party has a good faith concern that the launch of the Product in the Field in the Territory is not likely to be possible with Commercially Reasonable Efforts, based upon credible evidence, such as any decision by a Regulatory Authority to require significant additional information before granting or as a condition to granting Regulatory Approval, or (ii) Distributor has a good faith concern that the Commercialization of the Product in the Territory will not be commercially viable, such Party may raise such concern for discussion by the JSC. If, within the time periods set forth in Section 3.1(d) or such longer time period as the Parties may mutually agree upon in writing, neither the JSC nor the Executives agree whether to launch or commercialize Product in the Territory, then, notwithstanding anything to the contrary in Section 3.1(d) or Article 13, either Party shall have the right to terminate this Agreement upon at least [***] written notice to the other Party.

(h) Third Party Patent.

(i) Distributor shall have the right to terminate this Agreement upon written notice to Zogenix if (A) the Parties have discussed an issued Patent under Section 9.4(a), (B) either (1) both Zogenix and Distributor agree not to seek a license under such issued Patent or (2) the applicable Party as determined pursuant to Section 9.4(a) failed to obtain a license under such issued Patent, after good faith efforts to do so, within [***] after the Parties' agreement as to which Party would seek such license, and (C) Distributor reasonably and in good faith believes that the sale, offer for sale or import of the Product in the Territory in the Field infringes such issued Patent in the Territory, such that Distributor is not able to sell the Product in

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the Territory in the Field without infringing such issued Patent.

(ii) Zogenix shall have the right to terminate this Agreement upon written notice to Distributor if (A) the Parties have discussed an issued Patent under Section 9.4(a), (B) either (1) both Zogenix and Distributor agree not to seek a license under such issued Patent or (2) the applicable Party as determined pursuant to Section 9.4(a) failed to obtain a license under such issued Patent, after good faith efforts to do so, within [***] after the Parties' agreement as to which Party would seek such license, and (C) Zogenix reasonably and in good faith believes that the manufacture for and sale to Distributor of the Product infringes such issued Patent, such that Zogenix will not be able to conduct (or have conducted on its behalf) such manufacturing for and sale of the Product to Distributor without infringing (or its contract manufacturers infringing) such issued Patent.

(i) Change of Control. This Agreement may be terminated by either Party upon [***] written notice to the other Party in the event that the other Party undergoes a Change of Control; provided, however, that such termination notice shall only be effective if delivered within [***] after the later of the occurrence of such Change of Control or the date the Party undergoing the Change of Control delivers written notice thereof to the other Party.

(j) Other Zogenix Termination Rights. Zogenix shall have the right to terminate this Agreement immediately upon written notice to Distributor (i) if Distributor or any of its Affiliates or Sub-distributors, directly or indirectly through any Third Party, commences any interference or opposition proceeding with respect to, challenges the validity or enforceability of, or opposes any extension of or the grant of a supplementary protection certificate with respect to, any Zogenix Patent (or any related Patent owned or controlled by Zogenix outside the Territory); (ii) if Zogenix determines that Distributor or its Affiliates or Sub- distributors are, or have caused or shall cause any Zogenix Indemnitee to be, in violation of the FCPA or any other Applicable Laws; or (iii) if Zogenix decides to withdraw the Product from the market in the Territory or otherwise believes that the promotion of the Product in the Field in the Territory presents a substantial risk of harm or injury to consumers which risk is unacceptable according to established principles of medical ethics.

(k) Termination of Supply Agreement. Following the execution of the Supply Agreement pursuant to Section 5.2, the Parties agree that this Agreement shall automatically terminate upon termination of the Supply Agreement for any reason.

(l) Distributor Safety Concern. This Agreement may be terminated by Distributor upon written notice to Zogenix, in the event that Distributor has a reasonable belief after due inquiry that the promotion of the Product in the Field in the Territory presents a substantial risk of harm or injury to consumers which risk is unacceptable according to established principles of medical ethics. Prior to terminating this Agreement in accordance with this Section 12.2(l), Distributor shall present evidence supporting the basis for such termination to Zogenix and shall consider in good faith all comments provided by Zogenix prior to terminating this Agreement.

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12.3 Rights on Termination. The following will apply upon any termination of this Agreement:

(a) Termination of Rights and Obligations. Upon termination of this Agreement, all rights and obligations of the Parties under this Agreement will terminate, except as provided in this Section 12.3 and Sections 12.4, 12.5 and 12.6. Within [***] after the effective date of termination of this Agreement, each Party shall deliver to the other Party any and all Confidential Information of such other Party then in its possession, except to the extent a Party retains the right to use such Confidential Information pursuant to any rights granted under this Agreement that survive termination of this Agreement, and except for one (1) copy which may be kept in such Party's (or its counsel's) office for archival purposes subject to a continuing obligation of confidentiality and non-use under Article 8 for the duration set forth in Section 8.1. Neither Party shall be required to destroy Confidential Information contained in any electronic back-up tapes or other electronic back-up files that have been created solely by its automatic or routine archiving and back-up procedures, to the extent created and retained in a manner consistent with its standard archiving and back-up.

(b) Technology and Trademark License, Including Right to Reference and Technology Transfer. In the event that Zogenix terminates this Agreement pursuant to Section 12.2(c) or Distributor terminates this Agreement pursuant to Section 12.2(d), or after the expiration of this Agreement in accordance with Section 12.1, Zogenix shall negotiate in good faith with Distributor a license agreement for Distributor to make, use and sell the Product in the Field in the Territory under the Zogenix Technology, Zogenix Trademarks and the Product Trademarks. Any such license would include a royalty rate for the net sales of Product in the Field in the Territory of [***] if this Agreement is terminated by Distributor pursuant to Section 12.2(d) or of [***] if this Agreement is terminated by Zogenix pursuant to Section 12.2(c) or if the Agreement expires in accordance with Section 12.1. For clarity, the royalty rates, as applicable, set forth in this Section would be the total royalty due to Zogenix on Net Sales of the Product in the Territory under any such license agreement. In the event that Zogenix is the holder of the Regulatory Approval for the Product in the Territory at the time of termination pursuant to Section 12.2(c) by Zogenix or Section 12.2(d) by Distributor or expiration pursuant to Section 12.1, such license agreement shall also include a grant by Zogenix to Distributor of the right to reference and use all Data and Regulatory Filings (including all Regulatory Approvals), such reference and use solely for maintaining Regulatory Approval and commercializing the Product in the Territory in the Field. Such license shall also include Zogenix's agreement to use Commercially Reasonable Efforts to enable Distributor to establish manufacturing capability for the Product in or for the Territory at Distributor's cost. Such support and assistance would include: (i) amending agreements with Zogenix's contract manufacturers of Product for the Territory to permit such contract manufacturers to enter into manufacturing agreements with Distributor to manufacture the Product in or for the Territory and introducing Distributor to such contract manufacturers, (ii) provision of reasonable access to and consultation with Persons knowledgeable of the manufacture of such Products and (iii) providing such technical assistance as may be reasonably requested by Distributor relating to methods and manufacturing know-how transfer to Distributor's manufacturing facility. Such license

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agreement would include such other standard terms and conditions for license agreements of this type as are mutually agreed to by the Parties.

(c) Commercialization Transition. Unless this Agreement is terminated by Zogenix under Sections 12.2(f), (g)(i), (h)(ii), (j)(ii), or (j)(iii), or by Distributor under Sections 12.2(d), (g), or (l), or terminated automatically under Section 12.2(k), Distributor shall continue, to the extent that Distributor continues to have Product inventory, to fulfill orders received from customers for Product in the Territory until up to [***] after the date on which Zogenix notifies Distributor in writing that Zogenix has secured an alternative distributor for the Product in the Territory, but in no event for more for than [***] after the effective date of termination. All Product sold by or on behalf of Distributor or its Affiliates or Sub-distributors after the effective date of termination will be included in calculations under Article 6. Notwithstanding the foregoing, Distributor shall cease such activities upon [***] written notice from Zogenix at any time after the effective date of termination requesting that such activities cease. Within [***] after receipt of such cessation request, Distributor shall provide Zogenix an estimate of the quantity and shelf life of all Product remaining in Distributor's or its Affiliates' or Sub-distributors' inventory, and Zogenix shall have the right to purchase any such quantities of Product from Distributor at a price mutually agreed by the Parties.

(d) Assignment of Regulatory Filings and Regulatory Approvals. Unless this Agreement is terminated by Zogenix under Section 12.2(c), at Zogenix's option, which shall be exercised by written notice to Distributor, to the extent permitted under Applicable Laws, Distributor shall assign or cause to be assigned to Zogenix or its designee (or to the extent not so assignable, Distributor shall take all reasonable actions to make available to Zogenix or its designee the benefits of), at Zogenix's cost, all Regulatory Filings and Regulatory Approvals for the Product in the Field in the Territory.

(e) Transition. Unless this Agreement is terminated by Zogenix under Section 12.2(c), Distributor shall use Commercially Reasonable Efforts to cooperate with Zogenix and/or its designee to effect a smooth and orderly transition in the registration and Commercialization of the Product in the Field in the Territory during the applicable notice period under Section 12.2 and following the effective date of termination. Without limiting the foregoing, Distributor shall use Commercially Reasonable Efforts to conduct, in an expeditious manner, any activities to be conducted under this Section 12.3.

(f) Third Party Agreements. Unless this Agreement is terminated by Zogenix under Section 12.2(c), at the written request of Zogenix, Distributor shall assign to Zogenix any Product-specific Third Party agreements, to the furthest extent possible, provided that such assignment is permitted under the Product-specific agreement or is otherwise agreed by the applicable Third Party. In the event such assignment is not requested by Zogenix or is not permitted or agreed by such Third Party, then the rights of such Third Party with respect to the Product will terminate upon termination of Distributor's rights. Distributor shall ensure that each such Third Party (if its contract is not assigned to Zogenix pursuant to this Section 12.3) will transition any remaining Product back to Zogenix in the manner set forth in this Section 12.3 as

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if such Third Party were named herein. Distributor shall include provisions requiring compliance with these provisions in all applicable agreements with Third Parties.

12.4 Exercise of Right to Terminate. The use by either Party hereto of a termination right provided for under this Agreement shall not give rise, on its own, to the payment of damages or any other form of compensation or relief to the other Party with respect thereto.

12.5 Damages; Relief. Subject to Section 12.4 above, termination of this Agreement shall not preclude either Party from claiming any other damages, compensation or relief that it may be entitled to upon such termination.

12.6 Accrued Obligations; Survival. The expiration or termination of this Agreement for any reason shall not release either Party from any liability that, at the time of such expiration or termination, has already accrued to such Party or that is attributable to a period prior to such termination, nor will any termination of this Agreement preclude either Party from pursuing all rights and remedies it may have under this Agreement, at law or in equity, with respect to breach of this Agreement. The following Articles and Sections will survive any expiration or termination of this Agreement: Sections 4.2(e) (Ownership of Regulatory Information), 4.9 (Recalls) (to the extent Product remains on the market that was distributed under this Agreement), 7.4 (Records), 9.1 (Ownership of Intellectual Property), 9.7 (Zogenix Trademarks) (to the extent applicable to any post-termination distribution provided under Section 12.3(c)), 9.8 (Product Trademarks) (to the extent applicable to any post-termination distribution provided under Section 12.3(c)), 10.5 (Limitation of Liability), 12.3 (Rights on Termination), 12.4 (Exercise of Right to Terminate), 12.5 (Damages; Relief) and 12.6 (Accrued Obligations; Survival) and Articles 1 (Definitions) (to the extent necessary to give effect to other surviving provisions), 7 (Payments, Books and Records) (only with respect to periods prior to termination and, if applicable, any post-termination distribution provided under Section 12.3(c)), 8 (Confidentiality), 11 (Indemnification), 13 (Dispute Resolution) and 14 (General Provisions).

ARTICLE 13. DISPUTE RESOLUTION

13.1 Objective. The Parties recognize that disputes as to matters arising under or relating to this Agreement or either Party's rights or obligations hereunder may arise from time to time. It is the objective of the Parties to establish procedures to facilitate the resolution of such disputes in an expedient manner by mutual cooperation and without resort to litigation. To accomplish this objective, the Parties agree to follow the procedures set forth in this Article 13 to resolve any such dispute if and when it arises.

13.2 Resolution by Executives. Except as otherwise provided in Article 3, if an unresolved dispute as to matters arising under or relating to this Agreement or either Party's rights or obligations hereunder arises, either Party may refer such dispute to the Executives, who shall meet in person or by telephone within [***] after such referral to attempt in good faith to

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resolve such dispute. If such matter cannot be resolved by discussion of such officers within such [***] (as may be extended by mutual written agreement), such dispute shall be resolved in accordance with Section 13.3. The Parties acknowledge that discussions between the Parties to resolve disputes are settlement discussions under applicable rules of evidence and without prejudice to either Party's legal position.

13.3 Arbitration.

(a) Any and all disputes that are not resolved pursuant to Section 13.2 shall be finally settled by binding arbitration administered under the Rules of Arbitration of the International Chamber of Commerce by three (3) arbitrators appointed in accordance with said Rules. The arbitration will be conducted in New York, New York. The language to be used in the arbitral proceedings will be English. Judgment on the award may be entered in any court having jurisdiction.

(b) The award shall be rendered within [***] of the constitution of the arbitral tribunal, unless the arbitral tribunal determines that the interest of justice requires that such limit be extended.

(c) The arbitrators shall award to the prevailing party, if any, as determined by the arbitrators, its reasonable attorneys' fees and costs.

(d) The arbitration proceeding will be confidential and the arbitrators shall issue appropriate protective orders to safeguard each Party's Confidential Information. Except as required by Applicable Laws, no Party shall make (or instruct the arbitrators to make) any public announcement with respect to the proceedings or decision of the arbitrators without prior written consent of the other Party. The existence of any dispute submitted to arbitration, and the award, shall be kept in confidence by the Parties and the arbitrators, except as required in connection with the enforcement of such award or as otherwise required by Applicable Laws.

ARTICLE 14. GENERAL PROVISIONS

14.1 Governing Law. This Agreement and all questions regarding its existence, validity, interpretation, breach or performance and any dispute or claim arising out of or in connection with it (whether contractual or non-contractual in nature such as claims in tort, from breach of statute or regulation or otherwise) shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, United States, without reference to its conflicts of law principles to the extent those principles would require applying another jurisdiction's laws. The United Nations Conventions on Contracts for the International Sale of Goods shall not be applicable to this Agreement or the Supply Agreement.

14.2 Force Majeure. Neither Party shall be held liable to the other Party nor be

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deemed to have defaulted under or breached this Agreement for failure or delay in performing any obligation under this Agreement (other than failure to make payment when due) when such failure or delay is caused by or results from causes beyond the reasonable control of the affected Party, including embargoes, war, acts of war (whether war be declared or not), insurrections, riots, fire, floods, or other acts of God, or acts, omissions or delays in acting by any governmental authority or the other Party. The affected Party shall notify the other Party of such force majeure circumstances as soon as reasonably practicable, and shall promptly undertake all reasonable efforts necessary to cure such force majeure circumstances. Such excuse from liability shall be effective only to the extent and duration of the event(s) causing the failure or delay in performance and provided that the Party has not caused such event(s) to occur.

14.3 Assignment. Except as expressly provided in this Section 14.3, neither this Agreement nor any rights or obligations hereunder may be assigned or otherwise transferred by either Party without the prior written consent of the other Party, which consent shall not be unreasonably withheld; provided, however, that either Party may assign this Agreement and its rights and obligations hereunder without the other Party's consent:

(a) in connection with the transfer or sale of all or substantially all of the business of the assigning Party to a Third Party, whether by merger, sale of stock, sale of assets or otherwise; provided that in the event of a transaction (whether this Agreement is actually assigned or is assumed by the acquiring party by operation of law (e.g., in the context of a reverse triangular merger)), unless otherwise agreed with the acquiring party in writing, intellectual property of the acquiring party shall not be included in the intellectual property to which the other Party has access under this Agreement; or

(b) to an Affiliate, provided that the assigning Party shall remain liable and responsible to the non‑assigning Party hereto for the performance and observance of all such duties and obligations by such Affiliate.

For the avoidance of doubt, in the event that either Party assigns this Agreement pursuant to this Section 14.3(a), the other Party shall have the right to terminate this Agreement pursuant to Section 12.2(i). This Agreement shall be binding upon successors and permitted assigns of the Parties. Any assignment not in accordance with this Section 14.3 will be null and void.

14.4 Severability. If any one or more of the provisions contained in this Agreement is held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, unless the absence of the invalidated provision(s) adversely affects the substantive rights of the Parties. The Parties shall in such an instance use their best efforts to replace the invalid, illegal or unenforceable provision(s) with valid, legal and enforceable provision(s) which, insofar as practical, implement the purposes of this Agreement.

14.5 Notices. All notices required or permitted hereunder shall be in writing and sufficient if delivered personally, sent by facsimile (and promptly confirmed by personal delivery, registered or certified mail or overnight courier), sent by internationally- recognized

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overnight courier or sent by registered or certified mail, postage prepaid, return receipt requested, addressed as follows:

If to Zogenix, addressed to:

Zogenix, Inc. 5959 Horton Street, Suite 500 Emeryville, CA 94608, U.S.A Attention: Chief Executive Officer Facsimile Number: +1 (510) 550-8340

With a copy to (which shall not constitute notice):

Latham & Watkins, LLP 12670 High Bluff Drive San Diego, CA 92130, U.S.A Attention: Cheston Larson, Esq. Facsimile Number: +1 (858) 523-5450

If to Distributor, addressed to:

Nippon Shinyaku Co., Ltd. 14, Nishinosho-monguchi-cho Kisshoin, Minami-ku Kyoto 601-8550, JAPAN Attention: Alliance Department Facsimile Number: +81-75-321-9019

or to such other address as the Party to whom notice is to be given may have furnished to the other Party in writing in accordance herewith. Any such notice shall be deemed to have been given: (a) when delivered if personally delivered or sent by facsimile on a Business Day; and (b) on the second Business Day after dispatch if sent by internationally-recognized overnight courier.

14.6 Entire Agreement; Amendments. This Agreement and the Supply Agreement, together with the exhibits hereto and thereto, contain the entire understanding of the Parties with respect to the subject matter hereof and thereof and supersede and cancel all previous express or implied agreements and understandings, negotiations, writings and commitments, either oral or written, in respect to the subject matter hereof and thereof, including the Confidentiality Agreement. This Agreement may be amended, or any term hereof modified, only by a written instrument duly executed by authorized representatives of both Parties, but written instrument does not include the text of e-mails or similar electronic transmissions.

14.7 Headings. The captions to the several Articles and Sections hereof are not a part of this Agreement, but are merely for convenience to assist in locating and reading the several

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Sections hereof.

14.8 Independent Contractors. It is expressly agreed that Zogenix and Distributor shall be independent contractors and that the relationship between the two Parties shall not constitute a partnership, joint venture or agency. Neither Zogenix nor Distributor shall have the authority to make any statements, representations or commitments of any kind or to take any action that shall be binding on the other Party, without the prior written consent of the other Party.

14.9 Waiver. The waiver by either Party hereto of any right hereunder, or the failure of the other Party to perform, or a breach by the other Party, shall not be deemed a waiver of any other right hereunder or of any other breach or failure by such other Party whether of a similar nature or otherwise.

14.10 Cumulative Remedies. No remedy referred to in this Agreement is intended to be exclusive, but each shall be cumulative and in addition to any other remedy referred to in this Agreement or otherwise available under law.

14.11 Waiver of Rule of Construction. Each Party has had the opportunity to consult with counsel in connection with the review, drafting and negotiation of this Agreement. Accordingly, the rule of construction that any ambiguity in this Agreement shall be construed against the drafting Party shall not apply.

14.12 Interpretation. All references in this Agreement to an Article or Section shall refer to an Article or Section in or to this Agreement, unless otherwise stated. Any reference to any federal, national, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. The word including and similar words means including without limitation. The words herein, hereof and hereunder and other words of similar import refer to this Agreement as a whole and not to any particular Section or other subdivision. All references to days, months, quarters or years are references to calendar days, calendar months, calendar quarters, or calendar years, unless stated otherwise. References to the singular include the plural.

14.13 No Third Party Beneficiaries. This Agreement is neither expressly nor impliedly made for the benefit of any Party other than Zogenix and Distributor, except as otherwise provided in this Agreement with respect to Zogenix Indemnitees under Section 11.1 and Distributor Indemnitees under Section 11.2. This Agreement may be terminated, varied or amended in accordance with its terms or with the agreement of Distributor and Zogenix without the consent of the Zogenix Indemnitees or Distributor Indemnitees.

14.14 English Language. This Agreement is in the English language, and the English language shall control its interpretation. In addition, unless otherwise explicitly stipulated in this Agreement, all notices required or permitted to be given under this Agreement, and all written, electronic, oral or other communications between the Parties regarding this Agreement, shall be in the English language.

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14.15 Counterparts. This Agreement may be executed in two counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, all of which together shall constitute but one and the same instrument.

14.16 Further Actions. Each Party will execute, acknowledge and deliver such further instruments, and to do all such other ministerial, administrative or similar acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Agreement.

[Signature Page Follows]

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IN WITNESS WHEREOF, the Parties have executed this Distributorship Agreement as of the Effective Date.

ZOGENIX, INC. NIPPON SHINYAKU COMPANY, LTD.

By: /s/ Stephen J. Farr By: /s/Shigenobu Maekawa Name: Stephen J. Farr Name: Shigenobu Maekawa Title: President and Chief Executive Officer Title: President

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Exhibit 1.70

UNLABELED DRUG PRODUCT

[***] [***] [***] [***] [***] [***] [***]

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Exhibit 1.74

ZOGENIX ZX008 PATENTS AS OF THE EFFECTIVE DATE

Patents claiming ZX008 or its use in Japan

Docket No Appln. No Filing Date Publn. No Patent No Issue Date

[***]

ZGNX-135JP [***] [***] [***] [***] 11/30/18 ZGNX-135JP DIV [***] [***]

[***]

ZGNX-143JP [***] [***] [***]

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Exhibit 2.3

MATERIAL TERMS OF SUPPLY AGREEMENT

The Supply Agreement will include the following terms and conditions:

Appointment as Exclusive Supplier. During the Term, Zogenix shall retain and have the sole and exclusive right to supply or have supplied all of Distributors' and its Affiliates' and Sub-distributors' requirements of the Product for sale in the Field in the Territory.

Transfer Price. The price at which Zogenix supplies the Product (as Unlabeled Drug Product) to Distributor equals the consideration and Transfer Price set forth in the Agreement in Section 6.5. Distributor shall make payment in accordance with Sections 6.1, 6.3, and 6.4, and shall also pay Zogenix's invoice for the estimated Transfer Price within [***] of the date on which the applicable units of Product are delivered by Zogenix in accordance Section 6.5 and the terms of the Supply Agreement. The Parties will true-up the Fully-Burdened Manufacturing Cost on an annual basis when truing-up the Transfer Price. For any Product that is supplied to Distributor under this Agreement and damaged by Distributor during labeling or packaging, the transfer price for any such Product shall be [***] per unit of Product for the applicable Fiscal Year. The Supply Agreement shall also include terms permitting Distributor to audit Zogenix's Fully-Burdened Manufacturing Costs that are similar to Zogenix's audit rights in Section 7.5 of the Agreement.

Third Party Manufacturer Agreements. The terms of the Supply Agreement shall (a) establish the procedures, terms and conditions for manufacture, quality control, forecasting, ordering, delivery price, payment and appropriate other activities relating to the supply of the Product in the Territory so as to reasonably enable Zogenix to meet its obligations under its agreements with Third Party manufacturers and (b) provide Distributor no remedies for Zogenix's failure to supply the Product in accordance with the Supply Agreement that are in addition to those set forth herein or that are available to Zogenix in its existing agreements with Third Party manufacturers, and (c) set forth such terms and conditions so that the Supply Agreement is otherwise consistent in all material respects with such agreements with Third Party manufacturers.

Forecasts and Orders. [***] prior to the anticipated First Commercial Sale, Distributor shall provide Zogenix with a good faith, [***] rolling forecast of its anticipated requirements of the Product, the first [***] of which shall be on a monthly basis and the last [***] of which shall be on a quarterly basis. The first [***] of such forecast shall be binding. Distributor shall submit binding purchase orders consistent with the binding portion of its forecasts. Each purchase order shall have a requested delivery date that is at least [***] after the date of the purchase order. The terms of the Supply Agreement shall also provide for the order and delivery of launch stock for the Product prior to Regulatory Approval to ensure timely launch of the product following Regulatory Approval.

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Purchase orders shall be placed in full batch increments as defined in the Supply Agreement.

Delivery. All Products shall be shipped Ex Works manufacturing site (Incoterms 2010) to the destination requested by Distributor. Distributor shall be responsible for labeling and packaging Product.

Safety Stock. Distributor shall use Commercially Reasonable Efforts to build promptly following Regulatory Approval and thereafter to maintain an inventory of Product (itself and/or with wholesalers) which is not less than the equivalent of the immediate next [***] of anticipated demand for the Product in the Territory.

Change Controls. The Parties shall include in the Supply Agreement a reasonable change control procedure to deal with any reasonable changes to the Product specifications and other changes required by Applicable Laws. All Third Party costs incurred by either Party for any such changes in accordance with the agreed-upon change control procedure shall be paid by Distributor if requested by Distributor or if such changes are required by Applicable Laws in the Territory.

Second Source. Based on Distributor's forecasts, including its [***] forecasts, the Parties will discuss and determine whether Zogenix will obtain additional capacity to support Distributor's requirements for the Product in the Territory. Any decisions to build or engage additional manufacturing capacity for the Territory will be at Zogenix's sole discretion, and in no event will Zogenix be obligated to supply Product in excess of Distributor's binding forecasts.

Product Quality/Complaints. The Supply Agreement will define procedures for resolution of any disputes regarding Product quality and for notification of each Party in the event of a Product complaint or Product recall. The Supply Agreement will contain mutually acceptable provisions regarding release testing of the Product and, if applicable, the transfer of information necessary for Distributor to perform required quality testing, as applicable.

Regulatory Audits. Not more than once per Fiscal Year or as otherwise agreed by the Parties, and subject to the terms of the applicable agreement between Zogenix and its Third Party manufacturers, Zogenix shall, at Distributor's request, conduct GMP audits of the Third Party manufacturers and, if applicable, exercise such other audit rights that Zogenix may have under such agreements, and shall disclose to Distributor the results of such audits. Zogenix will use commercially reasonable efforts to cause such Third Party manufacturers to promptly correct any deficiencies or other adverse findings.

Representations and Warranties. Zogenix shall provide standard warranties applicable in the pharmaceutical industry, including warranties that all Product manufactured for Distributor:

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shall be manufactured and tested in accordance with all Applicable Laws, including GMP applicable to the manufacturing, storage, and shipment of the Product,

shall not be adulterated or misbranded within the meaning of the United States Food, Drug and Cosmetic Act, 21 U.S.C. Section 301c et. seq., or other Applicable Laws, and

the time of delivery to Distributor will meet the Product specifications.

Quality Agreement. The Parties shall work together in good faith to enter into a mutually acceptable quality agreement with respect to the manufacture of the Product prior to shipment of any Product to Distributor.

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Exhibit 4.2(a)

THE INITIAL VERSION OF THE REGULATORY PLAN

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Exhibit 8.5(a)

PRESS RELEASE

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Exhibit 9.7

ZOGENIX TRADEMARKS

Trademark Country Status Registration number Next renewal date Application number Application date Registration date Class

(Zogenix Logo) Japan Pending N/A N/A 2019031449 2/28/2019 N/A 5, 42

US-DOCS\105216871.19

Source: ZOGENIX, INC., 10-Q, 5/9/2019





Exhibit 9.8

PRODUCT TRADEMARKS

Trademark Country Status Registration number Next renewal date Application number Application date Registration date Class

FINTEPLA Japan Registered 6105099 12/7/2028 2018028557 3/9/2018 12/7/2018 5 (Fintepla Logo) Japan Registered 6093116 10/26/2028 2018028558 3/9/2018 10/26/2018 5

US-DOCS\105216871.19

Source: ZOGENIX, INC., 10-Q, 5/9/2019





Exhibit 10.2(b)

FORM OF COMPLIANCE CERTIFICATION

Date: __________

To: Zogenix, Inc. and its Affiliates (Zogenix)

Re: Distributorship Agreement dated [ ] (the Agreement)

For and on behalf of [__________________] and our Affiliates (as defined in the Agreement) and employees, we confirm that in respect of our distribution of Zogenix Product within the Territory during the period [insert date] to [insert date]:-

there was no offer, or promise to make, authorize or provide (directly or indirectly) a gift, payment or anything of value to a government official, political parties or candidates or private sector employee, in order to influence or reward any action or decision by such person in his or her official or professional capacity, for the purpose of corruptly obtaining or retaining business or securing any improper advantage;

all payments, expenses or credits properly paid to or incurred on behalf of Zogenix, were accurately and appropriately recorded and described in accordance with acceptable accounting and recordkeeping procedures, and substantiated by supporting documents and evidence;

there were no unauthorized and/or excessive payments of any kind to health care institutions, hospitals, hospital services or departments; and

has performed the necessary due diligence to ensure compliance with Applicable Laws (including anti-bribery laws and the U.S. FCPA) and the terms of the Agreement.

Please be advised accordingly.

Yours faithfully,

[____________________]

Authorized Representative

Name: Title:

Signature: Date:

US-DOCS\105216871.19

Source: ZOGENIX, INC., 10-Q, 5/9/2019

Answer:
Highlight the parts (if any) of this contract related to Covenant Not To Sue that should be reviewed by a lawyer. Details: Is a party restricted from contesting the validity of the counterparty’s ownership of intellectual property or otherwise bringing a claim against the counterparty for matters unrelated to the contract?